European Energy Financial Overview

Risk Factors, continued == EUROPEAN ENERGY Risks related to Investment in the Bonds Investors carry a credit risks Investors in the Bonds carry a credit risk relating to the Group. The investors' ability to receive payment under the Terms and Conditions is dependent on the Issuer's ability to meet its payment obligations, which in turn is largely dependent upon the performance of the Group's operations and its financial position. An increased credit risk may cause the market to charge the Bonds a higher risk premium, which would affect the Bonds' value negatively. Another aspect of the credit risk is that a deteriorating financial position of the Group may reduce the Group's possibility to receive debt financing at the time of the maturity of the Bonds. The Issuer is dependent on other companies within the Group A significant part of the Group's assets and revenues relate to the Issuer's subsidiaries. The Issuer is thus dependent upon receipt of sufficient income and cash flow related to the operations of the subsidiaries. The Issuer's subsidiaries will be legally separate and distinct from the Issuer and have no obligation to pay amounts due with respect to the Issuer's obligations and commitments, including the Bonds, or to make funds available for such payments. Consequently, the Issuer is dependent on the subsidiaries' availability of cash and their legal ability to make dividends which may from time to time be restricted by, the availability of funds, corporate restrictions, and law. Should the Issuer not receive sufficient income from its subsidiaries, the investor's ability to receive payment under the Terms and Conditions may be adversely affected. The Bonds are structurally subordinated to other debt of the Group In the event of liquidation, dissolution, bankruptcy or similar proceeding relating to a direct or indirect subsidiary of the Issuer, all creditors of such subsidiary would be entitled to payment in full out of the assets of such subsidiary before any entity within the Group, as a shareholder, would be entitled to any payments. Thus, the Bonds are structurally subordinated to the liabilities of the Issuer's direct and indirect subsidiaries. Any creditors of a direct or indirect subsidiary of the Group may be entitled to take action against such subsidiary and its assets, whether under applicable bankruptcy law, by contract or otherwise. In addition, the Issuer provides parent company guarantees for certain obligations of its subsidiaries, including financial and performance guarantees. Any defaults by, or the insolvency of, such subsidiaries could result in an obligation of the Issuer to make payments under parent guarantees in respect of such subsidiaries' obligations. Furthermore, defaults by one or more subsidiaries could result in the occurrence of cross defaults on certain borrowings of the Group. Security over assets granted to third parties The Group may, subject to limitations, incur additional financial indebtedness and provide additional security for such indebtedness. In the event of bankruptcy, reorganisation or winding-up of the Issuer, the Bondholders will be subordinated in right of payment out of the assets being subject to security. In addition, if any such third-party financier holding security provided by the Group would enforce such security due to a default by any Group company under the relevant finance documents, such enforcement could have a material adverse effect on the Group's assets, operations and ultimately the position of the Bondholders. Security granted to secure the Bonds may be insufficient and may be required to be shared with other holders of debt that the Issuer is permitted to incur The Issuer's obligations under the Bonds are secured by a share pledge of all shares in the Issuer ("Transaction Security"). Under the Terms and Conditions the Issuer is permitted to incur debt by way of Market Loans (defined as the issuance of debt securities which are subject to trade on Nasdaq Copenhagen or another regulated market or multilateral trading facility) in the maximum principal amount of up to EUR 200,000,000 provided that the Issuer Incurrence Test (as defined in the Terms and Conditions) is satisfied. Any such Market Loans are entitled to share in the Transaction Security on a pari-passu and pro-rata basis with the Bonds pursuant to the terms of an intercreditor agreement which the Agent is obliged to enter into without any further consent of the Bondholders. There can be no assurances that the Issuer will continue Market Loans are entitled to share in the Transaction Security on a pari-passu and pro-rata basis with the Bonds pursuant to the terms of an intercreditor agreement which the Agent is obliged to enter into without any to satisfy the Issuer Incurrence Test after a Market Loan is incurred. In addition, if the Issuer defaults on the Bonds, the Bondholders will be secured only to the extent of the value of the Transaction Security underlying the security interest (which, if the Issuer has issued new Market Loans, will be required to be shared with the holders thereof). There is a risk that the pledged assets will be insufficient for the Bondholders should the pledges be realized and this risk is increased if the Issuer issues additional debt which shares in the Transaction Security. The value of the Transaction Security may fluctuate over time and no appraisal is made by the Issuer or any other person with respect of the value of the Transaction Security. The amount received upon a sale or other disposal of the Transaction Security will depend on numerous factors including, but not limited to, the actual fair market value of the Transaction Security at such time, market and economic conditions, and the timing and the manner of the sale or disposal. There can also be no assurance that the Transaction Security will be saleable and, even if saleable, the timing of such sale or other disposal is uncertain | 45

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