Photon Energy N.V.

Photon Energy NV - 315700YHFON9RJOPCK19 - 2023 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 315700YHFON9RJOPCK19 2022-12-31 315700YHFON9RJOPCK19 2021-12-31 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:StatutoryReserveMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:RevaluationSurplusMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 PhotonEnergy:OtherCapitalFundsMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 315700YHFON9RJOPCK19 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:IssuedCapitalMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:SharePremiumMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:StatutoryReserveMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:RevaluationSurplusMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 315700YHFON9RJOPCK19 2022-12-31 PhotonEnergy:OtherCapitalFundsMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:TreasurySharesMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:RetainedEarningsMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 315700YHFON9RJOPCK19 2022-12-31 ifrs-full:NoncontrollingInterestsMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:StatutoryReserveMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:RevaluationSurplusMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 PhotonEnergy:OtherCapitalFundsMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:TreasurySharesMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 315700YHFON9RJOPCK19 2021-01-01 2021-12-31 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:IssuedCapitalMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:SharePremiumMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:StatutoryReserveMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:RevaluationSurplusMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 315700YHFON9RJOPCK19 2020-12-31 PhotonEnergy:OtherCapitalFundsMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:TreasurySharesMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:RetainedEarningsMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 315700YHFON9RJOPCK19 2020-12-31 ifrs-full:NoncontrollingInterestsMember 315700YHFON9RJOPCK19 2020-12-31 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:IssuedCapitalMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:SharePremiumMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:StatutoryReserveMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:RevaluationSurplusMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 315700YHFON9RJOPCK19 2021-12-31 PhotonEnergy:OtherCapitalFundsMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:TreasurySharesMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:RetainedEarningsMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 315700YHFON9RJOPCK19 2021-12-31 ifrs-full:NoncontrollingInterestsMemberiso4217:EUR iso4217:EURxbrli:shares Annual Report 2022 Photon Energy N.V. Photon Energy N.V. Annual Report 2022 Contact Details: Photon Energy N.V. Barbara Strozzilaan 201, 1083 HN, Amsterdam, The Netherlands Legal form: Joint-stock company (Naamloze Vennootschap) Registration: Dutch Chamber of Commerce (Kamer van Koophandel) Company No.: 51447126 Tax No.: NL850020827B01 Web: photonenergy.com E-mail: [email protected] This report is available online at photonenergy.com For questions contact our Investor Relations Department at [email protected] Photo on page 12–13: Nate Paul Productions Photo on page 74–75: Lord Howe Island Board / Jack C Shick Clean energy and water. The fundamentals of life. 103.6 MWp proprietary portfolio 380+ MWp O&M portfolio 280+ employees 900+ MWp PV projects in development Active in 16 countries Founded in 2008 CO 2 e savings of 49,013 tonnes in 2022 121.6 GWh of clean energy produced in 2022 Shares traded in Poland, Germany and the Czech Republic 3 Table of Contents Financial Information . . . . . . . . . . . . . . . . 8 Facts and Figures. . . . . . . . . . . . . . . . . . . 9 Letter from the Management . . . . . . . . . . . 10 Who We Are . . . . . . . . . . . . . . . . . . . . . . 14 What We Do . . . . . . . . . . . . . . . . . . . . . . 16 Sustainability . . . . . . . . . . . . . . . . . . . . . 18 Leadership . . . . . . . . . . . . . . . . . . . . . . . 20 Our Team . . . . . . . . . . . . . . . . . . . . . . . . 22 Our Markets . . . . . . . . . . . . . . . . . . . . . . 24 Our Competitive Strengths . . . . . . . . . . . . . 28 Our History . . . . . . . . . . . . . . . . . . . . . . . 29 2022 in Review . . . . . . . . . . . . . . . . . . . . . 30 Selected Projects . . . . . . . . . . . . . . . . . . . 32 Strategy and Results in 2022 . . . . . . . . . . . . 35 Our Media Presence . . . . . . . . . . . . . . . . . 36 Proprietary PV Portfolio . . . . . . . . . . . . . . . 38 Our Shares and Bonds. . . . . . . . . . . . . . . . 41 Directors’ Report . . . . . . . . . . . . . . . . . . . 46 Developments in 2022 . . . . . . . . . . . . . . 46 Strategy for 2023 and Beyond . . . . . . . . . 48 Shareholder Structure . . . . . . . . . . . . . . 48 Culture and Values . . . . . . . . . . . . . . . . 49 Risk Management . . . . . . . . . . . . . . . . 51 Corporate Social Responsibility . . . . . . . . 55 Going Concern . . . . . . . . . . . . . . . . . . 57 Fraud Management . . . . . . . . . . . . . . . 57 Anti-Takeover Measures . . . . . . . . . . . . . 57 Articles of Association . . . . . . . . . . . . . . 57 Subsequent Events . . . . . . . . . . . . . . . . 58 Board of Directors’ Statement . . . . . . . . . 59 Corporate Governance Report. . . . . . . . . . . 60 Supervisory Board Report . . . . . . . . . . . . . . 68 Remuneration Report . . . . . . . . . . . . . . . . 71 Financial Statements for the Year Ended 31 December 2022 . . . . . . 77 Consolidated Financial Statements for the Year Ended 31 December 2022 . . . . . . 80 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 . . . . . . 85 Standalone Financial Statements for the Year Ended 31 December 2022 . . . . . 148 Notes to the Company Financial Statements for the Year Ended 31 December 2022 . . . . . . 151 Other Information . . . . . . . . . . . . . . . . . 165 Independent Auditor’s Report . . . . . . . . . . 167 Management Report Introduction Company Profile Financials 5 Komorovice, Czech Republic Introduction Financial Information Note: All ﬁnancial ﬁgures throughout this report are provided in Euro (EUR). Figures stated in other currency such as Polish Złoty (PLN) and Czech Koruna (CZK) are provided for information purposes only. Figures provided in PLN and CZK were translated in accordance with IAS 21 as follows: Statement of Comprehensive Income – at the average exchange rate for given period; Statement of Financial Position – at the closing exchange rate for given period. For simplicity, the following separators were used throughout this report: point “.” for decimals, comma “,” for thousand and million. In thousands EUR PLN CZK 2022 2021 2022 2021 2022 2021 Revenue 95,136 36,359 445,684 165,970 2,337,032 932,436 Earnings before interest, taxes, depreciation & amortisation (EBITDA) 24,308 9,584 113,877 43,747 597,137 245,773 Results from operating activities (EBIT) 16,984 -712 79,566 -3,250 417,219 -18,258 Proﬁt / loss before taxation (EBT) 8,725 -5,927 40,875 -27,055 214,335 -151,999 Proﬁt / loss 6,262 -6,433 29,335 -29,364 153,823 -164,969 Other comprehensive income 1,410 8,528 6,605 38,929 34,633 218,705 Total comprehensive income 7,672 2,095 35,939 9,565 188,455 53,735 Non-current assets 189,279 142,463 885,961 654,889 4,564,472 3,541,639 Current assets 64,548 54,155 302,129 248,946 1,556,567 1,346,301 Of which Liquid assets 21,358 39,362 99,969 180,944 515,041 978,548 Total assets 253,826 196,618 1,188,085 903,831 6,121,015 4,887,916 Total equity 70,475 51,538 329,871 236,914 1,699,494 1,281,233 Non-current liabilities 149,792 111,122 701,131 510,815 3,612,228 2,762,489 Current liabilities 33,559 33,958 157,078 156,101 809,265 844,196 Operating cash ﬂow 2,847 6,221 13,339 28,399 69,945 159,547 Investment cash ﬂow -33,429 -14,233 -156,606 -64,971 -821,197 -365,013 Financial cash ﬂow 9,348 30,625 43,793 139,793 229,636 785,372 Net change in cash -21,234 22,613 -99,475 103,222 -521,616 579,910 EUR exchange rate – low – – 4.493 4.451 24.115 24.860 EUR exchange rate – average – – 4.685 4.565 24.565 25.645 EUR exchange rate – end of period – – 4.681 4.597 24.115 24.860 EUR exchange rate – high – – 4.953 4.716 25.865 26.420 8 Facts and Figures Cash Flow Profile in 2022 (In thousands of EUR) EBITDA (In thousands of EUR) Total Assets (In thousands of EUR) Total Revenues (In thousands of EUR) Total Comprehensive Income (In thousands of EUR) Breakdown of Liabilities and Equity Total equity Financial cash ﬂow Non-current liabilities Operating cash ﬂow In 2022, the Group’s revenues increased by 161.7% to hit a record EUR 95.136 million, thanks to an 81.6% increase in revenues from the sale of electricity generated by a growing proprietary portfo- lio selling electricity on the market, while other revenue streams increased by a remarkable 253.2% YOY, driven by a sound pro- curement strategy. EBITDA improved to EUR 24.308 million (+153.6% YOY), while EBIT swung from a loss of EUR -0.712 million to a EUR 16.984 million proﬁt. Bottom line, the Group reported a net proﬁt of EUR 6.262 million compared to a EUR -6.433 million loss in 2021 and a TCI of EUR 7.672 million compared to EUR 2.096 million a year ago. Equity increased by 36.7% YOY, while the adjusted equity ratio increased at a sound level of 32.0%. Current liabilities Investment cash ﬂow 2019 2020 2021 2022 2021 2018 2019 2020 2021 2022 2022 2018 2018 2019 2020 2021 2022 2022 2018 2019 2020 2021 2018 2019 2020 20,256 30,154 28,258 36,359 95,136 2,531 8,064 7,672 2,084 2,095 63% 65% 59% 56% 64% 9% 10% 13% 17% 8% 28% 25% 28% 26% 28% 196,618 253,826 8,145 106,348 7,942 8,440 9,584 24,308 137,018 158,905 Cash 31.12.2021 Cash 31.12.2022 9,348 11,271 32,506 -33,429 2,847 9 Dear Stakeholders, We saw a very eventful year in 2022, with continued project devel- opment activities across our key markets, as well as the strategic expansion of our business model through the full acquisition of Lerta, including its Virtual Power Plant (VPP) technologies and energy market services. We increased revenues by 161.7% to a record EUR 95.136 million, exceeding our guidance of EUR 85.0 million, and EBITDA by 153.6% to a record EUR 24.308 million, meeting our guidance of EUR 24.0 million. Throughout the year, we delivered on our growth strategy by ﬁnalising construction works on projects with a combined capacity of 32 MWp in Romania, with the ﬁrst of these plants commissioned in February 2023. In addition, we acquired the development rights for a 9.8 MWp/10 MWh solar-and- battery energy storage system facility in Australia. This represents our ﬁrst utility-scale solar-plus-storage installation and will serve as a prototype for a future roll-out across our European markets. We also reﬁnanced our PV assets in the Czech Republic and launched a B2B eCommerce platform to strengthen our position as a lead- ing supplier of PV modules, inverters and batteries across the CEE region at a time of skyrocketing demand. We are very excited to embark on the next steps in our journey together. Key Achievements In 2022, we completed and connected one power plant with a combined capacity of 1.4 MWp in Hungary and started the con- struction on a combined 32 MWp in Romania. We decided to enter the Hungarian market in 2017, followed by the Romanian market shortly after. Although Romania was probably the least popular solar market in Europe at that time, we began sowing the seeds of our presence there with our projects currently under construction. We were among the ﬁrst investors in this now booming investment market. In Hungary, we have built nearly 52 MWp, of which a total of 46.2 MWp operates on a merchant basis. Switching to a mer- chant model has become the ﬁnancial backbone of our business, improving the Group’s proﬁtability and maximising the return on investment on our Independent Power Producer (IPP) portfolio. There is now a regulatory response to high energy prices with the decision made, at the EU level, that power plants should not gener- ate more than EUR 180 per MWh. While it has a certain impact on our business, this amount remains well above our proﬁtability requirements, when compared to our Levelized Cost of Electricity (LCOE). Since the very beginning, the fuel for our strategy has been project development. That means that we control a pipeline of projects that we very often develop from scratch, or co-develop in some instances. Having control is extremely important, as the integration of in-house development and engineering to our projects makes us the master of our own destiny. From the moment we have all permits in place, the construction process is executed based on projects which are designed for long-term ownership. In Europe, we have increased our project pipeline in Hungary, Poland and Romania to a combined 617 MWp (+29.7% YOY). While our focus for growth will be on expanding our PV capacity in these countries, as well as in Australia, we are also investigating further markets in the region. In terms of EPC, we also had posi- tive developments in our eﬀorts to both build power plants for our own portfolio and to serve external customers. In Central Europe, we completed behind-the-meter projects for customers in Poland, Slovakia and Romania. In Australia, we acquired the development rights and land for a 9.8 MWp/10 MWh solar-and-battery energy storage system facility in New South Wales. This transaction marks a signiﬁcant milestone as Photon Energy Group’s ﬁrst utility-scale solar-and-battery stor - age project. This project will make a meaningful contribution to the NSW Government’s objective to deliver a 50% cut in emissions by 2030, compared to 2005 levels. In the area of remediation, which is a process used to eliminate various contaminants from water and soil, we successfully ﬁled for a patent on our in-situ nanoremediation technology. The most signiﬁcant project in this area is in Australia, with the Department of Defence, where we are engaged in a trial project to eliminate per- and polyﬂuorinated substances (PFAS) contamination. 2022 was also an exciting year with regards to our presence on capital markets. In the second half of the year, we increased the placement of our Green Bond to EUR 77.5 million, and to a total Letter from the Management Co-founder and CEO Georg Hotar (L) with co-founder and CTO Michael Gartner (R) 10 EUR 80.0 million as of the publication date for this report. Through these bond taps, we managed to win new institutional investors. This is the ﬁrst of our bonds to be rated as ‘green bond’, which means that we comply with a wide suite of ESG criteria, conﬁrmed by a Second Party Opinion from imug | rating. This underlines our commitment to sustainable development and transparency for our stakeholders. Last but not least, after more than three years of ever closer cooperation between our companies, we acquired a full control of Lerta S.A. Founded in 2016, Poland-based Lerta initially operated as a software provider for traditional utilities. Over the years, the company evolved into an independent, asset-free energy company focused on the optimisation of renewable energy sources and energy ﬂexibility. Its proprietary AI software platform, Lerta Energy Intelligence, allows Lerta to forecast and optimise the output of renewable power plants and the load of industrial clients based on current prices and grid needs. This allows Lerta to simultaneously transform a rooftop or a plot of land or roof into a high-performance renewable generation asset, support energy consumers in adapting to new market realities and optimising their energy costs, while also helping network opera- tors to balance their grids and to avoid blackouts. Since its incep- tion, Lerta has grown to become Poland’s third-largest renewable energy aggregator, with energy trading licenses in six countries across Central and Eastern Europe. We can conﬁdently state that this acquisition is the result of a perfect synergy of vision, values, entrepreneurial spirit and long-term thinking. Outlook for 2023 Our business model began with an oﬀer of comprehensive ser - vices for solar power plants, from development and engineering to maintenance. From there, we focused on developing our own port- folio of proprietary power plants, the vast majority of which is now selling clean energy directly to the market. Looking ahead to 2023, we see many opportunities for growth in the established Australian and Hungarian markets and the newly added Polish and Romanian markets for the expansion of PV generation capacity. The Group also intends to continue to disrupt and transform the PV industry. This is illustrated by our investment in RayGen, a company specialising in high-eﬃciency concentrated PV genera - tion with thermal absorption and storage, as well as the aforemen- tioned integration of Lerta. By combining our products and services with Lerta, we can now oﬀer comprehensive, integrated renewable energy solutions to both energy generators and consumers. In addition to these exciting prospects, we will retain our focus on the expansion of our operations and maintenance (O&M) solutions and the development of various water treatment technologies, as well as their preparation for their commercialisation. Based on the status quo of price caps and windfall taxes adopted by the governments in the Group’s core markets in the CEE region, the management board expects a modest negative impact in the Czech Republic and Hungary and no negative impact in Slovakia and Romania, with a potential slowdown in roll-out plans in Poland. New capacity additions in Romania and Hungary are expected to drive material revenue and EBITDA growth in 2023 and beyond. Resulting from our operating leverage manifesting across all of our business lines, consolidated revenues for 2023 are expected to increase to EUR 150.0 million from EUR 95.1 million in 2022, rep- resenting a 57.7% increase YOY, leading to an increase of EBITDA to EUR 29.0 million from EUR 24.3 million in 2022 (+19.3% YOY). Financial Results In 2022, the Group’s revenues increased by 161.7% to hit a record EUR 95.136 million, thanks to an 81.6% increase in revenues from the sale of electricity, primarily attributable to higher revenues from the electricity production generated by the Company’s new power plants operating on a merchant basis as well as to high electricity prices on the market, while other revenue streams increased by a remarkable 253.2% YOY, driven by a sound procurement strategy. EBITDA hit a record EUR 24.308 million (+153.6% YOY), while EBIT swung from a loss of EUR -0.712 million to a EUR 16.984 million proﬁt. We reported a net proﬁt of EUR 6.262 million com - pared to a EUR -6.433 million loss in 2021. TCI amounted to EUR 7.672 million compared to EUR 2.096 million a year ago, while the adjusted equity ratio increased at a sound level of 32.0%. We met our full-year 2022 ﬁnancial guidance to increase our con - solidated revenues to EUR 85.0 million from EUR 36.4 million in 2021, and EBITDA to EUR 24.0 million from EUR 9.6 million in 2021. For the past ﬁfteen years, we have provided services for solar installations around the world, built a proprietary portfolio of 92 PV power plants with a total capacity of 103.6 MWp (as of the pub- lishing date of this report), become an independent clean energy provider and expanded the scope of our work, establishing Photon Water to deliver ground-breaking clean water solutions and inte- grating Lerta, a next-generation energy company. Over this time, our team has grown from six people to nearly 300 in seven countries across two continents. In a consolidation of our experience and expertise, we embarked on an exciting path combining solar energy, energy storage and water technologies to create more wide-ranging, adaptable water and renewable energy solutions. We would like to thank you all for your continued support, and for the trust you have bestowed upon our company, while special thanks go to our hard-working employees who remain the lifeblood of Photon Energy Group. Amsterdam, 24 April 2023 Board of Directors Michael Gartner, Director Georg Hotar, Director 11 Leeton, Australia Company Profile Delivering the fundamentals of life. At Photon Energy Group, we are dedicated to en- suring that everyone has access to clean, afford- able energy and water. We deploy technology to provide these fundamentals and help build a thriving, sustainable world. We take a holistic approach to our work, within our companies and as a group, offering solutions that can be delivered separately or as an integrat- ed package. This allows us to meet the complete needs of our customers and takes us closer to a world where energy and water – the fundamen- tals of life – are clean, safe and accessible to all. Photon Energy N.V., the holding company for Photon Energy Group, is listed on the Warsaw, Prague and Frankfurt Stock Exchanges. We are headquartered in Amsterdam, with offices in Australia and across Europe. Who We Are Slavkov, Czech Republic 14 Our Values Innovation Sustainability Integrity Safety Community We think creatively to deliver solutions and actualise our vision. We understand the importance of foresight and long-term thinking. We operate with honesty and respect, and we never compromise our values. We prioritise the health and well-being of everyone impacted by our work. We believe it is our responsibility to enrich every community we are a part of. 15 Photon Energy delivers clean energy solutions to energy producers and consumers. Our compre- hensive products and services cover the entire lifecycle of photovoltaic systems. Beyond the work we do with our customers, we are also an independent power producer: we develop build, own and operate PV installations around the world. A recent acquisition of Photon Energy Group, Lerta delivers clean energy directly to consum- ers through its Virtual Power Plant. The Lerta VPP aggregates and distributes clean energy from a variety of sources, including solar, wind and biogas. Since its founding, Lerta has grown to become Poland’s third-largest renewable energy aggre- gator, with energy trading licenses in six countries across Central and Eastern Europe. What We Do Engineering We design and build PV installations and energy storage systems. Project Development We acquire projects of all sizes, at all stages of development, and guide them to completion. Technology We procure and trade PV components to fit any project’s location, design and budget. Operations and Maintenance We provide a full range of O&M services, including monitoring and inverter maintenance. 