European Energy Financial Overview

Risk Factors, continued == EUROPEAN ENERGY The Group's business depends on the successful divestment of its projects, which may become less profitable due to market conditions or other factors affecting the proceeds of the divestments The Group's business concept includes the total or partial divestment of projects. There are a number of risks, which can impede the successful divestment of projects by the Group and thus adversely affect the Group's cash flow and ability to reinvest in new projects and to seize new business opportunities. The demand for renewable energy projects may decrease due to e.g. the general economic situation or to country-specific market developments, such as uncertainties with regards to the continuity of feed-in tariff schemes. The changes in the subsidy- regimes could impact the profitability of the projects negatively, and thereby lead to further decrease in the demand for renewable energy projects. Such decrease in demand can affect both the market value of and the availability of divestment opportunities for the Group's projects. Finding creditworthy and reliable buyers can prove to be time and cost intensive. As a consequence, the divestment of projects can become more difficult and less profitable for the Group. In the framework of the divestment of a project, the Group may accept to give certain guarantees regarding the project to the buyer that are not fully covered by the back-to-back arrangements with the suppliers. Such guarantees, which may include fulfilment of permits or meeting project specific criteria for receiving subsidies, can force the Group to allocate (human and financial) resources to the project after its divestment and potentially lead to direct payment obligations. Part of the revenues resulting from a divestment may be held back by the buyer or held in escrow until the fulfilment of certain conditions subsequent. This can force the Group to allocate resources to the project after its divestment and the Group may not be able to receive the entirety of the revenues, e.g. in a case where the Group is exposed to a credit risk on the buyer. Based on earn-out mechanisms in the sales contract, the revenues resulting from a divestment may be dependent on the productivity of the projects after their divestment and be lower than expected. The production generated by the Group's projects may be adversely affected by a number of external factors lowering the Group's revenues The operation and production of the Group's projects may be affected by a series of risk factors, which can reduce the Group's revenues stemming from the operation of these projects. The production of renewable power projects depends on favourable weather conditions (such as wind or solar conditions). The actual weather conditions on the projects' sites may fall short of the predicted average conditions and the production and revenue from the respective projects may thus be reduced. Extreme weather conditions may lead to interruptions of operations as the production may have to be shut down, by precaution or as a result of damages caused to the project facilities. The operation of the projects may also be interrupted by technical defects or other external events (such as cases of force majeure, administrative prohibitions etc.). The interruption of operation may persist for a longer period of time if maintenance services are unavailable or not delivered as contracted. These interruptions of operation can lead to a reduction of the production and thus of the revenue generated by the concerned projects. The projects may not be able to feed the entirety of their production into the electricity grid in the absence of sufficient or delayed grid capacity. The increase in renewable generation capacity in the markets where the Group operates may lead to increased grid curtailment and such curtailment may not be compensated leading to a loss of revenue. The remuneration for the electricity produced by the Group's projects is partly paid out in currencies which are subject to exchange rate fluctuations to the Group's main currencies. This may adversely affect the profitability of the projects for the Group's accounts. Even though the Group applies what is considered proven technology in the projects, the technologies used in the Group's projects may entail risks for the production and profitability of the projects. Technologies which are based on the present scientific knowledge and state-of-the-art engineering may reveal themselves as being unreliable or having unexpected deficiencies in the future and thereby impair the productivity of the projects. 41

View entire presentation