PROSPECTUS RENONORDEN ASA. (A public limited liability company incorporated under the laws of Norway)

Transcription

1 PROSPECTUS RENONORDEN ASA (A public limited liability company incorporated under the laws of Norway) Rights issue of 350,000,000 Offer Shares at a subscription price of NOK 1.00 per Offer Share with Subscription Rights for Existing Shareholders Subscription Period for the Rights Issue: From 09:00 hours (CET) on 2 February 2017 to 16:30 hours (CET) on 16 February 2017 Trading in Subscription Rights: From 09:00 hours (CET) on 2 February 2017 to 16:30 hours (CET) on 16 February 2017 The information in this prospectus (the "Prospectus") relates to an underwritten rights issue (the "Rights Issue") by RenoNorden ASA (the "Company", and together with its subsidiaries, "RenoNorden" or the "Group"), a public limited company incorporated under the laws of Norway, and the listing on Oslo Børs, a stock exchange operated by Oslo Børs ASA (the "Oslo Stock Exchange"), of 350,000,000 new shares in the Company with a par value of NOK 1.00 each (the "Offer Shares") issued at a subscription price of NOK 1.00 per Offer Share (the "Subscription Price"). The shareholders of the Company as of 30 January 2017 (and being registered as such in the Norwegian Central Securities Depository (Nw.: Verdipapirsentralen) (the "VPS") on 1 February 2017 pursuant to the two days' settlement procedure (the "Record Date") (the "Existing Shareholders"), will be granted transferable subscription rights (the "Subscription Rights") in the Rights Issue that, subject to applicable law, provide preferential rights to subscribe for, and be allocated, Offer Shares at the Subscription Price. The Subscription Rights will be registered on each Existing Shareholder's VPS account. Subscription Rights will not be issued in respect of any existing shares held in treasury by the Company. The Subscription Rights will be listed and tradable on the Oslo Stock Exchange from 09:00 hours Central European Time ("CET") on 2 February 2017 to 16:30 hours (CET) on 16 February 2017 under the ticker code "RENO T". Each Existing Shareholder will be granted Subscription Rights for every existing share registered as held by such Existing Shareholder as of the Record Date, rounded down to the nearest whole Subscription Right. Subscription Rights acquired during the Subscription Period carry the same right to subscription as the Subscription Rights held by Existing Shareholders. Each Subscription Right will, subject to applicable law, give the right to subscribe for, and be allocated, one Offer Share. Over-subscription and subscription without Subscription Rights is permitted. The subscription period will commence at 09:00 hours (CET) on 2 February 2017 and expire at 16:30 hours (CET) on 16 February 2017 (the "Subscription Period"). Subscription Rights that are not used to subscribe for Offer Shares or sold before the expiry of the Subscription Period will have no value and will lapse without compensation to the holder. Following expiry of the Subscription Period, any Offer Shares that have not been subscribed for, and allocated, in the Rights Issue will be subscribed and paid for at the Subscription Price by an underwriting syndicate consisting of existing shareholders of the Company and new investors (collectively, the "Underwriters"), subject to the terms and conditions of the underwriting agreement entered into between the Company and the Underwriters on 18 December 2016 (the "Underwriting Agreement"). The Company's existing shares are, and the Offer Shares will be, listed on the Oslo Stock Exchange under the ticker code "RENO". Except where the context requires otherwise, references in this Prospectus to "Shares" will be deemed to include the existing Shares and the Offer Shares. All of the existing Shares are, and the Offer Shares will be, registered in the VPS in book-entry form. All of the issued Shares rank pari passu with one another and each carries one vote. Investing in the Shares, including the Offer Shares, involves a high degree of risk. Prospective investors should read the entire document and, in particular, consider Section 2 "Risk factors" beginning on page 11 when considering an investment in the Company. The Subscription Rights and the Offer Shares are being offered only in those jurisdictions in which, and only to those persons to whom, offers and sales of the Offer Shares and Subscription Rights may lawfully be made and, for jurisdictions other than Norway, would not require any filing, registration or similar action. The Subscription Rights and the Offer Shares have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or with any securities regulatory authority of any state or other jurisdiction in the United States, and are being offered and sold: (i) in the United States only to "qualified institutional buyers" ("QIBs") as defined in Rule 144A under the U.S. Securities Act ("Rule 144A") or in other transactions exempt from registration requirements under the U.S. Securities Act; and (ii) outside the United States in compliance with Regulation S under the U.S. Securities Act ("Regulation S"). The distribution of this Prospectus and the offer and sale of the Subscription Rights and the Offer Shares in certain jurisdictions may be restricted by law. For more information regarding restrictions in relation to the Rights Issue, see Section 16 "Selling and transfer restrictions". The due date for the payment of the Offer Shares is 23 February Delivery of the Offer Shares is expected to take place on or about 27 February 2017 through the facilities of the VPS. Trading in the Offer Shares on the Oslo Stock Exchange is expected to commence on or about 27 February Sole Manager and Bookrunner Carnegie AS The date of this Prospectus is 30 January 2017

2 IMPORTANT INFORMATION This Prospectus has been prepared in connection with the Rights Issue and the listing of the Offer Shares on the Oslo Stock Exchange. As this Rights Issue is addressed to the Company's existing shareholders, the level of disclosure in this Prospectus is proportionate to this type of issue, cf. EC Commission Regulation EC/809/2004 article 26a (3). This Prospectus has been prepared to comply with the Norwegian Securities Trading Act of 29 June 2007 no. 75 (the "Norwegian Securities Trading Act") and related secondary legislation, including the Commission Regulation (EC) no. 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses, as amended, and as implemented in Norway (the "EU Prospectus Directive"). This Prospectus has been prepared solely in the English language. The Financial Supervisory Authority of Norway (Nw.: Finanstilsynet) (the "Norwegian FSA") has reviewed and approved this Prospectus in accordance with Sections 7-7 and 7-8 of the Norwegian Securities Trading Act. The Norwegian FSA has not controlled or approved the accuracy or completeness of the information included in this Prospectus. The approval by the Norwegian FSA is dated 30 January 2017 and only relates to the information included in accordance with predefined disclosure requirements. The Norwegian FSA has not made any form of control or approval relating to corporate matters described in or referred to in this Prospectus. For definitions of certain other terms used throughout this Prospectus, see Section 18 "Definitions and glossary". The Company has engaged Carnegie AS ("Carnegie") as sole manager and bookrunner (referred to as the "Manager"). The information contained herein is current as at the date hereof and subject to change, completion and amendment without notice. In accordance with Section 7-15 of the Norwegian Securities Trading Act, significant new factors, material mistakes or inaccuracies relating to the information included in this Prospectus, which are capable of affecting the assessment by investors of the Offer Shares between the time of approval of this Prospectus by the Norwegian FSA and the listing of the Offer Shares on the Oslo Stock Exchange, will be included in a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus, nor the sale of any Offer Share, shall under any circumstances imply that there has been no change in the Group's affairs or that the information herein is correct as at any date subsequent to the date of this Prospectus. No person is authorised to give information or to make any representation concerning the Group or in connection with the Rights Issue or the sale of the Offer Shares or the Subscription Rights other than as contained in this Prospectus. If any such information is given or made, it must not be relied upon as having been authorised by the Company or the Manager or by any of the affiliates, representatives, advisors or selling agents of any of the foregoing. The distribution of this Prospectus and the offer and sale of the Offer Shares and the granting or use of the Subscription Rights in certain jurisdictions may be restricted by law. This Prospectus does not constitute an offer of, or an invitation to purchase, any of the Offer Shares or use the Subscription Rights to subscribe for Offer Shares in any jurisdiction in which such offer, sale or subscription would be unlawful. Neither this Prospectus nor any advertisement or any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with applicable laws and regulations. Persons in possession of this Prospectus are required to inform themselves about and to observe any such restrictions. In addition, the Shares and the Subscription Rights are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable securities laws and regulations. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. See Section 16 "Selling and transfer restrictions". This Prospectus and the terms and conditions of the Rights Issue as set out herein and any sale and purchase of Offer Shares and the granting and use of the Subscription Rights hereunder shall be governed by and construed in accordance with Norwegian law. The courts of Norway, with Oslo as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Rights Issue or this Prospectus. In making an investment decision, prospective investors must rely on their own examination, and analysis of, and enquiry into the Group and the terms of the Rights Issue, including the merits and risks involved. None of the Company or the Manager, or any of their respective representatives or advisers, is making any representation to any offeree or purchaser of the Offer Shares or holder of Subscription Rights regarding the legality of an investment in the Offer Shares or the Subscription Rights by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Offer Shares or the use of the Subscription Rights to subscribe for Offer Shares. All Sections of the Prospectus should be read in context with the information included in Section 4 "General information". NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. NOTICE TO INVESTORS IN THE UNITED STATES Because of the following restrictions, prospective investors are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the Offer Shares or the Subscription Rights. The Offer Shares and the Subscription Rights have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction in the United States and may not be offered, sold, pledged or otherwise transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in compliance with any applicable state securities laws. All offers and sales in the United States will be made only to QIBs in reliance on Rule 144A or pursuant to another exemption from, on in transactions not subject to, the registration requirements of the U.S. Securities Act. All offers and sales outside the United States will be made in "offshore transactions" as defined in, and in reliance on, Regulation S. Prospective purchasers are hereby notified that sellers of Offer Shares or Subscription Rights may be relying on the exemption from the provisions of Section 5 of the U.S. Securities Act provided by Rule 144A. See Section 16.2 "United States". I

3 Any Offer Shares or Subscription Rights offered or sold in the United States will be subject to certain transfer restrictions and each purchaser will be deemed to have made acknowledgements, representations and agreements, as set forth under Section 16.2 "United States". Neither the Offer Shares nor the Subscription Rights have been recommended by any United States federal or state securities commission or regulatory authority. Further, the foregoing authorities have not passed upon the merits of the Rights Issue or confirmed the accuracy or determined the adequacy of this Prospectus. Any representation to the contrary is a criminal offense under the laws of the United States. In the United States, this Prospectus is being furnished on a confidential basis solely for the purposes of enabling a prospective investor to consider purchasing the Offer Shares or the Subscription Rights. The information contained in this Prospectus has been provided by the Company and other sources identified herein. Distribution of this Prospectus to any person other than the offeree specified by the Manager or its representatives, and those persons, if any, retained to advise such offeree with respect thereto, is unauthorised and any disclosure of its contents, without prior written consent of the Company, is prohibited. This Prospectus is personal to each offeree and does not constitute an offer to any other person or to the public generally to purchase Offer Shares or Subscription Rights or subscribe for or otherwise acquire the Offer Shares or Subscription Rights. NOTICE TO INVESTORS IN THE UNITED KINGDOM This Prospectus is only being distributed to and is only directed at (i) persons who are outside the United Kingdom (the "UK") or (ii) investment professionals falling within Article 19(5) of the UK Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). The Subscription Rights and the Offer Shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this Prospectus or any of its contents. The Manager has represented, warranted and agreed (i) that it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of the Offer Shares and Subscription Rights in circumstances in which section 21(1) of the FSMA does not apply to the Company and (ii) that it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Offer Shares and the Subscription Rights in, from or otherwise involving the UK. NOTICE TO INVESTORS IN THE EUROPEAN ECONOMIC AREA In any member state of the European Economic Area (the "EEA") that has implemented the EU Prospectus Directive, other than Norway (each, a "Relevant Member State"), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the EU Prospectus Directive. The Prospectus has been prepared on the basis that all offers of Subscription Rights and Offer Shares outside Norway will be made pursuant to an exemption under the EU Prospectus Directive from the requirement to produce a prospectus for offer of securities. Accordingly, any person making or intending to make any offer within the EEA of Offer Shares or Subscription Rights which is the subject of the Rights Issue contemplated in this Prospectus within any EEA member state (other than Norway) should only do so in circumstances in which no obligation arises for the Company or the Manager to publish a prospectus or a supplement to a prospectus under the EU Prospectus Directive for such offer. Neither the Company nor the Manager has authorised, nor do they authorise, the making of any offer of Shares or Subscription Rights through any financial intermediary. Each person in a Relevant Member State other than, in the case of paragraph (a), persons receiving offers contemplated in this Prospectus in Norway, who receives any communication in respect of, or who acquires any Offer Shares or Subscription Rights under, the offers contemplated in this Prospectus will be deemed to have represented, warranted and agreed to and with the Manager and the Company that: a) it is a qualified investor as defined in the EU Prospectus Directive; and b) in the case of any Offer Shares or Subscription Rights acquired by it as a financial intermediary, as that term is used in Article 3(2) of the EU Prospectus Directive, (i) such Offer Shares or Subscription Rights acquired by it in the Rights Issue have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the EU Prospectus Directive, or in circumstances in which the prior consent of the Manager has been given to the offer or resale; or (ii) where such Offer Shares or Subscription Rights have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those Offer Shares or Subscription Rights to it is not treated under the EU Prospectus Directive as having been made to such persons. For the purposes of this provision, the expression an "offer to the public" in relation to any of the Offer Shares and the Subscription Rights in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any of the Offer Shares or Subscription Rights, as the same may be varied in that Relevant Member State by any measure implementing the EU Prospectus Directive in that Relevant Member State, and the expression "EU Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU amending the EU Prospectus Directive. See Section 16 "Selling and transfer restrictions" for certain other notices to investors. ENFORCEMENT OF CIVIL LIABILITIES The Company is a public limited company incorporated under the laws of Norway. As a result, the rights of holders of the Shares will be governed by Norwegian law and the Company's articles of association (the "Articles of Association"). The rights of shareholders under Norwegian law may differ from the rights of shareholders of companies incorporated in other jurisdictions. The members of the Company's board of directors (the "Board Members" and the "Board of Directors", respectively) and the members of the Group's senior management (the "Management") are not residents of the United States, and a substantial portion of the Company's assets are located outside the United States. As a result, it may be difficult for investors in the United States to effect service of process on the Company or its Board Members and members of Management in the United States or to enforce in the United States judgments obtained in U.S. courts against the Company or those persons, including judgments based on the civil liability provisions of the securities laws of the United States or any State or territory within the United States. Uncertainty exists as to whether courts in Norway will enforce judgments obtained in other jurisdictions, including the United States, against the Company or its Board Members or members of Management under the securities laws of those jurisdictions or entertain actions in Norway against the Company or its Board Members or members of Management under the securities laws of other jurisdictions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may not be enforceable in Norway. The United States does not currently have a treaty providing for reciprocal recognition and enforcement of judgements (other than arbitral awards) in civil and commercial matters with Norway. II

4 AVAILABLE INFORMATION The Company has agreed that, for so long as any of the Offer Shares are "restricted securities" within the meaning of Rule 144(a)(3) under the U.S. Securities Act, it will during any period in which it is neither subject to Sections 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the U.S. Exchange Act, provide to any holder or beneficial owners of Shares, or to any prospective purchaser designated by any such registered holder, upon the request of such holder, beneficial owner or prospective owner, the information required to be delivered pursuant to Rule 144A(d)(4) of the U.S. Securities Act. III

5 TABLE OF CONTENTS 1 SUMMARY RISK FACTORS RESPONSIBILITY FOR THE PROSPECTUS GENERAL INFORMATION DIVIDENDS AND DIVIDEND POLICY REASONS FOR THE RIGHTS ISSUE INDUSTRY AND MARKET OVERVIEW BUSINESS OF THE GROUP CAPITALISATION AND INDEBTEDNESS FINANCIAL AND OTHER INFORMATION BOARD OF DIRECTORS, MANAGEMENT AND CORPORATE GOVERNANCE CORPORATE INFORMATION AND DESCRIPTION OF THE SHARE CAPITAL SECURITIES TRADING IN NORWAY TAXATION THE TERMS OF THE RIGHTS ISSUE SELLING AND TRANSFER RESTRICTIONS ADDITIONAL INFORMATION DEFINITIONS AND GLOSSARY APPENDICES APPENDIX A ARTICLES OF ASSOCIATION OF RENONORDEN ASA... A1 APPENDIX B SUBSCRIPTION FORM FOR THE RIGHTS ISSUE... B1 1

6 1 SUMMARY Summaries are made up of disclosure requirements known as "Elements". These Elements are numbered in Sections A E (A.1 E.7) below. This summary contains all the Elements required to be included in a summary for these types of securities and the Company. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case, a short description of the Element is included in the summary with the mention of "not applicable". Section A Introduction and Warnings A.1 Warning This summary should be read as an introduction to the Prospectus; any decision to invest in the securities should be based on consideration of the Prospectus as a whole by the investor; where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before the legal proceedings are initiated; civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. A.2 Consent for intermediaries Not applicable. No consent is granted by the Company for the use of the Prospectus for subsequent resale or final placement of the Shares or the Subscription Rights. Section B Issuer B.1 Legal and commercial name B.2 Domicile and legal form, legislation and country of incorporation B.3 Current operations, principal activities and markets RenoNorden ASA. The Company is a public limited company organised and existing under the laws of Norway, pursuant to the Norwegian Public Limited Liability Companies Act. The Company was incorporated in Norway on 17 March 2011, and the Company's registration number in the Norwegian Register of Business Enterprises is The Group is a leading domestic waste collection services provider, and the only operator in its segment with coverage in four Nordic countries. The headquarter of this cross-nordic group is located in Eastern Norway, in Frogner in Sørum. Within each country, the Group operates a network of local branches that manage the day-to-day operations of the Group's business and customer contracts. The core business activity of the Group is the collection and transportation for household waste from households to designated waste separation facilities and treatment facilities. In general, the Group tenders waste collection contracts awarded by the municipalities, which are typically entered on a five to seven year basis with a renewal option of two or more years for the municipalities. To generate additional revenue the Group also provides additional services to its customers, such as leafleting to residents, cleaning or replacement of bins or tagging of bins. In Finland, the business also operates in the commercial waste collection segment. Since its establishment, the Group has experienced strong revenue 2

7 growth, both organically and through acquisitions. In 2015, the Group generated revenues of NOK million and EBITDA of NOK 291 million (EBITDA margin 16.1%). For the same period the operating profit was NOK 158 million. The revenue as of 30 September 2016 is slightly higher at NOK million while the EBITDA is 255 million (EBITDA margin 13.2%) and the operating loss was NOK 405 million. The decrease in margins is driven by a combination of replacement of high margin contracts with lower margin contracts, loss making contracts and operational issues, as well as increasing competition and price pressure within the Group's business segment. As of 30 September 2016, the Group had an order reserve of approximately NOK 5.0 billion, excluding customer extension options, and NOK 7.5 billion including such extension. Non-extension of the contracts is a rare occurrence. The Group operates in strong growing economies with increasing waste volumes and increasing waste fractions. With long-term contracts and strong and order reserves, the Group has a good revenue visibility. The majority of the Group's customers are municipalities, whereas Nordic municipalities in general have strong credit ratings, limiting the counter-party credit risk. B.4a Significant recent trends The market demand for services such as the ones the Group offer fluctuates, depending on several different factors. Waste and economic growth are correlated, meaning that the Group's business is affected by macroeconomic trends and development. The level of domestic waste collection defines the amount of the addressable market the Group can target in order to grow, but also highlights the level of market share the Group needs to defend through renewal or re-win of current contracts. Since 31 December 2015 and until the date of the Prospectus, the Group has experienced operational issues, delivering results below the Group s expectations. The current Management of the Group has taken significant measures to improve the operations of the Group. Below is an overview of the material developments in the Group's business since 31 December 2015: The Group has experienced a decrease in EBITDA and operating profit driven by expired high margin contracts, continued operational challenges related to new contracts and investments into strengthening the organisation; Provisions made for onerous contracts. The Group identified six onerous contracts in Norway and two onerous contracts in Denmark, which according to IAS 37, totalled NOK 166 million in losses; The goodwill for all segments were tested for impairment and goodwill for the Norwegian and Danish segment was accordingly written off by NOK 239 million as of 30 June Reduced depreciation time and write down of the Group's vehicles. Financing: The Group has invested NOK 263 million in Vehicles as of 30 September 2016, financed by lease arrangements. See Section 10.1 "Financial Statements and Interim Financial Statements" for more information. Except for the above, there have been no other significant changes in the financial or trading position of the Group since the date of the Interim Financial Statements. B.5 Description of the Group The Company, which is the parent company of the Group, is a holding company and the operations of the Group are carried out through the operating subsidiaries of the Company. The Company owns 100% of 3