16 Photon Water provides clean water solutions for all environments, from treatment and remedia- tion services to the management of wells and other water resources. We also work closely with leading academic insti- tutions and participate in governmental research programmes to develop cutting-edge water treatment and management solutions. Remediation We offer a range of remediation services to eliminate contaminants from groundwater and soil. Water Treatment We deliver treatment solutions including potable and wastewater treatment, hazardous liquid waste and industrial water treatment. Water Resource Management We help our customers optimise the use of water resources such as lakes, ponds and industrial water bodies. Wells and Resources We provide complete services for wells and water resources, from design to maintenance. 17 Sustainability We view independent sustainability ratings as a way to ensure that we hold ourselves to the high- est standards, and to provide our stakeholders with confidence in our genuine commitment to a sustainable business model. In 2021, we were awarded a rating of ‘very good’ by imug | rating, attributed based on the following scale: weak, moderate, good, very good, excellent. A renewal of our ESG rating profile has been initi- ated and the result of the process will be available on 4 May 2023. imug | rating has been active in the fields of sus- tainable finance and socially responsible invest- ment (SRI) for over 20 years. It is one of the leading sustainability rating agencies in Germany and a specialist in customised ESG research. Our 2022 Sustainability Report has been prepared in accordance with the GRI framework. We believe that GRI reporting in-creases accountability and provides transparency surrounding our sustain- ability goals, efforts and outcomes. The GRI reporting framework consists of univer- sal standards and topic standards that organisa- tions can use to prepare and report information that showcases significant sustainability impacts. Sustainability Rating GRI Framework Highlights of 2022 Our Green Bond was tapped to EUR 77.5 million Tracking of our CO 2 e footprint across scope 1, scope 2 and scope 3 emissions Pilot project to test our in-situ nanoremediation technology with experts from universities in Liberec and Stuttgart Development of internal training course related to insider trading and our Code of Ethics Employee engagement and ESG survey Further details are available in our 2022 Sustainability Report at photonenergy.com/sustainability . Creation of a donation policy, including the establishment of CSR days for employees 18 We are committed to upholding the highest environmental, social and governance standards in all of our practices, on every scale. All of our ﬁeld operations are subject to local environmental regulations, which we strictly adhere to. When disposing of waste, all recyclable materials such as metal, wood, plastic, glass and paper are sorted and recycled. We do not use chemical fertilisers or pesticides for landscape management. We use only demineralised water to clean PV panels, not chemical agents. When clearing land to construct new power plants, we con- duct in-depth biodiversity studies and implement measures to ensure that any unavoidable impact is minimised or reversed. We follow all local guidelines and regulations regarding com- munity involvement and consultation. When working with subcontractors, we prioritise local suppliers to help ensure a positive impact on the local economy through job creation. We have stringent health and safety policies and procedures in place, and all employees are responsible for complying with any applicable laws and regulations. As a result of our rigorous practices and standards, we had no serious accidents in 2022. We embrace all forms of diversity and provide equal employ- ment opportunities without regard to gender, race, religion, disability, sexual orientation or age. We provide an open, inclusive and non-retaliatory work envi- ronment; discrimination of any kind is not tolerated. We ensure that all employees are treated equally and objec- tively in opportunity and remuneration, using merit-based criteria. We understand our obligation to protect the privacy of our customers and suppliers. We have strict policies and proce- dures in place to ensure that sensitive data is protected. This includes electronic data stored in our systems. We have an independent supervisory board and audit com- mittee in place to provide guidance and oversight to the man- agement board on the general aﬀairs of the company. As a listed company, we apply the Dutch Corporate Govern- ance Code and Warsaw Stock Exchange Best Practices. We are committed ensuring that all employees, customers and suppliers act in an ethical manner and that stakeholders are not subject to unethical behaviours such as corruption, bribery or extortion. We have an anti-corruption policy in place, and an insider trading policy is signed by all employees when they sign their contract of employment. Our misconduct reporting channel, the Photon Energy Group SpeakUp Line, is available to all our employees, consultants, suppliers and stakeholders. The channel allows users to remain anonymous and is managed by an independent third- party operator. Our ESG Commitments Environment Social Conduct Corporate Governance 19 Leadership Georg Hotar CEO and Co-founder Georg co-founded Photon Energy in 2008 and was the company’s CFO until 2011. Since then he has spearheaded the group’s expansion in Europe and overseas as CEO. Georg has extensive knowledge of the solar energy industry as well as in international ﬁnance. Before Photon Energy, Georg established a ﬁnance and strategy advisory boutique focused on the CEE region and previously held various positions in ﬁnancial services in London, Zurich and Prague. Michael Gartner CTO and Co-founder Michael developed one of the ﬁrst large PV installations in the Czech Republic before co- founding Photon Energy in 2008. Michael was CEO of Photon Energy until rolling out the company’s business in Australia. Michael is instrumental in driving Photon Energy’s oﬀ- grid and solar-hybrid power solutions. Before Photon Energy, Michael ran an investment boutique and was an analyst and head of ﬁxed income sales at ING and Commerzbank Securities in Prague. Clemens Wohlmuth CFO Clemens joined Photon Energy in 2012. He has contributed many years of experience in ﬁnancial management, having run his own consulting practice focused on ﬁnancial services and interim management. Prior to this, he was CFO and later CEO at Telekom Austria’s subsidiary, Czech On Line. From 1994 to 2000 he was Senior Manager for Ernst & Young Consulting in Austria. After many successful years with the Group, Clemens will be leaving at the end of May, following a handover period to our new CFO Andrej Horánsky. Ricky D’Ambrosca COO Ricky is responsible for the day-to-day administration of Photon Energy Group and its operational functions as a business. He joined the company in 2022 in order to strengthen our management team during this period of growth. Previously, Ricky worked at ADP Employer Services as senior client services director for the EMEA region. He has led 450+ associates spanning twenty countries providing services for 250 clients for 100 large corporate entities. 20 and Audit Committee Marek Skreta Marek is the chairman of the Photon Energy Group supervisory board and a member of the audit committee. He is the co-founder and CEO of P4 Wealth Management in Zurich and serves as a member of the board and head advisor at R2G in Prague, a private investment platform which he helped to establish. Prior to this, he was a managing director at UBS Switzerland AG and a director at Credit Suisse in Zurich. His earlier professional experience included providing advisory services to family oﬃces and private equity funds on investments in the CEE region and M&A transactions. Bogusława Skowroński Bogusława is an independent Supervisory Board member as deﬁned by the Dutch Corporate Governance Code. She is an entrepreneur, technology start-up ecosystem builder, VC and angel investor. She has gained ﬁnancial experience in organizations such as Union Bank of Switzerland, European Bank for Reconstruction and Development and Capital Solutions proAlfa, a company which she founded. She is an active member of the Polish capital market and has advised many companies on their strategies and transactions. She co-founded MIT Enterprise Forum CEE, an equity-free startup acceleration program. Ariel Sergio Davidoff Ariel is a member of the Photon Energy Group supervisory board and chairman of the audit committee. He is a partner at Lindemannlaw, an international law ﬁrm based in Zurich. The law ﬁrm focuses on UHNW entrepreneurs and regulated clients, such as banks, external asset managers and mutual funds. Prior to joining Lindemannlaw, Ariel held various positions in the banking industry in Switzerland and Lichtenstein, including the position of CEO. In addition, he recently co-funded several companies in the Swiss ﬁnancial sector. Supervisory Board 21 21 ‘The work we do is very dynamic. Every day is different, so it’s always challenging and exciting.’ ‘I’m glad to be part of a company that works in renewables, the sector of tomorrow.’ ‘The management team makes me feel like I work with them, not for them, and that we have a mutual goal.’ ‘The culture here is friendly and multicultural, which is an awesome environment to work in.’ Mark Csete Project Development Manager Mihai Banica Project Manager Alexandra Materna Sales Manager Světlana Karafiátová Receptionist Our Team As of 31 December 2022 * Incl. 63 employees added to our staﬀ following the acquisition of Lerta on 12 December 2022. These are not included in the employee demographic numbers. 39 22 283 37 % Average age Nationalities Employees * Female employees 22 All-staff Meeting Prague, Czech Republic Teambuilding at Lhota Lake Lhota, Czech Republic Kongres PV Warsaw, Poland Lunch & Learn Sydney, Australia 23 23 HQ Our Markets Power Plants Owned by Photon Energy Group Australia O&M Services for Power Plants Photon Water Services Inverter Maintenance Services Energy Trading Licence Photon Energy Group Office 24 2022 PV Market Overview Evolution of Global Annual and Cumulative Installed Capacity, 2011–2022 Worldwide Europe The year 2022 saw 268 GWp of new solar generation capacity deployed, in comparison to 191 GWp in 2021, bringing the total cumulative installed capacity to approximately 1,218 GWp. In 2022, the PV market grew by 29% year-to-year. This unexpected raise is connected to the ﬁrst truly global energy crisis, which was triggered by Russia’s invasion of Ukraine, that sparked unprecedented momentum for renewables according to IEA. Fossil fuel supply disruptions have underlined the energy security beneﬁts of domestically generated renewable electric - ity, leading many countries to strengthen policies supporting renewables. Solar PV generation in the US during 2022 increased by 24.14% year-on-year according to the country’s Energy Information Admin- istration (EIA) latest report. The data which was reviewed by Sun Day Campaign showed that solar remained the fastest-growing renewable energy source in 2022 and ended the year with a share of 4.74% of all electricity capacity generated in 2022, up from the 3.95% share in 2021. Solar deployment in China jumped to a new high in 2022, accord- ing to new ﬁgures from the country’s National Energy Administra - tion. Newly installed solar capacity in China last year reached a record 87.4GW, a 59% increase on 2021, taking the country’s total installed PV capacity to 390GW. According to Solar Power Europe, 2022 was the year when solar power displayed its true potential for the very ﬁrst time in the EU, driven by record high energy prices and geopolitical tensions that largely improved its business case. The 27 EU Member States saw 41.4 GW of new solar PV capacity connected to their grids; a 47% increase compared to 2021. The share of renewables in net electricity generation in Germany accounted for nearly half of total power generation in 2022 with 49.6%, according to the Fraunhofer Institute for Solar Energy Sys- tems (ISE). Most solar power facilities in the EU are still operated by Germany. By the end of 2022, aggregate installed capacity will be roughly 68.5 GW, with new yearly installations of 7.9 GW. Spain achieved a total of 26.4 GW capacity in 2022, becoming second largest market in the EU. For the very ﬁrst time, a nation with a solar ﬂeet larger than 10 GW – Poland, which has 12.5 GW of potential ranked out- side the top 5. The other top 10 nations – Belgium, 7.7 GW, Greece, 5.6 GW, Portugal, 4.2 GW, and Denmark, 3.9 GW – remain below this mark. Hungary, which has 3.9 GW as well, drops to outside the top 10 in 2022 due to a few MW diﬀerence. Cumulative installed capacity (GWp) Annual installations (GWp) 2014 2018 2012 2016 2020 2011 2015 2019 2013 2017 2021 2022 77 38 118 30 98 39 135 30 104 50 191 268 304 139 624 70 402 178 759 100 506 227 950 1,218 Sources: BNEF, SPE, the Company 25 Our Key Markets In 2022, 4.1 GWp have been installed which makes up a total capacity of 31.0 GWp as of 31 December 2022. According to Clean Energy Regulator (CER), the year 2022 saw more than 290,000 rooftop installations added to the grid with a total capacity of 2.51 GWp. According to the Czech Solar Association, 33,760 solar power plants with a total capacity of 288.8 MWp were installed in 2022. Total capacity of 2.5 GWp was reported at the end of 2022, representing a 13.6% increase from 2021 to 2022. Residential photovoltaics in the Czech Republic are breaking records. Compared to 2021, when 9,321 power plants with an output of 62 MWp were built, this represents an increase of 366% in terms of capacity. Cumulative PV capacity in 2022 was estimated at 3.9 GWp, according to an analy- sis by Solar Power Europe; Compared to 2021, we saw an increase of about 30%. The capacity target for 2030 is 6.5 GWp of which more than 50% has been achieved, according to SPE. Australia Czech Republic Hungary 2022 Market Overview 2022 Market Overview 2022 Market Overview Photon Energy in Australia Photon Energy in the Czech Republic Photon Energy in Hungary Total capacity at the end of 2021: Total capacity at the end of 2021: Total capacity at the end of 2021: 26.9 GWp 31.0 GWp 2.2 GWp 3.0 GWp 2.5 GWp 3.9 GWp Total capacity at the end of 2022: Total capacity at the end of 2022: Total capacity at the end of 2022: In Development 309.8 MWp In Development 86.3 MWp Our Portfolio 14.7 MWp Our Portfolio 15.0 MWp Our Portfolio 51.8 MWp As of 31 December 2022 26 According to Solar Power Europe, a total of 4.9 GWp was installed in 2022, a signiﬁ - cant increase of 63.6% over 2021. Poland completes the top three ranking with its impressive solar record. Poland has once again increased its annual solar installa- tions, this time by 26% to 4.9 GWp compared to 3.9 GWp in 2012. High electricity bills and massive energy security issues resulting from the Russian war have ensured that the pace of installations has remained steady throughout the year despite a slightly less attractive support structure for small-scaled solar projects. Romanian cumulative PV capacity in 2022 was estimated at 1.8 GWp, according to an analysis by Solar Power Europe; Compared to 2021, we saw an increase of about 20%. The capacity target for 2030 is 5 GWp of which 35% of them has been achieved, according to SPE. According to the PV magazine, residential PV instal- lation is expected to increase in 2023 by reduction of tax on PV panels for use in residential homes and public building from 19% to 5%. The PV power plants capacity of Slovakia in 2022 was estimated at 5.7 GWp, according to the Solar Power Europe; Compared to 2021, an increase of about 7.5% been reported. The capacity target for 2030 is 12 GWp which 48% of them has been achieved, according to SPE. Poland Romania Slovakia 2022 Market Overview 2022 Market Overview 2022 Market Overview Photon Energy in Poland Photon Energy in Romania Photon Energy in Slovakia Total capacity at the end of 2021: Total capacity at the end of 2021: Total capacity at the end of 2021: 7.7 GWp 1.5 GWp 5.3 GWp 5.7 GWp 12.5 GWp 1.8 GWp Total capacity at the end of 2022: A total of 11.7 MWp commissioned after the reporting period as of the publication date. Total capacity at the end of 2022: Total capacity at the end of 2022: In Development 227.6 MWp In Development 303.0 MWp Our Portfolio 10.4 MWp 27 Our Competitive Strengths Photon Energy Group stands out from our com- petitors in a number of ways. Our years of experience and technical expertise in both photovoltaics and clean water solutions, applied to design and develop state-of-the-art technology and services. Providing a personalised, intelligent customer experience, simplifying the complexity of the operating environment. Continual innovation in a changing market, as demonstrated by our development of solar-hybrid power solutions or off-grid solutions. Energy storage is increasingly important in regions which generate high levels of solar power in order to maintain a continuous and reliable electricity supply. We also develop PV solutions coupled with other off-grid applications, such as on-site water pumping and filtration powered by solar energy. The growing demand for these solutions is driven by a wide range of consumers, from industry to agriculture. Providing services and solutions that are scal- able, integrated and modular. 28 2009 We construct our first PV projects, including our first proprietary power plant in the Czech Republic. 2015 We hit the 150 MWp mark for O&M services pro- vided in Europe and Australia. 2013 We place our first corporate bond on the Frank- furt Stock Exchange. 2019 We complete the roll-out of rooftop solar sys- tems across 30 ALDI locations and build 20 power plants in Hungary. 2021 Our shares are listed on the regulated markets of Warsaw and Prague, and on the Quotation Board of the Frankfurt Stock Exchange. 2011 We construct new power plants in Germany, Italy and Slovakia. 2017 We establish our office in Hungary and expand our vision to include clean water solutions through Photon Water. 2008 Photon Energy is founded. We are listed on the NewConnect market of the Warsaw Stock Exchange. 2014 We install our first solar storage battery system in Australia and add five countries to our O&M portfolio. 2010 We construct plants with a combined capacity of 32 MWp in the Czech Republic and Slovakia. 2016 We commission four power plants in Australia. Our shares are listed in Prague, along with a corporate bond. 2012 We establish our office in Australia and our new corporate HQ in the Netherlands. 2018 Our first Hungarian power plants are con- nected to the grid. 2020 Our proprietary portfolio reaches 74.7 MWp, and we commission two utility-scale power plants. Our History 29 2022 in Review 151 MWp added to our project development pipeline 49,013 tonnes of CO 2 e emissions avoided 121.6 GWh of clean energy produced JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY Bond Magazine Award We are annoucned as the winner of Bond Magazine’s award for Best Issuer, Green SME Bonds 2021. ‘Buy’ Recommendation Our share is given a ‘buy’ recommendation by analysts at AlsterResearch. Sustainability Report 2021 Publication of our second sustainability report and our first green financing report. Green Bond Tapped We successfully increase the volume of our Green EUR Bond by EUR 10 million to EUR 65 million. O&M in Poland We sign a major agreement with a new key customer in Poland. Additional ‘Buy’ Recommendations Our share receives ‘buy’ recommendations from WOOD & Co. and IPOPEMA. Construction in Romania We break ground on our first two Romanian PV power plants. Water Quality Project Photon Water launches water monitoring and control project in Mount Gambier, Australia. Crown Sponsorship for RayGen Project Our Australian solar storage project receives sponsorship from the South Australian Government for development approval. Misconduct Reporting Policy We institute our new policy and the Photon Energy Group SpeakUp Line as channel for stakeholders to report misconduct. 