Annual Report 2017 Enovos Luxembourg S.A.

26 27 Part I Our Mission 6 Part II Our Achievements 14 Part III Annual Accounts 22 Annual Report 2017 Enovos Luxembourg • Improve and align the processes and management of said activities across different commodities. • Increase redundancy between power and gas activities and rationalize the necessary FTE’s for smooth operations. • Establish 1 point of contact per activity for both commodities, hence improving the communication between entities. • Enhance our employees’ cross commodity knowledge and operational excellence. The trading desk of Enovos assures a window to the wholesale energy markets, in both their physi- cal and derivative forms, including power, gas, oil, coal and carbon. Their core business is to provide liquidity and profitable market access to support portfolio structuring and hedging activities, and to do some proprietary trading. Through 78 EFET contracts, 6 brokers, and an active presence on 5 energy exchanges, Trading handled 13.4 TWh of power and 92.8 TWh natural gas with external counterparts. The reorganization of our intraday trading, in parallel with the establishment of automated trading activities, has improved profitability and increased development potential for intraday optimization and market arbitrage. Rigorous mathematical models were and will continue to be implemented to improve our risk assessment, asset valuation and transfer pricing, and to assess risks from a consolidated portfolio perspective. In 2017, the terms and conditions of two long-term commitments were commercially settled outside on-going arbitrage procedures and cross-border transport capacity optimization reduced the recurrent cost of idle or un-used capacities. Group assets like storage and Cegyco Joint Venture activities are now more actively integrated and steered within the EMT perimeter. Renewable Energies Renewable Energies activities in 2017, were mainly determined by the implementation of the group strategy to focus on development in our core markets and to restructure our position in Belgium. Renewables in Luxembourg The total net installed capacity by end of 2017 for Renewables in Luxembourg was 112 MW with a total production of 202 GWh. Assets comprise 91 MW of onshore wind, 20 MW of hydro power, and 1.6 MW of photovoltaic installations. The 35 MW wind capacity installed at the end of 2016 by Soler S.A., Enovos Luxembourg S.A.’s joint venture with SEO S.A., yielded an additional 72 GWh of power production. Furthermore, dismantling of two wind parks Hengischt Phase1 and Phase 2 with a total of 8 WTGs (Wind Turbine Generators) was completed. In addition, the wind assets of Renewables in Luxembourg were successfully connected and set up in the Renewables asset management platform selected in 2016, enabling at a glance data monitoring and supervision of overall and individual performance of the whole asset portfolio. It allows the identification of im- mediate or progressive performance degrada- tions and thus instant action implementation. The features of managing maintenance plans, ticket- ing system, creating contract and plan interven- tions, automating reporting, helps improve the overall efficiency. The wind project development activities of Soler S.A. continue to prosper and a capacity increase of 20 MW is expected by 2019. Renewable Energies in Germany For Biogas, the German market environment remained difficult due to increasing regulatory requirements which necessitated further on site investments. Moreover, following the insourcing of full technical and commercial management in 2016 and the termination of the O&M contracts with Revis, relevant maintenance investments were necessary in order to return the assets to minimum technical standards, allowing the reduction of technical risks, and planned and unplanned O&M costs for the future. For PV O&M, Enovos continued its successful growth path with the acquisition of Skytron’s O&M business including some 160 MWp control center contracts and 25 MWp of O&M contracts allowing for consolidation and synergies both in scope and scale of Enovos’ PV O&M activities. The PV O&M portfolio of 600 MW propels Enovos to one of Germany’s largest providers in that field. For Wind, Enovos has come to an agreement with Vensys for the full replacement of all rotor blades of the Priesberg and Schiffweiler Wind Farms. For PV, Enovos came to an agreement with Stadtwerke Saarbruecken to unwind the sales contracts of Ahorn and Kenn PV parks. Moreover, for Kenn PV park, Enovos came to an agreement with First Solar for an exchange of underperform- ing solar panels. The overall environment for PV and Wind devel- opment remains difficult, with tendering pro- cesses for both PV and wind showing sharply decreasing tariffs of (on average) 4.91 ct/kWh and 3.82 ct/kWh, respectively. Other Amongst the most important achievements are the successful negotiation of the exit of our partner in NPG and the takeover of 100% of the shares, as well as the divestment of two biogas units in Belgium. Significant investments for rebuilding the remaining damaged two biogas installation, combined with increased safety requirements have been engaged by our Belgian subsidiary. Finally, Enovos Luxembourg S.A. has successfully divested its wind assets in France selling both French wind parks to the regional French indus- trial partner Sergies. Energy Business IT In 2017, the Business IT department could deliver an increasing number of projects after having simplified the IT architecture. Simplified cloud- based environments providing stable operations together with easy update, backup and recovery capabilities, facilitated the integration of new applications. The high number of projects reflects the increas- ing change in the markets and the pressure on the business. Most projects are derived from the need to provide better customer journeys and interaction points, but also from the need for cost reduction. Below are some major developments and achievements of 2017: enoprimes: The new web solution simplifies the request and approval of the cash-back (primes) that customer receive for their energy saving in- vestments. All calculations are managed and can be accessed through a central interface. Customer Portal: The first release of the new customer portal enhances the selling of the new products. The next release of the customer portal (expected 1Q 2018) digitizes the customer’s self- service. In this context, a single sign-on service for all web-based applications was developed. E-shop: A new online offer was implemented to sell off-the-shelf products like “tado” and mKaart directly to customers. Next to these digitization activities, challenging regulatory projects were implemented. In par- ticular, the project to separate billing and cus- tomer service support operations into two SAP- environments for Creos and Enovos, required for regulatory unbundling, proved to be very compli- cated and time intensive. Personnel The number of employees decreased from 215 FTE at year end 2016 to 199 FTE at year end 2017. The Board of Directors and the Management of Enovos Luxembourg S.A. would like to thank all the employees for the fulfilment of their duties, for their contribution throughout the year, and for their full support in providing reliable and strong operations of the company’s core activities. Financials Results in the core sales business of Enovos Luxembourg S.A. remained stable in 2017. Yet, the company’s total EBITDA suffered under expensive long-term natural gas contracts and power upstream assets. As well, the overall difficult market environment in gas, and a number of extraordinary impairments and provisions, mainly on the Company’s renewable production assets, impacted the bottom line. The latter relate to a provision of EUR 8.6 million to cover the Company’s risks regarding its PV activities in Italy, and a further impairment of its investments in Energiepark Trelder Berg GmbH by an amount of EUR 11.2 million regarding its affiliates Biogas Oebisfelde GmbH and Biogas Ohretal GmbH. Furthermore, in the context of the restructuring of the affiliates of NPG Energy NV, the net impact of the impairment of the transactions related to the biogas activities of NPG Energy and NPG Agro BVBA amounts to EUR -6.7 million. During the year, the Company converted EUR 3.2 million