8 the shares in the subsidiaries (i) RenoNorden AB (Sweden), (ii) RenoNorden AS (Norway), (iii) RenoNorden A/S (Denmark) and (iv) RenoNorden OY (Finland). B.6 Interests in the Company and voting rights As of 27 January 2017, the Company had 1438 shareholders. The Company's 20 largest shareholders as of the same date are shown in the table below. # Shareholders Number of Shares Percent 1 Asta Netherlands B.V. 3,284, % 2 Folketrygdfondet 2,500, % 3 Accentfourteen Holding Limited 2,078, % 4 Danske Bank A/S (nominee) 1,479, % 5 SEB Nordenfond 1,457, % 6 Nordnet Bank AB (nominee) 1,388, % 7 Skandinaviska Enskilda Banken AB (nominee) 1,100, % 8 Carnegie AS Egenhandelskonto 682, % 9 UBS Switzerland AG (nominee) 624, % 10 Canaccord Genuity Non US RESA 595, % 11 ALM. Brand Bank A/S (nominee) 550, % 12 Waage Johan Petter 400, % 13 Avanza Bank AB (nominee) 366, % 14 Skandinaviska Enskilda Banken S.A. (nominee) 362, % 15 The Bank of New York Mellon N.V. (nominee) 277, % 16 UBS AG, London Branch 264, % 17 UBS Switzerland AG (nominee) 260, % 18 Bergen Kommunale Pensjonskasse 250, % 19 Danske Invest Norge Vekst 205, % 20 JPMorgan Chase Bank, N.A., London (nominee) 185, % Others... 8,933, % Total... 27,247, % Shareholders owning 5% or more of the Shares have an interest in the Company's share capital which is noticeable pursuant to the Norwegian Securities Trading Act. As of the date of this Prospectus, no shareholder, other than Asta Netherlands B.V. (approximately 12%), Folketrygdfondet (approximately 9.2%), Accenturefourteen Holding Limited (approximately 7.6%), Danske Bank A/S (approximately 5.4%), SEB Nordenfond (approximately 5.4%) and Nordnet Bank AB (approximately 5.1%) holds 5% or more of the issued Shares. Each of the Shares carries one vote. There are no differences in voting rights between the Shares. The Company is not aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. B.7 Selected historical key financial information The following selected financial information has been derived from the Company's unaudited condensed consolidated Interim Financial Statements as of, and for the three and nine month periods ended, 30 September 2016 (the Interim Financial Statements) and the Group's audited consolidated Financial Statements as of, and for the year ended, 31 December 2015 (the Financial Statements). It should be noted that the Interim Financial Statements have been restated to reflect the correction of an error in the interim financial statements previously issued by the Company. The Financial Statements have been prepared in accordance with IFRS, while the Interim Financial Statements have been prepared in accordance with IAS 34. The selected financial information included herein should be read in 4

9 connection with, and is qualified in its entirety by reference to the Financial Information incorporated by reference hereto. In NOK 1,000 Three months ended 30 September Nine months ended 30 September Year ended 31 December Income statement Total operating revenue , ,343 1,463,251 1,338,213 1,808,359 Operating profit (loss)... 44,015 57,871 (405,755) 133, ,428 Profit(loss) for period... 32,951 34,019 (373,956) 76,595 83,422 Balance sheet Total non-current assets... 1,604,591 1,789,733 1,604,591 1,789,733 1,847,195 Total current assets , , , , ,336 Total assets... 2,097,537 2,249,053 2,097,537 2,249,053 2,344,530 Total equity , , , , ,998 Total non-current liabilities... 1,418,907 1,188,752 1,418,907 1,188,752 1,238,263 Total current liabilities , , , , ,269 Total liabilities... 1,823,393 1,549,151 1,823,393 1,549,151 1,633,532 Total equity and liabilities... 2,097,537 2,249,053 2,097,537 2,249,053 2,344,530 Cash flow Net cash flows from operating activities... 71,790 60, , , ,752 Net cash flow from investing activities... (13,399) (2,306) (22,164) (20,782) (20,914) Net cash flows from financing activities... (25,041) (25,320) (124,649) (192,726) (208,483) Net change in cash and cash equivalents... 29,145 34,858 (46,867) (64,255) (24,065) Cash and cash equivalents at end of period , , , , ,577 1 The figures presented for the three and nine months ended 30 September 2016, are restated, as described in note 5 to the Interim Financial Statements incorporated by reference hereto. The Company published the restated Interim Financial Statement on 19 December Prior to this, the Group had published interim financial statements for the three and nine months ended 30 September 2016, on 8 November 2016 and published on 9 November B.8 Selected key pro forma financial information Not applicable. There is no pro forma financial information. B.9 Profit forecast or estimate Not applicable. No profit forecasts or estimates are made. B.10 Audit report qualifications Not applicable. There are no qualifications in the audit report. B.11 Insufficient working capital Not applicable. The Company is of the opinion that the working capital available to the Group is sufficient for the Group's present requirements, for the period covering at least 12 months from the date of this Prospectus. Section C Securities C.1 Type and class of securities admitted to trading and identification number The Company has one class of Shares, and all Shares in that class have equal rights in the Company. Each of the Shares will carry one vote. The Shares have been created under the Norwegian Public Limited Liability Companies Act and are registered in book-entry form with the VPS under ISIN NO C.2 Currency of issue The Shares are issued in NOK. C.3 Number of shares in issue and par value C.4 Rights attaching to the securities As of the date of this Prospectus, the Company's share capital is NOK 27,247,948 divided into 27,247,948 Shares, each having a par value of NOK 1. The Company has one class of Shares in issue, and in accordance with the Norwegian Public Limited Liability Companies Act, all Shares in that class provide equal rights in the Company. Each of the Shares carries one vote. 5

10 C.5 Restrictions on transfer The Articles of Association do not provide for any restrictions on the transfer of Shares, or a right of first refusal for the Company. Share transfers are not subject to approval by the Board of Directors. C.6 Admission to trading The Shares are, and the Offer Shares will be, admitted to trading on the Oslo Stock Exchange. The Company currently expects commencement of trading in the Offer Shares on the Oslo Stock Exchange on or around 27 February The Company has not applied for admission to trading of the Shares on any other stock exchange or regulated market. C.7 Dividend policy In 2014 the Company paid NOK 50,000,000 in dividends which equals NOK dividend per share, and in 2015 the dividends were NOK 50,136,224 which equals NOK 1.84 dividend per share. The Board of Directors will not propose dividend distribution for the year ended 31 December 2016 due to the Group's current financial situation. The Company will aim to pay dividends in the future. However, there can be no assurance that a dividend will be proposed or declared in any given year as this, and the amount of any dividend, will be determined by the prevailing circumstances at the time. If a dividend is proposed or declared, there can be no assurance what the dividend amount will be. Section D Risks D.1 Key risks specific to the Company or its industry The following is a summary of key risks that relate to the Group's business and industry, laws, regulations and litigation and financing and market risks. Investors should read, understand and consider all risk factors in this Prospectus, which should be read in their entirety, before making a decision to invest in the Offer Shares. Risks related to the business of the Group and the industry in which the Group operates, including: The Group operates in a highly competitive industry, which is subject to competitive tender processes where there is no guarantee that the Group can renew existing contracts nor win new or existing contracts The market is subject to a fierce price competition, whereas the price is an important component in the tender process. If the Group has to lower its prices in order to be the successful bidder, its profitability and cash flow will be affected Some of the Group's competitors, such as the vertically integrated waste management companies, may have competitive advantages not available to the Group, allowing the competitors to reduce their prices at levels that are not profitable for the Group Waste collection demand and consumer consumption are correlated, meaning that the Group's business will be affected by changes in national, regional and general economic factors The Group may be adversely affected by exposure under current, as well as future, inflexible, long-term contracts with fixed unit prices Risks related to laws, regulations and litigation, including: Waste contracts with municipalities, inter-municipal companies and other associations and companies are subject to competitive tender processes, where the law requires the fixed term contracts entered into to be re-tendered at the end of their terms 6

11 The tender processes for municipal waste collection contracts are highly regulated, rigid and transparent. The Group cannot enter into bilateral discussions with its potential customers. All tenders submitted, and the respective unit prices, are made public to all other bidders once the contract is awarded, giving all bidders full transparency of competitor bids. This enhances the importance of tactics in the tenders processes, and exposes the Group to competitive challenge The Group may lose contracts by early termination due to material breach or failure to meet contractual requirements. In addition, and subject to the sole discretion of its customers, the contracts may not be extended past the original expiration date The Group is subject to strict environmental and occupational health and safety laws and regulations. Compliance with existing regulatory requirements is costly, and changes in the applicable laws and regulations could increase the Group's compliance costs and reduce the Group's profitability Substantially all of the Group's employees are parties to collective bargaining agreements and trade unions, and increases in cost of labour may reduce the Group's profitability Risks related to financing and market risk, including: The Group operates in a capital intensive industry that requires a substantial amount of capital expenditure and other long-term committed expenditures, e.g. expenditure relating to the leasing of vehicles. The Group faces risks beyond its control, such as financial institutions ceasing to provide loans or require guarantors to guarantee the Group's performance under loan arrangements The Group is financed by equity and debt, and there are no guarantees that it will obtain the financing it requires in the future. There is also a risk of higher financing costs related to future debt financing, such as higher interest rates D.3 Key risks specific to the securities The following is a summary of key risks that relate to the Shares and the Rights Issue. Investors should read, understand and consider all risk factors in this Prospectus, which should be read in their entirety, before making a decision to invest in the Offer Shares. Risks related to the Shares, including: The price of the Shares could fluctuate significantly in the future Future issuances of Shares or other securities could dilute the holdings of shareholders and could materially affect the price of the Shares Pre-emptive rights to secure and pay for Shares in additional issuance could be unavailable to U.S. or other shareholders Investors could be unable to exercise their voting rights for Shares registered in a nominee account The transfer of Shares and Subscription Rights is subject to restrictions under the securities laws of the United States and other jurisdictions The Company s ability to pay dividends is dependent on the availability of distributable reserves, as well as sufficient liquidity, and the Company may be unable or unwilling to pay any dividends in the future Exchange rate fluctuations could adversely affect the value of the 7

12 Shares and any dividends paid on the Shares for an investor whose principal currency is not NOK Risks related to the Rights Issue, including: Existing Shareholders who do not participate in the Rights Issue may experience significant dilution in their shareholding An active trading market in Subscription Rights may not develop on the Oslo Stock Exchange and/or the market value of the Subscription Rights may fluctuate The sale of Subscription Rights by or on behalf of Existing Shareholders may result in a reduction in the market price of the Subscription Rights and increased volatility in the Shares If the Rights Issue is withdrawn, the Subscription Rights will no longer be of value Section E Offer E.1 Net proceeds and estimated expenses E.2 Reasons for the Rights Issue and use of Proceeds The net proceeds from the Rights Issue are expected to be approximately NOK 330 million. The total costs and expenses related to the Rights Issue are estimated to amount to NOK 20 million (excluding VAT). The Group has in 2016 struggled with operational issues combined with a challenging competitive environment with observable increased competition and price pressure, leading to delivered operating results below the Group s expectations. In the restated Interim Financial Statements as of 30 September 2016, the Group recognized provisions at 30 June 2016 for onerous contracts in Denmark and Norway of NOK 166 million in total and goodwill impairment of NOK 239 million in Norway and Denmark and impairment of equipment of NOK 71 million. This has contributed to a decrease in the Group's equity ratio which was reported at 13% as of 30 September The combination of increased investments and decreased EBITDA has also lead net interest bearing debt (NIBD) over EBITDA (NIBD/EBITDA) approaching the maximum covenant level of 5.0x (4.85x as of 30 September 2016).Although significant improvement measures have been taken and new Management has been onboarded, the above issues continue to put pressure on the statement of financial position and covenants of the Group. The Company expects revenue for and as of the period ended 31 December 2016 to be slightly below the level for the same period ended 31 December 2015 and a weaker seasonal development in EBITDA margin in the period ended 31 December 2016 compared to the previous year. Furthermore, the Company expects the total capital expenditure for the period ended 31 December 2016 to be slightly higher compared to the level as of the period ended 30 September Going forward, the Company expects the Group EBITDA margins to stabilize in the short term and thereafter slightly improve in the medium term, and Management will apply a disciplined approach to new contracts. At the same time, starts-ups of large contracts are expected in 2017, mainly related to already committed contracts, are expected to lead to capital expenditures in 2017 which are above the capital expenditure level of In addition, the following changes in technological requirements in contracts, we have during the second quarter seen that the value at 8

13 the end of the contract period is limited for certain older vehicle groups. This has led to a write down of book value for these groups to expected recoverable amount. Furthermore, the review revealed that some of the trucks were already taken out of use in the second quarter and had a carrying value higher than expected sales price less cost to sell at that time, which required that an immediate impairment is recognized. These two effects lead to impairment of equipment in the second quarter of 2016 with NOK 71 million. In addition, estimated useful life of newer vehicle groups is reduced to 10 years, also due to the increased technological change. This has led to increased depreciation costs by approximately NOK 15 million in total for the second and third quarter of 2016 and increased annual depreciation going forward. Going forward, the effect of these increased depreciations is expected to be approximately NOK 6 to NOK 8 million in the three month period ended 31 December 2016, while in 2017 and over the next 10 years, the total effect is expected to be approximately NOK 50 million, of which approximately NOK 15 million will be effective in 2017 and thereafter decreasing. As a consequence of the increased investments mainly related to already committed contracts, in combination with the margin development, the Company expects a further increase in the NIBD/EBITDA ratio and that continued compliance with the Company's maximum NIBD/EBITDA covenant of 5.0x under the Company's financing agreements will be challenging over the coming quarters unless a share capital increase is conducted. A covenant breach is expected to result in a significant increase in financing cost and disruption of Management's focus on operational improvements. Given the current situation, the Board of Directors, has decided to execute the Rights Issue of NOK 350 million to strengthen the Group's statement of financial position and create headroom with respect to its NIBD/EBITDA covenant, thus providing a better platform for the business going forward and increased refinancing flexibility. E.3 Terms and conditions of the Rights Issue The Rights Issue consists of an offer by the Company to issue 350,000,000 Offer Shares at a Subscription Price of NOK 1.00 per Offer Share, thereby raising gross proceeds of NOK 350 million. Existing Shareholders will be granted tradable Subscription Rights that, subject to certain limitations based on applicable laws and regulations, provide preferential right to subscribe for, and be allocated, Offer Shares at the Subscription Price in the Rights Issue. Over-subscription and subscription without Subscription Rights is permitted; however, there can be no assurance that Offer Shares will be allocated for such subscriptions. The Rights Issue is underwritten by the Underwriters pursuant to, and subject to the limitations in, the Underwriting Agreement, as further described in Section "The Underwriting" below. The Subscription Period will commence at 09:00 hours (CET) on 2 February 2017 and end at 16:30 hours (CET) on 16 February The Subscription Period may not be extended or shortened. The Subscription Rights will be fully tradable and listed on the Oslo Stock Exchange with ticker code "RENO T" during the Subscription Period. The payment for Offer Shares allocated to a subscriber falls due on the Payment Date (23 February 2017). Subject to timely payment of the entire subscription amount in the 9

14 Rights Issue, the Company expects that the share capital increase pertaining to the Rights Issue will be registered with the Norwegian Register of Business Enterprises on or about 24 February 2017 and that the Offer Shares will be delivered to the VPS accounts of the subscribers to whom they are allocated on or about the same day. The Offer Shares allocated in the Rights Issue are expected to be traded on the Oslo Stock Exchange from and including 27 February Completion of the Rights Issue is subject to certain conditions, see Section 15.4 "Conditions for completion of the Rights Issue". E.4 Material and conflicting interests The Manager or its affiliates have provided from time to time, and may provide in the future, investment and commercial banking services to the Company and its affiliates in the ordinary course of business, for which they may have received and may continue to receive customary fees and commissions. The Manager, its employees and any affiliate may currently own Shares in the Company. Furthermore, in connection with the Rights Issue, the Manager, its employees and any affiliate acting as an investor for its own account may receive Subscription Rights (if they are Existing Shareholders) and may exercise its right to take up such Subscription Rights and acquire Offer Shares, and, in that capacity, may retain, purchase or sell Subscription Rights or Offer Shares and any other securities of the Company or other investments for its own account and may offer or sell such securities (or other investments) otherwise than in connection with the Rights Issue. The Manager does not intend to disclose the extent of any such investments or transactions otherwise than in accordance with any legal or regulatory obligation to do so. Furthermore, the Manager will receive fees in connection with the Rights Issue and, as such, have an interest in the Rights Issue. E.5 Selling shareholders and lock-up agreements E.6 Dilution resulting from the Offering E.7 Estimated expenses charged to investor There are no selling shareholders, and there are no lock-up agreements related to the Shares. The Rights Issue will result in an immediate dilution of approximately 93% for Existing Shareholders who do not participate in the Rights Issue. Not applicable. The expenses related to the Rights Issue will be paid by the Company. 10

15 2 RISK FACTORS An investment in the Offer Shares and/or the Subscription Rights involves inherent risk. Before making an investment decision, investors should carefully consider the risk factors and all information contained in this Prospectus, including the Financial Information and related notes. The risks and uncertainties described in this Section 2 are the principal known risks and uncertainties faced by the Group as of the date hereof that the Company believes are the material risks relevant to an investment in the Offer Shares and/or the Subscription Rights. An investment in the Offer Shares and/or the Subscription Rights is suitable only for investors who understand the risks associated with this type of investment and who can afford to lose all or part of their investment. The absence of negative past experience associated with a given risk factor does not mean that the risks and uncertainties described herein should not be considered prior to making an investment decision in respect of the Offer Shares and/or the Subscription Rights. If any of the following risks were to materialise, individually or together with other circumstances, they could have a material adverse effect on the Group and/or its business, results of operations, cash flows, financial condition and/or prospects, which may cause a decline in the value and trading price of the Offer Shares and/or the Subscription Rights, resulting in the loss of all or part of an investment in the same. The order in which the risks are presented does not reflect the likelihood of their occurrence or the magnitude of their potential impact on the Group's business, results of operations, cash flows, financial condition and/or prospects. The risks mentioned herein could materialise individually or cumulatively. The information in this Section 2 is as of the date of this Prospectus. 2.1 Risks related to the business of the Group and the industry in which the Group operates The Group operates in a highly competitive industry which is reflected in pricing pressure for the market participants and there is no guarantee that the Group can renew, or renew at favourable terms or win contracts in the future. The domestic and commercial waste collection industry is highly competitive. Substantially all waste collection contracts with municipalities, inter-municipal companies and other associations and companies are subject to competitive tender processes. As these contracts generally are fixed term contracts, the law requires that they are re-tendered at the end of their terms (which include extension options). Because the contract terms are between five and seven years, it is expected that between 14-20% of all contracts come up for re-tender each year, although this can be higher and lower depending on when the original contracts were awarded. Price competition is fierce, and price is an important component in determining who will ultimately win and be awarded the contract. Municipality focus on price may increase. While the Group does not expect to renew all existing contracts and win all new contracts, the prospects of the Group are dependent on its ability to continue to retain and win its fair share of contract tenders. The Group competes with large and medium-sized vertically integrated waste management companies in each of its geographies that may have competitive advantages not available to private companies or niche providers. Some of these competitors may have greater financial and/or operational resources, such as lower administrative costs or larger fleets of unutilized vehicles, which may put them at a competitive advantage relative to the Group. The industry also includes numerous regional and local companies, of varying sizes and financial resources. Some of these competitors may have lower financial return expectations, allowing them to reduce their prices to win contracts at levels that are not profitable for the Group. Competition levels may also increase further in the future due to various reasons. For example Norwegian, Swedish and Danish municipalities processing capacity may in the future be privatised thereby allowing vertical integration throughout the waste management supply chain. This could favour vertically integrated operators, which would negatively impact the position and prospects of the Group. Also a change in legislation could result in the removal of the monopoly position the municipalities currently hold on the domestic waste collection routes, thereby turning the markets into unregulated or "free" markets, such as is the case in parts of Finland. While this would not impact existing contracts, this could affect the profitability and prospects of the Group as existing contracts end. Furthermore, there is a risk that the Group may experience a decrease in overall EBITDA-margin, if there is a reallocation to countries with lower margin. 11