30 AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER Polish 2027 Capacity Auction Lerta secures 157 MW of DSR (Demand Side Response) in Polish capacity auction for 2027. Shares on XETRA Our shares are now listed on the electronic trading platform XETRA, Germany’s leading trading platform for listed companies provided by Deutsche Börse AG. Bond Repaid We fully repay our 7.75% EUR Bond 2017/2022. Second Green Bond Tap We successfully increase the volume of our Green EUR Bond by EUR 12.5 million to EUR 77.5 million. Refinancing for Czech Portfolio We secure a EUR 28.1 million refinancing agreement for nine PV plants in the Czech Republic. Construction in Romania We begin construction on five additional Romanian PV plants. Lerta Acquisition We acquire a majority stake in Lerta, which was fully integrated into Photon Energy Group on 1 February 2023. Utility-scale Solar-Plus-Storage We acquire land and development rights for a 9.8 MWp / 10 MWh solar and battery energy storage facility in Australia. 31 Selected Projects CTP Business Parks Combined Capacity We partnered with CTP – the largest industrial property developer in CEE – to install rooftop PV plants at three CTP business parks in Slovakia. Our teams worked closely throughout the con- struction, with AC connections handled by CTP and DC compenents by Photon Energy. These plants will help CTP to meet its goal of becoming carbon neutral by 2023, as well as lower its tenants’ operational costs and provide them with a viable source of renewable energy to meet their own sustainability goals. 1.26 MWp up to 1.39 GWh Annual Production Bratislava Slovakia Trnava Žilina 32 Romanian PV Projects Combined Capacity In 2022, we began construction of a series of pro- jects in Romania, breaking ground on eight PV power plants. Including these projects, we ended the year with a total capacity of 228 MWp in development. Upon the commissioning of the first seven instal- lations, our IPP portfolio will include 96 solar power plants. Of the total 122 MWp generation capacity, a combined 107 MWp will be selling subsidy-free clean electricity directly on the energy market. 31.5 MWp up to 8.1 GWh Expected Annual Production Calafat Romania Săhăteni Aiud, Teius Siria Făget 33 Tolna 2 PFAS Remediation Solar Capacity Partner Australian Government, Department of Defence We completed and grid-connected our second PV installation in Tolna, Hungary. The new instal- lation will operate on a merchant model, with an expected revenue of EUR 440,000 in its first year, based on current forward prices for electricity base load in Hungary. Like our first plant in Tolna, this installation was financed by proceeds from our Green Bond. In 2022 we continued a trial project implementing our in-situ PFAS remediation technology. The trial involves water and energy monitoring platforms, groundwater injection equipment, an array of groundwater monitoring and injection wells and a combination of application and mon- itoring electrodes. 1.4 MWp up to 2.1 GWh Annual Production Australia Tolna, Hungary 34 Strategy and Results in 2022 Increase the production of clean energy by expanding our global electricity generation capacity of our proprietary portfolio of PV power plants. Grow our PPA business and the construction of commercial behind-the-meter PV projects for industrial customers and off-takers in Australia and in Europe. Continue to provide O&M services that allow PV power plants to run smoothly at high generation levels and increase revenues while reducing risks for our customers. Deploy remediation solutions for groundwater contamination, with a focus on PFAS nanoremediation. Procure and trade PV components through cooperation with PV technology manufacturers. Compete for PV projects in locations that require a tailor-made, integrated approach to the application of PV technology, combining clean energy generation with energy storage solutions. Acquire new PV projects to develop, design and construct for our proprietary portfolio, supporting the growth of a recurring revenue stream from clean electricity generation with a focus on Australia, Hungary, Poland and Romania. Our proprietary portfolio of PV power plants generated 121.6 GWh of clean electricity production, a 18% increase from 2021. Our team includes specialists dedicated to capitalising on the fast-growing interest in behind-the-meter projects. Increased capacity under contract 383 MWp in 2022 ( +14% YOY ), with a significant growth experienced in Poland. We continued our trial project for the Australian Government Department of Defence, implementing our proprietary in-situ PFAS remediation technology. Our trading volume was increased, generating revenue of EUR 65.021 million, compared to EUR 9.221 million in 2021. We acquired the development rights and land for a 9.8 MWp/10 MWh solar and battery energy storage system facility in Boggabri, New South Wales. The project represents the Company’s first utility-scale solar-plus- storage installation and will serve as a prototype for a future roll-out across Photon Energy Group’s European markets. A total of 151 MWp was added to our project pipeline in Hungary, Poland, Romania and Australia. Strategy Result 35 Our Media Presence At Photon Energy Group, we have always seen it as our duty to be a trusted media partner. In 2022, we actively expanded upon our ongoing partner- ships with journalists covering energy, finance and sustainability-related topics, with Romania being a new addition to our target media markets. Our stories were covered by a wide range of European and Australian media outlets, from specialised energy news websites to popular daily newspapers. Additionally, we worked closely with industry associations and NGOs to promote solar energy as a future-proof energy source and to share our industry know-how with our customers and partners. We continued to operate with honesty and in full transparency, with our CEO Georg Hotar giv- ing several interviews about our ongoing projects and future plans, and our representatives shar- ing their expertise in response to media enquiries throughout the year. To read our past articles and press releases, please visit photonenergy.com/news . Follow us on Linkedin and Twitter . 28 July 2022 23 June 2022 11 August 2022 13 July 2022 Photon Energy z kontraktem na obsługę polskich elektrowni fotowoltaicznych Photon Energy breaks new ground with three more solar projects in Romania Photon Energy N.V. erhöht Prognose für 2022 deutlich Photon Energy începe lucrările la a doua centrală fotovoltaică în județul Alba 36 24 November 2022 2 February 2023 5 October 2022 22 November 2022 12 August 2022 2 September 2022 Photon Energy Group increases its stake in Lerta to 100% Photon Energy Group Secures EUR 28.1 Million Long-term Refinancing for its Czech Portfolio Photon chooses NSW for its first ever solar and battery project Photon Energy Group Launches B2B eCommerce Platform Photon Energy stockt Anleihe auf – „Loyalitätsprämie“ für Altanleger Photon Energy Debuts on German Electronic Trading Platform XETRA 37 38 Proprietary PV Plants The table below represents power plants owned directly or indirectly by Photon Energy N.V. in 2022. Production Results in 2022 Project Name Legal Entity Capacity Revenue Prod. 2022 Proj. 2022 Perf. % of change 2022 vs. 2021 Unit kWp per MWh, in 2022 kWh kWh % % Komorovice Exit 90 s.r.o. 2,354 EUR 812 2,586,992 2,477,578 4.4% 9.3% Zvíkov I Photon SPV8 s.r.o. 2,031 EUR 810 2,282,152 2,281,816 0.0% 2.6% Dolní Dvořiště Photon SPV10 s.r.o. 1,645 EUR 814 1,663,524 1,670,096 -0.4% 0.2% Svatoslav Photon SPV4 s.r.o. 1,231 EUR 816 1,228,843 1,194,293 2.9% 7.1% Slavkov Photon SPV6 s.r.o. 1,159 EUR 815 1,389,238 1,322,565 5.0% 4.2% Mostkovice SPV 1 Photon SPV1 s.r.o. 210 EUR 736 226,217 218,212 3.7% 5.2% Mostkovice SPV 3 Photon SPV3 s.r.o. 926 EUR 323 1,027,624 9 64,874 6.5% 5.1% Zdice I Onyx Energy I s.r.o. 1,499 EUR 811 1,750,615 1,673,405 4.6% 7.8% Zdice II Onyx Energy projekt II s.r.o. 1,499 EUR 811 1,774,069 1,686,667 5.2% 6.8% Radvanice Photon SPV11 s.r.o. 2,305 EUR 816 2,576,461 2,481,904 3.8% 4.2% Břeclav rooftop Photon SPV1 s.r.o. 137 EUR 924 164,781 152,793 7.8% 5.1% Total Czech PP 14,996 16,670,515 16,124,174 3.4% 5.2% Babiná II Sun4Energy ZVB s.r.o. 999 EUR 271 1.013,759 962,816 5.3% 2.4% Babina III Sun4Energy ZVC s.r.o. 999 EUR 271 1,002,519 976,833 2.6% -0.1% Prša I. Fotonika s.r.o. 999 EUR 270 1,066,299 1,048,133 1.7% 3.8% Blatna ATS Energy s.r.o. 700 EUR 272 732,096 714,114 2.5% 1.1% Mokra Luka 1 EcoPlan 2 s.r.o. 963 EUR 258 1,234,419 1,129,082 9.3% 2.9% Mokra Luka 2 EcoPlan 3 s.r.o. 963 EUR 257 1,256,418 1,171,137 7.3% 2.5% Jovice 1 Photon SK SPV2 s.r.o. 979 EUR 263 926,565 886,231 4.6% 6.7% Jovice 2 Photon SK SPV3 s.r.o. 979 EUR 263 919,104 876,427 4.9% 6.8% Brestovec Photon SK SPV1 s.r.o. 850 EUR 257 1,055,088 1,013,477 4.1% 7.7% Polianka Solarpark Polianka s.r.o. 999 EUR 261 1.008,127 972,128 3.7% 3.8% Myjava Solarpark Myjava s.r.o. 999 EUR 259 1,138,769 1,111,400 2.5% 1.2% Total Slovak PP 10,429 11,353,164 10,861,777 4.5% 3.4% Tiszakécske 1 Ekopanel Befektetési Kft. 689 EUR 247 885,198 838,413 5.6% 1.5% Tiszakécske 2 Energy499 Invest Kft. 689 EUR 247 890,688 843,815 5.6% 1.6% Tiszakécske 3 Future Solar Energy Kft. 689 EUR 249 857,875 820,891 4.5% 1.7% Tiszakécske 4 Green-symbol Invest Kft. 689 EUR 247 889,678 843,815 5.4% 1.1% Tiszakécske 5 Montagem Befektetési Kft. 689 EUR 247 886,549 838,413 5.7% 6.7% Tiszakécske 6 Onyx-sun Kft. 689 EUR 247 887,118 843,815 5.1% 1.4% Tiszakécske 7 Solarkit Befektetesi Kft. 689 EUR 247 889,559 837,798 6.2% 1.9% Tiszakécske 8 SunCollector Kft. 689 EUR 247 875,681 834,993 4.9% 1.0% 39 Project Name Legal Entity Capacity Revenue Prod. 2022 Proj. 2022 Perf. % of change 2022 vs. 2021 Unit kWp per MWh, in 2022 kWh kWh % % Almásfüzitő 1 Ráció Master Kft. 695 EUR 246 866,111 833,740 3.9% 3.4% Almásfüzitő 2 Ráció Master Kft. 695 EUR 246 841,200 833,151 1.0% 0.5% Almásfüzitő 3 Ráció Master Kft. 695 EUR 245 842,285 829,120 1.6% 0.3% Almásfüzitő 4 Ráció Master Kft. 695 EUR 246 867,116 835,745 3.8% 0.4% Almásfüzitő 5 Ráció Master Kft. 695 EUR 245 880,596 830,197 6.1% 2.7% Almásfüzitő 6 Ráció Master Kft. 660 EUR 245 875,234 798,499 9.6% 0.3% Almásfüzitő 7 Ráció Master Kft. 691 EUR 245 870,652 825,317 5.5% 0.2% Almásfüzitő 8 Ráció Master Kft. 668 EUR 246 856,438 808,072 6.0% 0.0% Nagyecsed 1 Mediator Ingatlanközvetítö Kft. 689 EUR 250 853,678 819,166 4.2% -1.0% Nagyecsed 2 Aligoté Kft. 689 EUR 252 869,510 819,166 6.1% 0.8% Nagyecsed 3 Proma Mátra Kft. 689 EUR 252 877,397 819,574 7.1% 1.4% Fertod I Fertod Napenergia-Termelo Kft. 528 EUR 244 676,103 607,271 11.3% -0.7% Fertod II No 2 Photon Energy HU SPV 1 Kft. 699 EUR 245 887,825 827,038 7.4% -0.5% Fertod II No 3 Photon Energy HU SPV 1 Kft. 699 EUR 245 883,853 827,038 6.9% -2.5% Fertod II No 4 Alfemo Alpha Kft. 699 EUR 245 878,889 827,038 6.3% -2.3% Fertod II No 5 Ráció Master Kft. 691 EUR 245 878,256 831,694 5.6% -2.4% Fertod II No 6 Photon Energy HU SPV 1 Kft. 699 EUR 244 874,289 827,038 5.7% -2.8% Kunszentmárton I No 1 Ventiterra Kft. 697 EUR 244 917,654 878,417 4.5% 1.0% Kunszentmárton I No 2 Ventiterra Kft. 697 EUR 245 913,106 878,551 3.9% 1.3% Kunszentmárton II No 1 Ventiterra Alpha Kft. 693 EUR 245 927,317 849,019 9.2% 0.4% Kunszentmárton II No 2 Ventiterra Beta Kft. 693 EUR 245 932,260 849,316 9.8% 0.4% Taszár 1 Optisolar Kft. 701 EUR 241 887,106 878,233 1.0% -0.2% Taszár 2 Optisolar Kft. 701 EUR 241 900,449 878,233 2.5% 0.7% Taszár 3 Optisolar Kft. 701 EUR 241 902,765 878,233 2.8% 0.3% Monor 1 Photon Energy HU SPV 1 Kft. 688 EUR 245 888,790 845,537 5.1% -0.8% Monor 2 Photon Energy HU SPV 1 Kft. 696 EUR 246 886,933 855,996 3.6% 0.4% Monor 3 Photon Energy HU SPV 1 Kft. 696 EUR 246 897,932 855,996 4.9% 1.1% Monor 4 Photon Energy HU SPV 1 Kft. 696 EUR 246 896,977 855,996 4.8% 0.5% Monor 5 Photon Energy HU SPV 1 Kft. 688 EUR 246 861,609 839,673 2.6% -3.6% Monor 6 Photon Energy HU SPV 1 Kft. 696 EUR 245 896,606 855,996 4.7% 0.5% Monor 7 Photon Energy HU SPV 1 Kft. 696 EUR 246 895,235 855,996 4.6% 0.2% Monor 8 Photon Energy HU SPV 1 Kft. 696 EUR 246 902,131 855,996 5.4% 1.0% Tata 1 Tataimmo Kft. 672 EUR 257 940,621 915,901 2.7% 2.6% Tata 2 ALFEMO Beta Kft. 676 EUR 245 839,875 828,579 1.4% 1.4% Tata 3 ALFEMO Gamma Kft. 667 EUR 245 843,405 809,326 4.2% 1.7% Tata 4 Tataimmo Kft. 672 EUR 256 957,397 937,898 2.1% 2.5% Tata 5 Öreghal Kft. 672 EUR 257 948,602 941,081 0.8% 7.0% Tata 6 Tataimmo Kft. 672 EUR 257 920,636 926,101 -0.6% -0.6% 40 Project Name Legal Entity Capacity Revenue Prod. 2022 Proj. 2022 Perf. % of change 2022 vs. 2021 Unit kWp per MWh, in 2022 kWh kWh % % Tata 7 European Sport Contact Kft. 672 EUR 257 946,090 916,499 3.2% 2.8% Tata 8 Tataimmo Kft. 672 EUR 257 958,505 930,294 3.0% 2.0% Malyi 1 Zuggo - Dulo Kft. 695 EUR 251 856,728 821,957 4.2% 0.3% Malyi 2 Egespart Kft. 695 EUR 249 876,568 823,080 6.5% 2.0% Malyi 3 Zemplenimpex Kft. 695 EUR 248 877,174 823,080 6.6% 1.9% Puspokladány 1 Ladány Solar Alpha Kft. 1,406 EUR 90 1,972,150 1,899,780 3.8% 0.5% Puspokladány 2 Ladány Solar Alpha Kft. 1,420 EUR 257 2,047,443 1,846,648 10.9% 0.9% Puspokladány 3 Ladány Solar Alpha Kft. 1,420 EUR 261 2,011,092 1,804,753 11.4% 0.7% Puspokladány 4 Ladány Solar Beta Kft. 1,406 EUR 258 1,986,366 1,886,364 5.3% -0.6% Puspokladány 5 Ladány Solar Beta Kft. 1,420 EUR 260 2,050,711 1,841,830 11.3% 0.2% Puspokladány 6 Ladány Solar Beta Kft. 1,394 EUR 90 1,981,915 1,864,979 6.3% 0.5% Puspokladány 7 Ladány Solar Gamma Kft. 1,406 EUR 90 1,996,171 1,886,269 5.8% 0.0% Puspokladány 8 Ladány Solar Gamma Kft. 1,420 EUR 257 2,010,315 1,809,932 11.1% 0.3% Puspokladány 9 Ladány Solar Delta Kft. 1,406 EUR 90 2,001,423 1,885,219 6.2% 3.5% Puspokladány 10 Ladány Solar Delta Kft. 1,420 EUR 259 2,009,415 1,803,165 11.4% 0.6% Tolna 1 Tolna (Barbican) 1,358 EUR 278 2,098,737 2,098,737 0.4% nm Tolna 2 Tolna (Barbican) 1,358 EUR 310 1,503,024 1,502,132 0.1% na Total Hungarian PP 51,814 68,783,013 65,206,800 5.5% 6.3% Symonston Photon Energy AUS SPV 1 Pty Ltd 144 EUR 434 158,133 178,750 -10.5% -6.9% Leeton Leeton Solar Farm Pty Ltd 7,261 EUR 109 12,393,092 14,180,103 -12.6% 112.8% Fivebough Fivebough Solar Farm Pty Ltd 7,261 EUR 109 12,248,620 14,004,545 -12.5% 113.2% Total Australian PP 14,744 24,799,845 28,361,399 -12.6% 111.3% Total 91,905 121,606,537 120,554,150 0.9% 17.8% Notes: Capacity: installed capacity of the power plant Prod.: production in the reporting period. Proj.: projection in the reporting period. Perf.: performance of the power plant in the reporting period i.e. (production in 2022 / projection for 2022) – 1. * The reported figures correspond to: - Green Bonus + realized electricity price during the reporting period in the Czech Republic. - the applicable FIT for the period in Slovakia. - Realized electricity prices in Hungary except for Puspokladány 1, Puspo- kladány 6, Puspokladány 7 and Puspokladány 9, which are entitled to the applicable FIT for the period, amounting to HUF 35,540. - Realized electricity prices + Australian Large-scale Generation Certifica- tes for our Leeton and Fivebough power plants in Australia. - the applicable FIT of AUD 301.60 + Large-scale Generation Certificates for our Australian power plant in Symonston. . 41 Our Shares and Bonds The Share Shareholding Structure Solar Future and Solar Power to the People are controlled by the co-founders of Photon Energy N.V. Share Trading Details (ISIN: NL 0010391108 ) Trading of the Company’s shares on the regulated markets of the Warsaw Stock Exchange (WSE) (Giełda Papierów Wartościowych w Warszawie) and Prague Stock Exchange (PSE) (Burza cenných papírů Praha) commenced on 5 January 2021. Prior to that date, the Company’s shares were traded on NewCon- nect in Poland and on the Free Market of Prague. The admission to listing and trading of the Company’s shares on the Quotation Board of the Frankfurt Stock Exchange followed on 11 January 2021. The Group is following the Dutch Corporate Governance Code and the Best practices of the Warsaw Stock Exchange. Market: GPW Main Market, Warsaw, Poland Ticker: PEN Web address: www.gpw.pl Market: Standard Market, Prague, Czech Republic Ticker: PEN Web address: https://www.pse.cz/en/ Market: Quotation Board of the Frankfurt Stock Exchange, Germany WKN: A1T9KW Web address: https://www.boerse-frankfurt.de/ Market Maker Details in Poland Dom Maklerski PKO Bank Polski Address: ul. Puławska 15, 02 - 515 Warszawa, Poland Web address: www.dm.pkobp.pl Dividend Policy The Company’s strategy is to create value for its shareholders through strong expansion in the globalising photovoltaic industry. For as long as value-creating growth and investment opportunities exist, the Board of Directors does not intend to propose to distrib- ute dividends to shareholders. Solar Future 35.56% Solar Power to the People 33.45% Free-float 28.77% The Company 2.22% 42 Share Performance in 2022 Main market of the Warsaw Stock Exchange Selected Share Information PLN Opening price (3 January 2022 ) 7.10 52 -week max (16 August 2022 ) 1 7.00 52 -week min (7 February 2022 ) 6. 55 Closing price (30 December 2022) 13.10 Source: www.gpw.pl The trading volume in 2022 amounted to 5,366,056 shares (corre- sponding to 20,639 shares per trading session) compared to 7,002,825 shares in 202 1 (corresponding to 27,900 shares per trading session). XETRA The Company’s shares have been listed on the electronic trading platform XETRA (provided by the German Stock Exchange) since 7 December 2022. Main market of the Prague Stock Exchange Selected Share Information CZK Opening price (3 January 2022 ) 38 . 60 52 -week max (16 August 2022 ) 89.00 52 -week min (7 March 2022 ) 3 7.00 Closing price (30 December 2022) 38.20 Source: http://www.pse.cz The Company reports a yearly trading volume of 491,280 shares (corresponding to 1 ,890 shares per trading session) in 2022 , com- pared to 2,917 , 420 shares (corresponding to 14,026 shares per trading session) in 202 1. Quotation Board of the Frankfurt stock exchange Selected Share Information EUR Opening price (3 January 2022 ) 1.52 52 -week max (16 August 2022 ) 3. 57 52 -week min ( 8 February 2022 ) 1. 42 Closing price (30 December 2022) 2.74 Source: https://www.boerse-frankfurt.de/ The trading volume in 2022 amounted to 491,280 (corres ponding to 1, 904 shares per trading session)., compared to 454,900 shares (corresponding to 1,777 shares per trading session) in 2021 . Our Bonds In December 2016 the Company issued a 7 -year corporate bond with a 6% annual coupon and monthly payments in the Czech Re- public. The corporate bond (ISIN CZ0000000815) with a nominal value of CZK 30,000 has been traded on the Free Market of the Prague Stock Exchange since 12 December 2016. The outstand- ing amount is CZK 75.9 million (EUR 3.1 million) and will be repaid on 13 December 2023 . On 27 October 2017 the Company issued a 5 - year corporate EUR bond with a 7.75% annual coupon and quarterly coupon paym ents in Germany, Austria and Luxemburg. The original target volume of EUR 30 million was successfully increased in two steps with all parameters unchanged, to an outstanding amount of EUR 45.0 million prior to the completion of the exchange offer described be- low. The corporate bond (ISIN DE000A19MFH4) with a nominal value of EUR 1,000 has been traded on the Open Market of the Frankfurt Stock exchange since 27 October 2017. The bond was also listed on the stock exchanges in Berlin, Hamburg, Hannover, Munich and Stuttgart. The total outstanding bond volume of EUR 15.232 million was fully repaid together with the final interest pay- ment to the bondholders on 27 October 2022. On 17 November 2021, The Company successfully placed its 6.50% Green EUR Bond 2021/2027 (ISIN: DE000A3KWKY4) in the amount of EUR 50 million. The bond issuance was met with strong demand from the Company’s existing bondholders, who subscribed to EUR 21.281 million in the exchange that was offered for the existing EUR Bond 2017/2022. The green bond – with an interest rate of 6.50% p.a., paid quarterly – was confirmed by imug | rating with regard to its sustainability in a Second Party Opinion, and can be traded on the Open Market of the Frankfurt Stock Ex- change. On 29 November 2021, the Group s uccessfully increased the bond placement by EUR 5 million with all parameters unchanged, bring- ing the total outstanding bond volume to EUR 55 million. In May 2022, the Company successfully tapped its 6.50% Green EUR Bond 2021/2027 (ISIN: DE000A3KWKY4) in t he amount of EUR 10 million to a total outstanding amount of EUR 65 million. In October 2022 and November 2022, the Company announced that it has increased its 6.50% Green EUR Bond 2021/2027 (ISIN: DE000A3KWKY4) in the amount of another EUR 12.5 mill ion to a total outstanding amount of EUR 77.5 million. In this round the bonds were again offered to bondholders of the older 2017/2022 corporate bonds in form of an exchange offer with a 1.5% loyalty premium plus the difference in net accrued interest on each ex- changed bond. Existing investors registered around 6.0 million eu- ros nominally for exchange, which corresponds to a ratio of 30% of the outstanding bond. Together with the initial exchange offer organized in November 2021, 60% of the outstanding vol ume of the Company’s 2017/2022 bond got exchanged for the new Green EUR Bond. This tap issuance of the 2021/2027 Green bond was included into trading on the Quotation Board trading segment of the Open Mar- ket (Freiverkehr) on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) on 14 October 2022. 