Annual Report 2017 Enovos Luxembourg S.A.

28 29 Part I Our Mission 6 Part II Our Achievements 14 Part III Annual Accounts 22 Annual Report 2017 Enovos Luxembourg of its loan to Enovos Solar Investments II S.r.l. Unipersonale in Italy into equity, and booked an additional impairment with a net impact of EUR 1.1 million. Finally, the Company also booked additional provisions and write-downs of EUR 3.5 million to cover the risks identified with regard to its sales activities in Belgium and EUR 0.3 million follow- ing the decision to liquidate the entity Learning Factory S.A. In December 2017, Twinerg S.A. reimbursed outstanding loans of EUR 1.0 million. As a consequence, an impairment of EUR 0.9 million has been reversed positively impacting the financial results of Enovos Luxembourg S.A. Also in December of 2017, an agreement was signed to sell the windfarms of La Benâte Energies S.à r.l. and Ferme Eolienne de la Côte du Gibet S.à r.l., with the closing of the transaction in January 2018. Consequently, transaction fees of EUR 0.5 million have been posted to the caption “Prepayments” and an impairment reversal of EUR 1.7 million was posted in 2017. Considering the above-mentioned value adjust- ments, the Company realized a net loss for the year of EUR -18.3 million, compared to a net profit of EUR 25.2 million in 2016. Excluding the net impact of the above mentioned extraordinary items, EUR 28.7 million on total (of which EUR 8.6 million EBITDA effective), the Company would have achieved a net profit of EUR 10.4 million. Net financial debt has decreased during the year, with EUR 181.9 million at the end of 2017, compared to EUR 202.8 million a year earlier, leading to a gearing ratio of 47% in 2017 (49% in 2016). RISK MANAGEMENT AND REGULATORY AFFAIRS On 3 rd January 2018, the Directive 2014/65/EU on markets in financial instruments (MiFID II) amending Directive 2002/92/EC, and Directive 2011/61/EU entered into force. MiFID constitutes the framework for European Union financial services legislation and aims at improving effi- ciency and fostering the integration of EU financial markets. After having analysed the scope and impact of MiFID, the Regulatory Affairs team carried out the two necessary tests in order to actively file for an exemption with the national regulator. As Enovos Luxembourg S.A. is below the thresholds defined by MiFID II, the company filed for the exemption in December 2017. Furthermore, independent of whether or not an organisation is exempt from MiFID II, market participants must deliver specific data to organised market places in order to provide support in the position and trans- action reporting. The set-ups necessary for data provision have been carried out. Starting from November 2017, Enovos updated its reporting required under Regulation (EU) No 648/2012 on OTC derivatives, central coun- terparties and trade repositories (the so-called European Market Infrastructure Regulation, in short EMIR). The revised reporting require- ments have been analysed and implemented by the back-office team with the support of the Regulatory Affairs department. During 2017, the reporting solution of Enovos Luxembourg S.A. in relation to the Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency (‘REMIT’) was constantly improved. About 14,000 reports were sent by the Regulatory Affairs Team during that same year. Last but not least, the Regulatory Affairs team continued monitoring the ever-changing regu- latory landscape, analysing the impacts and determining the necessary steps to take in order to further reduce regulatory risk. In 2017, a risk management, risk reporting and risk limits review took place at Enovos Luxembourg S.A. using an external consultant. The main recommendations were about refining the book structure in order to delineate the value pools, including a revision of risk limits based on the new book structure and implementation of key risk indicators. The implementation of the recommen- dations started in 2017 and will continue in 2018. In regards to the status of the Italian photovoltaic assets, it should be noted that GSE (the authority that has granted the feed-in-tariffs to the various Italian subsidiaries of Enovos Luxembourg S.A.) has continued its investigations during the course of 2017 and has kept contact with Encevo S.A. and Enovos Luxembourg S.A. that continued to accommodate the requests for information. In addition, EAM had filed a criminal complaint in Luxembourg against Enovos Luxembourg S.A., Encevo S.A. and four of its employees for alleged damages regarding the purchase of Italian assets from Aveleos S.A., a subsidiary of Enovos S.A. Encevo S.A. took meanwhile legal counter-action against EAM and the Court suspended its deci- sion on the slanderous denunciation claim until the end of investigations. On the substance, no further material events occurred in 2017 which could justify a change in the appreciation of the facts at stake and thus the taking of additional provisions in the accounts of Enovos Luxembourg S.A. OUTLOOK The company expects energy markets to remain volatile and difficult to predict. Geostrategic un- certainties in the Middle East may affect primary energy prices and burden the operational margin spreads for European players. In this context, market players turn increasingly to short-term exchange platforms, whereas the economy expresses continuous demand for stable and secured prices and flexibility in consumption. Enovos trusts its experienced teams to deal with related risks in a responsible manner and is confident to take on the upcoming challenges. In the course of 2018, the internal organisation of Enovos Luxembourg S.A. will evolve into a “business unit” concept, allowing management to better steer the company by main activity types. Particular attention will be drawn to inno- vation and expansion into future market gravity, i.e. technical services combined with energy effi- ciency competence and electro-mobility services. The former “Energy Solutions and Services” department was integrated directly into the new business units. The development of further renew- able energy facilities shall be concentrated in the Company’s core sales markets Luxembourg and Germany. More than in the past, Enovos Luxembourg S.A. intends to become an inclusive energy partner, providing a full range of products and services to all residential, professional, industrial and administrative customers in its traditional geographical markets. Regarding the technological challenges of digitali- zation, the company will move through a careful project management program that keeps an eye on external opportunities. The ultimate objective remains competitiveness and excellence in the delivery of products and services to our customers. The Company‘s Financial results for the next 2 years are expected to stay at similar levels to 2017. Excluding the extraordinary impacts from last year, they will still be negatively impacted by legacy long-term supply contracts. Thus, the increased need for cost control, and enhanced risk management, with regard to the Company’s energy management activities, will continue. CHANGE IN THE BOARD OF DIRECTORS OF ENOVOS LUXEMBOURG S.A. There was no change in the composition of the Board of Directors in 2017. In the context of the change in the shareholding of Encevo S.A. as of 21 February 2018, Mr Johan van Bragt resigned from his office as member of the Board of Directors of Enovos Luxembourg S.A. with effect as of the same date. The Board co-opted Mr Claude Strasser as a new Director on March 29 th 2018. This co-optation is expected to be ratified at the annual general meeting of shareholders. AUDITOR The mandate of the external independent statu- tory auditor, PricewaterhouseCoopers S.C., will come to term with the audit of the financial year 2017. The Board of Directors will submit a propos- al on this behalf to the annual general meeting of shareholders to be held in May 2018. PROPOSED APPROPRIATION OF NET PROFIT The profit available for appropriation of EUR 45,355,348 includes the loss for the year of EUR 18,288,050 and the profit brought forward of EUR 63,643,398. The Board of Directors proposes to the Annual Shareholder’s Meeting, to be held on 8 th of May 2018, the following appropriation of net profit: Dividend of 0 Euros per share* 0 Allocation to the legal reserve 0 Allocation to the blocked reserve 0 Allocation to other reserves 0 Amount carried forward 45,355,348 45,355,348 *Number of shares 4,768,964 The Board of Directors Esch-sur-Alzette, 29 th March 2018