16 If the Group is unable to successfully compete against its competitors, the Group's ability to retain existing customers and obtain future business could be adversely affected. The Group's failure to renew and win contracts, or the Group renewing and winning contracts at levels below what it expects or has been able to do historically, would adversely impact the Group's business, results of operations, financial position and prospects. Importantly, the Group may have to substantially lower prices in order to be the successful bidder, thereby negatively affecting its profitability and cash-flow. General economic and other factors can affect the Group's revenues and profitability. The Group's business is affected by changes in national, regional and general economic factors that are outside of the Group's control. Although waste needs to be collected regardless of economic conditions, a weak economy generally results in decreased levels of consumer spending which may reduce the volumes of waste generated. Where the Group is paid on the basis of kilogram/tonnes collected, this could directly negatively impact the Group's revenues and profit. In situations where the volume of waste to be collected falls dramatically, it could also cause a reduction in the number, or frequency, of bins to be collected, thereby adversely impacting the Group's revenues, profit and cash-flow. Other factors that affect the number of bins or volume of waste collected include urbanisation, given the fact that waste is usually collected in larger bins in urbanised areas, and the level of immigration into and the extent of emigration out of a region. Declines in population in the areas the Group operate could negatively impact the level of revenues and profitability on the Group's contracts. In addition, the Group's costs (largely people, fuel and maintenance on the vehicles) may be difficult to quickly adjust to match shifting volume levels given the respective routes still need to be driven. Most of the Group's contracts have price adjustment provisions that are tied to an index 1, and the Group's costs may increase in excess of the increase, if any, in such indices. The Group may be adversely affected by exposure under current, as well as future, inflexible, longterm contracts with fixed unit prices. The Group typically collects waste in a particular geographical area under a long-term contract. The terms and conditions of many of the Group s contracts are fixed as part of a tender process; i.e. not open to negotiation. In fact, the contract forms the basis of the underlying tender on which bids are invited. Any material changes to the terms and conditions subsequent to the tender being awarded would, by law, require that the contract is formally re-tendered. The unit price, i.e. the fee charged per bin or per kilogram/tonne collected, is decided upfront having been calculated by the bidders on the basis of the contract terms and other information and assumptions provided by the customer. With the exception of adjustment provisions that allow for annual inflation adjustment of the fixed unit prices in line with a prescribed index 2, unit prices may only be adjusted in very limited circumstances for example when waste volumes to be collected increase or decrease by 10% to 20% of the initial annual volume. Tenders could also include assumptions on roll-out of certain services (for example separate food bins) which are typically for the risk of the bidder and not the customer. In situations where the rate of roll-out is slower than expected, this could have a negative impact on profitability. In some of the municipality contracts in Finland, the index change will only occur if the change is at least two percent (subject to the specific regulation in the particular contract). Commercial contracts generally have a back-to-back clause with waste processors for the gate fees 3 and in some contracts an index change will occur if there is a change regardless of the materiality of change. The length of municipality contracts in Finland generally varies from five to up to seven years and for commercial contracts between two and five years which may be extended annually. The length of the Group's municipal contracts in Sweden, Norway and Denmark generally varies from five to up to seven years. Entering into inflexible long-term contracts exposes the Group to the risks of: 1 Normally, indices published by Statistics Denmark, Statistics Finland, Statistics Norway and Statistics Sweden, respectively. 2 Normally, indices published by Statistics Denmark, Statistics Finland, Statistics Norway and Statistics Sweden, respectively. 3 A gate fee is a charge levied upon a given quantity of waste received at a waste processing plant. 12

17 (i) Being legally bound to perform an unprofitable contract as a result of inaccurate pricing by the Group based on erroneous or omitted assumptions or due to insufficient internal controls, for example, but not exclusively number and cost of vehicles, number of employees etc., without a mechanism to restore or improve profitability. There is also a risk of miscalculating contracts in the future, however, significant actions are taken to mitigate this going forward. (ii) Being required to compensate the customer in the case where the Group walks away from the contract. Such compensation could be material and would generally represent the difference between the cost of a replacement service provider and the level of the Group's winning bid for the remaining term of the contract. (iii) Becoming subject to margin pressure from increases in operating costs, including fuel prices and wages, and various other costs above that compensation for in the annual index. The Group could also suffer from cost inflation rates fluctuating during the year compared to the point at which the index is applied. Any of the above could materially impact the Group's business, results of operations, profitability, financial position and prospects. Tender processes for municipal waste collection contracts are highly regulated, rigid and transparent. Most of the Group's tenders are subject to highly regulated, transparent and rigid public tender procedures. The Group cannot have bilateral discussions with its potential customers. Rather, the Group is entitled to ask questions related to upcoming tender situations, but these questions have to be made in writing and formally lodged. These questions and the written answers provided are a matter of public record, although anonymous. Once the final, signed tender documentation is submitted, it is not capable of being amended, corrected or updated. If accepted by the customer, the Group is legally bound to deliver what it has undertaken to do in the tender submission. There is limited ability to sell additional services to customers over and above the contracted services. It is important that all the documentation is correct, complete and submitted in time to avoid technical disqualification, or missing the opportunity to compete. This process exposes the Group to the risk of being disqualified without redress as a result of human error. This process also exposes the Group to perform the contract as tendered, even if unprofitable, without a mechanism to adjust, except in very limited circumstances. All tenders submitted, and the respective unit prices, are made public to all other bidders once the contract is awarded. This gives all bidders full transparency of competitor bids, so tactics in each contract tender process are important. Competitors are entitled to ask for and receive all of the Group's tender documentation once the tender is awarded. This exposes the Group to successful challenge from competitors, which could result in a contract award being over-turned if errors are found to exist in the documentation after the event. This also gives competitors a current view of the Group's current operating models, which reduces its competitive advantage. The Group may lose contracts by early termination or lack of contract extensions by its customers in their sole discretion. The Group's customers may terminate contracts with the Group before the end of the contract term. Many of the Group's contracts may be terminated by the customer in instances where the Group fails to meet contractual requirements, following a certain notice period that is generally not shorter than six months. Compensation may be payable to the Group in some contracts following customer termination. While six months should give the Group sufficient time to manage down the work-force and related costs in an efficient and cost effective way, early termination of contracts would adversely impact the Group's business, results of operations, financial position and prospects. The Group's contracts may in most cases be terminated by the customer upon material breach of the contract by the Group. This is also true in some cases, upon repeated failure by the Group to meet certain specified performance criteria in the contract, such as required level of delivery reliability measured over a certain period, or an unacceptable level of end-user complaints over a certain period. In such situations, in addition to termination, the Group may be exposed to related penalties and fines, which can be material. 13

18 If the Group is not able to replace revenues from any terminated contracts within a reasonable time period, the Group's revenues and operating income would decline. To the extent the Group would not be able to redeploy the related vehicles, they would need to be sold. To the extent the market for used trucks would not be sufficiently liquid, this could result in a realised loss on sale. In addition to the financial impact, there is also the risk that the reputation of the Group will suffer and so too its ability to secure future business. In addition to the initial fixed term, which is generally around five years, the Group's contracts typically also include a possible extension period of up to three one-year extension options where the customer has the option to extend the contract on its current terms in its sole discretion. Because of the pay-back period on the vehicles, the exercise of the extension options could be very valuable to the Group. To the extent that customers choose not to exercise the extension options, this could negatively impact the Group's financial position and prospects. Impairment of goodwill may result in a loss for the Group. The Group's goodwill impairment reviews are undertaken annually at year-end or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the relevant unit including goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment of goodwill is recognized immediately as an expense and is not subsequently reversed. Impairment of goodwill may result in a loss on the Group's consolidated income statement. The Group can provide no assurance that the Group's order reserve will be ultimately realised. As of 30 September 2016, the Group had an order reserve of approximately NOK 5.0 billion, excluding customer extension options, and NOK 7.5 billion including extension options, see Section 8.6 "Order reserves" for further information. The Group calculates order reserve by adding annual future revenue from ongoing or newly awarded contracts and assumes it remains the same for the duration of the initial fixed term. For the avoidance of doubt, the revenues are not adjusted for price or volume changes, including indexation. Option values are calculated in the same manner, running from expiry of the fixed term to the final date, assuming all the extension options are exercised. The order reserve assumes local currencies, converted to NOK at fixed exchange rates throughout the period of NOK:SEK= , NOK:DKK= and NOK:EUR= It is important to highlight that the order reserve is indicative, and that in practice, there is a risk that the actual amounts of revenue earned may differ from the amounts indicated here and in the tables provided in Section 8.6 "Order reserves" because, among other things: Unit prices are negotiated at the start of the contract. These unit prices will be index-adjusted on the basis of the official public inflation indices applicable on the anniversary of the respective contracts, determined by the actual inflation development in the underlying cost base during the preceding 12 months; The customer may, under any contract with the Group, require the Group to collect a higher or lower volume of waste than that initially set out in the contract, or to increase or decrease the collection frequency, on the basis of these unit prices; The Group may sell additional services to its customers, for which additional revenue can be earned, for example leafleting to residents, cleaning or replacement of bins, or tagging of bins; Any customer may, under any contract with the Group, deduct from revenue any daily penalties imposed by the customer for non-performance by the Group; Any of the Group's contracts may be early terminated by the customer, or any customer may elect not or fail to exercise an extension option, although compensation may be payable to the Group in some contracts; and Exchange rates fluctuations. Non-realisation of the Group's order reserve could adversely affect the Group's business, results of operations, profitability, financial position and prospects 14

19 The Group has low customer- and counter party risk. The Group has a relatively diversified customer base, and in 2015, no single customer generated more than 10% of total Group revenue. The majority of the Group's waste collection contracts are with municipalities and inter-municipal companies, which represented 94% of the Group's revenue for It is generally accepted that Nordic municipal and inter-municipal counter-parties represent low credit risk. In Finland, the Group has some corporate customers such as hotels, owners of office blocks and shopping centres. While these represent a higher degree of counter-party risk, they in total accounted for 6% of the Group's revenue for In the event that customers were to fail, refuse to pay or delay payment, or if a customer becomes insolvent or goes bankrupt, or if the Group's customers change payment terms, or terminate their contracts with the Group, there is a risk that the Group's business, results of operations and financial position and future prospects could be negatively affected. The Group has a relatively concentrated supplier base. Other than its workforce, the Group's key suppliers are in relation to fuel, vehicles and maintenance. While the Group works to ensure that it adequately safeguards supply with alternative suppliers, it does have a relatively concentrated supplier base: (i) Fuel. The Group has several fuel suppliers in total, but generally one or two within each country. On some routes, however, there is a lack of local competition and in these situations, the Group relies on a single provider. Daily operations highly depend on the vehicle being able to efficiently access fuel. The route plan is typically set up in a way to take on fuel in an optimised way and the contract is priced as such. To the extent there is a dispute with a supplier or a lack of, or no available fuel, the efficiency and profitability of the route will be negatively impacted as drivers are forced to travel to find less convenient alternative fuel sources, and in extreme circumstances, collection may be compromised until fuel supply resumes. (ii) Vehicles. The Group will typically order vehicles, to the extent necessary, upon being awarded a contract, from suppliers including Scania, Mercedes and Volvo for chassis and NTM, Joab and GeesinkNorba for compactors. In most cases, contracts are awarded with sufficient notice to cope with the respective vehicle manufacturers' normal lead times. In situations where this is not the case, there is an increased risk of not having all or some of the finalized vehicles in time to operate the contracts. Often delays of new vehicles occur for reasons outside of the Group's control, namely quality, classification or engineering problems; changes in governmental regulations; work stoppages or other labour disturbances at the manufacturer or dealer, or bankruptcy or other financial crisis of the manufacturer or dealer. When delays do occur, the chassis and compactor manufacturers, who are dependent on each other to successfully delivery on time to the Group, may refuse responsibility and blame the other manufacturing party, hence obstructing constructive problem-solving. While the Group actively manages the supply chain to avoid such delays and has a large fleet with capacity to cover some level of vehicle delays, there is the risk of severe disruption and material penalties if a vehicle order cannot be fulfilled or is materially delayed. (iii) Maintenance. Keeping the vehicles running is a key element to having efficient operations and maintaining profitability. Vehicle breakdowns are an everyday feature of the business, which needs active management. Preventative maintenance and real-time support to fix vehicles efficiently are core competencies and an operational focus for the Group. As a precautionary measure, the Group maintains appropriate levels of reserve vehicles to substitute into the operations in normal level of breakdown, as required under the contracts with customers. The Group also has in place maintenance contracts with vehicle suppliers to provide quick turnaround support cost effectively. Without adequate systems and controls over this area, and in situations of abnormal level of vehicles breakdown, there is a risk of disruption to service provision. Any disruption in the supply of fuel, vehicles or maintenance services or other material supply items could materially negatively impact the ability of the Group to operate its business and expose it to penalties, fines and potential contract termination; any of which could adversely affect the Group s business, results of operations, profitability, financial position and prospects. 15

20 The Group relies on access to road networks. The Group operates a large fleet of vehicles that visit a great number of individual premises every day in the geographies in which the Group operates. The efficiency of the service the Group provides is largely dependent on its large vehicles getting access to road networks in these areas. The Group has a contractual obligation to its customers to collect and unload waste with such agreed frequency and within prescribed times, regardless of any disruptions to road transport systems, because of, for example, traffic congestion, road works or closures and inclement weather. Disruption to road transport systems may require the Group to use alternative, longer and less cost efficient routes, which may reduce contract profitability. In addition, delays in collection as a result of any such event may also, according to the Group's contracts, result in imposition of daily penalties by the customer, and may, in certain circumstances, also entitle to customer to terminate the contract. In addition, the local authorities may, in some instances, deny waste collecting operators the possibility to collect waste on certain roads and in particular areas due to health risks to personnel or extremely difficult driving conditions. Such situations may have an effect on the Group's business, results of operations and financial position and reduce its opportunity to serve areas in which it is currently operating and to obtain new tender contracts. Weather disruption may affect the Group's operations. The Group's core business is operated outside. As such, weather is a factor that could add complexity and cost to daily operations, especially in the harsh winters. Given the geographic reach of the Group, harsh winters are a common occurrence. Snow is an occupational hazard increasing the level of accidents and vehicle damage, as well as slowing and hindering the speed of collection. Sickness rates also increase. In very cold conditions, vehicles are difficult to start and break-down levels escalate. Therefore, there is a risk that bad or abnormal weather conditions may negatively impact service levels, increase rates of damage and thereby negatively affect the Group s business, results of operations, financial position and prospects. The Group is subject to strict environmental and occupational health and safety laws and regulations. The Group's is subject to strict laws and regulations relating to waste management and collection, vehicle requirements and working conditions of the employees of the Group, including specific precautionary and preventative measures. Please see Section 8.12 "Regulations" for more information on regulations and the Group's licenses, permits and certifications. These laws and regulations include rules governing the number of hours that drivers can work on consecutive days. In periods of high collection activity, high levels of sick leave among, or absence of, employees, or inclement weather conditions, these regulations may restrict the Group from deploying drivers that otherwise would have been available, and require the Group to increase its workforce and hence cost base, or hiring more expensive temporary employees, in order to satisfy its contractual obligations, which could reduce the Group's operating profitability. Regulations also govern the weight limits of the loads each of the Group's vehicles can take. For instance, the Group's waste collection vehicles are generally limited to a loaded weight of 25 tonnes (large vehicle), 20 tonnes (medium sized vehicle) and 7 tonnes (small vehicle). Where a customer requires the Group to collect a number of units or weight in excess of the number of units or weight initially contemplated to be collected under a contract, which the Group's customer generally may do without adjustments to the unit prices under the contract, the Group may be required to re-allocate the vehicles in its fleet, or to acquire additional vehicles, or additional stops to unload waste from that in the original tender which could negatively impact the Group's financial position and profitability. The Group's compliance with existing regulatory requirements is costly, and changes in such laws and regulations could increase the Group's compliance costs and reduce the Group's profitability. 16

21 New environmental and technological standards and requirements may require the Group to replace its vehicles earlier than originally estimated The Company intends to, where possible, redeploy used vehicles in new contracts to maximise the useful lifetime of the vehicles. This is, however, dependent on that municipal customers do not require the latest available environmental and technical standards to be used in the new contract. At the end of their estimated useful life, the vehicles have generally been sold to third-parties or returned to the supplier at, or around, net book value at the date of the sale or return. There is a risk that the Group must write down all or parts of the vehicle's book value due to changed technological requirements, erasing or reducing residual value at the end of the contract period for certain vehicles. The Group experienced this in the second quarter of 2016, and an impairment of NOK 71 million is included as per 30 June In situations where large number of vehicles are unable to be redeployed and need to be sold in a short period of time, there is a risk that they will not be able to be sold at net book value resulting in losses on sale. Increasing political pressure and societal emphasis on environmental issues has amplified the focus by municipalities and corporates on the vehicle types used in outsourced contracts. Customers are not legally able to change the specifications of vehicles deployed on contracts already in force, however, the Group has noticed that in some new tenders, especially for larger cities, specifications included are for the latest environmental and technical standards, such as with respect to fuel efficiency, levels of emissions and fuel type, for example gas, versus diesel and petrol. While this is relevant to a different extent in each of the Group s core geographies, the trend is becoming more established. The impact of this trend for the Group is that it may be required to replace its vehicles earlier, i.e. at the end of a contract cycle rather than at the end of their previously estimated useful lives. While the Group can manage this by re-using vehicles in contract renewals in less demanding geographies, such as in Denmark, which currently has lower environmental standards, this could have the effect of increasing the capital intensity of the Group s business model. The Group may also be required to incur various other expenditures for alterations or additions to vehicles to bring them in line with the latest environmental or safety standards, which could negatively impact the Group s results of operations and financial position, and reduce the profitability of the business. To the extent there is not a liquid market into which to sell vehicles no longer able to be deployed, the Group may need to recognise impairment charges that will reduce the earnings and net assets of the Group. Failure of the Group s logistics and route planning and other IT systems could adversely affect the Group s revenues and profitability. The Group is dependent upon its IT systems for the efficient functioning of its operations, including logistics and route planning, invoicing and administration. An important part of the Group s policy is to achieve cost efficiencies, generally and compared to its competitors, while timely delivering a high quality service. The ability to do this requires efficient functioning, and continuous improvement, of IT systems. Some customer contracts also specify that each waste collection unit (bin lifted/kilogram collected) must be registered in the Group s IT systems, and if the IT system is not functioning properly the Group risks not receiving payment for the waste collection service completed. The Group s IT systems may become subject to disruption caused by circumstances beyond the Group s control, such as power outages, computer systems and network failures, computer viruses, cyber-attacks, or malicious software programmes. In addition, the deployment of new IT systems can adversely affect, or even disrupt, the Group s operations until resolved. Although the Group does have business continuity plans in place to mitigate against the effect of such events, should the Group s IT systems fail, this could adversely affect the Group s revenues and profitability. 17