43 The Company intends to use the net proceeds of the green bond placement to finance or refinance, in part or in whole, new and/or existing eligible assets, as well as financial instruments that were used to finance such projects or assets, in accordance with the Company’s Green Finance Framework, enabling Photon Energy Group to make a significant contribution to an environmentally friendly future. On 29 November 2021 , the Group successfully increased the bond placement by EUR 5.0 million with all parameters unchanged. The total outstanding bond volume amounts to EUR 55.0 million as of the end of the reporting period. Bonds Performance in 2022 CZK Bond Trading Performance in Prague In the trading period from 1 January 2022 until 31 December 2022 the trading volume amounted to CZK 210,000 (nominal value) with a closing price of 100.00 (compared to CZK 25,200,000 in 202 1). EUR Bond 2017/22 Trading Performance In the trading period from 1 January 2022 until its repayment on 27 October 2022, the trading volume amounted to EUR 1.619 million (nominal value) with an opening price of 101.00 and a closing price of 99.75 in Frankfurt (compared to EUR 5.223 million in 2021 ). Green EUR Bond 2021/27 Trading Performance in Frankfurt In the trading period from 1 January 2022 until 31 December 2022 , the trading volume amounted to EUR 3. 544 million (nominal value, in Frankfurt) with an opening price of 102.00 and a closing price of 102. 4 0 in Frankfurt (compared to EUR 4. 261 million in 2021 in the trading period from 17 November 2021 until 31 December 2021 ). Communication with Investors Communication with investors has always been more than a mere legal requirement to Photon Energy Group. We believe it is a means to build trust in our business practices and an opportunity to be transparent about our financial health and business achieve- ments. During the reporting period, the following actions have been taken: ► The Company’s website continued to be developed to en- sure it remains a principal source of information on the Group and its activities. An Investor Relations news ser- vice allows investors to stay up-to-date on company an- nouncements, reports and other ad hoc information. ► The Company ho sted live webcasts to present its quarterly results. Presentations and video recordings of the events are available in the Investor Relations section of our website. ► The company participated in the German Spring Conference held in Frankfurt in May 2022 (https://equityforum.de/en/ger- man-spring-conference). ► The company participated in the Wallstreet Conference held online andin Zakopane in May 2022 ( https://www.wallstreet.org.pl/?utm_source=sii.org.pl&utm_ medium=referral&utm_content=main-menu-link&utm_cam- paign=WS ). ► The Company participated in the Equity Forumheld in Frank- furt in September 2022 ( https://equityforum.de/en/german - fall-conference ) ► The Company participated in the AlsterResearch Renewa- bles Conference held online in September 2022 ( https://www.photonenergy.com/uploads/inves- tors/events/flyer-pop-up-conference.pdf ) ► The Company participated in the RES Energy Conference held online in September 2022 ( https://konferencjeinwes- torskiepekao.pl/ ). ► The Company participated in the Deutsches Eigenkapital- forum held in Frankfurt in November 2022 ( https://www.eigenkapitalforum.com/#/en/ ). Further Information For more information about: a) characteristics of the structure of assets and liabilities of the consolidated balance sheet, also from perspective of the liquidity of the Issuer’s group b) description of the structure of main equity deposits or main capital investments made within the Issuer’s group during the financial year Please refer to the Financial section. Management Report 46 Directors’ Report The directors present their report together with the annual financial statements of Photon Energy N.V. (the ‘Company’) for the year ended 31 December 2022. The non-financial information, as presented within the Director’s Report, which in this document comprises the Introduction, Com- pany Profile and Management Report of this Annual Report, com- plies with the Dutch Disclosure of Non-Financial Information. Photon Energy N.V. is a joint-stock company incorporated under the laws of the Netherlands on 9 December 2010. The statutory seat of the Company is Barbara Strozzilaan 201, 1083HN Amster- dam. The consolidated financial statements of the Company for the year ended 31 December 2022 comprise the Company and its sub- sidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’) and the Group’s jointly controlled entities. Developments in 2022 Financial Results In 2022, the Group’s revenues increased by 161.7% to hit a record EUR 95.136 million, thanks to an 81.6% increase in revenues from the sale of electricity, primarily attributable to higher revenues from the electricity production generated by the Company’s new power plants operating on a merchant basis as well as to high electricity prices on the market , while other revenue streams increased by a remarkable 253.2% YOY, driven by a sound procurement strategy. EBITDA improved to EUR 24.308 million (+153.6% YOY), while EBIT swung from a loss of EUR -0.712 million to a EUR 16.984 million profit. During the reporting period, the Group continued to record higher expansion-driven overheads, which are crucial in- vestments for the development of existing business lines as well as new activities. Photon Energy reported a net profit of EUR 6.262 million com- pared to a EUR -6.433 million loss in 2021. At the bottom line, TCI amounted to EUR 7.672 million compared to EUR 2.096 million a year ago, while the adjusted equity ratio increased at a sound level of 31.9%. In 2022, the Group posted a positive operating cash flow, which amounted to EUR 2.847 million, compared to EUR 6.221 million in 2021, mainly driven by an improved profitability and a negative net working capital, including increased inventories in line with the strong growing Technology sales and our procurement strategy. Investment cash flow equalled to EUR -33.429 million in 2022 com- pared to EUR -14.233 million in 2021, mainly related to work in progress for our proprietary portfolio in Romania and Hungary, and the acquisition of Lerta S.A.. Financial cash flow amounted to EUR 9.348 million in 2022, com- pared to EUR 30.625 million in 2021, impacted by our long-term project refinancing in the Czech Republic, the additional placement of our EUR Green bond 2021/27, scheduled repayments, and the repayment of our EUR Bond 2017/22. Overall, the cash position decreased to EUR 11.271 million at the end of 2022 compared to EUR 32.506 million the end of 2021, mak- ing our financial situation solid and allowing the company to deliver on its strategic objectives. Capital Management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and eq- uity balance. The Group’s overall strategy will unwind accordingly to the further negotiations with the Group's creditors. The Group’s net debt to adjusted equity ratio at the reporting date was as follows: In thousands of EUR 2022 2021 Total liabilities 183,350 145,080 Less: Liquid assets 21,358 39,362 Net debt 161,993 105,718 Total equity 70,475 51,538 Net debt to equity ratio at 31 December 2.29 2.05 Equity ratios: In thousands of EUR 2022 2021 Full Equity ratio 27.8% 26.2% Adjusted Equity ratio (for bond governance) 32.0% 28.6% There were no changes in the Group’s approach to capital man- agement during the year. 47 Selected Indicators Debt to Assets Ratio (Total Liabilities/Total Assets) ► 2022: 0.72 ► 2021: 0.74 Debt to Equity Ratio (Total Liabilities/Shareholders’ Equity) ► 2022: 2.60 ► 2021: 2.81 Current Ratio (Current Assets/Current Liabilities) ► 2022: 1.92 ► 2021: 1.59 Solvency Ratio (Net Income + Depreciation/Current and Non-current Liabilities) ► 2022: 8.30% ► 2021: 2.92% Strategy Execution in 2022 Strategy 2022 Result Increase the production of clean energy by expanding our global electricity generation capacity of our proprietary portfolio of PV power plants. Our proprietary portfolio of PV power plants generated 121.6 GWh of clean electricity production, a 18% increase from 2021. Acquire new PV projects to develop, design and construct for our proprietary portfolio, supporting the growth of a recurring revenue stream from clean electricity generation with a focus on Australia, Hungary, Poland and Romania. A total of 151 MWp was added to our project pipeline in Hungary, Poland, Romania and Australia. Grow our PPA business and the construction of commercial be- hind-the-meter PV projects for industrial customers and off-takers in Australia and in Europe. Our team includes specialists dedicated to capitalising on the fast- growing interest in behind-the-meter projects. Compete for PV projects in locations that require a tailor-made, in- tegrated approach to the application of PV technology, combining clean energy generation with energy storage solutions. We acquired the development rights and land for a 9.8 MWp/10 MWh solar and battery energy storage system facility in Boggabri, New South Wales. The project represents the Company’s first util- ity-scale solar-plus-storage installation and will serve as a proto- type for a future roll-out across Photon Energy Group’s European markets. Continue to provide O&M services that allow PV power plants to run smoothly at high generation levels and increase revenues while reducing risks for our customers. Increased capacity under contract 383 MWp in 2022 (+14% YOY), with a significant growth experienced in Poland. Procure and trade PV components through cooperation with PV technology manufacturers. Our trading volume was increased, generating revenue of EUR 64.886, compared to EUR 9.221 million in 2021. Deploy remediation solutions for groundwater contamination, with a focus on PFAS nano remediation. We continued our trial project for the Australian Government De- partment of Defence, implementing our proprietary in-situ PFAS remediation technology. 48 Strategy for 2023 and Beyond The Group’s focus for future growth lies on the established Austral- ian and Hungarian markets and the newly added Polish and Ro- manian markets for the expansion of PV generation capacity. Further markets in Central, Eastern and South-Eastern Europe, the Middle East and Africa as well as Asia remain under the Group’s investigation. The Group also intends to continue to disrupt and transform the PV industry. This is illustrated by the recent acquisition of Lerta, devel- oping Virtual Power Plant technologies and energy market services and the strategic investment concluded with RayGen, a company specialized in high efficiency concentrated PV generation with ther- mal absorption and storage. In addition, the Group’s focus remains on the expansion of opera- tions & maintenance (O&M) solutions in Central and Eastern Eu- rope and Australia and selective entry to new markets following its customers, and the development of various water treatment tech- nologies and the preparation for their commercialization. ► Utility: The development and acquisition of new PV projects to de- velop, design and construct them for the proprietary portfolio supporting the growth of recurring revenue streams from clean electricity generation with a clear focus on Australia, Hungary, Poland and Romania; An increase in the production of clean energy by expanding the Group’s global electricity generation capacity of its pro- prietary portfolio of photovoltaic power plants; A significant acceleration in the deployment of utility-scale and on-site energy storage capacities both as an EPC sup- plier as well as an investor, leveraging the Group's experi- ence in Australia such as the Lord Howe Island hybrid energy system and the planned utility-scale hybrid plant in Boggabri, New South Wales. ► New Energy: The delivery of a 'one-stop shop' offering that combines as- sets, services and IT solutions to establish Photon Energy Group as the preferred partner for commercial and industrial customers in the CEE region and Australia on their journey from passive energy users to proactive energy flexumers; A close monitoring of the emergence of markets for grid flex- ibility and other ancillary services worldwide and evaluation of opportunities as they emerge, which may lead to relatively low-risk and low-cost market entries into new locations cur- rently not served by the Company. The expansion of the Group’s PPA business and the con- struction of commercial behind-the-meter PV projects for in- dustrial customers and off-takers in Australia and in Europe. ► Technology Distribution: An utilisation of existing economies of scale through a busi- ness-to-business online sales platform to generate additional trading revenues from PV modules, inverters, batteries, and other components. ► Operations and Maintenance: The increase of the Group’s operations and maintenance (O&M) services to maximise the energy generation output of both proprietary and third-party power plants and to optimise the useful life of PV assets; ► Water Solutions: The development of the Group’s suite of water services and products to become a leading worldwide player in the PFAS remediation industry on the back of its proprietary patent- pending nano remediation technology, as well as other tech- nologies currently under development. Shareholder Structure Share Capital The Company’s share capital is EUR 600,000 divided into 60,000,000 shares with a nominal value of EUR 0.01 each. The share capital is fully paid-up. Each share has one vote at the Gen- eral Meeting of Shareholders, with the exception of the treasury shares held by the Company. There is no limitation on transfer of the Company’s shares with the exception of the restriction imposed on employees who hold shares based on the Company’s Employee Share Purchase Programme (ESPP). According to the ESPP, employees are not allowed to sell their shares acquired through the ESPP as long as they are em- ployees. In addition, certain restrictions are imposed on the Company to ac- quire and hold its own shares. Under Article 9.1, the Company may only acquire fully paid-up shares in its own share capital for no con- sideration or provided that the Company's equity minus the acqui- sition price is not less than the aggregate amount of the issued share capital and the reserves which must be maintained pursuant to the law. No acquisition pursuant to Article 9.1 shall be permitted if a period of six months following the end of a financial year has expired without the annual accounts for such year having been adopted. Share Capital as of 31 December 2022 Series / Issue Type of Shares Type of Preference Limitation of Right to Shares Number of Shares Nominal Value of Series/Issue (EUR) Capital Covered With A bearer - - 60,000,000 600,000 cash Total number of shares 60,000,000 Total share capital 600,000 Nominal value per share = EUR 0.01 49 The number of issued shares by the Company amounts to 60,000,000. As of 31 December 2022, to the knowledge of the Management, the shareholder structure was as follows: Shareholder No. of shares % of capital No. of votes at Shareholders Meeting % of votes at Shareholders Meeting Solar Future Cooperatief U.A. 21,775,075 36.29% 21,775,075 37.12% Solar Power to the People Cooperatief U.A. 20,492,057 34.15% 20,492,057 34.93% Photon Energy N.V. 1,332,797 2.22% 0 0.00% Free float 16,400,071 27.33% 16,400,071 27.95% Total 60,000,000 100.00% 58,667,203 100.00% Mr. Michael Gartner and Mr. Georg Hotar are the only members of the Company’s Board of Directors. Mr. Michael Gartner indirectly owns 37.12 % of the votes, via Solar Future Cooperative U.A. and directly 0.04% of votes at the Share- holders Meeting. Mr. Georg Hotar indirectly owns 34.93 % of votes, via Solar Power to the People Coöperatief U.A. and directly 0.18% of votes at the Shareholders Meeting. The Free float includes shares allocated to the employee share purchase programme. The disposition rights to these shares are limited and employees can dispose of these shares only under spe- cific conditions. Transactions between the Company and legal or natural persons who hold at least ten percent of the shares in the company are agreed on terms that are customary in the market. In compliance with the best practice provision 2.7.5 of the Dutch Corporate Gov- ernance Code, such transactions are detailed in the table below. The Supervisory Board approval for the transactions listed below was not formally documented. The following loans have been granted to the Managing Directors by the Company or the Company’s affiliated entity. The loans are short term for a period of up to 12 months and bear an interest rate of 3%. Culture and Values Good corporate governance is essential to creating an atmosphere of trust and building solid, lasting relationships with stakeholders, from suppliers to investors, in accordance with the Group’s values. A supervisory board and an audit committee were established on 4 December 2020. These changes to the Group’s corporate struc- ture were connected to the transfer of its share listings to the regu- lated market of the Warsaw Stock Exchange and the standard market of the Prague Stock Exchange, in order to be in full compli- ance with the laws and regulations imposed on public companies as well as the best practices of the regulated markets. The Supervisory Board of the Company is responsible for super- vising and advising the Management Board. In exercising its role, the Supervisory Board follows the applicable law, the Articles of Association of the Company, Dutch and Polish Corporate Code of Conduct, Rules of Procedure of the Supervisory Board, and the Company’s interests. It is a separate body that operates inde- pendently of the Management Board. The Company’s Audit Committee (and its chairman, in particular) undertakes preparatory work for the Supervisory Board’s decision- making regarding the supervision of the integrity and quality of the Company’s financial reporting and the effectiveness of the Com- pany’s internal risk management and control systems. It maintains contact with the external auditors, and also monitors the Manage- ment Board in connection with the Company’s funding, tax policy and application of IT technology, especially with respect to cyber- security. Both bodies are comprised of three members: Boguslawa Skow- ronski, Marek Skreta and Ariel Sergio Davidoff, appointed to a four- year term of office. The three members not only possess extensive experience as en- trepreneurs and executives at international institutions, but also know Photon Energy Group and its end-markets extremely well, and the membership consists of two men and a woman. Governance Best Practices As of 5 January 2021, the Company was admitted to trading on the regulated markets of the Warsaw Stock Exchange (WSE) and the Prague Stock Exchange (PSE). It therefore became mandatory to follow the WSE Best Practices and the Dutch Corporate Govern- ance Code. The WSE Best Practices is a set of recommendations, principles, best practices and rules of procedure for governing bodies of pub- licly listed companies and their shareholders. The WSE Rules and resolutions of the WSE’s management board and its council set forth the way publicly listed companies disclose information on their compliance with corporate governance rules and the scope of in- formation to be provided. If a publicly listed company does not In thousands of EUR Total Loan Amount as of 31 December 2022 Georg Hotar, Managing Director and CEO 594 Michael Gartner, Managing Director and CTO 91 50 comply with any specific rule on a permanent basis or has breached it incidentally, such publicly listed company is required to disclose this information. The application of the principles and best practice provisions of the Dutch Corporate Governance Code is also subject to the “comply or explain” (pas toe of leg uit) principle. If a company departs from a best practice or principle in the Dutch Corporate Governance Code, the reason for such departure must be explained in its man- agement report. More information can be found in the Company’s Corporate Gov- ernance report. Supervisory Board In the financial year 2022, the Supervisory Board met 6 times. In addition, the Audit Committee met three times. The Supervisory Board also adopted four written resolutions. In the meetings, the Supervisory Board discussed a wide range of topics: ► The financial plan, strategy for the year 2022 and long-term value creation was discussed at the beginning of the financial year (namely, the guidance with respect to the MWps in de- velopment and impact of electricity prices on revenue in- crease) The Supervisory Board discussed the increase in capacity of connected power plants (and its feasibility of the project pipeline in development by the end of 2024), switch from the various support mechanisms to merchant business model, and other strategies for long-term value creation (de- velopment of proprietary portfolio vs. acquisition of built or ready-to-built projects; PPAs vs. generation of electricity in proprietary plants etc.); ► Financial results were discussed and analysed on quarterly basis, including results and margins of the individual Com- pany operational segments; ► Developments on turbulent energy markets in EU and world- wide, and specifically countries where the Company is active. The Supervisory Board discussed the volatility of electricity prices, the potential effect of the conflict in Ukraine, impact of the shutdown of German nuclear power plants, continued disruptions of the supply chain, planned governmental cap on electricity prices and windfall taxes in each country and the Company strategies of how to minimize their impact; ► Current operational, financial and legal affairs were ana- lysed, including the acquisition of Lerta and its synergies, dy- namic growth in the size of the Company, development of Australian projects with Raygen technology, PFAS pilot pro- ject in cooperation with the Department of Defence in Aus- tralia. ► Financing of the Group, issue of Green Bonds, EUR currency fixing of the loans as a leverage against rising interest rates; ► The Supervisory Board, through a written resolution, adopted and published (i) the Supervisory Board Succession and Re- tirement Plan, (ii) Diversity Policy for the Management Board and (iii) change to the Remuneration Policy. Audit Committee In 2022, Mr. Davidoff was appointed as the head of the Audit Com- mittee during the general meeting held on 31 May 2022. In the course of 2022, Audit Committee met three times: ► The Audit Committee discussed the audit plan and the out- come of the audit with the external auditors; ► The chairman of the Audit Committee made an on-site visit and met with the Management Board and individual employ- ees/managers and reviewed the Company’s internal risk management, controlling, compliance and internal audit pro- cedures. ► The chairman of the Audit Committee visited the Company’s 2.998 MWp power plant in Zdice, Czech Republic. Further information on the Group’s corporate governance can be found in the Corporate Governance report. Anti-corruption and Anti-bribery Policy The Board of Directors is committed to ensuring that all employees, customers and suppliers act in an ethical manner and that stake- holders are not the subject of unethical behaviours such as corrup- tion, bribery, extortion or insider trading. Photon Energy Group believes in free competition and will complete fairly, through honest business practices. An anti-corruption and anti-bribery policy has recently been imple- mented within the Company, and an ad-hoc disciplinary committee has been introduced, composed of representatives from the Group’s HR and Legal departments, a Member of the Board and a Compliance Officer. This committee will be assembled to discuss any breaches of our anti-corruption and anti-bribery policy and de- cide on the necessary course of action. This policy was updated in February 2022 to include rules on providing and receiving gifts, as well as reporting violations in ac- cordance with the rules of the Photon Energy Group Misconduct Reporting Policy, developed in March 2022. Insider Trading Policy An insider trading policy is signed by all Group employees along with their contract of employment. This policy was developed to make sure employees understand their obligations to preserve the confidentiality of undisclosed information and to protect them and the Company against legal liability. Employees who have perma- nent access to confidential information are subject to trading re- striction periods and to trading notifications. They are reminded of their obligations on a quarterly basis. A training course related to Insider trading was developed during the reporting period and organized for all employees after the re- porting period, in January 2023. Code of Ethics The foremost objective of the Group’s Code of Ethics is to share and divulge the values that Photon Energy Group acknowledges and accepts, at all levels, to provide all of the Company’s partners, management and employees with guidance in ethical decision making. It contains a section with specific rules of conduct for the area of purchasing and procurement. The document was updated in February 2022 to integrate princi- ples regarding the prohibition of gender-based violence and har- assment (GBVH). A training course related to the Code of Ethics was organized for all employees after the reporting period, in January 2023. 51 Risk Management The Group’s risk management policies were established to identify and analyse risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and proce- dures, aims to develop a disciplined and constructive control envi- ronment in which all employees understand their roles and obligations. The Group considers governance of top business risks a high pri- ority. It focuses on risks with a high impact on the business and/or high probability of occurrence, taking into consideration the Group’s risk appetite. Our risk appetite refers to the nature and ex- tent of risks we are willing to incur to achieve our strategic objec- tives. Among others, the risk appetite considers revenue growth, earnings sustainability, environmental impact, employee well-be- ing, health and safety, and value creation for all stakeholders. The Group regularly reviews risk appetite. For all the risks listed in this report, control measures are in place, and no shortcomings occurred in 2022. The Audit Committee has performed a thorough and continuous review of the internal risk management systems, controlling and legal compliance policies, throughout the year and during its on- site visit in September 2022. The assessment included the evalua- tion of the existing processes in place, human resources, its com- petences, and responsibilities as well as the reporting structure within the organization. The chairman of the Audit Committee per- formed the analysis through the consultations with the responsible personnel (the management, the head of accounting and consoli- dation, head of legal, head of compliance). He reviewed the proce- dures and evaluated whether adequate resources are in place, and discussed relevant topics with external auditors. The results of this analysis were discussed with the Management Board. It was con- cluded that given the size of the Company, the current measures with respect to internal risk management and control systems are appropriate and satisfactory. The Supervisory Board also noted with satisfaction that a new full-time position of risk manager was created and filled as of the end of the financial year. Compliance Management The Group has a very low risk acceptance level with regards to risks relating to compliance with legislation and regulations. The Group’s Code of Ethics and Anti-bribery and Anti-corruption Policy act as control measures against bribery and corruption, alongside the Misconduct Reporting Policy. Tax policies are formulated by both the Group and individual com- panies. The Group generally follows the rules to tax profits in the countries it provides its services. The Group does not engage in any aggressive tax planning or structuring activities. There is no formalised tax policy, however certain procedures are in place: 1. The Group engages certified tax advisors in each country in which it operates to comply with local tax requirements. 2. The Group regularly monitors developments in taxation and related areas and continually evaluates their impact on the Group. Identified tax risks are regularly monitored and evaluated. 3. The Group undertakes analysis of tax risks before entering new markets. Principal Risk Related to the Group’s Business and the Industry in Which It Operates Risk of Dependence on Support of Photovoltaics The Group is dependent on the economic development of the pho- tovoltaic market. In the majority of countries worldwide, the photo- voltaic sector is not yet competitive without state subsidy programs, especially in comparison with the use of conventional energy sources (e.g. nuclear power, coal, and natural and shale gas). Therefore, the commercial operations of the Group are influenced by the continuation of state-managed subsidy programs for photo- voltaics. In July 2021, the Slovak Republic decided to prolong and reduce the feed-in tariff for PV power plants connected in 2010 and 2011. The value of Company’s Slovak portfolio is not impacted by any of the measures adopted by the Slovak government. In the Czech Republic, a price cap of EUR 180 per MWh has been introduced from 1 December 2022 to 31 December 2023 for PV installations with an installed capacity exceeding 1 MWp. Above the cap price a 90% tax applies. In June 2022 the Hungarian government issued a decree introduc- ing a 65% tax on the excess revenues (that is above the feed-in- tariff/contract-for-difference price of EUR 85 per MWh) generated by solar PV power plants which had either exited one of the support schemes or had been awarded a METÁR license in auction but did not execute the contract-for-difference with the designated Hungar- ian state entity for the financial years 2022 and 2023, excluding power plants with built-in capacity under 0.5 MW. The Romanian government has introduced a price cap of RON 450 per MWh of solar PV generated electricity from 1 September 2022 until 31 March 2025. Above the price cap an 80% solidarity tax ap- plies. However, in March 2022 Law 27/2022 has been passed which explicitly exempts all new electricity generation capacity commissioned after 1 September 2022 from any price caps. Based on the status quo the Company’s power plants in Romania will not be subject to the price cap. Based on the status quo of price caps and windfall taxes adopted by the governments in the Group’s core markets in the CEE region the Board of the Company expects a modest negative impact in the Czech Republic and Hungary and no negative impact in Slovakia and Romania. New capacity additions in Romania and Hungary in 2023 are expected to drive material revenue and EBITDA growth in 2023 and beyond. Risk Associated with the Valuation of Special Purpose Vehicles In its Audited Consolidated Financial Statements, the Group is us- ing for revaluation of the special purpose vehicles (SPVs) and its property the so-called Discounted Cash Flow (DCF) method based on IAS 16 rules. In the financial statements, the updated value is higher than the purchase price, and consequently also above the acquisition costs. There is a risk that the assumptions and founda- tions of the evaluation will prove to be incorrect or overly favourable and that extraordinary impairment in the balance of the company will be necessary. Extraordinary impairment of this kind would pro- foundly harm or burden the balance sheet as well as the results of the Group’s the operating activities. The Group assesses the probability of this risk as medium, with a potentially moderate impact on the Group’s operations and finan- cial results. 52 Risk Associated with Projects in the Pipeline In addition to the continued monetisation its current portfolio of pho- tovoltaic installations in operation, the Group also intends to de- velop and either sell or operate additional PV projects, including both projects developed by the Group and those acquired from third parties. Development and/or acquisition of a project is always based on an economic calculation which involves certain assump- tions, such as the development of market interest, feed-in tariff, electricity prices or the price of green certificates. If these assump- tions should prove to be incorrect, or if certain factors develop dif- ferently to what was planned, this could have an adverse effect on the profitability of a PV installation. All of the aforementioned factors could have a material adverse effect on the Group’s business, results of operations or prospects. The Group assesses the probability of this risk as medium, with a potentially moderate impact on the Group’s operations and finan- cial results. Regulatory Risk In the countries where the Group operates, the market for solar projects, solar power products and solar electricity is heavily influ- enced by national, state and local government regulations and pol- icies concerning the electricity utility industry, as well as policies disseminated by electric utilities. These regulations and policies of- ten relate to electricity pricing. It is the Group’s intention to integrate PV power that are not supported by the state into its portfolio. How- ever, in these cases there is the risk of reduced income from the integrated power plants due to falling electricity prices. In the worst- case scenario, there could be low or no positive operational cash flow generated, which in turn would lead to a situation where there can be no pay-outs to the Group. The Group intends to actively manage the revenues from merchant power plants using electricity market hedging instruments (where available) and/or by entering into PPA agreements with various durations and volumes. Depending on their scope, any of these circumstances could have a potentially adverse influence on the Group’s financial situation, status and results. The Group assesses the probability of risk as medium, with a potentially moderate impact on the Group’s opera- tions and financial results, mitigated by the Group’s geographical diversification. Risk Associated with Cybersecurity The Group has several cyber security systems in place and is per- manently updating them to state-of-the-art security technologies. Key applications are available only on a secure company network. Document storage is a hybrid system of internally maintained server storage and cloud storage. Communication of applications operated by Photon Energy Group takes place using secure and encrypted protocols. Every employee is acquainted with the cyber- security rules during the onboarding process and documents with these rules are available on the intranet. An IT helpdesk is also accessible to report any issues encountered in this area. Principal Financial Risks The Group has exposure to the following financial risks: ► Sovereign ► Operational ► Currency ► Credit ► Liquidity ► Interest Rate ► Inflation In the notes to the Consolidated Financial Statements, information is included about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Sovereign Risk The Company’s results can be adversely affected by political or regulatory developments negatively impacting on the income streams of projects in the portfolio. A number of countries have al- ready succumbed to retroactive measures reneging on existing agreements, guarantees and legislation by imposing levies, can- celling contracts or renegotiating terms unilaterally or by other measures reducing or in the worst-case cancelling Feed in Tariffs (FiT) for renewable energy investments. Legal remedies available to compensate investors for expropriation or other takings may be inadequate. Lack of legal certainty exposes projects in the portfolio to increased risk of adverse or unpredictable actions by govern- ment officials, and also makes it more difficult for us to enforce ex- isting contracts. In some cases these risks can be partially offset by agreements to arbitrate disputes in an international forum, but the adequacy of this remedy may still depend on the local legal system to enforce the award. Operational Risk The economic viability of energy production using photovoltaic in- stallations depends on FiT systems. The FiT system can be nega- tively affected by a number of factors, including but not limited to a reduction or elimination of the FiT or green bonus per KWh pro- duced, an elimination or reduction of the indexation of the FiT and a shortening of the period for which the FiT applies to PV installa- tions. On the investment side, the Company faces uncertainty in relation to the approval process for the construction of PV installa- tions, grid connections and the investment cost per KWp of in- stalled capacity. The operating and financial results of the Company could be seriously affected by a sudden or significant change in the regulatory environment in any of the countries where the Company or its subsidiaries conduct business. Currency Risk The Group is exposed to a currency risk on sales, purchases and borrowings that are denominated in a currency other than the re- spective functional currencies of Group entities. The transactions of the Group entities are mainly denominated in CZK, EUR, AUD, CHF, RON, PLN and HUF. The Group does not manage the foreign currency risk by the use of FX derivatives, it rather uses natural hedging by actively managing FX positions. It is not done in a formalised way. Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers, including the electricity distributors. The Group’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets in the consolidated statement of finan- cial position. Credit risk in respect of cash balances held with banks and deposits with banks are managed via diversifications of bank deposits and only with the major reputable financial institutions with rating by S&P between A- and BBB+. For trade and other receiva- bles, receivables from related and contract assets that do not con- tain a significant financing component, the Group recognises a lifetime expected loss allowance. The Group applies a provision matrix that applies the relevant loss rates to the trade receivable balances. 53 Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as pos- sible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without in- curring unacceptable losses or risking damage to the Group’s rep- utation. Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. It is measured by the extent to which changes in market interest rates impact on net interest expense. The Company uses interest rate derivatives to manage interest rate risk. The change in fair value of these derivatives is recognized via the equity of the Company and the result is shown in hedging reserve of the Company’s equity. Inflation Risk State support, especially feed-in tariffs, is indexed in the cases of Czech and Hungarian projects; i.e. they are subject to inflationary adjustment that is defined by a specific band. In case of high infla- tion, there is consequently a risk that the running operative costs increase while the yields will not be adjusted accordingly. In pro- jects that are not supported by the state there is a different risk - namely that by lower inflation the calculated market prices for elec- tricity will not develop as it was planned. Climate Change-related Risks Climate change represents both strategic and operational risks to our business. These can be grouped as physical risks and transi- tional risks. Physical risks include greater severity of flooding, droughts or other extreme weather events which could disrupt our operations and supply chain. Transitional risks range from regula- tory frameworks and the rising price of carbon to the viability and customer acceptance of emerging technologies. Another transi- tional risk is our ability to set and meet Paris-aligned targets. Our actions related to climate change mitigation are detailed in the Group’s Sustainability reports. Our 2022 Sustainability Report does not represent part of this Annual Report 2022. A separate sustain- ability report is available on our website. Physical Risks Risk of Natural Disasters The Group’s business could be materially and adversely affected by natural disasters or other catastrophes, such as earthquakes, fires, floods, hail, windstorms, severe weather conditions and envi- ronmental accidents, which could potentially cause power loss, communication failures, explosions or similar events. As a result of any damages to the Group’s facilities, the Group could have to tem- porarily suspend part or all of its facilities’ operations. Furthermore, authorities could impose restrictions on transportation and imple- ment other preventive measures in affected regions to deal with a catastrophe or emergency, which could lead to the temporary clo- sure of the Group’s facilities and declining economic activity at large. Moreover, if a natural disaster results in the damage of any of the Group’s PV power plants, the Group’s ability to fulfil its liabil- ities may be considerably impaired, particularly if the damage is not covered by insurance. All of the aforementioned circumstances would have a significantly adverse effect on the Group’s financial situation, status and results. The Group assesses the probability of risk as low, with low potential impact on the Group's operations and financial results thanks to the geographic diversification of the Group’s business. Meteorological Risk The performance and therefore the earning potential of the compa- nies within the Group are often dependent upon meteorological conditions. Certain revenues