22 The Group may not be successful in implementing its strategies in the future or be successful in its initiated operational improvements. The Group may not be successful in implementing its strategies for the Group in the future. Further, the adopted strategies may not be right for the Group or may not result in fulfilment of the financial goals or other objectives. The Group s future development and success will depend on these strategies being accurate for the Group, that the measures are being efficiently and correctly implemented and that they provide the expected result. In the event that such strategies are not accurate for the Group or are not accurately implemented or implemented within the expected time frames, earnings may not be maintained or grown and savings may not be realised. Furthermore, the Group may not be successful in the operational improvements it has initiated in order to turn around the negative margin trend seen over the last years. This may negatively affect the Group s business, results of operations, financial position, profitability and future prospects. The Group can provide no assurance that it will be able to achieve and manage growth by way of acquisitions. The Group has been created in part through mergers and acquisitions, most recently in 2013 with the acquisition of HFT Environment in Finland. The Group may engage in mergers, acquisitions and joint venture schemes in the future. Mergers, acquisitions and joint ventures are associated with several risks, such as strategic and due diligence risks, risks relating to financing and valuation, risks relating to sustainability of profit and cash-generation ability and retention of key customers, suppliers and personnel of the target company, as well as risks relating to the combination and integration of the business operation. In international transactions these risks are enhanced because of, among other things, different corporate cultures, official procedures, local laws and regulations, politics, local foreign exchange, as well as the interpretation of local circumstances. The Group s evaluation of potential acquisitions will typically be based on imprecise and incomplete information and assumptions that may prove to be incorrect. In addition, competition legislation may also affect or even prevent the Group from making acquisitions. The Group may not be successful in implementing plans regarding existing or new projects, and mergers or acquisitions, their implementation or any expectations concerning integration and synergies may not be achieved according to plan. The Group may not find suitable targets for mergers or acquisitions in the future, at an acceptable price, and the Group may not be allowed to make such acquisitions due to competition legislation. The Group s business is subject to health and safety risks, including the risk of personal injury to employees and others. Providing waste collection services involves risks of fatal and serious accidents, including, but not limited to fatal accidents or personal injury to employees and the general public, and damage to third party property. While the Group seeks to minimise its exposure to such risks through training and compliance programs, as well as vehicle and equipment maintenance programs, if the Group were to incur substantial liabilities not covered by insurance, its business, results of operations and financial condition could be adversely affected. Any such incidents could also affect the Groups reputation with local communities, customers and employees. The Group may from time to time be involved in litigation matters and disputes. The Group may from time to time be involved in litigation matters and disputes within the framework of its normal business activities and, like other operators in the Group s industry, be subject to disputes over tender awards and claims concerning agreements, product liability, personal injury, alleged faults in supplies of services, environmental issues, employment matters and government claims for taxes or duties and intellectual property rights. It is common in the industry to be involved in legal disputes in terms of public procurement processes that are challenged either by the Group or its competitors. Disputes and claims of this kind can be time consuming, disrupt normal operations, involve large amounts and result in considerable costs. Moreover, it can be difficult to predict the outcome of complex disputes, claims or other litigation matters. Such costs associated with prosecuting or defending such lawsuits, including the diversion of Management s attention to these matters may negatively affect the Group s business, results of operations, financial position and future prospects. 18

23 The Group is exposed to risks and liabilities that may not be adequately covered by insurance. The Group s is exposed to a variety of risks that could, among other things, result in damage to property and environment, personal injury, monetary losses and liability. Although the Group seeks to maintain insurance for such risks and in such amounts as it considers reasonably prudent, the Group s insurance policies are subject to exclusions and limitations of liability both in amount and with respect to insured loss events. Certain risks are also not possible to insure against. For example, even though certain costs in connection with service provision stoppages are covered by the Group s insurance, the long-term effects of such service provision stoppages, such as loss of confidence with the customers, are generally not possible to insure. Consequently its insurance may not adequately protect it against losses sustained. In addition, the Group s current insurance coverage may be cancelled or become unavailable on reasonable economic terms in the future. Any damage caused by the Group which is not materially covered by insurance could have a material adverse effect on the Group s business, results of operations, financial condition and future prospects. Any claims made under the Group s insurance policies may also cause insurance premiums to increase. The Group s risk management procedures may fail to identify or anticipate future risks. The Group's risk management procedures, internal control procedures and the methods used to manage risk may not identify or anticipate current or future risks or the extent of future exposures, which could be significantly greater than historical measures indicate. Risk management methods depend on the evaluation of information regarding markets, customers or other matters that is publicly available or otherwise accessible to the Group. Failure (or the perception that the Group has failed) to develop, implement and monitor the Group s risk management policies and procedures and, when necessary, pre-emptively upgrade them could give rise to reputational issues which could have a material adverse effect on the Group s business, prospects, results of operations and financial conditions. The Group is dependent upon its key personnel and its local managers. The Group s continued success depends in large part on the sustained contribution of the Group s key personnel. The Group relies on its senior managers to execute its operational strategies and to identify and pursue new business opportunities. In addition, the Group depends on its local managers to manage and control its day-to-day operations and adhere to Group policies and internal control procedures. The Group manages its operations on a decentralised basis, and also delegates financial and commercial responsibility to its local managers. Key personnel are of great importance to the Group s future, especially in implementing the strategic objectives and directing, managing and controlling business operations effectively in a competitive marketplace. If key personnel resign, start working for competitors or retire from the Group and are not suitably and efficiently replaced or if the Group cannot recruit or retain qualified personnel in the future, or if the cost to replace key personnel is materially higher than the Group currently pays, this may negatively affect the Group s business, results of operations, financial position and future prospects. If key personnel do not comply with Group policies and internal control procedures, this could have a material adverse effect on the Group's business, prospects, result of operations and financial conditions. Substantially all of the Group s employees are parties to collective bargaining agreements and trade unions. Substantially all of the Group s employees are party to collective bargaining agreements and trade unions. The Group s relationship with works councils and trade unions is therefore important. The presence of works councils and trade unions may limit the Group s flexibility in dealing with its workforce and ultimately lead to increased operating costs. Inability to agree local pay deals, or a lengthy strike or other work stoppage by the Group s employees could have a material adverse effect on the Group s ability to conduct its operations and complete its contractual obligations, which again could affect revenues and profits earned under contracts, result in delays that could entitle the customer to impose of daily penalties on the Group, and in certain circumstances also entitle the customer to terminate the contract. Any such delays, stoppages or interruptions could have a material adverse effect on the Group s results of operations and financial position. 19

24 Increases in the cost of labour may reduce the Group s profitability. Labour costs represent major operating expenses for the Group. Labour costs are dependent upon, among other things, unemployment levels, demand and supply imbalances in various geographic regions, prevailing wage rates, collective bargaining arrangements, insurance costs, changes in employment and labour legislation and employee turnover rate in the waste collection industry. The Group competes with other businesses in its markets for qualified employees. The labour market is currently tight in some of the areas in which the Group operate, for example in Norway and parts of Finland. Historically, the Group has been able to find the right personnel as needed, but in the future, a shortage of qualified employees may require the Group to enhance its wage and benefits packages to compete more effectively for employees. An increase in wage rates or the need to take on temporary employees to meet shortfalls would reduce the Group s profitability. Changes in the prices of diesel fuel and liquefied natural gas ( LNG ) may affect the Group s profitability. The Group needs diesel fuel and LNG to run its large fleet of collection vehicles and other vehicles, and the expenses relating especially to diesel fuel represent major operating expenses for the Group. The prices of diesel fuel and LNG fluctuate based on events outside of the Group s control, including, but not limited to, local taxes and oil price. The Group tries to minimise the risk of increased costs of diesel through indexation of the unit price, where fuel is included as one of the component costs, in the customer contracts. However, this may not be sufficient and a time lag between the increase in fuel price and index adjustment may be apparent. The Group has historically entered into OTC commodity hedging agreements in order to lower the risk of increased fuel costs. However, the Group does not have diesel cap agreements going forward. A sustained increase in the costs of diesel fuel and LNG, or reductions in the supply, would increase the Group s operating costs and reduce the Group s profitability or could interrupt or curtail the Group s operations. The presence of a Nordic black market for the waste collection industry may have a material adverse effect on the Group s revenues. A black market in the waste collection industry may occur in order for black market participants to avoid government regulation and taxes. While consumers and customers usually shun the black market because they consider it wrong and illegal, there may be some customers who purchase such services regardless. Europe has seen examples of such black markets in Italy and Spain. Fortunately, the governments in the Nordic countries have so far been able to regulate waste collection services in such a way that black-markets have not made their strong-hold. However, if such were to occur, the Group may experience a lack in tendering contracts and thereby a reduction in the Group s revenues. Exchange rate fluctuations may affect the Group s results of operations, financial position and future prospects. The Group is exposed to currency risk since exchange rates affect the Group s income statement, statement of financial position and cash flow statement. Currency exposure is the result of purchases and sales of goods and services in other currencies besides the respective company's local currency (transaction exposure) and of the conversion of statement of financial position and income statements in foreign currencies into NOK (translation exposure). This translation exposure does not give rise to an immediate cash effect, and should not impact the Group s financial covenants. Changes in exchange rates can also affect the Group s suppliers and thus indirectly affect the Group s profits. Furthermore, the Group is exposed to foreign currency transactions. The Group s business model is to provide services from the local subsidiary to municipalities in their local currency. Bank loans are denominated in the four currencies of Norway, Sweden, Finland and Denmark largely in proportion to the underlying earnings, such that the financing does not give rise to significant exposures for the Group. As a result of the international structure of the Group, the Group is exposed to some foreign currency exchange risks relating to various transactions in currencies other than the functional currency of each company. The Group is principally exposed to changes in EUR, DKK and SEK compared to NOK. Exchange rate fluctuations may negatively affect the Group s business, results of operations, financial position and future prospects. 20

25 Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which the Group operates or adverse outcomes from audits by taxation authorities could result in an unfavourable change in its effective tax rate. The Group has grown by way of mergers and acquisitions in the Nordic markets. Mergers and acquisitions typically entail exposure on existing and future tax positions. Although the Group has obtained qualified advice by local counsel in its mergers and acquisitions, tax exposure may exist on the transactions that have created the Group. The Group operates its business in different tax jurisdictions; Denmark, Finland, Norway and Sweden. As a result, its effective tax rate is derived from a combination of the applicable tax rates in these jurisdictions. The Group s effective tax rate may be lower or higher than its tax rates have been in the past due to numerous factors, including the sources of its income and the tax filing positions it takes. The Group estimates its effective tax rate at any given point in time based on a calculated mix of the tax rates applicable to the Group and on estimates of the amount of business likely to be done in any given jurisdiction. Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which the Group s operates, expiration of tax credits formerly available, or adverse outcomes from tax audits that the Group may be subject to in any of the jurisdictions in which it operates could result in an unfavourable change in its effective tax rate. A loss of a tax dispute or a successful tax challenge to the Group s operating structure or to the Group s tax payments, among other things could result in a higher tax rate on the Group s earnings, which could result in a significant negative impact on its earnings and cash flows from operations. From time to time, the Group s tax payments may be subject to review or investigations by tax authorities of the jurisdictions in which the Group operates. If any tax authority successfully challenges the Group s operational structure, intercompany pricing policies, the taxable presence of its subsidiaries in certain countries, or if the Group loses a material tax dispute in any country, or any tax challenge of the Group s tax payments is successful, its effective tax rate on its earnings could increase substantially and the Group s earnings and cash flows from operations could be materially adversely affected. There could also be a risk that any adjustment is retrospective. There are, for instance, limited transactions taking place between the companies in the Group and related companies, which must be carried out in accordance with arm s length principles in order to avoid adverse tax consequences. There can be no assurance that the tax authorities will conclude that the Group s transfer pricing policy calculates correct arm s length prices for intercompany transactions, which could lead to an adjustment of the agreed price, which would in turn lead to increased tax cost for the Group. Some of the Group s employees have acquired shares in the Company at a time when there was no public market for its shares. In the event the tax authorities would deem the purchase price as lower than the fair market value for such investments there is a risk that the Group becomes liable for paying payroll tax based on the difference between the tax authorities view of the fair market value and the purchase price at the time of investment. Certain of the Group s agreements and instruments are subject to change of control or similar provisions. Certain of the Group s agreements and instruments are subject to change of control provisions that may be triggered by the completion of the Rights Issue or changes of control in the Company after the Rights Issue. For example, the Group s Senior Facility contains a change of control provision which may be triggered if any person or group of persons acting in concert acquire or gains direct or indirect control of more than 50% of the issued Shares and/or the voting shares in the Company. Further, the standard terms and conditions of many of the Group s counter-parties under its vehicle lease agreements contain change of control provisions, as is customary for these types of agreements, and some of the Group s customer contracts with municipalities or inter-municipal companies contain change of control provisions. Where considered needed and appropriate, the Company aim to obtain consents or waivers or other comfort to the change of control provisions in these agreements. Failure to receive necessary consents or waivers for any reason could result in the loss of contractual rights and benefits, or the termination of agreements, which could also result in cross-default provisions in other financing agreements and instruments being triggered, any of which could have a material and adverse effect on the Group s business, results of operations and financial condition. 21

26 2.2 Risks relating to financing The Group operates in a capital intensive industry. The Group operates in a capital intensive industry that requires a substantial amount of capital expenditure and other long-term committed expenditures, including, but not limited to, those relating to the leasing of vehicles. The Group has funded and expects to fund future investments and other capital and operating expenses from a combination of cash on hand, cash generated from operations and bank and leasing facilities. One risk in this regard is that the relevant financial institutions providing the credit facilities or loans may cease providing such arrangements, outside of the control of the Group. Another risk is that the relevant financial institutions providing the credit facilities or loans may require guarantors to guarantee the due performance of the Group s obligations under those loan arrangements. The Group may not be able to obtain or provide such guarantees at all, or obtain such guarantees on commercially reasonable terms. Lease agreements typically have a term of between seven and ten years. There is a risk that if vehicles are not utilisable for the full duration of the leasing contract, the vehicles may need to be disposed of at the end of a contract period (say five or seven years), leaving the remaining loan to be settled from the disposal proceeds. In a situation where the vehicle is not sold at or around the value or the outstanding loan, the Group will be required to repay the remaining lease balances out of operating cash flow or cash balances, with the commensurate negative impact on the Group s financial position. The Group expects to have sufficient cash and/or committed financing to meet its obligations as they fall due. However, no assurances can be given that it will be able to generate sufficient cash from operations or obtain the necessary financing or the required guarantee can be provided for the relevant financing arrangement or that such financing will be at interest rates and on the terms that are favourable to it or consistent with its expectations. If the Group is unable to secure necessary financing required to complete the purchase of these vehicles, the Group may not be able to fulfil its obligations under the vehicle purchase contracts or to meet other funding requirements and may incur penalties under those contracts, the payment of which may adversely affect its business, financial condition and results of operations. The Group may not obtain the financing it requires in the future and there is a risk of higher financing costs related to future debt refinancing. The Group is financed by equity and debt, and is therefore exposed to the risks associated with debt financing, inter alia, covenants which upon un-remedied breach may result in the loan being considered due and payable. See Section 6 "Reasons for the rights issue" related to potential future breach of covenants. Interest payments could adversely affect the Group, e.g. by reducing or postponing investments or by requiring the Group to sell assets, issue equity or restructure the debt at unattractive terms. The Group may require additional capital in the future due to unforeseen liabilities, to fund acquisitions or in order to take advantage of other business opportunities, or to be able to respond to competitive pressures. The Group may not be able to obtain necessary financing in a timely manner on acceptable terms, or at all, in the future. The current loan agreement expires in December 2019 and there is a risk that financing costs might be higher in the future, see Section 10.5 "Material indebtedness". The Group s ability to obtain such additional capital or financing will depend in part upon prevailing market conditions as well as conditions of its business and its operating results, and those factors may affect its efforts to arrange additional financing on satisfactory terms. If the Group raises additional funds by issuing additional shares or other equity or equity-linked securities, it may result in a dilution of the holdings of existing shareholders. If funding is insufficient at any time in the future, this could adversely impact the Group s business, results of operations, cash flow, financial position and prospects. To the extent the Group is unable to meet capital expenditure requirements on new or renewed contracts out of operating cash flow in situations where lease or bank financing cannot be obtained, the Group will not be able to tender for contracts, thereby negatively impacting the financial condition, performance and prospects of the Group. 22

27 The Company operates as a holding company and depend on its subsidiaries for cash to satisfy its obligations and to pay dividends. The Company operates as a holding company and its principal assets consist of direct and indirect shareholdings in subsidiaries. The Company s ability to make required payments of interest and principal on the Company s indebtedness and funding of the Group s operations, as well as to pay dividends, is affected by the ability of the subsidiaries to transfer available cash resources to the Company. Transfer of funds to Company from its subsidiaries, by way of dividends, intercompany loans or otherwise may be restricted or prohibited by legal and contractual requirements applicable to the respective subsidiaries. Limitations or restrictions of the transfer of funds between companies within the Group may become more restrictive in the event that the Group experiences difficulties with respect to liquidity and financial position. This may also negatively affect the Group s business, results of operations, financial position and prospects. The Group s current and future debt levels could have important consequences to the Group. The Group is more leveraged than many other public companies. The Company is of the opinion that the Group s capital structure generally is beneficial for the Group as a substantial portion of the Group s debt is incurred under vehicle leasing arrangements, which provides a cheaper and more efficient way of financing a high amount of fixed assets than alternative financing sources, and because such financing is backed by vehicles which have relatively liquid values, and are mainly supported by long-term contracts with municipality customers. The Group s level of debt, and any additional debt incurred in the future could however have important consequences to the Group, including: affecting the Group s ability to obtain additional financing on favourable terms, or at all, for working capital, capital expenditures, acquisitions or other purposes; the sustained pressure on the Group's margins in combination with increased investments could lead to a covenant breach; affecting the Group s costs of borrowing, which could increase with high leverage levels; requiring the Group to use a substantial portion of its cash from operations to make principal and interest payments on its debt, reducing the funds that would otherwise be available for operations, future business opportunities and dividends to its shareholders; making the Group more vulnerable than its competitors with less debt to competitive pressures, a downturn in its business or the economy generally; and limiting the Group s flexibility in responding to changing business and economic conditions. The Group s ability to service its current and future debt will depend upon, among other things, its future financial and operating performance, which will be affected by prevailing economic conditions as well as financial, business, regulatory and other factors, some of which are beyond its control. If the Group s operating income is not sufficient to service its current or future debt, the Group will be forced to take action such as reducing or delaying its business activities including contract tenders, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing its debt or seeking additional equity capital. The Group may not be able to affect any of these remedies on satisfactory terms, or at all. Interest rate fluctuations could affect the Group's cash flow and financial condition in addition to the price of the Shares. The Group faces interest rate risk from borrowings and deposits with a floating rate. The Group may enter into and maintain certain hedging arrangements designed to fix or limit risk on a portion of these rates, but in the future such arrangements may not be available on commercially reasonable terms. The Group has sought to reduce such interest rate risk by entering into an OTC interest rate cap agreement with a bank, which in effect caps the interest rate until December 2016 for the majority of the Company s bank debt. If interest rates were to rise significantly the Group s interest expense would correspondingly increase, thus reducing free cash flow. Accordingly, fluctuations in interest rates could negatively affect the Group s business, results of operations, financial position and future prospects. 23

28 2.3 Risks related to the Shares The price of the Shares has, and could, fluctuate significantly, which could cause investors to lose a significant part of their investment. The market for securities is very volatile. As an equity investment can both rise and fall in value, it is not certain that an investor will get back the capital invested. An investment in the Company s shares should therefore be preceded by a careful analysis of the Group, its competitors and the business environment, general information about the industry and other relevant information. The value of the Company's Shares has, and may, fluctuate significantly in the future, even as a result of events that are not directly linked to the Group or to the operations of the Company. Therefore there is no guarantee regarding the future development of the price of the Company's shares. The share price can be negatively affected as a result of capital market volatility, general macroeconomic conditions, the possibility of a large number of shares being sold on the market, or as a result of an expectation that such divestment will occur. Sales of shares by major shareholders or executive officers may also make it difficult for the Group to obtain capital through new issues of shares or other securities in the future. In addition, the liquidity and market price of the Shares may be affected by major fluctuations, including fluctuations in actual or projected results of operations or those of its competitors, changes in earnings projections or failure to meet investors and analysts earnings expectations, investors evaluations of the success and effects of the policy described in this Prospectus, as well as the evaluation of the related risks, changes in general economic conditions, seasonal fluctuations that cause the Group s results of operations to vary among quarters, changes in shareholders, changes in the regulatory environment and other factors. Those changes may occur without regard to the operating performance of these companies. The price of the Shares may therefore fluctuate based upon factors that have little or nothing to do with the Group, and these fluctuations may materially affect the price of the Shares. Furthermore, limited liquidity of the Company s shares may increase the fluctuations of the share price. Limited liquidity may also make it difficult for individual shareholders to sell their shares. It is possible that shareholders in the Company will not be able to sell their share at a price acceptable to the shareholder at every given time. In addition, the trading market for the Company s shares will be influenced by the research reports that research analysts publish about the Company or its business. If one or more of these analysts cease coverage of the Company s business or fail to publish reports on the Company regularly, the Company could lose visibility in the financial markets, which in turn could cause the Company s share price or trading volume to decline. Moreover, if one or more of the analysts who cover the Company s business adversely changes their recommendations regarding the Company s shares or if the Company s operating results do not meet their expectations, the Company s share price could decline. Future issuances of Shares or other securities could dilute the holdings of shareholders and could materially affect the price of the Shares. The Company may in the future decide to offer additional Shares or other securities in order to finance new capital-intensive projects, in connection with unanticipated liabilities or expenses or for any other purposes. There is no assurance the Company will not decide to conduct further offerings of securities in the future. Depending on the structure of any future offering, certain existing shareholders may not have the ability to purchase additional equity securities. If the Company raises additional funds by issuing additional equity securities, holdings and voting interests of existing shareholders could be diluted. Future sales, or the possibility for future sales of substantial numbers of Shares may affect the Shares' market price The market price of the Shares could decline as a result of sales of a large number of Shares in the market after the date hereof or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate. 24

29 The Company cannot predict what effect, if any, future sales of the Shares, or the availability of Shares for future sales, will have on their market prices. Sales of substantial amounts of the Shares in the public market following the date hereof, or the perception that such sales could occur, may materially and adversely affect the market price of the Shares, making it more difficult for holders to sell their Shares or the Company to sell equity securities in the future at a time and price that they deem appropriate. Pre-emptive rights to secure and pay for Shares in additional issuance could be unavailable to U.S. or other shareholders. Under Norwegian law, unless otherwise resolved at the Company s general meeting of shareholders (the "General Meeting"), existing shareholders have pre-emptive rights to participate on the basis of their existing ownership of Shares in the issuance of any new Shares for cash consideration. Shareholders in the United States, however, could be unable to exercise any such rights to subscribe for new Shares unless a registration statement under the U.S. Securities Act is in effect in respect of such rights and Shares or an exemption from the registration requirements under the U.S. Securities Act is available. Shareholders in other jurisdictions outside Norway could be similarly affected if the rights and the new Shares being offered have not been registered with, or approved by, the relevant authorities in such jurisdiction. The Company is under no obligation to file a registration statement under the U.S. Securities Act or seek similar approvals under the laws of any other jurisdiction outside Norway in respect of any such rights and Shares, and doing so in the future could be impractical and costly. To the extent that the Company s shareholders are not able to exercise their rights to subscribe for new Shares, their proportional interests in the Company will be diluted. Investors could be unable to exercise their voting rights for Shares registered in a nominee account. Beneficial owners of the Shares that are registered in a nominee account (such as through brokers, dealers or other third parties) could be unable to vote such Shares unless their ownership is re-registered in their names with the VPS prior to any General Meeting. There is no assurance that beneficial owners of the Shares will receive the notice of any General Meeting in time to instruct their nominees to either effect a re-registration of their Shares or otherwise vote their Shares in the manner desired by such beneficial owners. The transfer of Shares is subject to restrictions under the securities laws of the United States and other jurisdictions. The Shares have not been registered under the U.S. Securities Act or any U.S. state securities laws or any other jurisdiction outside Norway and are not expected to be registered in the future. As such, the Shares may not be offered or sold except pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable securities laws. See Section 16 Selling and Transfer Restrictions. In addition, there is no assurance that shareholders residing or domiciled in the United States will be able to participate in future capital increases or rights offerings. The Company s ability to pay dividends is dependent on the availability of distributable reserves and the Company may be unable or unwilling to pay any dividends in the future. The size of any future dividend from the Company is dependent on a number of factors, such as the Company s business development, results, financial position, cash flow, available liquidity and need for working capital. There are many risks that may affect the Company s earnings and there is no guarantee that the Company will be able to present results that enable distribution of dividend to shareholders in the future. If no dividend is distributed, returns on the investment in the Company will solely be generated by the potentially positive development of the share price. Norwegian law provides that any declaration of dividends must be adopted by the shareholders at the General Meeting. Dividends may only be declared to the extent that the Company has distributable funds and the Company s Board of Directors finds such a declaration to be prudent in consideration of the size, nature, scope and risks associated with the Company s operations and the need to strengthen its liquidity and financial position. As the Company s ability to pay dividends is dependent on the availability of distributable reserves, it is, among other things, dependent upon receipt of dividends and other distributions of value from its subsidiaries and companies in which the Company may invest. As a general rule, the General Meeting may not declare higher dividends than the Board of Directors has proposed or approved. If, for any reason, the General Meeting does not declare dividends in accordance with the above, a shareholder will, as a general rule, have no claim in respect of such non-payment, and the Company will, as a general rule, have no obligation to pay any dividend in respect of the relevant period. 25

30 One of the factors that could influence the price of the Shares is its annual dividend yield as compared to yields on other financial instruments. Thus, an increase in market interest rates will result in higher yields on other financial instruments, which could adversely affect the price of the Shares. Investors could be unable to recover losses in civil proceedings in jurisdictions other than Norway. The Company is a public limited liability company organised under the laws of Norway. As a result, it may not be possible for investors to effect service of process in other jurisdictions upon the Company, to enforce against the Company judgments obtained in non-norwegian courts, or to enforce judgments on the Company in other jurisdictions. Norwegian law could limit shareholders ability to bring an action against the Company. The rights of holders of the Shares are governed by Norwegian law and by the Articles of Association. These rights may differ from the rights of shareholders in other jurisdictions. In particular, Norwegian law limits the circumstances under which shareholders of Norwegian companies may bring derivative actions. For instance, under Norwegian law, any action brought by the Company in respect of wrongful acts committed against the Company will be prioritised over actions brought by shareholders claiming compensation in respect of such acts. In addition, it could be difficult to prevail in a claim against the Company under, or to enforce liabilities predicated upon, securities laws in other jurisdictions. The transfer of Shares and Subscription Rights is subject to restrictions under the securities laws of the United States and other jurisdictions None of the Shares or the Subscription Rights have been registered under the U.S. Securities Act or any U.S. state securities laws or any other jurisdiction outside of Norway and are not expected to be registered in the future. As such, the Shares and the Subscription Rights may not be offered or sold and the Subscription Rights may not be granted or used except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the U.S. Securities Act and other applicable securities laws. See Section 16 "Selling and transfer restrictions". In addition, there is no assurances that shareholders residing or domiciled in the United States will be able to participate in future capital increases or rights offerings. Exchange rate fluctuations could adversely affect the value of the Shares and any dividends paid on the Shares for an investor whose principal currency is not NOK. The Shares will be priced and traded in NOK on Oslo Børs and any future payments of dividends on the Shares will be denominated in NOK. Investors registered in the VPS whose address is outside Norway and who have not supplied the VPS with details of any NOK account, will, however, receive dividends by cheque in their local currency, as exchanged from the NOK amount distributed through the VPS. If it is not practical in the sole opinion of DNB Bank ASA ("DNB"), being the Company's VPS registrar, to issue a cheque in a local currency, a cheque will be issued in USD. The issuing and mailing of cheques will be executed in accordance with the standard procedures of DNB. The exchange rate(s) that is applied will be DNB's rate on the date of issuance. Exchange rate movements of NOK will therefore affect the value of these dividends and distributions for investors whose principal currency is not NOK. Further, the market value of the Shares as expressed in foreign currencies will fluctuate in part as a result of foreign exchange fluctuations. This could affect the value of the Shares and of any dividends paid on the Shares for an investor whose principal currency is not NOK. Market interest rates could influence the price of the Shares. One of the factors that could influence the price of the Shares is its annual dividend yield as compared to yields on other financial instruments. Thus, an increase in market interest rates will result in higher yields on other financial instruments, which could adversely affect the price of the Shares. Lack of liquidity in the Company's Shares may increase price fluctuations of the share price, and make it difficult for individual shareholders to sell their shares. The Company is, by listing standards, a small company, and experience has shown that the liquidity of the Company's shares has been limited. Limited liquidity of the Company's shares may increase the fluctuations of the share price, as well as make it difficult for individual shareholders to sell their shares. It is possible that shareholders in the Company will not be able to sell their shares at a price acceptable to the shareholder at any given time. 26

31 In addition, the trading market for the Company's shares will be influenced by the research reports that research analysists publish about the Company or its business. If one or more of these analysts cease coverage of the Company's business or fail to publish reports on the Company regularly, the Company could lose visibility in the financial markets, which in turn could cause the Company's share price or trading volume to decline. Moreover, if one or more of the analysts who cover the Company's business adversely changes their recommendations regarding the Company's shares or if the Company's operating results do not meet their expectations, the Company's share price could decline. 2.4 Risk related to the Rights Issue Existing Shareholders who do not participate in the Rights Issue may experience significant dilution in their shareholding Subscription Rights that are not traded or exercised by the end of the Subscription Period will have no value and will automatically lapse without compensation to the holder. To the extent that an Existing Shareholder does not exercise its Subscription Rights prior to the expiry of the Subscription Period, whether by choice or due to a failure to comply with procedures set forth in Section 15 "The terms of the Rights Issue", or to the extent that an Existing Shareholder is not permitted to subscribe for Offer Shares as further described in Section 16 "Selling and Transfer Restrictions ", such Existing Shareholder's proportionate ownership and voting interests in the Company after the completion of the Rights Issue will be diluted. Even if an Existing Shareholder elects to sell its unexercised Subscription Rights, or such Subscription Rights are sold on its behalf, the consideration it receives in the trading market for the Subscription Rights may not reflect the immediate dilution in its shareholding as a result of the completion of the Rights Issue. An active trading market in Subscription Rights may not develop on the Oslo Stock Exchange and/or the market value of the Subscription Rights may fluctuate An active trading market in the Subscription Rights may not develop on the Oslo Stock Exchange. In addition, because the trading price of the Subscription Rights depends on the trading price of the Shares, the price of the Subscription Rights may be volatile and subject to the same risks as described for the Shares in Section 2.3 "Risks related to the Shares". The sale of Subscription Rights by or on behalf of Existing Shareholders may result in a reduction in the market price of the Subscription Rights and increased volatility in the Shares Certain Existing Shareholders may be unable to take up and exercise their Subscription Rights as a matter of applicable law. The Subscription Rights of such Existing Shareholders, with the exception of Subscription Rights held through financial intermediaries, may be sold on their behalf in the market by the Manager pursuant to instructions from the Company, as further described in Section 15.9 "Subscription Rights", but no assurance can be given as to whether such sales may actually take place or as to the price that may be achieved. Other holders of Subscription Rights may also choose not to exercise their Subscription Rights and therefore sell them in the market. The sale of Subscription Rights by or on behalf of holders of such rights could cause significant downward pressure on, and may result in a substantial reduction in, the price of the Subscription Rights and the Shares. If the Rights Issue is withdrawn, the Subscription Rights will no longer be of value If the Rights Issue is withdrawn, all Subscription Rights will lapse without value, subscriptions for, and allocations of, Offer Shares that have been made will be disregarded and any subscription payments made will be returned without interest or any other compensation. 27

32 3 RESPONSIBILITY FOR THE PROSPECTUS This Prospectus has been prepared in connection with the Rights Issue described herein and the listing of the Offer Shares on the Oslo Stock Exchange. The Board of Directors of RenoNorden ASA accepts responsibility for the information contained in this Prospectus. The Board Members confirm that, after having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect its import. 30 January 2017 The Board of Directors of RenoNorden ASA Erik Thorsen Chairman Charlotte Gaarn Hansson Board member Niklas Nikita Sloutski Board member Penelope Kate Briant Board member Markus Metyas Board member Ingvild Huseby Board member Per Johan Eriksson Board member 28

33 4 GENERAL INFORMATION 4.1 Other important investor information The Company has furnished the information in this Prospectus. No representation or warranty, express or implied is made by the Manager as to the accuracy, completeness or verification of the information set forth herein, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. The Manager assumes no responsibility for the accuracy or completeness or the verification of this Prospectus and accordingly disclaims, to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which it might otherwise be found to have in respect of this Prospectus or any such statement. Neither the Company nor the Manager, or any of their respective affiliates, representatives, advisers or selling agents, is making any representation to any offeree or purchaser of the Offer Shares or holder of the Subscription Rights regarding the legality of an investment in the Offer Shares or the Subscription Rights. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Offer Shares and the use of the Subscription Rights to subscribe for Offer Shares and the Subscription Rights. Investing in the Offer Shares involves a high degree of risk. See Section 2 "Risk factors" beginning on page Presentation of financial and other information Financial information The Company's audited consolidated financial statements as of, and for the year ended, 31 December 2015 (the "Financial Statements") and the Company's unaudited condensed consolidated interim financial statements as of, and for the three and nine month periods ended, 30 September 2016 (the "Interim Financial Statements") have been incorporated by reference hereto, see Section 17.3 "Incorporation by reference". The Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), while the Interim Financial Statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the EU ("IAS 34"). The Financial Statements have been audited by KPMG AS ("KPMG"), as set forth in their report incorporated by reference, see Section 17.3 "Incorporation by reference". The Interim Financial Statements have not been audited. The Interim Financial Statements have been restated to correct errors that originated in the period covered by the interim financial statements ended 30 June In connection with the contract reviews in the second quarter of 2016, the Company should have shortened its estimated useful lives for all vehicles and decreased its residual values for some of its vehicles. The impairment review and impairment tests performed were incomplete, and did not take into consideration an increase in the estimated discount rates and that some vehicles already were not in use. The correction of these errors led to an increase in depreciation and impairments. The Interim Financial Statements issued 16 December 2016 replaces the previous interim financial statements ended 30 September 2016, which were issued in the interim financial report as of 8 November As a consequence, the interim financial statements issued in the report of 8 November 2016 and the report of 16 August 2016, respectively, should not be read without the restated Interim Financial Statements. The Group's retroactive adjustment of the Interim Financial Statement to reflect the correction of errors related to impairment of goodwill, and certain vehicle assets and changes in estimates related to depreciation of certain vehicle assets is further described in note 5 to the Interim Financial Statement and Section 10.3 "Recent developments and trends" Alternative performance measures ("APMs") In this Prospectus, the Company has used basic alternative performance measures ("APMs"). The Group defines "EBITDA" as operating profit (loss) before depreciation, amortisation, write down of assets, impairment losses and loss on onerous contracts. "EBITDA Margin" is defined as EBITDA in percent of total operating revenue. "EBIT" equals operating profit (loss). 29

34 The APMs presented herein are not measurements of performance under IFRS or other generally accepted accounting principles and investors should not consider any such measures to be an alternative to: (a) operating revenues or operating profit (as determined in accordance with IFRS or other generally accepted accounting principles), as a measure of the Group s operating performance; or (b) any other measures of performance under generally accepted accounting principles. The APMs financial measures presented herein may not be indicative of the Group s historical operating results, nor are such measures meant to be predictive of the Group s future results. The Company believes that the APMs measures presented herein are commonly reported by companies in the markets in which it competes and are widely used by investors in comparing performance on a consistent basis without regard to factors such as depreciation, amortisation and impairment, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred), business practice or based on non-operating factors. Accordingly, the Group discloses the APMs financial measures presented herein to permit a more complete and comprehensive analysis of its operating performance relative to other companies and across periods, and of the Group s ability to service its debt. Because companies calculate the APMs financial measures presented herein differently, the Group s presentation of these APMs financial measures may not be comparable to similarly titled measures used by other companies Industry and market data This Prospectus contains statistics, data, statements and other information relating to markets, market sizes, market shares, market positions and other industry data pertaining to the Group's future business and the industries and markets in which it may operate in the future. Unless otherwise indicated, such information reflects the Company's estimates based on analysis of multiple sources, including data compiled by professional organisations, consultants and analysts and information otherwise obtained from other third party sources, such as annual financial statements and other presentations published by listed companies operating within the same industry as the Company may do in the future. Unless otherwise indicated in the Prospectus, the basis for any statements regarding the Company's competitive position in the future is based on the Company's own assessment and knowledge of the potential market in which it may operate. The Company confirms that where information has been sourced from a third party, such information has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where information sourced from third parties has been presented, the source of such information has been identified. The Company does not intend, and does not assume any obligations to update industry or market data set forth in this Prospectus. Industry publications or reports generally state that the information they contain has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. The Company has not independently verified and cannot give any assurances as to the accuracy of market data contained in this Prospectus that was extracted from these industry publications or reports and reproduced herein. Market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of actual market conditions. Such statistics are based on market research, which itself is based on sampling and subjective judgments by both the researchers and the respondents, including judgments about what types of products and transactions should be included in the relevant market. As a result, prospective investors should be aware that statistics, data, statements and other information relating to markets, market sizes, market shares, market positions and other industry data in this Prospectus (and projections, assumptions and estimates based on such information) may not be reliable indicators of the Company's future performance and the future performance of the industry in which it operates. Such indicators are necessarily subject to a high degree of uncertainty and risk due to the limitations described above and to a variety of other factors, including those described in this Prospectus Section 2 Risk Factors and elsewhere in this Prospectus Other information In this Prospectus, all references to "NOK" are to the lawful currency of Norway, all references to "DKK" are to the lawful currency of Denmark, all references to "SEK" are to the lawful currency of Sweden, all references to "USD" are to the lawful currency of the United States and all references to "EUR" are to the lawful common currency of the EU member states who have adopted the Euro as their sole national currency. The Financial Information is published in NOK. 30