for a generated kWh of energy are admittedly guaranteed on the basis of the state subsidy programs; however, the volume of energy generated depends on the period of sunshine and the sun’s radiance. The Company’s subsidiaries have used certain historically based assumptions in cash flow plan- ning. It is, however possible that climatic conditions could change in the future and that predictions regarding weather patterns and hours of sunshine could prove incorrect. In cases such as these, electricity generation at PV power plants would be below the ex- pected level, adversely affecting the installation’s liquidity and the asset, financial and earnings positions of the respective project companies and on the Group as a whole. The earnings from PV power plants are subject to seasonal fluctu- ations in the weather. As such, earnings are higher in the summer months and fall off significantly in winter. The companies within the Group try to adapt their payment obligations, especially with regard to interest and loans, to incoming payments. However, it cannot be rules out that such adaptations may not always be possible, which could result in an adverse effect on the asset, financial and earn- ings position of the Group. With the realisation of investment pro- jects in Australia, the overall financial liquidity of the Group will become less seasonal due to the diversification of locations in the northern and southern hemispheres. The Group assesses the probability of risk as low, with low potential impact on the Group’s operations and financial results. Transitional Risks Environmental Risk In environmental matters, the Group must comply with laws, regu- lations and directives valid in the location of each PV power plant; these laws regulate such things as airborne emissions, sewage, the protection of soil and groundwater as well as health and safety. Transgressions against these environmental provisions can be pursued according to civil, criminal and public law. In particular, temporary provisions could encourage a third party to begin a legal process or to demand costly measures to control and remove en- vironmental pollution or to upgrade technical facilities. The proper- ties necessary for PV power plants are partially owned by the respective SPV. It cannot be ruled out that sites may be contami- nated. The respective SPV is responsible for the removal of any pollution, regardless of the cause. This could result in liability risks and costs related to administrative orders or requirements. All of these circumstances could have a negative impact on the financial situation, status and results of the Group. The Group as- sesses the probability of risk as low, with low potential impact on the Group’s operations and financial results. Climate Governance At Photon Energy Group, sustainability is a core value, viewed as central to the continual growth and success of any business. A key element of the Group’s increasing focus on sustainability is the de- velopment of strong ESG practices. In adopting a strategic ap- proach to sustainability, the Group addresses material external risks, to become more resilient and adaptable in the face of chal- lenges such as climate change and creating a space for new ideas and creative responses. In 2020, we laid the foundations for stra- tegic management, controlling and reporting practices that are fully 54 geared toward sustainability. A sustainability department was cre- ated to work closely with the board of directors and representatives from several business units within the Company. The objective of the department is to monitor the strategic coordination of the Com- pany’s sustainability plans. 100% of our revenue is connected to activities adding sustainable value to the environment. Beyond the Company’s work developing solar energy and clean water solutions, various policies are in place to ensure that our dedication to environmental causes is also re- flected in our internal practices: ► All of our field operations are subject to local environmental regulations, which we strictly adhere to. ► When disposing of waste, all recyclable materials such as metal, wood, plastic, glass and paper are sorted and recy- cled. ► We generally do not use chemical fertilisers or pesticides for landscape management. ► For the cleaning of PV panels, we use only demineralised water, no chemical agents. ► When clearing land to construct new power plants, we con- duct in-depth biodiversity studies and implement measures to ensure that any unavoidable impact is minimised or re- versed. ► We follow all local guidelines and regulations regarding community involvement and consultation. ► When working with subcontractors, we prioritise local sup- pliers to have a positive impact on the local economy through job creation. 55 Corporate Social Responsibility ESG Key Performance Indicators The Company’s internal policies were reinforced to achieve a more efficient and effective integrated management system by utilising the following performance objectives: environment, quality, and workplace health and safety. The Company’s ESG key performance indicators are the following: Environmental Data 2022 2021 Percentage of revenues connected to activities which create sustainable value 100% 100% Clean energy generated by our Proprietary portfolio of PV power plants 121.6 GWh 103.3 GWh Assessment of our carbon footprint across scope 1 and 2 emissions (CO2e tonnes) 409.6 342.8 CO 2 e savings 49.013 tonnes (+11.7%) 43,867 tonnes (+47.8%) Social Data Number of full-time staff / number of employees 212 / 220 (96%) 141 / 144 (98%) Percentage of female employees 37% 37% Number of employees who completed training courses 145 / 220 (66%) 64 / 144 (44%) Turnover ratio 23% 36% Gender Pay Gap between male and female employees as a % of male gross salary) * analysis performed based on comparable job positions 2.3% na Lost time injuries 0 0 Governance Data Contributions to political parties as percentage of total revenues 0% 0% Claims against the Company ruled by a court as a percentage of total revenues 0% 0% Gender equality Board of Directors (Female/Male) 0% 0% Gender equality Supervisory Board (Female/Male) 33% 50% Responsible procurement, subjected to due diligence 100% of our technology purchases 95% of our technology purchases Social Commitments The renewables industry is burgeoning, with a rapidly increasing workforce. Within this fast-growing industry, a major challenge for employers is to recruit, onboard and train new talent to enable con- tinued expansion. The Company supports and provides ongoing training and profes- sional development, especially in areas related to health and safety – in particular training for accreditation for electrical work – work- station training for the adoption of new tools and the development of other competencies such as linguistic skills. In March 2022, we instituted an anti-corruption training program. We never engage in the use of forced or child labour, nor do we condone the mistreatment of individuals. In view of the high labour and legal standards in the European Union and Australia, the risks of human rights violations and violations of labour law – such as child and forced labour or the suppression of freedom of associa- tion – are extremely low. During the reporting period, a CSR-Donation policy has been de- veloped including the establishment of CSR days for employees starting from January 2023. Internal training courses related to insider trading and our Code of Ethics have also been developed. The Company’s social commitments are the following ones: ► Stringent health and safety policies and procedures are in place, and all employees are responsible for complying with any applicable laws and regulations. ► The Group embraces all forms of diversity and provide equal employment opportunities without regard to gen- der, race, religion, disability, sexual orientation or age. ► The Group provides an open, inclusive and non-retali- atory work environment, and discrimination of any kind is not tolerated. The Company ensures that all employees are treated equally and objectively in opportunity and remunera- tion, using merit-based criteria. ► The Company understands its obligation to protect the privacy of our customers and suppliers. 56 ESG developments in 2022 ESG Management ► Publication of our third annual Sustainability Report for the year 2022 ► Our 2022 Sustainability Report has been prepared according to the GRI framework ► Our Green Bond was tapped to EUR 77.5 million ► Renewal of our ESG Rating ongoing, with a released planned on 4 May 2023 (‘ very good’rating and 75/100 received from sustainability rating agency imug | rating, the second highest rating possible (photonenergy.com/uploads/sustainability/imug-sustainability-rating-photon-energy-nv-2021- one-pager.pdf) in May 2021) ESG Actions ► Tracking of our CO2e footprint across Scope 1, 2 emissions, and some elements across Scope 3 emissions ► Pilot project to test a new electro-nano-bioremediation technology with experts from universi- ties in Liberec and Stuttgart ► Internal mobility challenge ► Employee engagement and ESG survey ► Creation of a donation policy, including the establishment of CSR days for employees ► Development of internal training course related to insider trading and our Code of Ethics Sustainable Investments As of the end of 2022, the net proceeds of the Group’s first green bond amounting to EUR 75.9 million were allocated to: ► Projects in development, under construction and commis- sioned in Australia, Hungary, Poland and Romania for a total of EUR 31.9 million. ► The refinancing of our existing EUR Bond 2017/2022, by the means of an exchange offer for EUR 26.9 million. ► Liquid assets for a total amount of EUR 17.0 million. With our allocated green bond proceeds, we support progress to- wards the Paris Agreement and aspire to have a transformative impact on the UN Sustainable Development Goals: #7 on afforda- ble and clean energy and #13 on climate action. The Tolna PV power plants commissioned in December 2021 and May 2022 is expected to generate approximately 4.2 GWh per year, corresponding to an estimated avoidance of 1,347 tonnes of CO 2 e emissions per year. The estimated annual electricity generation of projects in develop- ment/in construction amounts to 1,831 GWh, which would corre- spond to an estimated avoidance of 1,120,200 tonnes of CO 2 e emissions. Research and Development The Company does not invest substantial amounts in research and development activities. Personnel As of 31 December 2022, the number of staff employed by the Group was 220 (283 including Lerta employees, 144 employees as of 31 December 2021). Management expects that the number of employees in 2023 will be higher compared to the current year due to the growth dynamics expected in the coming year. 57 Employee Share Purchase Programme The management of the Company recognises the significant con- tribution of team members to the future development of the Group. Therefore, it manages an Employee Share Purchase Programme (ESPP) as part of its motivation system. Under the terms of the programme, the Group periodically purchases shares for participat- ing employees equal to 10% of their gross compensation. The disposition rights to these shares are limited and employees can dispose of these shares only under specific conditions. In 2022, employees were entitled, in line with the ESPP, to 63,144 shares (a value of EUR 134 thousand), compared to 48,044 shares (a value of EUR 98 thousand) in 2021. The Company expects to continue with the programme in 2023. Going Concern Management Statement The Consolidated financial statements have been prepared on a going concern basis, resulting from the Management’s assessment of the Company’s ability to continue its operations for the foresee- able future. The Management based its assessment on an evalua- tion of, among others, the company’s financial position, expected future cash flows and market developments. As of 31 December 2022, liquid assets amounted to EUR 21.358 million. The Manage- ment also considered the Company’s ability to obtain financing, taking into account the company’s credit standing. Expected future cash flows are based on the latest forecasts. These forecasts take into account internal and external developments relevant in the as- sessment of the ability of the Company to continue as a going con- cern, including but not limited to market developments, developments in the macro-economic environment and climate-re- lated developments. The Management’s assessment did not lead to uncertainties in relation to the Company’s ability to continue as a going concern. Fraud Management We take a zero-tolerance approach to any incidents of fraud, brib- ery or corruption in our operations and value chain. This approach is set out in our Code of Ethics and our Third-party Conduct Princi- ples. In 2022, we enhanced and further embedded our compliance policies and procedures and conducted training courses in the area of anti-bribery and corruption. A misconduct policy and a whistle- blowing channel were set up in February 2022. The hotline is inde- pendently operated, confidential and anonymous and is available in all areas and languages where the Company operates. All reports are assessed by the Compliance team and then addressed on a case-by-case basis. The Compliance department and the Board of Directors reviews the process and reports and ensures that there are arrangements in place in the event an independent investigation is needed and also a follow-up action is taken. The Company’s Compliance department conducts compliance risk assessments, including fraud related rissks in collaboration with the Company’s Risk manager and the Audit Committee. Anti-Takeover Measures There are no ongoing agreements to which the Company is a party and which take effect, alter or terminate upon a change of control of the company following a takeover bid. No anti-takeover measures have been implemented. Articles of Association Our Articles of Association outline certain of the Company’s basic principles relating to corporate governance and organization. The current text of the Articles of Association is available at the Trade Register of the Chamber of Commerce and on our public website at www.photonenergy.com. The Rules Governing the Amendment of the Articles of Association In accordance with the Company’s Article of Association, the reso- lution to amend the Articles of Association may only be adopted by the General Meeting on the proposal of the Management Board and it is adopted with a simple majority of votes cast. Notwithstand- ing the aforementioned, a resolution to amend Article 7.3 of the Articles of Association involving a change of the provision relating to the Qualified majority to limit or exclude pre-emption rights or to designate Management Board competent to limit or exclude pre- emption rights, requires a majority of at least eighty percent (80%) of the votes cast by the General Meeting. A proposal to amend the Articles of Association shall always be mentioned in the notice of the General Meeting. The text of the proposed amendment shall be made available at the offices of the Company for inspection by each shareholder and each usufructuary and pledgee to whom the voting rights accrue until the end of the meeting. Failing such, the resolution regarding the proposal may only be adopted by unani- mous vote at a meeting at which the entire issued share capital is represented. Supervisory Board In accordance with the applicable law, the General Meeting may appoint the Supervisory Directors for a maximum of four years and his/her term of office shall lapse on the day of the annual General Meeting held in the fourth year after the year of his/her appoint- ment. Two of the Supervisory Directors’ term expires in 2024, one Supervisory Director’s term expires in 2026. A Supervisory Direc- tor may be re-appointed once for another period of four years after which he/she may be re-appointed once for a maximum period of two years, which term may be extended once for a maximum pe- riod of two years. A Supervisory Director may serve for a maximum of 12 years in total. The Company has adopted a rotation schedule and succession policy to provide continuity and avoid extended vacancies in the positions of the Supervisory Board and Audit Committee. Photon Energy’s succession plan is designed to ensure that the proper function and necessary fulfilment of the Supervisory Board is met 58 in case of a vacancy due to retirement, resignation, death or pur- suing new business opportunities. In the event of an emergency departure, resignation or other va- cancy in the Supervisory Board, the Chairman of the Supervisory Board, if unavailable, the Chairman of the Audit Committee, if una- vailable, any other member of the Supervisory Board shall convene an extraordinary meeting of the Supervisory Board within latest one month from the day of such vacancy to discuss the functioning of the Supervisory Board and a new distribution of tasks within the Supervisory Board and Audit Committee. In line with the Supervisory Board Profile and the required diversity of the Supervisory Board members, the Supervisory Board shall propose a new suitable candidate to the General Meeting as soon as practicable. The General Meeting shall appoint a new candidate in accordance with the Articles of Association. Board of Directors In accordance with the Company’s Articles of Association, mem- bers of the Board of Directors shall be appointed by the General Meeting for a maximum period of four years. The term of office of a Board member shall lapse on the day of the Annual General Meeting to be held in the fourth year after the year of appointment. A Board member may always be re-appointed for another maxi- mum period of four years. The General Meeting may at any time suspend and dismiss a Board member. The supervisory board is not authorised to suspend a Board member. During the course of the year 2022 the Supervisory Board defined diversity policy for the Management Board, which will serve as a guidance in the recruitment process, in case there is a need to appoint new members to the Management Board. Supervisory Board will take gender diversity into account as much as possible in future appointments in accordance with article 2:276 paragraph 2 of the Dutch Civil Code, which aims at a representation of at least 30% of either gender in the Management Board. Diversity A diversity policy was drawn up as a part of the Supervisory Board profile, which is published on the Company’s website. The desired composition of the Supervisory Board is such that the combined expertise, experience, diversity and independence of the Supervisory Board members enables the Supervisory Board to best carry out the variety of its responsibilities and duties with re- gard to the Company and all stakeholders involved including its shareholders, consistent with applicable law and regulations. The Supervisory Board strives for a mixed composition in respect of gender, age, nationality and background. Its aim is to have a composition with a female representation of at least thirty percent (30%) and a male representation of at least thirty percent (30%). The target minimum participation of the minority group of at least 30% was achieved in case of the composition of the Supervisory Board. Due to the size of the Board of Directors, which consists of two members - founders only, the target minimum participation of the minority group of at least 30% was not achieved. The diversity policy assumes that in case of an enlargement of the Board of Di- rectors from its current size, the Supervisory Board shall make best efforts to nominate a person in order to reflect the following ratio: at least 30% of female representation in the Board of Directors and at least 30% of male representation in the Board of Directors. Subsequent Events Photon Energy Completed Full Takeover of Lerta With reference to the investment agreement signed on 20 Decem- ber 2022 with the founders of Lerta S.A., Photon Energy N.V. has become holder of 100% of the share capital of the company on 1 February 2023. Acting based on a General Meeting authorization from 31 May 2021, the Management Board of the Company de- cided on 1 February 2023 to issue 1,238,521 new shares with a nominal value of EUR 0.01 each. Pursuant to the issuance of the new shares on 1 February 2023, the share capital of the Company has increased from EUR 600,000.00 to EUR 612,385.21. The new shares were issued against a contribution in-kind consist- ing of 2,477,042 shares in Lerta S.A., in line with the above-men- tioned investment agreement. Pursuant to Dutch law, there are no pre-emptive rights of existing shareholders of the Company with respect to the issuance of new shares against a non-cash contri- bution. With this step the acquisition process of Lerta S.A. is com- pleted and Photon Energy has become holder of 100% of the share capital of Lerta S.A. The Management Board also resolved that the newly issued shares shall be included in the collective deposit as mentioned in Section 12 of the Dutch Giro Securities Act, and in- tends to undertake all necessary actions to register these new shares with the Czech