35 The "Nordic countries" in the Prospectus refers to Denmark, Finland, Norway and Sweden, and not including Iceland throughout Rounding Certain figures included in this Prospectus have been subject to rounding adjustments (by rounding to the nearest whole number or decimal or fraction, as the case may be). Accordingly, figures shown for the same category presented in different tables may vary slightly. As a result of rounding adjustments, the figures presented may not add up to the total amount presented. 4.3 Cautionary note regarding forward-looking statements This Prospectus includes forward-looking statements that reflect the Company's current views with respect to future events and financial and operational performance. These forward-looking statements may be identified by the use of forward-looking terminology, such as the terms "anticipates", "assumes", "believes", "can", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "should", "will", "would" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements are not historic facts. They appear in the following Sections in this Prospectus, Section 2 "Risk Factors", Section 7 "Industry and Market Overview", Section 7 "Business of the Group", and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, potential risk factors, financial strength and position of the Group, operating results, liquidity, prospects, growth, the implementation of strategic initiatives, as well as other statements relating to the Group's future business development and financial performance, and the industry in which the Group operates. Prospective investors in the Shares are cautioned that forward-looking statements are not guarantees of future performance and that the Group's actual financial position, operating results and liquidity, and the development of the industry in which the Group operates, may differ materially from those made in, or suggested by, the forward-looking statements contained in this Prospectus. The Company cannot guarantee that the intentions, beliefs or current expectations upon which its forward-looking statements are based will occur. By their nature, forward-looking statements involve, and are subject to, known and unknown risks, uncertainties and assumptions as they relate to events and depend on circumstances that may or may not occur in the future. Because of these known and unknown risks, uncertainties and assumptions, the outcome may differ materially from those set out in the forward-looking statements. Important factors that could cause those differences include, but are not limited to: implementation of the Group's strategy and its ability to further expand its business and growth; the competitive nature of the industry the Group operates in and the competitive pressure and changes to the competitive environment in general; earnings, cash flow, dividends and other expected financial results and conditions; fluctuations of exchange and interest rates, and diesel fuel and LNG; changes in general economic and industry conditions, including changes to tax rates and regimes and other increases in costs, including wage inflation; changes in the legal and regulatory environment; the state of the Group's relationships with major customers, suppliers and the renewal, extension or termination of any contract with any major customer or supplier; inadequacy of the Group s insurance to cover the Group's losses; political, governmental, social, legal, environmental and regulatory changes; failure to retain and attract a sufficient number of skilled personnel; changes in and compliance with laws and regulations; 31

36 access to funding; and legal proceedings. Additional factors that could cause the Group's actual results, performance or achievements to differ materially include, but are not limited to, those discussed under Section 2 "Risk Factors". The information contained in this Prospectus, including the information set out under Section 2 "Risk Factors", identifies additional factors that could affect the Group's business, financial condition, results of operations, cash flows, liquidity, performance and prospects. Prospective investors in the Shares and/or Subscription Rights are urged to read all Sections of this Prospectus and, in particular, Section 2 "Risk Factors" for a more complete discussion of the factors that could affect the Group s future performance and the industry in which the Group operates when considering an investment in the Company. These forward-looking statements speak only as at the date on which they are made. The Company undertakes no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or to persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Prospectus. 32

37 5 DIVIDENDS AND DIVIDEND POLICY 5.1 Dividend policy In deciding whether to propose a dividend and in determining the dividend amount, the Board of Directors will take into account legal restrictions, as set out in the Norwegian Public Limited Liability Companies Act of 13 June 1997 no. 45 (the "Norwegian Public Limited Liability Companies Act") (see Section 5.2 "Legal constraints on the distribution of dividends ), the Group s capital requirements, including capital expenditure requirements, its financial position and condition, future growth opportunities, general business conditions and any restriction that its contractual arrangements in place at the time of the potential dividend may place on its ability to pay dividends and the maintaining of appropriate financial flexibility. Except in certain specific and limited circumstances set out in the Norwegian Public Limited Liability Companies Act, the amount of dividends paid may not exceed the amount recommended by the Board of Directors. The Company paid NOK 50,136,224 in 2015 which equals NOK 1.84 dividend per share, and NOK 50,000,000 in 2014 which equals NOK dividend per share. The Company's Board of Directors will not propose dividend distribution for the year ended 31 December 2016 due to the Group's current financial situation. The Company will aim to pay dividends in the future. However, there can be no assurance that a dividend will be proposed or declared in any given year as this, and the amount of any dividend, will be determined by the prevailing circumstances at the time. If a dividend is proposed or declared, there can be no assurance what the dividend amount will be. 5.2 Legal constraints on the distribution of dividends Dividends may be paid in cash, or in some instances, as contribution in kind. The Norwegian Public Limited Liability Companies Act provides the following constraints on the distribution of dividends applicable to the Company: Section 8-1 of the Norwegian Public Limited Liability Companies Act provides that the Company may distribute dividends to the extent that the Company's net assets, following the distribution covers (i) the share capital, (ii) the reserve for valuation variances and (iii) the reserve for unrealised gains. The amount of any receivable held by the Company which is secured by a pledge for Shares in the Company, as well as the aggregate amount of credit and security which, pursuant to Section 8 7 to Section 8-10 of the Norwegian Public Limited Liability Companies Act fall within the limits of distributable equity, shall be deducted from the distributable amount. The calculation of the distributable equity shall be made on the basis of the balance sheet included in the approved annual accounts of the last financial year, provided, however, that the registered share capital, as of the date of the resolution to distribute dividends, shall be applied. Following the approval of the annual accounts of the last financial year, the General Meeting may also authorise the Board of Directors to declare dividends on the basis of the Company's audited annual accounts. Dividends may also be resolved by the General Meeting based on an interim balance sheet which has been prepared and audited in accordance with the provisions applying to the annual accounts and with a balance sheet date not further into the past than six months before the date of the General Meeting's resolution. Dividends can only be distributed to the extent that the Company's equity and liquidity following the distribution is considered sound by the Board of Directors, acting prudently. In deciding whether to propose a dividend and in determining the dividend amount, the Board of Directors will take into account legal restrictions, as set out in the Norwegian Public Limited Liability Companies Act, the Company's capital requirements, including capital expenditure requirements, its financial condition, general business conditions and any restrictions that its contractual arrangements in place at the time of the dividend may put on its ability to pay dividends and the maintaining of appropriate financial flexibility. For a description of restrictions on payment of dividends in the Group's credit facilities, see Section 10.5 "Material borrowings". Except in certain specific and limited circumstances set out in the Norwegian Public Limited Liability Companies Act, the amount of dividends paid may not exceed the amount recommended by the Board of Directors. 33

38 The Norwegian Public Limited Liability Companies Act does not provide a time limit in which entitlement to dividends lapses. Subject to various exceptions, Norwegian law provides a limitation period of three years from the date an obligation is due. There are no dividend restrictions or specific procedures for non-norwegian residential shareholders to claim dividends. For a description of withholding tax on dividends applicable to non- Norwegian residents, see Section 14 "Taxation". 5.3 Manner of dividend payments Any future payments of dividends on the Shares will be denominated in NOK, and will be paid to the shareholders through the VPS. Investors registered in the VPS whose address is outside Norway and who have not supplied the VPS with details of any NOK account, will, however, receive dividends by cheque in their local currency, as exchanged from the NOK amount distributed through the VPS. If this is not practical, in the sole opinion of DNB, being the Company's VPS registrar, to issue a cheque in a local currency, a cheque will be issued in USD. The issuing and mailing of cheques will be executed in accordance with the standard procedures of DNB. The applicable exchange rate(s) will be DNB's rate on the date of issuance. Dividends will be credited automatically to the VPS registered shareholders' NOK accounts, or in lieu of such registered NOK account, by cheque, without the need for shareholders to present documentation proving their ownership of the Shares. 34

39 6 REASONS FOR THE RIGHTS ISSUE The Group has in 2016 struggled with operational issues combined with a challenging competitive environment with observable increased competition and price pressure, leading to delivered operating results below the Group s expectations. The operational issues includes loss making contracts in Norway related to tender wins due to miscalculation of bids, in addition to new and revised estimates for two ongoing contracts in Denmark leading to estimated losses. Also, truck delivery challenges in Denmark has contributed to lower efficiency and inhibited the implementation of planned route improvements, which has resulted in higher operating costs than initially planned. See Section "Introduction" for more information regarding these issues. In the restated Interim Financial Statements as of 30 September 2016, the Group reported provisions recognized in the period ended 30 June 2016 for onerous contracts in Denmark and Norway of NOK 166 million in total and a goodwill impairment of NOK 239 million in Norway and Denmark, and impairment of equipment of NOK 71 million. This has contributed to a decrease in the Group s equity ratio which was reported at 13% as of 30 September The combination of increased investments and decreased EBITDA has also lead net interest bearing debt ("NIBD") over EBITDA (NIBD/EBITDA) approaching the maximum covenant level of 5.0x (4.85x as of 30 September 2016) permitted by the Group's financing arrangements. Although significant improvement measures have been taken and new Management has been on-boarded, the above issues continue to put pressure on the statement of financial position and covenants of the Group. The Company expects revenue for and as of the period ended 31 December 2016 to be slightly below the level for the same period ended 31 December 2015 and a weaker seasonal development in EBITDA margin in the period ended 31 December 2016 compared to the previous year. Furthermore, the Company expects the total capital expenditure for the period ended 31 December 2016 to be slightly higher compared to the level as of the period ended 30 September Going forward, the Company expects the Group EBITDA margins to stabilize in the short term and thereafter slightly improve in the medium term, and Management will apply a disciplined approach to new contracts. At the same time, starts-ups of large contracts are expected in 2017, mainly related to already committed contracts, are expected to lead to capital expenditures in 2017 which are above the capital expenditure level of As a consequence of the increased investments mainly related to already committed contracts, in combination with the margin development, the Company expects a further increase in the NIBD/EBITDA ratio and that continued compliance with the Company's maximum NIBD/EBITDA covenant of 5.0x under the Company's financing agreements will be challenging over the coming quarters unless a share capital increase is conducted. A covenant breach is expected to result in a significant increase in financing cost and disruption of Management's focus on operational improvements. Given the current situation, the Board of Directors, has decided to execute the Rights Issue of NOK 350 million to strengthen the Group's statement of financial position and create headroom with respect to its NIBD/EBITDA covenant, thus providing a better platform for the business going forward and increased refinancing flexibility. See Section 2.2 "Risks relating to financing" for more information regarding risks related to the Group's financing. 35

40 7 INDUSTRY AND MARKET OVERVIEW The information contained and data included in this Section 7 "Industry and market overview" has been prepared by PwC at the request of the Company for the purpose of being included in this Prospectus. PwC has based the information contained in this Section on data and research from recognised research companies, as well as official financial statistics and other publicly available information. The industry and market overview does not purport to contain all of the information the recipient may desire nor require to make a decision to proceed with further investigations. Industry publications or reports generally state that the information they contain has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. Neither PwC nor the Company has independently verified this information, and cannot give any assurances as to the accuracy of market data contained in this Section that was extracted from these industry publications or reports and reproduced herein. Market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of actual market conditions. Such statistics are based on market research, which itself is based on sampling and subjective judgements by both the researchers and the respondents, including judgements about what types of products and transactions that should be included in the relevant market. Interested parties should conduct their own investigations and analyses of the industry and the Company. Certain statements, estimates and projections with respect to future industry development are included herein. Such statements, estimates and projections reflect various assumptions and anticipated results, which may or may not be correct. As a result, prospective investors should be aware that statistics, data, statements and other information relating to markets, market sizes, market shares, market positions and other industry data in this Section (and projections, assumptions and estimates based on such information) may not be reliable indicators of the Group s future performance and the future performance of the industry in which it operates. Such indicators are necessarily subject to a high degree of uncertainty and risk due to the limitations described above and to a variety of other factors, including those described in Section 2 "Risk factors" and elsewhere in this Prospectus. Although the information set out herein is believed to be correct, no representation or warranty, express or implied, is given by PwC or the Company, as to the accuracy or completeness of the contents of this industry and market overview or to the accuracy or completeness of the projections included herein or of any other document or information supplied at any time in connection with the Rights Issue. 7.1 Waste management value chain The waste management industry comprises collection, treatment and trading of household and commercial waste. RenoNorden specialises in collection and transportation of household waste in Scandinavia, and now operates across the entire Nordic region, except Iceland. The Groups operations in Finland also include some activity in commercial waste collection. 36

41 The definition of municipal waste differs somewhat across the Nordics. In Norway and Denmark, the term includes only waste from households, public places and recycling stations. In Sweden and Finland, municipal waste also includes comparable waste generated outside of the home, i.e. waste collected from public places, hospitals, schools, stores, restaurants, offices etc. Commercial waste comprises waste from commercial businesses, construction and industry. In general, municipalities have ownership of household waste throughout the value chain, and it is their responsibility to ensure proper waste collection from their inhabitants and waste treatment in accordance with governmental regulations. Collectors of household waste do not take ownership of the waste as opposed to collectors of commercial waste who own the waste and receive revenue or generate cost from selling or disposing recycled waste fractions (e.g. gate fees). Hence, collectors of household waste are not exposed to fluctuating material prices or associated environmental risks, and are less exposed to changes in waste volumes. 7.2 The Nordic household waste collection market Market structure Responsibility for municipal waste collection and treatment is largely the same across the Nordic countries and mirrors EU developments where all responsibility and cost lies on the municipalities. Traditionally, household waste collection has been a relatively unsophisticated service in which a single waste bin is emptied at a given frequency using standard waste vehicles. As environmental concerns have grown, requirements for increased recycling and separation of waste fractions have emerged. In parallel, focus has been given to the cost aspects of municipal services leading to more outsourcing to external collection providers. This has resulted in an increasing private market for collection services. Thus, collection has become more specialised, requiring improved route planning and setting higher requirements to the waste collection vehicles and the external providers. Household waste collection services is usually either managed as an internal (in-house) operation (financed directly from the operational budget, and either operated by a municipal or an inter-municipal company), or outsourced to a third-party provider, such as RenoNorden. When services are outsourced, the contract is awarded through a public tender process. The cost for household waste collection in Scandinavia is in principle fully recovered by the municipality through a waste management fee charged to the households. The fee is meant to cover the entire cost for the municipalities including collection and transportation, sorting, treatment and disposal. The low-cyclical nature of the market is explained by collectors not having ownership for the waste, reducing the impact from material prices and variation in volume. Furthermore, temporary fluctuations in household waste volume can be accommodated without modifying bin-size or collection frequency, and most contracts are relatively long term without price fluctuations for the services Regulatory development The waste volume is generally expected to increase with economic growth. This has prompted governments to prioritise and stress initiatives on how to reduce the amount of waste produced, but also to make best use of the waste. In the end of 2013, European Member States governments developed a resource/waste strategy in accordance with the EU Waste Directive 2008/98/EC (Article 29 of the Directive). The focus of the Directive was grounded in waste reduction. In 2015, the European Commission concluded that simply setting targets to reduce waste output did not account for the entire circle of waste management and what is needed to close the loop. In December 2015, the European Commission passed the Circular Economy Package, which includes revised legislative proposals on waste reduction in addition to clear direction on recycling and turning waste into valuable resources. Key elements of the revised waste proposal include: i) a sharp increase in targets for recycling (a common recycling target of 65% of municipal waste by 2030), ii) a ban on landfilling of separately collected waste fractions and iii) a requirement for separate collection of bio-waste. In this context, European Member States are prioritising actions, setting goals and indicators for waste reduction and reuse in accordance with the requirements of the amended EU Waste Directive. 37

42 Low Priority High Reduce (volume of waste produced) Reuse Recycle (or compost) Recover (energy) Dispose Source: European Commission's Waste, 2016 Elevated importance under the Circular Economy Package The elevation of recycling in the waste hierarchy is attractive for collectors of municipal waste. The Circular Economy Package leads to more complex waste collection contracts with higher requirements and a higher number of fractions, increasing barriers to enter, as well as being total market size-positive, in a pay-per-bin structure. The extent and impact of regulatory reform differ between the Nordic countries. Nevertheless, the trends and initiatives in the respective countries are fairly similar. In December 2016, the Norwegian Ministry of Environment issued a memorandum to the Government on waste and recycling, reaffirming an overall goal of 50% material recycling of paper, metals, plastics and glass waste in Norway by 2020, and a goal of 65% recycling by In practice, the municipalities are responsible for household waste, and increased recycling can be achieved through either increased sorting in the home or through centralised sorting facilities. The share of household waste that is recycled has been stable at 37%- 39% the past three years. The Ministry s memorandum outlines potential initiatives to lift the recycling rate, with suggested implementation from 2017 onwards. In Denmark, the EU Waste Directive has led to a resource and waste strategy for 2018, including several initiatives on conservation of resources in the waste hierarchy for both industries and households. Denmark is characterised by low landfilling rates (approximately 1.3%) and the highest rate of incineration in EU-28 (approximately 54%). Historically, the increase of the recycling rate has been slow. The strategy going forward is underpinned by increasing instances of separate collection, with the end objective of 50% recycling by As in Denmark, the EU Directive has led to a number of initiatives in Sweden. The Swedish Environmental Protection Agency has determined that the waste recycling level in Sweden should reach 50% by the year 2020 through decreasing the amount of waste and increasing the recycled part of the total waste. Another goal is that at least 50% of the food waste should be biologically treated before Historically, Finland had set a national target of 50% recycling by The recycling rate in Finland was at approximately 37% in While their internal target was overly ambitious, Finland has confirmed it is a governmental priority to fulfil the EU Directive s 2020 target of 50% recycling. In general, these regulations are changing the way municipalities collect household waste as it requires even more segmented disposal as well as more complex sorting systems in both households and central sorting. The requirements are likely to be beneficial to operators in the waste collection market as the requirements, among other things, will lead to an increase in the number of fractions to be collected. Country Household recycling rate (2015) Household recycling rate goal Norway 38% Denmark 44% Sweden 50% Finland 37% 50% by % by % by % by % by % by % by % by 2030 Source: The Ministry of Environment in the respective countries 38

43 7.2.3 Tender process According to the EU Public Procurement Directive, all central, county and municipal authorities in the Nordic countries are required to arrange purchases over EUR 209,000 as open and transparent tender processes. This ensures a level playing field between niche service providers and vertically integrated waste management companies. Inter-municipal tendering is increasing, driving larger contract sizes and reduced administration costs for local authorities. Tenders for household waste collection contracts awarded by municipalities typically have durations of five years with options for two further years (one plus one), exercisable at the discretion of the municipalities. Price is the main criteria in contract awards, but most issuers also include additional quality criteria. One or more of the following criteria will typically be included in addition to price: Quality, i.e. capacity, stability, competence, previous experience. Environment, i.e. environmental concerns and energy utilisation. Understanding of assignment, i.e. accordance with tender, number of modifications. Over the past five years, price has been increasingly used as a main criteria, shifting from a period ( ) where issuers put more emphasis on quality criteria. The use of soft criteria has turned out to be somewhat problematic due to challenges in measuring and evaluating quality criteria accurately. Several tender outcomes in Norway have been appealed to the Norwegian Complaints Board (KOFA) by participants, claiming that selection mechanisms have not fulfilled the transparency requirement. This has also been the case in Sweden with the Stockholm contracts in In addition, as more requirements on e.g. equipment and environmental standards have been included in the qualification process, an emphasis on quality criteria has been reduced. The average number of participants in tender processes has in general been stable during the last decade, indicating complex tender processes with more services to be performed and illustrating the consolidation trend seen in some of the markets. The municipal reform in Denmark in 2007 reduced the number of municipalities leading to larger contracts, thus changing the contract structure and competitive landscape. In general, it is easier to operate contracts in Denmark due to geography and its heritage as a transport-intense market, resulting in higher tender participants. In Finland, a number of small operators have entered different local markets, resulting in an increase in the number of participants per tender. Development in average number of participants in tenders Norway Sweden Denmark Finland Source: Doffin, Opic, Credita, Tenders Electronic Daily, PwC Market size The total household waste volume handled in the Nordic market is estimated to 13.2 million tons in Waste volumes have increased steadily since 2010, in line with moderate population and GDP growth across the Nordics. Projections towards 2019 indicate a stable and positive annual growth rate of 2%. Modest volume growth is expected in all the Nordic countries, where the strongest growth is expected in the Danish market. 4 Small sample size for Finland (six tenders) due to limited available information 39

44 Market volume Nordic household waste collection Million tonnes +2% +1% Finland Denmark CAGR % 2.3% Sweden Norway 1.5% 1.0% e 2017e 2018e 2019e Source: Market information, PwC analysis The Nordic market for collection and transportation of municipal household waste is estimated at NOK 8.3 billion in 2016 (i.e. the total market including the in-house part), and is forecasted to grow 3% per annum, reaching NOK 9.0 billion in Market value Nordic waste collection NOK billion % +4% Finland Denmark Sweden Norway CAGR % 2.2% 3.5% 2.3% e 2017e 2018e 2019e Source: Market information, PwC analysis Market drivers and trends Typically, household waste collection contracts are valued based on the number of units collected, price per unit, and total distance covered. One unit represents a bin or a container. The unit price is a function of waste complexity, which again is a function of the type of waste (e.g. unsorted waste, paper, metal etc.) and unit size. As a result, a contract collecting only half-full containers has the same value as a contract collecting only full containers. This means that the market value is only partly dependant on the market volume, with the exception being when high volumes increase the unit size (i.e. waste complexity) or the number of units. Population growth and increased recycling are the main drivers for volume growth. Industry drivers Price drivers indexation Waste collection complexity Technology requirements Re-tendering Collection frequency Volume drivers Population growth GDP growth Waste per capita 40

45 Industry driver forecast Industry drivers Indexation Annual impact on price per capita Re-tendering (price pressure) Price reduction on retenders Population growth Annual impact on population Waste complexity Annual impact on price per capita DK 0.9% FI 0.8% DK -3.8% FI 0% DK 0.8% FI 0.4% DK 1.5% FI 0.8% Annual Estimate NO 1.1% SE 1.1% NO -3.8% SE 0% NO 1.0% SE 1.5% NO 0.7% SE 1.1% Source: SCB, Eurostat, SSB, DST, PwC analysis Indexation Contracts typically include provisions to adjust the unit price based on defined national indices. The most commonly used indices are: Norway - Cost index for road transport (with separate indices for different vehicle types), published by Statistics Norway (SSB). Sweden Waste index (A12:1 household waste collection index), published by Statistics Sweden (SCB) on behalf of Avfall Sverige, from 2012 and onwards. Denmark - Cost index for household waste collection, published by Statistics Denmark (DST). Finland - Cost index for road transport of goods, published by Statistics Finland (Tilastokeskus). All indices have shown year-on-year growth in the recent years Re-tendering At expiry, contracts are usually renewed through a public tender process. The most important selection criteria in these processes is price, creating price pressure that in many cases offsets the index adjustment effect. Increasing competition on re-tenders in Norway has recently yielded a high price pressure, but this is expected to be more stable going forward. While changes to the contract scope can happen during the contract period, adjustments are most common when re-tendering, i.e. catchment area, truck requirements, number of fractions collected, pick-up frequency etc. Scope changes impact contract pricing, rendering price comparisons to historical contracts not possible on a like-for-like basis Growing population and GDP in the Nordics The Nordic population is forecast to grow at 1% annually from , increasing the total amount of waste produced in the region. This is expected to positively impact the need for waste transportation services. 41

46 Population growth GDP per capita in knok * Country Est CAGR Country Est CAGR Sweden % Sweden % Norway % Norway % Denmark % Denmark % Finland % Finland % * Constant currency of NOK:SEK= , NOK:DKK= and NOK:EUR= Source: Market information Despite the regulatory initiatives to maximise conservation of resources through reducing the amount of waste generated, waste volumes in the Nordic countries has historically increased. The amount of waste generated per capita is a key market driver, and often follows the GDP development. In line with GDP per capita, the generated waste volume declined in 2008, but has shown signs of recovery across all Nordic markets since 2009, and is anticipated to keep growing in alongside GDP and population Increasing waste collection complexity Increased environmental awareness and political attention in all Nordic markets have led to new policies and schemes being implemented on waste management related services. This has often resulted in more complex waste collection procedures. The ability to reach national and European recycling goals depends on the growing societal norm for households to sort waste into different fractions. The most common fractions collected today are organic waste, paper & cardboard, glass, metal and plastic. The share of population with four or more fractions collected is the highest in Norway and Finland while Denmark is lagging behind the other Nordic countries, representing potential upside on re-tendered contract values if further requirements are implemented. The number of different fractions collected at each household has increased steadily from 2010 to 2015, and is expected to continue to grow. Households with four or more fractions collected 40% 30% 23% 25% 21% 13% 14% 5% Norway Finland Denmark * Sweden *2015 figures for Denmark is based on 2013 information as the latest available estimate Source: PwC 42

47 In the Nordics in general, a larger responsibility is put on the households to pre-sort their waste into different fractions using multi-fraction solutions. With multi-fraction solutions, several different systems are being attended for, e.g. the four-bin system and the domestic sorting system. The four-bin system demands better technology vehicles and expertise from the collection services firm, which drives the price per collection. According to industry experts and interviewed municipalities, a shift from a two-bin system to a four-bin system would increase the contract price by approximately 30%. In Sweden, this price increase has not yet affected the outsourced market, largely because the four-bin system is relatively new to the market, so the majority of the municipalities using this solution have waste collection services in-house. In connection with renewing outsourced contracts, an increasing demand for multi-fraction solutions is expected. The domestic sorting solution is especially common in apartment buildings, and allows each household to sort their waste in several different compartments situated near their home. Each waste type has one large compartment, which is collected with different vehicles. It does not necessarily drive the price as much as the four-bin system because it is not as advanced however it drives the number of collections which in turn increases the contract values. Another possible sorting solution that is frequently discussed is the opti-bag system. The opti-bag system allows the household to sort each waste type in differently coloured plastic bags and throw them into the same compartment. All the waste gets picked up by one vehicle and transported to a refuse disposal plant. In order for the opti-bag solution to work, the refuse disposal plant has to be equipped with a reader to map the correct colour of the bag and sort it into its category. This system does not drive complexity for the waste collection part (easy to pick up, no advanced vehicles needed). However, since compactors cannot be used it drives volume. The opti-bag solution requires significant investment from municipalities. Hence, the likelihood of the opti-bag solution becoming a standard system is considered moderate Stable outsourcing trend estimated The main reasons for operating waste collection in-house are the historical tradition of municipalities running their own waste collection and a general resistance towards dismissing internal employees for the benefit of external service providers. The level of waste collection outsourced in the Nordic countries has been stable from 2010 to 2016, and is estimated to be approximately 80% in Sweden and Norway are the least developed outsourcing markets, with outsourcing levels of approximately 66% and 68% respectively. In both countries, there is a history of using municipality-owned players for a number of community services, such as waste collection. For Sweden, the slightly reduced share in 2016 is likely a result from SamTek s bankruptcy and services being in-sourced. The level of outsourcing is not estimated to increase in the years up to 2019, as most municipalities considering outsourcing waste collection already are doing so, based on the municipalities interviewed. The Nordic countries generally have high degrees of outsourcing in comparison to other countries. This is particularly true for Finland and Denmark, which are the two countries with the highest shares of outsourcing in Europe. Level of outsourcing in Nordic countries 2010, 2016 by population 93% 94% 100% 100% 67% 67% 67% 66% Norway Denmark Sweden Finland Source: Management information, RenoNorden database and PwC analysis 43

48 7.2.6 Contract opportunities The average contract length in the Nordic household waste market is five years, with a one plus one extension option. The options are usually exercised. Assuming all options are exercised, and that each contract is renewed upon expiry, gives the market pipeline set out below. Typically, around a 100 contracts are retendered each year. The tender process is usually conducted one year prior to the current contract s expiration, meaning that the tender process for the 2020 volumes is in Consequently, 2017 is excluded from the graph as most of the contracts have already been retendered. Contract values to be tendered, (MNOK) Norway Sweden Denmark Finland Source: Management Information, RenoNorden database and PwC analysis The pipeline only includes contracts that are currently being publicly tendered, and does not cover any new contracts being added from increased outsourcing. In Sweden, the Stockholm contract was re-tendered in 2016, coming into effect in March A large share of contracts (36 contracts), are being retendered in 2020, compared to an average of 27 the preceding years. For Denmark, the 2022 peak is caused by many larger contracts going out for tender at the same time. Norway experiences a peak in 2023, which mainly driven by more contracts being retendered this year than usual, 17 compared to an average of 8 the other years. Due to limited contract information available, the Finnish pipeline is derived using the Finish market size and assuming a five-year contract period. Consequently, all contracts are re-tendered over a five-year period, and the pipeline can be described as the market size divided by five. To account for the cost price index, the contracts that are being retendered are index adjusted. As commercial contracts are assumed to run on a continued basis, only contracts tendered by municipalities are included in the Finnish pipeline The competitive landscape The household waste market in the Nordics has a clear leader in RenoNorden, with an estimated market share of 31% of the outsourced part of the population in the Nordic countries, an increase of 3ppt since The growth has been achieved organically through winning several new contracts in Denmark and Sweden. The Group is the only operator that is present across the Nordic countries. In-house collection of waste comprise approximately 20% of the total market. There are several operators with a market share 5%-10%. 5 Excluding the impact of the outcome from the Oslo tender as discussed below. 44

49 Estimated Nordic market shares Nordics Norway Sweden Denmark Finland 2016e ~ 8.3 NOKbn 20% In-house ~ 1.8 NOKbn ~ 2.2 NOKbn ~ 2.3 NOKbn ~ 1.9 NOKbn In-house 7% 27% 33% 18% 34% In-house Other Other In-house In-house In-house Other Other 56% Other RenoNorden 24% ~31% of outsourced market Other 6% Retur 3% VeiReno 5% 16% Norsk Gjenvinning RenoNorden 38% ~57% of outsourced RenoNorden market 23% Other Renova 5% Ragn- Sells 9% Ragn-Sells SUEZ 11% SITA RenoNorden 19% ~28% RenoNorden of outsourced market Local 13% Marius Pedersen 14% Meldgaard 19% Morten M.Larsen Larsen RenoNorden 30% RenoNorden ~32% of outsourced market Sihvari 8% 15% SUEZ Norsk Gjenvinning 35% Lassila & Tikanoja RenoNorden 15% RenoNorden In Norway, there are two leading operators, namely RenoNorden and Norsk Gjenvinning, whereof RenoNorden is the largest, having a market share of 57% of the outsourced market (serving 38% of the Norwegian population in 2016), an increase of 11% since However, the 2016 market shares exclude the impact of VeiReno winning the Oslo contract commencing October VeiReno won the contract on price with a total bid of NOK 420 million, NOK 129 million below RenoNordens bid and NOK 81 million below Norsk Gjenvinnings bid. Adjusting market shares to reflect the outcome of the Oslo contract results in VeiReno s market share increasing from 5% of the population served, to 17%. Accordingly, RenoNorden and Norsk Gjenvinning, who previously shared the contract, concede market share of 6% and 6% respectively. VeiReno now faces the challenge of executing the Oslo contract in its entirety. The Swedish market is relatively fragmented, with the top three nationwide private operators (RenoNorden, SUEZ and Ragn-Sells) making up only 39% of the market. RenoNorden is the market leader with a 19% market share. The second largest operator is SUEZ, previously SITA, closely followed by Ragn-Sells. Market shares exclude the Stockholm contract that was split between RenoNorden and SUEZ (where RenoNorden won seven districts and SUEZ won 4 districts), which come into effect in March There are signs that the market is consolidating as smaller private players, such as Liselott Lööf, lost the Stockholm contract (April 2016), SamTek filed for bankruptcy (April 2016) and Bengt Werpers Åkeri was acquired by SUEZ (2015). Market shares among the municipality-owned players have remained fairly constant with Renova being the largest municipality-owned player with 5% market share and most frequently active in the Western parts of Sweden. Other large municipality owned players are Sysav, SRV and Vafab. The Danish market is concentrated with the top six players accounting for 85% of the market. The remaining 15% is split between municipalities operating their collection in-house (6%) and smaller local players (9%). RenoNorden is the largest player, with a 30% market share. The second largest player is MLarsen with a 19% market share, followed by Meldgaard with a 14% market share. In January 2016, Marius Pedersen acquired Miljøteam, making them the fourth largest player with a 13% market share. Denmark has the lowest share of households with four or more fractions collected of the four countries, suggesting potential for further price development. 6 a) Household, municipal contracts only, excluding Finland which includes commercial contracts. b) November 2016 Market shares based on population served c) Marius Pedersen acquired Miljøteam January 1, 2016 Source: Management Information, RenoNorden database and PwC analysis 45

50 The Finnish market is dominated by three nationwide operators, RenoNorden, Suez Finland and Lassila & Tikanoja, with a combined market share of 65%. Hartwall Capital s acquisition of Suez Finland is expected to be completed by the end of 2016, but no significant changes in the company s operations are expected at the beginning of the ownership. In the capital region, RenoNorden has managed to increase its market share during 2016, from 8% to 11%, whereas Lassila & Tikanoja and Suez have seen their market share somewhat decrease. Beside the three largest operators, Retena has in 2016 increased its position in the capital region from 9% to 17%. However, Retena is considered to be a local player and its total market share is 4%. Top 3 Nordic competitors to RenoNorden Peer Services Presence Revenue EBIT % Comments Listed Finnish based provider of Waste and Facility management Waste Mgmt Industrial services Facility services Other Nationwide in Finland, operations in Sweden (facility mgmt only), Latvia and Russia NOK 5.9 billion 6% Ambition to become the largest recycling company in the Nordics. Focusing on fortifying market position and bolt-on acqusitions The Finnish unit of the Suez Listed French global specialist in securing and recovering resources Waste Mgmt Industrial services Water Mgmt Other >70 countries with 70% of revenue in Europe, present in Sweden and Finland NOK 137 billion 9% group (NOK 645 million revenue in 2015) is to be sold in late December 2016 to Hartwall Capital. Suez acquired SITA in 2016 increasing their Nordic presence. Group has focused on inorganic growth since 2014 Waste Mgmt PE-owned Norwegian waste management player Industrial services Facility services Other Norway NOK 4.1 billion 5% Focusing on cost reduction to meet challenging market conditions Source: Public company information, company websites and Mergermarket. 46

51 8 BUSINESS OF THE GROUP 8.1 Overview Introduction As shown in the table below, the Group is a leading 7 domestic waste collection services provider, operating across the Nordic region and headquartered in Frogner in Sørum, Norway. The Group operates primarily in the household waste collection segment within the wider waste management industry and is the only operator in this segment that has operations in four Nordic countries. In general, the Group tenders for household waste collection contracts awarded by municipalities that typically have durations of five to seven years with extension options for the municipalities for two further years (one plus one). The Group also sells additional services to its customers, for which additional revenue can be earned, for example leafleting to residents, cleaning or replacement of bins, or tagging of bins. In Finland, the business also operates in the commercial waste collection segment (6% of revenue in 2015) for selected clients on a contracted basis. As at the date of this Prospectus, the Group employs 2,000 people and has more than 1,000 vehicles of which it services close to 300 municipalities and over six million inhabitants in Norway, Sweden, Denmark and Finland. Country Market position 8 Employees Vehicles 9 Branches 10 Norway No Sweden No Denmark No Finland No Total 2,008 1, Since establishment, the Group has experienced strong revenue growth, both organically and through acquisitions. The graphs on the following pages show the revenue, EBITDA and EBITDA margin development for the Group from 1 January 2014 to 30 September In 2015, the Group generated revenues of NOK 1,808 million and EBITDA of NOK 291 million (EBITDA margin of 16.1%) 11, compared to the last twelve months prior to 30 September 2016, revenue of 1,934 million and EBITDA of 255 million (EBITDA margin on 13.2%) 12. See Section "Alternative performance measures ("APMs")" for a definition of EBITDA. The decrease in EBITDA margins is mainly driven by a combination of replacement of high margin contracts with lower margin contracts and increased competition and price pressure observed within the Group's business segment. The recent decrease in EBITDA margins in the last twelve months prior to 30 September 2016, is further explained by truck delivery challenges in Denmark, in addition to start-up and close-down costs in Sweden. The Group expects that the EBITDA margins will stabilize in the short term, based on the Group's disciplined approach to new contracts, and thereafter slightly improve in the medium term. 7 See Section "The competitive landscape" for market share data. 8 See Section 7 "Industry and market overview" for market share data. Finnish market shares include commercial waste. 9 Table includes asset heavy and operation critical vehicles only. The table does not include smaller units, such as trailers, company cars, forklifts, tractors and vans. See Section Vehicles, fleet management and maintenance for further details on the fleet of vehicles. 10 Branches defined as physical locations with ongoing operations. Source: Management. 11 In 2015, the Group's operating profit was NOK 158 million. 12 As of 30 September 2016, the Group's operating loss was NOK 405 million. See the Interim Financial Statements as of 30 September 2016 for more information. See Section 17.3 "Incorporation by reference herein" 47

52 The following summarises the recent operational issues and measures taken to address these issues: Tender process: Loss making contracts in Norway is related to tender wins due to miscalculation of bids, in addition to new and revised estimates for two ongoing contracts in Denmark leading to estimated losses. Several bids delivered in 2016 was found to have been calculated with insufficient employee and truck resources. This was caused by a combination of human errors, ex. diesel fuel costs being omitted from a tender, and overconfidence in the Group's ability to operate complex contracts with slim resources on the operational and administrative side. To minimize and avoid such errors in the future, the Group has improved risk assessment and group controlling, established specific team with key roles and responsibilities in all countries, in addition to introducing database with key performance indicators ("KPI s") to support tender processes and avoid human mistakes. Truck deliveries in Denmark: Truck delivery challenges in Denmark has contributed to lower efficiency and inhibited the implementation of planned route improvements, which has resulted in higher operating costs than initially planned. To address the issue the Group has renegotiated agreements and executed on-site refurbishment and some factory refurbishment. To avoid similar issues going forward, the Group has strengthened procurement routines through implementation of more stringent routines and recruiting a new Group Procurement Director leading the process. Cost base: New management has identified several cost reducing and efficiency measures. In addition, the Group has identified potentials through improved route planning and better resource planning. The Group has identified measures in the three and nine months ended 30 September 2016, which will be incorporated in 2017, which is expected to permanently lower cost base by a reasonable amount per year. Furthermore, management has increased operational control through weekly monitoring. Quarterly and yearly revenue development for the Group 13 NOK million The Group is exposed to seasonal variances where typically the first quarter of the year is the weakest quarter due to limited extra collections, such as for waste from vacation houses, and the calendar effect of a short month of February. 13 LTM means the last twelve months and indicates a period of time from the last twelve months prior to 30 September