and Polish depositaries acting as secondary depositaries for the Company’s shares, and undertake all actions that are necessary to apply for the listing and admission to trading of these new shares on the Prague and Warsaw Stock Exchanges and in the Open Market of the Frankfurt Stock Exchange. Working Capital Credit Line for Photon Energy Tech- nology CEE s.r.o. In January 2023, a new loan agreement between Photon Energy Technology CEE s.r.o. and Unicredit Bank Czech Republic and Slovakia a.s. was signed. This credit line is meant to be used for financing of the working capital needs of the trading business ac- tivities with a credit line of up to EUR 5 million. Photon Energy Commissioned Its First Romanian Utility-Scale PV Power Plant On 23 February Photon Energy has completed and grid-connected its first Romanian PV power plant in the municipality of Șiria. The plant has a capacity of 5.7 MWp. High efficiency bifacial solar mod- ules mounted on single-axis trackers will deliver around 8.7 GWh of renewable energy annually to the grid managed by Enel E-Dis- tributie Banat. The electricity generated by the plant will be sold on the energy market on a merchant basis, without any support or power purchase agreement with an energy offtaker. The Company expects the plant to generate EUR 1.4 million in revenues based on the current forward prices for electricity base load in Romania in the next 12 months. Located near Șiria in Romania’s Arad County, the power plant extends over 9.3 hectares of greenfield land and is equipped with some 10,600 solar panels. The power plant is owned and operated by Siria Solar S.R.L., a special pur- pose company fully-owned by Photon Energy Group. Photon Energy Group Announced the Resignation of Clemens Wohlmuth as CFO On 7 March 2023, the Group announced the resignation of Clem- ens Wohlmuth as the Group’s Chief Financial Officer. Clemens Wohlmuth will remain involved during the handover process until after the conclusion of the Group’s financial audit for the financial year 2022. The Management Board appointed Mr. Andrej Horan- sky as the Photon Energy Group’s new Chief Financial Officer starting 8 March 2023. Andrej is a Slovak national and has gained extensive experience in senior finance roles including CFO in the financial services industry (Santander Consumer Finance, Simply 59 Kilcullen Capital Partners, GE Money Bank (Moneta), Generali PPF Holding and Slavia Insurance, energy (Ezpada Group) and automotive retail (AURES Holding). Photon Energy Group Secured EUR 21.9 Million Financing for Romanian Projects On 17 March 2023, the Group closed a nonrecourse project refi- nancing agreement in the amount of EUR 21.9 million with Austrian Raiffeisen Bank International (RBI) for its portfolio of PV power plants in Romania with a total installed capacity of 31.5 MWp. The signing of the agreement represents the Group’s first project fi- nancing of European PV assets that operate on a merchant basis, selling energy to the market without a power purchase agreement or state support. To date, only the Company’s two merchant utility- scale power plants in Leeton, Australia, which have a combined installed capacity of 14.6 MWp, have obtained non-recourse pro- ject financing. Photon Energy Secured DSR Capacity of 389 MW and Locked-in EUR 24.8 Million in 2024 Revenue On 16 March 2023, the Group’s subsidiaries Lerta JRM Sp. z o.o. and Lerta S.A. (part of the Company’s New Energy Division) have succeeded in the additional 2024 Polish capacity auction with 375 MW of Demand Side Response (‘DSR’). With the previously con- tracted capacity of 14 MW for 2024, the Company’s total DSR ca- pacity of 389 MW will lock-in PLN 116.8 million (EUR 24.8 million) in total DSR revenues for 2024. Photon Energy Group increases Green Bond to EUR 80.0 million On 28 March 2023, the Group announced that it has successfully increased its first 6.50% Photon Energy Green EUR Bond 2021/27 (ISIN: DE000A3KWKY4) to a total amount of EUR 80.0 million. The additional nominal amount of EUR 2.5 million has been placed through a private placement to institutional investors in the UK, Switzerland, Germany, and Austria. Photon Energy Exceeds 100 MWp in IPP Portfolio With Three New Romanian PV Power Plants On 13 April 2023, the Group announced the completion and grid- connection of further three PV power plants near Calafat in Roma- nia's Dolj County. The combined generation capacity of the new installations is 6.0 MWp. The electricity generated by the plant will be sold on the energy market on a merchant basis, without any support or power purchase agreement with an energy offtaker. The Company expects the plant to generate EUR 1.4 million in reve- nues based on the current forward prices for electricity base load in Romania over the next 12 months. The power plant is owned and operated by a special purpose company fully-owned by Photon Energy Group. Board of Directors Statement The Board of Directors has assessed the effectiveness of the de- sign and operation of the internal control and risk management sys- tems. On the basis of this report, and in accordance with: ► best practice 1.4.3 of the Dutch Corporate Governance Code of December 2016, and Article 5:25c of the Financial Supervision Act, ► the aforementioned assessment, the current state of af- fairs, and to its best knowledge, the Board of Directors declares that: ► The report gives sufficient insight into any shortcomings in the operation of the internal risk management and control systems. ► The aforementioned systems provide a reasonable degree of assurance that the financial reporting does not contain any material misstatement. ► Drawing up the financial reporting on a going concern basis is justified based on the current state of affairs. ► The Director’s report states any material risks and uncer- tainties that are relevant with regards to the expectation of continuity of the Company for a period of 12 months after drawing up the report. It should be noted that the above does not imply that these systems and procedures provide absolute assurance as to the realisation of operational and strategic business objectives, or that they can pre- vent all misstatements, inaccuracies, errors, fraud and non-compli- ances with legislation, rules and regulations. In view of the above, the Board of Directors declares that to the best of its knowledge: ► The annual accounts give a true and fair view of the assets, liabilities, financial position and results of the Company and the subsidiaries included in their consolidation. ► The Directors’ Report gives a true and fair view of the situ- ation as of 31 December 2022 and of the state of affairs of the company and its consolidated subsidiaries in the 2022 financial year, the details of which are included in its annual accounts, and that the Directors’ Report describes the main risks faced by the company. Amsterdam, 24 April 2023 The Board of Directors: Georg Hotar, Director Michael Gartner, Director 60 Corporate Governance Report Photon Energy Group is committed to high ethical standards, con- ducts its business and operates in compliance with applicable laws, regulations and generally accepted practices for good corporate governance. Dutch Corporate Governance Code Photon Energy N.V. is required to apply the Dutch Corporate Gov- ernance Code. The application of the principles and best practice provisions of the Dutch Corporate Governance Code is not com- pulsory and is subject to the “comply or explain” ( pas toe of leg uit ) principle. Dutch companies are required under the laws of the Netherlands to disclose in their annual reports whether they apply the provisions of the Dutch Corporate Governance Code and if they do not apply those provisions, to give the reasons for such non- application. The Dutch Corporate Governance Code recognises that non-application of its best practice provisions is not in itself objectionable and indeed may be justified under certain circum- stances. If a company departs from a best practice or principle in the Dutch Corporate Governance Code, the reason for such depar- ture must be explained in its management report. The table below presents an indicative information on only the principles and best practice of the Dutch Corporate Governance Code the Company departs from as at the date of the annual report along with a corre- sponding explanation. The Company complies fully with applicable laws and regulations and with the remaining best practises. The full text of the Dutch Corporate Governance Code can be found on the webpages of the Corporate Governance Monitoring Committee (Home | Monitoring Commissie Corporate Governance (mccg.nl)). Principle / Best Practice Explanation of Departure from the Dutch Corporate Governance Code Chapter 1. Long-Term Value Creation Internal Audit Function (Principle 1.3) Partially applied. The Company partially adheres to this principle. An explanation of how the Company departs from the principle is based on the analysis of the individual best practises below. Appointment and dismissal (Best practice 1.3.1) Not applied. The Company does not apply this best practice as there is no formal internal audit unit in the Company. As of the date of this report the function of internal audit unit is performed by two senior employees (“audit specialists”) with competence and knowledge of accounting and auditing procedures who are informally appointed by the Board of Directors. These procedures are being supervised by the Board of Directors. The Supervisory Board performed an annual assessment of internal audit procedures and included its conclusions with regards to the existing alternative measures, along with any resulting recommendations, in the report of the Supervisory Board. As of January 1 2023, the Company appointed Risk Manager who supports Internal Audit function. Appointment and assessment of the functioning of the external auditor (Principle 1.6) Partially applied. An explanation of how the Company departs from this principle is based on the analysis of the individual best practises discussed below. Engagement (Best practise 1.6.3) Not applied. The Supervisory Board recommended the engagement of PriceWaterhouseCoopers as the exter- nal auditor at the Annual General Meeting held in 2022. The resolution was not adopted then, and the Board of Directors finalized the terms of engagement with PriceWater houseCoopers as the external auditor for the year 2022 after the Annual General Meeting. Chapter 2. Effective Management and Supervision Composition and size (Principle 2.1) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Diversity Policy and accountability about diver- sity (Principle 2.1.6) Partially applied. The diversity requirements for the Supervisory Board are listed in the Profile of the Supervi- sory Board adopted in 2021. The Diversity Policy for the Board of Directors was adopted in 2022. The Company is fully compliant with regard to gender diversity of the Supervisory Board (at least 1/3 of the Supervisory Board members are males and at least 1/3 are female). Due to the size of the Board of Directors , which consists of two members - founders only - the target minimum participation of the minority group of at least 30% was not achieved. The Diversity Policy assumes that in case of an enlargement of the Board of Directors from the current size, the Supervisory Board shall make best efforts to nominate a person in order to reflect the following ratio: at least 30% of the Board of Directors will be comprised of women and at least 30% of the Board of Directors will be comprised of men. Appointment, succession and evaluation (Princi- ple 2.2) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. The Company believes that it adheres to this principle partially as transparency of the procedures is ensured by the for mal rules set out in the current regulations of the Company, i.e. in Articles of Association. Succession (Best practise 2.2.4) Partially applied. The succession plan for the Supervisory Board was implemented in the co urse of the reporting period. Succession plan for the Board of Directors will be discussed during the terms of the year 2023. Duties of the selection and appointment commit- tee (Best practice 2.2.5) Not applicable. This best practice has not been applied as there is no selection and appointment committee appointed in the Supervisory Board due its limited size. The entire Supervisory Board performs the function of the committee. It should be noted that the Articles of Association allow that such committees are appointed by the Supervisory Board in the future, at the discretion of the Supervisory Board and according to the needs of the Company. Culture (Principle 2.5) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Employee participation (Best practice 2.5.3) Not applied. The limited size of the Company, its distribution over several countries of operation and its flat managerial structure does not justify implementation of an employee participation body. Preventing conflict of interest (Principle 2.7) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. 61 Principle / Best Practice Explanation of Departure from the Dutch Corporate Governance Code Personal loans (Best practice 2.7.6) Not applied. This best practice has not been applied as the Company has granted such loans to its Board of Directors’ members. All the details about those loans are disclosed in the annual report. Chapter 3. Remuneration Determination of Board of Directors remunera- tion (Principle 3.2) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Remuneration committee’s proposal (Best prac- tice 3.2.1) Not applied. This best practise was not applied in the course of the reporting period . The Supervisory Board acting as the Remuneration Committee is planning to submit a proposal for 2023 financial year. Accountability for implementation of remunera- tion policy (principle 3.4) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Agreement of Board of Directors member (Best practice 3.4.2) Not applied. This best practice is not applicable as there are no Board of Directors’ agreements in place be- tween the Company and Board of Directors members. The Board of Directors was appointed by notarial deed of incorporation in 2010 and re-appointed for the term of 4 years by the General Meeting on 4 December 2020. Chapter 4. The General Meeting Provision of information (Principle 4.2) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Policy on bilateral contacts with shareholders (Best practice 4.2.2) Not applied. The Company does not have such policy in place. The Company however keeps a dialogue with its shareholders and provides extensive reports to its shareholders and investors, also with a quarterly online presentation of business update and financial results during which questions from shareholders are answered. Outline of anti- takeover measures (Best practice 4.2.6) Not applied. This best practise has not been applied as there are no anti- takeover measures implemented by the Company. The Articles of Association state that anti- takeover measures may be adopted by the Supervisory Board, when necessary. Casting votes (principle 4.3) Partially applied. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Voting right on financing preference shares (Best practice 4.3.4) Not applicable. There are no preference shares. Publication of institutional investors’ voting pol- icy (Best practice 4.3.5) Not applied. The Company has not implemented a voting policy for institutional investors as there are currently no institutional investors who have expressed an interest in participation in the Company’s general meetings and a need for such policy to be implemented. Report on the implementation of institutional in- vestors’ voting policy (Best practice 4.3.6) Not applied. See explanation above Issuing depositary receipts for shares (Principle 4.4) Not applicable. An explanation how the Company deviates from this principle is based on the analysis of the individual best practises discussed below. Trust office board (Best practice 4.4.1) Not applicable. There is no trust office in the Company. Appointment of board members (Best practice 4.4.2) Not applicable. See explanation under 4.4.1 above. Board appointment period (Best practice 4.4.3) Not applicable. See explanation under 4.4.1 above. Attendance of the general meeting (Best prac- tice 4.4.4) Not applicable. See explanation under 4.4.1 above. Exercise of voting rights (Best practice 4.4.5) Not applicable. See explanation under 4.4.1 above. Periodic reports (Best practice 4.4.6) Not applicable. See explanation under 4.4.1 above. Contents of the reports (Best practice 4.4.7) Not applicable. See explanation under 4.4.1 above. Voting proxies (Best practice 4.4.8) Not applicable. See explanation under 4.4.1 above. 62 A Statement on the Company's Compliance with the Corporate Governance Principles Contained in Best Practice for GPW Listed Companies 2022 In accordance with the WSE Best Practices, companies listed on the main market of the WSE should observe the principles of cor- porate governance set out in the WSE Best Practices. The WSE Best Practices is a set of recommendations, principles, best prac- tices and rules of procedure for governing bodies of publicly listed companies and their shareholders. The WSE Rules and resolu- tions of the WSE’s Board of Directors and its council set forth the manner in which publicly listed companies disclose information on their compliance with corporate governance rules and the scope of information to be provided. If a publicly listed company does not comply with any specific rule on a permanent basis or has breached it incidentally, such publicly listed company is required to disclose this fact in the form of a current report. Furthermore, a publicly listed company is required to attach to its annual report information on the scope in which it complied with the WSE Best Practices in a given financial year. The Company strives to ensure maximum transparency with respect to its operations, the best quality of communication with its investors and the protection of the rights of its shareholders, also in respect of areas not governed by law. Accordingly, the Company has taken or will take the necessary actions to observe all of the rules comprising the WSE Best Prac- tices to the fullest extent possible. Below is a list of Best Practises which the Company applies only partially or does not apply. The rest of the Best Practises are observed and applied by the Com- pany. No. Principle / Best Practice Comments of the Company 1. Disclosure Policy, Investor Communications 1.4.2 Present the equal pay index for employees, defined as the percentage difference between the average monthly pay (including bonuses, awards and other benefits) of women and men in the last year, and present information about actions taken to eliminate any pay gaps, in- cluding a presentation of related risks and the time horizon of the equality target. The principle is not applied. Due to the size of the Company (around 220 employees within 10 dif- ferent locations) with different labour laws and standards of living, the use of a common remuneration policy is not relevant. Equality princi- ples applied throughout the Group are described in the Code of Ethics. The Company ensures that all employees are treated equally and ob- jectively in opportunity and remuneration, using merit-based criteria. 1.5. Companies disclose at least on an annual basis the amounts ex- pensed by the company and its group in support of culture, sports, charities, the media, social organisations, trade unions, etc. If the com- pany or its group pay such expenses in the reporting year, the disclo- sure presents a list of such expenses. The principle is not applied. The amount of expense incurred by the Company and related to cul- ture, sports, charities, media, social organization, trade unions and etc during year 2022 was immaterial in the context of the Group's overall business 2. Board of Directors, Supervisory Board 2.2. Decisions to elect members of the Board of Directors or the supervi- sory board of companies should ensure that the composition of those bodies is diverse by appointing persons ensuring diversity, among oth- ers in order to achieve the target minimum participation of the minority group of at least 30% according to the goals of the established diver- sity policy referred to in principle 2.1. The principle is not applied. The target minimum participation of the minority group of at least 30% was achieved in case of the composition of the Supervisory Board. Due to the size of the Board of Directors, which consists of two mem- bers - founders only, the target minimum participation of the minority group of at least 30% was not achieved. The diversity policy assumes that in case of an enlargement of the Board of Directors from the cur- rent size, the Supervisory Board shall make best efforts to nominate a person in order to reflect the following ratio: at least 30% of the Board of Directors will be comprised of women and at least 30% of the Board of Directors will be comprised of men. 2.7. A company’s Board of Directors members may sit on corporate bodies of companies other than members of its group subject to the approval of the supervisory board. The principle is not applied. The principle is not applied however in the Rules of Procedure of the Supervisory Board point 3.2 states that "Board of Directors members and Supervisory Board members, shall report any other positions they may have to the Supervisory Board in advance and, at least annually, the other positions should be discussed at the Supervisory board meeting". This partially mitigates the risks which are addressed by this principle. 