53 Quarterly and yearly EBITDA and EBITDA margin development for the Group NOK million History RenoNorge (the former name of RenoNorden) was established in 2000 in Norway. At that time, the Norwegian waste market was dominated by two vertically integrated waste management companies. The core premise of the Company s tailored business model, which remains today, was to be a focused, specialist waste collection service provider to municipalities and to create a niche operator within this segment. RenoNorden was awarded its first contract in 2001 by the Kongsberg municipality in Norway, and continued thereafter to grow organically in Norway by successfully winning public waste collection tenders. The Group is today the largest household waste collection service provider in Norway, in terms of number of households serviced 14. In 2016, the Group serviced approximately 150 municipalities in Norway and one of every three Norwegians. In 2007, RenoNorden was awarded its first contract in Sweden by AOS Skaraborg and continued thereafter to grow organically in Sweden by successfully winning public waste collection tenders. In 2010, RenoNorden acquired a Swedish competitor s assets out of bankruptcy, including its contracts in Stockholm and Malmö. The Group is today the largest household waste collection service provider in the Swedish market 15, in terms of number of households serviced. In 2010, RenoNorden completed the acquisition of the tender division of the household waste collection service provider Renoflex-Gruppen A/S. Renoflex-Gruppen A/S was at the time a regional operator in the Danish market, based in Zealand, but provided the Group with a strong platform for further expansion into the Danish market. In 2011, the Group further strengthened its position in the Danish market through the acquisition of Nord-Ren A/S in Jutland. Through the acquisition of Nord-Ren A/S, the Group became a national operator in Denmark and is today the largest household waste collection service provider in the Danish market 16, in terms of number of households serviced. RenoNorden entered the Finnish market in December 2013 through the acquisition of HFT Environment. The Group is today the second largest within the waste collection market in Finland (including commercial waste), in terms of population serviced, including both household and commercial waste. 17 The acquisition underpins the Group's position as a leading provider of waste collection services in the Nordics. Further, the acquisition also marked RenoNorden's first move into commercial waste collection. 14 See Section 7 "Industry and market overview" for market share data. 15 See Section 7 "Industry and market overview" for market share data. 16 See Section 7 "Industry and market overview" for market share data. 17 See Section "The competitive landscape" for market share data. 49

54 RenoNorden was listed on the Oslo Stock Exchange in December 2014, and shortly thereafter completed two smaller acquisitions of local competitors in Norway and Denmark, respectively Organisational structure The Company is a holding company, and operates through its operating subsidiaries in Norway, Sweden, Denmark and Finland. The Group Management is set up to reflect the Nordic focus of the Group, and the majority of the Group's central management works out of the Group s headquarters in Frogner, Sørum, Norway. In addition, the Norwegian, Swedish, Danish and Finnish operating subsidiaries have central country management teams. The main premise of the business model is that each country shall have core resources in place to be able to drive its day-to-day operations independently, but such that these resources shall be complemented and supported by certain key functions which are more efficiently managed centrally for the benefit and support of the whole Group, such as tendering, fleet management and business development. Aligned KPI reporting across the Group enables the Group's headquarter to monitor operational performance across geographies. Within each country, the Group operates a lean and efficient central country management team with a main focus on adapting the business to national conditions, and to monitor and ensure adherence to the national regulatory environment. The central country management is also responsible for monitoring and following the local market through continuous market surveillance, and for preparing and submitting tenders. Monthly profit and loss performance is monitored and consolidated at country level before submitted to the central Group management for review. Another key responsibility for the central country management is to assist and aid branches in the start-up phase of any new contract. The chart below provides an overview of the central Group management and the central country management. The Danish country manager Torben Lindholm ends his employment with the Group in March 2017, and a replacement is hired. For further information on the Group s Management, see Section 11.3 "Management" 50

55 Within each country, the Group operates a network of local branches that manage the day-to-day operations of Group s respective customer contracts. Each branch typically has an operational manager (branch manager) with responsibility to deliver on contracted services on a daily basis, focus on profitability improvements, expand local business and ancilliary services through close and pro-active customer interaction, to ensure appropriate fleet maintenance and that the necessary resources are available within the branch or are called upon from central functions. It is also the branch manager's responsibility to report monthly profit and loss performance to the central country management. The branch managers are part of a yearly incentive programme designed to align their incentives with continuously improving the overall performance of the operations. In addition to a branch manager, a branch typically consists of waste collection operators and ancillary support staff. A foreman carries out standard waste collection operations, similar to the other collection operators, but takes on more of an administrative and coordinating role. The number of collection operators and support staff per branch depends on the size of the contract, but ranges from 10 to 35. All personnel in the Group are employed on standard contract terms, appropriate to the position and country in which they are working. The Group employs the majority of its workforce, which is collection operators, in direct response to the award of a new contract. In Norway, the availability of skilled personnel within the automotive and transport sector has been limited in the recent years. As a result, the Group has required a number of operators from other European countries. All international staff receives the same compensation as locally-recruited staff. In addition, the Group supports international staff as they relocate, providing, if appropriate, help with accommodation. RenoNorden requires that all international workers take local language courses when they begin work. Importantly, much of the training material and handbooks provided by the Group are available in a range of languages to ensure all employees have a good understanding of important Group procedures, particularly in relation to health and safety. In the future, availability of local personnel is expected to improve and the Company anticipates that it will be able to recruit a greater proportion of new employees domestically also. In Sweden, Denmark and Finland, the availability of suitable personnel has been less of an issue and the majority of employees are local. The predominant salary system for waste collectors is based on a simple model, under which they are paid a base salary, equivalent to a 37.5 hour working week. In addition, all operators have the ability to supplement this salary by demonstrating a superior efficiency or competency in their work. This is regulated by the branch manager. There are examples of variations to the salary system, for example in Denmark and in a few branches in Sweden. In those branches the waste collectors are paid a performance based salary that is based on the number of waste collection lifts performed. There is a guaranteed minimum salary for the collectors, however, the employees are generally paid more than the minimum salary. The actual number of hours a waste collection operator works varies during the course of the year, depending on factors such as waste volumes to be collected, road maintenance and winter weather conditions, which affect time used on the routes. The daily work schedule, with an early start and early finish, is somewhat unorthodox to a typical nine to five job. However, RenoNorden ensures that suitable focus and consideration is placed on the welfare and satisfaction of its employees. The employee turnover rate in the business, over the past three years, has been approximately 15%. Over the same period, the average short-term sickness rate was approximately 3.0%. Management believes these figures are lower than market comparable benchmarks Customers and markets The Group's principal customers are municipalities, whom represented 94% of the Group s revenue in Norway, Sweden, Denmark and Finland in Municipalities in the Nordics generally have very strong credit ratings, which limits the counter-party credit risk exposure of the Group. In 2015, 6% of the Group s revenue, came from selected commercial contracts, 100% of which from the Group's operations in Finland. A typical municipality contract has a duration for five years to seven with extension options for the customer for two further years (one plus one). The Group also operates shorter contracts for commercial waste in Finland where the typical contract duration is two to three years. 51

56 In accordance with national legislation in Norway, Sweden, Denmark and parts of Finland, municipalities are required to facilitate collection of household waste from their inhabitants. Most municipalities fulfil this duty by outsourcing the service to third-party operators such as the Group. These countries have all implemented the EU Public Procurement Directive and appurtenant regulations in their national legislation, which ensures that awards of household waste collection contracts by municipalities are made on the basis of transparent public tender processes. The Group s core business activity is the collection and transportation of household waste from households to designated waste separation and treatment facilities. In Norway, Sweden and Denmark, these facilities are often owned by the municipalities. With the exception of contracts for commercial waste collection in Finland, the Group does not assume ownership of the waste during collection and transport and is not pursuant to laws or regulations imposed such ownership. The Group's operations do not include taking any risk on the secondary value of the waste it collects as it only collects and transports it for its customers. Furthermore, the Group does not process the waste and is therefore not exposed to environmental liabilities in the same manner as vertically integrated waste management companies are. Household waste collection is a vital service required by municipalities. The demands of inhabitants to receive the most seamless and least intrusive service, coupled with growing regulatory, environmental and technological requirements, places increasing obligations on waste collection operators. RenoNorden believes that the Group, with its scale and position in the Nordic market, is well positioned to meet customized and innovative solutions in the future. In Finland, the household waste market is split between areas where the municipalities facilitate collection of household waste, like in Norway, Sweden and Denmark and areas where the households contract with collection providers directly. The Group primarily operates within the former section of this market. In Finland, the Group also has certain commercial contracts with customers under which it provides collection services similar to the services it provides to municipalities, but for light commercial waste. 8.2 Geographic presence RenoNorden is present in Norway, Sweden, Denmark and Finland and is headquartered in Frogner, Sørum approximately 30 km north of Oslo. In 2015, the Norwegian operations accounted for approximately 34% of the Group's total revenues and 30% in the last twelve months prior to 30 September 2016, making it the Group's largest market. The Group has increased its presence in both Sweden and in particular Denmark, both by way of organic growth, through winning contract tenders, and as a result of acquisitions. As of 30 September 2016, Denmark was the Group's largest market both in term of revenue and number of employees. The Group entered the Finnish market in December 2013 by acquiring the then third largest operator in the Finnish waste collection market (in terms of number of households serviced), HFT Environment. The Swedish, Danish and Finnish operations accounted for approximately 23%, 32% and 16% of the Group s total revenues in the last twelve months prior to 30 September 2016, respectively. The Group is now the largest household waste collection operator in the Nordic region, and a market leader in Norway, Sweden and Denmark, in terms of households served 18. The chart below depicts the Group's geographic presence. 18 See Section 7 "Industry and market overview" for market share data. 52

57 RenoNorden locations across the Nordics Norway The Group has a total of 25 branch offices in Norway. RenoNorden believes it has built up a strong reputation and track record in the 16 years that it has been in operation in this country. From the award of its first contract in 2001, the Group has grown significantly and currently, as of the date of this Prospectus, operates 35 contracts in Norway Sweden The Group has a total of 17 branch offices in Sweden. The Group won its first contract in Sweden from AOS Skaraborg in 2007 and began operations in Sweden in The Group has since grown steadily in Sweden. In August 2016, the Group was awarded seven out of eleven contracts in Stockholm. However, an appeal was made by three competitors and the contracts were thus not signed. On 26 January 2017, the appeal was rejected by The Administrative court of appeal in Stockholm (Sw: Kammarrätten i Stockholm), and the contracts are planned to be signed on 10 February 2017 unless a new appeal is made to the higher juridical instance. Sweden is the Group s largest market, and the Group s third largest segment, in terms of revenue. The Group is of the opinion that it has built a strong reputation and track record during the eight years it has been in operation in this country. From the award of its first contract in 2007, the Group has grown significantly and currently operates 38 contracts in Sweden Denmark The Group has a total of 23 branch offices in Denmark. The Group entered the Danish market in January 2010 through the acquisition of the household waste collection division of Reno-Flex-Gruppen A/S. In March 2011, RenoNorden completed its second acquisition in Denmark, acquiring the shares of Nord-Ren A/S. Nord-Ren operated contracts in the North Western region of Denmark and therefore presented a good complementary fit with the Group s other operations. Through these acquisitions and further tender awards, the Group has become the largest operator in Denmark, in terms of number of households serviced, and is currently operating a total of 43 contracts in 36 municipalities. 53

58 8.2.4 Finland The Group has 10 branch offices in Finland. The Group entered the Finnish market by acquiring the then third largest waste collection operator, HFT Environment. The Finnish household waste collection market is operated in a different setting than the other Nordic countries, in several ways. In Finland, the household waste market is split between areas where the municipalities facilitate collection of household waste, similar to Scandinavia, and areas with free markets. In free market areas, households normally can select service operator amongst two to three operators with license to operate in a specific region. Households enter into contracts with the service operator directly. The Group primarily operates within the former section of this market. In some contracts the Group must pay gate fees to the waste facility. 8.3 Operating model RenoNorden's operating model RenoNorden provides waste collection services primarily to municipalities and inter-municipal companies in the Nordic region, based on contracts that are secured through highly regulated and transparent tender processes. The Group has a niche focus and operates the majority of its contracts itself with leased or owned vehicles, and with its own employed staff. In some contracts, the Group does collect some waste from businesses or more industrial-type operations, such as hospitals, care homes or schools as well as from recycling and collection stations. However, this is mainly waste that is similar to household waste rather than hazardous waste or specially-treatable items. In Finland, where the Group operates a commercial waste collection in parallel with municipal waste contracts, waste collection from business and industrial-type fractions represent a meaningful share of the total revenues. These commercial clients are typically customers, such as hotels, owners of office buildings and shopping centres. The operating model is based on having a diversified contract portfolio, comprising of: many relatively small contracts, where a single contract represent a limited part of the total revenues; contracts with different expiry dates spanning a number of years; contracts with municipalities, which retains ownership to the waste lifted and bears the responsibility for the disposal; and contracts with selected counter-parties that are not municipalities. The Group operates in a niche segment of the Nordic waste management value chain, as depicted in the chart below. 54

59 This niche segment is characterised by an established and stable regulatory environment, including: Municipal responsibility for collection. Municipalities in the Nordics are in general legally responsible to collect domestic waste. Since household waste collection is believed to be a non-vital basic public service, these services are largely outsourced. Public and transparent tender processes. The EU Public Procurement Directive, and national legislation implementing the Directive, requires public authorities to tender services which have a value in excess of EUR 209,000 in public and transparent processes. This secures transparent tender processes on equal terms. An awarded contract gives the service provider monopoly in the collection area. Consumer relationships being managed by the municipalities. It is primarily the municipalities who manage consumer relationships, i.e. the relationship with the households, such as with respect to complaints. Only in limited cases in Denmark, it is the responsibility of the waste-collection operator to manage customer complaints and similar day-to-day issues. Municipal waste ownership and processing. In general, with exception of Finland, it is the municipalities that own the waste collected, and it is also the municipalities that represent most of the processing capacity. Therefore it is limited, or no, economic incentive to collect waste volume other than for the logistic service revenues, and collectors do not take on volume risk or substantial environmental liabilities Description of the operational processes for commercial collection The process of winning and operating a commercial contract follows a similar structure as a municipal contract. Initially, a contact is established with a potential customer for which the Group performs a situation review of their current waste management set-up including, but not limited to, location of facilities, number of fractions, potential volumes, waste bin set-up, and suitable collection frequency. The Group then details a proposal for a service delivery, detailing material flows, collection schemes and total cost level, before negotiating the contract with the prospective customer. After a contract is signed, the Group initiates the preparation phase and verifies that the internal organisation has the delivery capacity needed, or engages with required sub-contractors. In parallel, internal accounting and statistical systems are prepared to track the performance of the upcoming service delivery. After the service has been delivered for 1-2 months, the Group and the client meets in a start-up evaluation meeting to verify to what extent the Group has delivered services to expected levels. This type of service review meeting typically occurs throughout the length of the contract with frequencies adapted to the contract size, to ensure tight collaboration with larger customers. These review meetings also offer the opportunity for additional add-on sales, for example adding additional waste fractions or volumes, statistical performance reports, or consultative services. Well in advance of a contract reaching its expiry date, the Group engages with the customer to promote extension of the agreement so it is not made subject to competitive tenders Vehicles, fleet management and maintenance Vehicles overview As of November 2016, the Group had a total vehicle fleet of 1,229 vehicles, including reserves. Of these, 1,015 vehicles were classified by the Group as asset heavy and operation critical. The remaining 214 vehicles were smaller and less operational critical vehicles, including company cars, vans, forklifts, etc. All vehicles used for standard household waste collection services have vehicle bodies with modules customised for waste collection. The vehicle body has a waste container that is usually equipped with a compactor. The waste container may contain up to four chambers, depending on the number of waste fractions that are transported, including paper and plastics in separate chambers. Some vehicles are equipped with cranes for lifting waste containers, and some with suction equipment designed for sub-terrain containers. 55

60 The majority of the vehicles in the Group's fleet are on financial leases and most of its waste collection vehicles are sourced from Scania, Mercedes and Volvo. Compactors are delivered by separate suppliers, with volumes being split mainly between NTM, Joab and GeesinkNorba. The majority of the Group's vehicles are diesel-fuelled. However, tender specifications, and increased environmental focus has led to the inclusion of a number of LNG-fuelled vehicles, delivered by Mercedes and Scania, in the fleet. As of November 2016, 181 of the vehicles were LNG-fuelled. The Group continues to work with its main suppliers continuously to further develop and optimise the technology in the vehicles. Often, changes and modifications are made to support increased efficiency and to prevent personnel injuries or damage to the equipment. The chart below shows the Group's fleet of vehicles, split by country and type as of November The charts include the entire fleet of 1,229 vehicles. RenoNorden locations across the Nordics No Trucks 56

61 The charts below provides certain selected data on vehicles in the Group's fleet: Type Picture Main specifications Brands Comprimator 831 vehicles 2-4 axels Normally tons Main brands: Scania, Mercedes and Volvo Main vehicle for waste collection Primarily rear-end loading Side feed comprimator 18 vehicles 2-4 axels Main brands: Scania and Volvo Used for collection of waste bins lifted and emptied on the side of the vehicle Used mainly in Sweden Flatbed truck 29 vehicles 2 axels Up to 8 tons Main brand: Mercedes Used for collection of various types of containers Mainly used in Norway and Denmark Other heavy units 36 vehicles 2-4 axels Main brands: Scania and Volvo Different types of vehicles used for collecting and moving different types of material Other smaller units 214 vehicles/units Company cars Trailers Lift trucks Pick-up vehicles Tractors Vans Fork lifts Other vehicles Different types of vehicles used for collecting and moving different types of material Fleet management Group fleet management, which is part of the central Group management, is responsible for setting the overall strategic direction with respect to the the fleet. RenoNorden has focused on developing a strong relationship with a limited number of vehicle suppliers. The Company believes that this contributes to the Group's ability to buy vehicles with shorter delivery schedules than otherwise would have been the case, thus supporting flexibility with regard to planning and contract startup. In some cases, where there is a short lead-time between contract award and start-up, beneficial delivery schedules for new vehicles can be a competitive advantage. Given the nature of the contracts that the Group is awarded, the Group generally does not need to acquire vehicles until it has won the contract. As a result, the Group has historically been able to purchase its vehicles entirely through debt financing. This provides the Group with good flexibility to grow the business, without requiring significant equity resources. The average price per vehicle vary with specification of each contract, but higher technological requirements from customers lead to higher capex, which today is approximately NOK million for a fully equipped vehicle. The fleet is primarily financed through bank debt and financial leases. Historically, start-up investment has been in the area of % of the first-year contract revenues in Norway and Sweden, with somewhat less investment in Denmark (in the area of 60-70% of first-year contract revenues) and Finland (approximately 80% of the first-year contract revenues). Leases are typically at a % margin with a five to ten year duration. RenoNorden s current financing strategy for its vehicles is to primarily use financial leasing. Historically, this has not always been the preferred option and currently close to 49% of the heavy asset fleet are owned by the Group while 51% of the fleet of vehicles are currently financed through leases. As the Group intends to use financial leasing as the primary source of financing going forward, the share of leased vehicles and vehicles is expected to increase. 57