2.11.5. In addition to its responsibilities laid down in the legislation, the super- visory board prepares and presents an annual report to the annual general meeting once per year. Such report includes at least the fol- lowing: assessment of the rationality of expenses referred to in principle 1.5; The principle is not applied. As the amount of expense incurred by the Company and related to culture, sports, charities, media, social organization, trade unions and etc during year 2022 was immaterial in the context of the Group's over- all business and therefore not disclosed, Supervisory Board could not comment on that. 3. Internal Systems and Functions 3.2. Companies’ organisation includes units responsible for the tasks of in- dividual systems and functions unless it is not reasonable due to the size of the company or the type of its activity. The principle is not applied. The Board of Directors and Supervisory Board believe that the current organization and resources responsible for the individual systems are sufficient and adequate to the size of the Company and specifics of its business. Given the nature of the Company’s business, it seems rea- sonable to keep risk management and controlling department inte- grated as a part of the financial department, as they all provide necessary input for the investment decisions. This ensures that both financial and non-financial information is collected, analysed, and pro- cessed within the same department and the optimal business decision 63 The full text of the statement on the company's compliance with the corporate governance principles contained in Best Practice for GPW Listed Companies 2022 is available on the Company’s website. Management and Control Systems in Connection with Financial Reporting With respect to financial reporting, the Company’s general objec- tive is to have reliable reporting and ensure that transactions are recorded and reported completely and correctly. The Board of Directors regularly reviews the Group’s financial per- formance and assesses whether adequate processes are in place to evaluate the risks and effectiveness of controls related to the financial reporting process at all levels of the organization. The Au- dit Committee oversees the Company’s finances, financial report- ing as well as the Internal Audit functions, as part of the Company’s corporate governance. At the beginning of the 2023 the Risk Man- ager was hired to complete the Company’s internal risk manage- ment and control team. No. Principle / Best Practice Comments of the Company is taken. For more details please see the Supervisory Board report for the year 2022. 3.3 Companies participating in the WIG20, mWIG40 or sWIG80 index ap- point an internal auditor to head the internal audit function in compli- ance with generally accepted international standards for the professional practice of internal auditing. In other companies which do not appoint an internal auditor who meets such requirements, the audit committee (or the supervisory board if it performs the functions of the audit committee) assesses on an annual basis whether such person should be appointed. The principle is not applied. Due to the fact that Photon Energy was included in sWIG80 in year 2022, according to this principle, the Company is now required to ap- point an internal auditor to head the internal audit function in compli- ance with generally accepted international standards for the professional practice of internal auditing. However, the Audit Commit- tee performed a thorough and continuous review of the internal sys- tems including internal audit function, throughout the year 2022 and also during its on-site visit. The assessment included the evaluation of the existing processes in place, human resources, its competences, and responsibilities as well as the reporting structure within the organ- ization. The chairman of the Audit Committee performed the analysis through the consultations with the responsible personnel (the man- agement, the head of accounting and consolidation, internal audit spe- cialists, head of legal, head of compliance). He reviewed the procedures and evaluated whether adequate resources are in place and discussed relevant topics wit h external auditors. The results of this analysis were discussed with the Board of Directors. It was con- cluded that given the size of the Company, the current measures with respect to internal audit function are appropriate and satisfactory. This topic will be addressed again by Audit Committee during the course of year 2023 and if needed necessary steps to establish internal audit department will be undertaken. 3.6. The head of internal audit reports organisationally to the president of the Board of Directors and functionally to the chair of the audit com- mittee or the chair of the supervisory board if the supervisory board performs the functions of the audit committee. The principle is not applied. This principle is not applied as there is no separate internal audit unit in the Company, there is no head of the internal audit department, who could be placed in the organizational structure as required by this prin- ciple. Further explanation can be found in comment 3.1. and 3.3. 3.10. Companies participating in the WIG20, mWIG40 or sWIG80 index have the internal audit function reviewed at least once every five years by an independent auditor appointed with the participation of the audit committee. The principle is not applicable. The Company is in the first year of this obligation hence this obligation to review the internal audit function by an independent auditor was not required in the course of the reporting period. 4. General Meeting, Shareholder Relations 4.1. Companies should enable their shareholders to participate in a gen- eral meeting by means of electronic communication (e-meeting) if jus- tified by the expectations of shareholders notified to the company, provided that the company is in a position to provide the technical in- frastructure necessary for such general meeting to proceed. The principle is not applied. Historically, there has never been an interest expressed by minority shareholders to participate in a general meeting by means of elec- tronic communication (e-meeting). While the company does not offer participation at the general meeting through electronic means of com- munication, it provides its shareholders an option to (i) vote in advance on all resolutions on the agenda of a general meeting; and (ii) ask questions in advance, in order to ensure full participation of all share- holders. The shareholders also have an option to participate in quar- terly investors podcast where they can pose questions and learn in detail about financial results, business development and strategy. 4.3. Companies provide a public real-life broadcast of the general meet- ing. The principle is not applied. Please see the explanation provided in the principle 4.1. 4.5. If the Board of Directors becomes aware a general meeting being convened pursuant to Article 399 § 2 – 4 of the Commercial Compa- nies Code, the Board of Directors immediately takes steps which it is required to take in order to organise and conduct the general meet- ing. The foregoing applies also where a general meeting is convened under authority granted by the registration court according to Article 400 § 3 of the Commercial Companies Code. The principle is not applied. The Company is incorporated in the Netherlands and therefore the Polish commercial code and regulation stipulated here does not apply to the Company. 64 Shareholders Meetings The Annual General Meeting was held on 31 May 2022, in accord- ance with the Company’s Articles of Association. The Annual General meeting approved the Consolidated Financial Statements of the Company for the year 2021, considered Remu- neration Report from the Supervisory Board and updated the Re- muneration Policy. The Annual General Meeting approved the extension of the Supervisory Board to three members and appointed a new member of the Supervisory Board. The authoriza- tion was granted to the Board of Directors to a) acquire the shares in the share capital of the Company and b) to issue shares up to EUR 10 million in the authorized capital c) to limit/exclude pre-emp- tion rights of shareholders to the newly issued shares. Minutes of the meetings are available on the Company’s website ( penv-minutes-of-the-agm-held-on-31-may-2022.pdf (pho- tonenergy.com) ). Major Shareholders According to the Company’s information, as of 31 December 2022, its main shareholders hold Shares representing the total number of votes in the General Meeting and the Company’s share capital shown in the table below. Shareholder Number of Shares Share in the Share Capital (%) Number of Votes in the General Meeting Share in the Total Number of Votes in the General Meeting (%) Solar Future Cooperatief U.A. 21,775,075 36.29% 21 775 075 37,12% Solar Power to the People Cooperatief U.A. 20,492,057 34.15% 20 492 057 34,93% The ultimate beneficial owner of Solar Future Cooperatief U.A. is Michael Gartner and the ultimate beneficial owner of Solar Power to the People Cooperatief U.A. is Georg Hotar. Solely by virtue of the voting power they hold, Solar Future Cooperatief U. A. and So- lar Power to the People Cooperatief U.A. (and Messrs. Gartner and Hotar indirectly) are controlling shareholders of the Company. Based on representations of the members of the Board of Direc- tors, there are no arrangements, known to the Company, the oper- ation of which may at a subsequent date result in a change in control of the Company. The Powers of Board Members, in Particular the Power to Issue or Buy Back Shares The Board of Directors is charged with the management of the Company. The Board of Directors may decide on the issue of shares if it was designated for that purpose by resolution of the General Meeting for a specified period of not more than five years. Upon the designation, the number of shares that may be issued, shall be determined. The designation may at any time be extended for a period of not more than five years. Unless provided otherwise upon the designation, it may not be revoked. As long as the desig- nation is in force, the General Meeting shall not be authorised to resolve to issue shares. A resolution to issue shares shall stipulate the price and the further terms and conditions of the issue. The Board of Directors may also limit or exclude the pre-emption rights if it was designated by the resolution of the General Meeting for a specified period of not more than five years as competent to limit or exclude pre-emption rights. Such a designation may only be made if the Board of Directors was previously designated as competent to issue shares or is simultaneously designated as such. The designation may at any time be extended for a period of not more than five years. Unless provided otherwise upon the des- ignation, it may not be revoked. The designation shall terminate in any event if the designation of the Board of Directors as competent to issue shares terminates. A resolution of the general meeting to limit or exclude pre-emption rights or to designate the Board of Di- rectors competent to limit or exclude pre-emption rights shall re- quire a majority of at least eighty percent (80%) of the votes cast. The Board of Directors may be authorized by the General Meeting to decide on acquisition of the Company’s shares for a considera- tion. Such acquisition may only take place if and to the extent the General Meeting has authorized the Board of Directors for that pur- pose. Such authorisation shall be valid for not more than eighteen months. In the authorisation the General Meeting shall specify the number of shares which may be acquired, the manner in which they may be acquired and the limits within which the price must be set. The restrictions specified in Article 9 of the Articles of Association must be observed. This shall not be required if and to the extent the Company acquires shares in its own share capital for the pur- pose of transferring the same to employees of the Company or of a group company under a scheme applicable to such employees. Resolutions of the Board of Directors with regard to an important change in the identity or character of the Company or the business enterprise are subject to the approval of the General Meeting, in- cluding in any case: (a) transfer of the business enterprise or almost the entire business enterprise to a third party; (b) entry into or termination of a long-term cooperation by the Company or a subsidiary with another legal entity or com- pany or as a fully liable partner in a limited or general part- nership, if such cooperation or termination thereof is of far- reaching significance to the Company; (c) acquisition or disposal by the Company or a subsidiary company of a participating interest in the capital of a Com- pany with a value of at least one third of the amount of the assets as shown in the balance sheet with explanatory notes or, if the Company prepares a consolidated balance sheet, as shown in the consolidated balance sheet with ex- planatory notes, according to the most recently adopted annual accounts of the Company. 65 Composition & Functioning of the Statutory Bodies The Company has a two-tier corporate structure. The managing body of the Company is the Board of Directors comprising of managing directors, and the supervising body of the Company is the Supervisory Board comprising of supervisory directors. Board of Directors The Board of Directors is the statutory executive body ( raad van bestuur ) and managing directors are collectively responsible for the Com- pany’s management and the general affairs of the Company. The Board of Directors is responsible for the day-to-day operations of the Company. Name Position Date of Birth Start of Function Georg Hotar Director (Bestuurder) 21.04.1975 4 December 2020 Michael Gartner Director (Bestuurder) 29.06.1968 4 December 2020 Mr Hotar and Mr Gartner have been the Company’s managing directors since 9 December 2010, however, new term of their office (previously unlimited and currently term of four years) has started on 4 December 2020, due to the changes in the Company’s corporate structure. Georg Hotar Georg Hotar co-founded the Company in 2010 and was the Com- pany’s Chief Financial Officer until 2011. Since then he has spear- headed the Group’s expansion in Europe and overseas as the Chief Executive Officer. Mr Hotar started his professional career in 1995 as an equity sales trader with IB Austria Securities in Prague. In 1996, he joined Carnegie AB in London as an equity analyst and later that year he moved to ICE Securities Ltd. in London as an equity analyst for the TMT sectors in the CEE region. In 1999, he joined FFC Fincoord Finance Coordinators Ltd. in Zurich as an in- vestor relations specialist. In 2000, he founded Central European Capital, a financial advisory boutique headquartered in Prague. In 1999, he graduated from the London School of Economics with a BSc Accounting and Finance degree. In 2001, he completed and obtained a Master in Finance degree in finance from the London Business School. Michael Gartner Michael Gartner co-founded the Company in 2010 and was the Company’s Chief Executive Officer until 2011. Since then he has held the position of Chief Technology Officer and until last year held a position of the Managing Director of Photon Energy Australia. Mr Gartner has an extensive experience in the photovoltaic business and is instrumental in driving the Company’s utility-scale project development, EPC, commercial solar and off-grid and solar-hybrid power solutions. Between 2011 and end of 2022, his focus was on developing Group’s projects in Australia. In 2007 he developed one of the first large PV installations in the Czech Republic. Between 1994 and 2004, he was an equity and debt analyst and head of fixed income sales in ING and Commerzbank Securities in Prague. From 2005 to 2007, he ran an investment boutique specializing in medium-term notes in the Eurobond market and M&A. In 1991, he completed and obtained a bachelor’s degree in economics from University of Newcastle in Australia. He holds MBA title from the US Business School in Prague obtained in 1994. In accordance with the Company’s Articles of Association, mem- bers of the Board of Directors shall be appointed by the General Meeting for a maximum period of four years and his term of office shall lapse on the day of the Annual General Meeting to be held in the fourth year after the year of his appointment. A Board member may always be re-appointed for another maximum period of four years. The General Meeting may at any time suspend and dismiss a Board member. The supervisory board is not authorised to sus- pend a Board member. Supervisory Board The Supervisory Board is a supervisory body ( raad van toezicht) and supervisory directors are collectively responsible for the Company’s supervision, advising the Board of Directors and the general affairs of the Company. Name Age Gender Nationality Date of Initial Appointment Term of Office Function Independency Status 1 Marek Skreta 56 male Swiss 4.12.2020 2024 Chairman of the Supervisory Board Independent Boguslawa Skowronski 66 female Polish, Swiss, U.S. 4.12.2020 2024 Member of the Supervisory Board Independent Ariel Sergio Davidoff 55 male Swiss 31.5.2022 2026 Chairman of the Audit Committee Independent 1 Independency is defined within the meaning of the Dutch Corporate Code 66 The Supervisory Board provides guidance and oversight to the Board of Directors on the general affairs of the company. They also serve as Audit Committee. The supervisory board and audit committee is comprised of three members, Boguslawa Skowronski, Marek Skreta and Ariel Sergio Davidoff, appointed to a four-year term of office. The Supervisory Board is elected by the General Meeting for a period of 4 years. More about the election process in the Supervisory Board report. More information can be found in the Supervisory Board report. To our best knowledge there were no transactions in the course of the year 2022, in which a conflict of interest with the members of the Board of Directors and members of the Supervisory Board oc- curred. The Company is compliant with the best practices 2.7.3 and 2.7.4 of the Dutch Corporate Governance Code. In addition, no transactions between the Company and legal or natural persons who hold at least 10% of the shares in the Company occurred in 2022, corresponding to the best practice provision 2.7.5 of the Code. Articles of Association Our Articles of Association outline certain of the Company’s basic principles relating to corporate governance and organization. The current text of the Articles of Association is available at the Trade Register of the Chamber of Commerce and on our public website at www.photonenergy.com. The Rules Governing the Amendment of the Articles of Association In accordance with the Company’s Article of Association, the reso- lution to amend the Articles of Association may only be adopted by the General Meeting on the proposal of the Board of Directors and it is adopted with a simple majority of votes cast. Notwithstanding the aforementioned, a resolution to amend Article 7.3 of the Articles of Association involving a change of the provision relating to the Qualified majority to limit or exclude pre-emption rights or to desig- nate Board of Directors competent to limit or exclude pre-emption rights, requires a majority of at least eighty percent (80%) of the votes cast by the General Meeting. A proposal to amend the Arti- cles of Association shall always be mentioned in the notice of the General Meeting. The text of the proposed amendment shall be made available at the offices of the Company for inspection by each shareholder and each usufructuary and pledgee to whom the voting rights accrue until the end of the meeting. Failing such, the resolution regarding the proposal may only be adopted by unani- mous vote at a meeting at which the entire issued share capital is represented. Diversity Policy, Succession Plan Supervisory Board The diversity policy was drawn up as a part of the Supervisory Board profile, which is published on the Company’s website. The desired composition of the Supervisory Board is such that the combined expertise, experience, diversity and independence of the Supervisory Board members enables the Supervisory Board to best carry out the variety of its responsibilities and duties with re- gard to the Company and all stakeholders involved including its shareholders, consistent with applicable law and regulations. The Supervisory Board strives for a mixed composition in respect of gender, age, nationality and background. Its aim is to have a composition consisting of at least thirty percent (30%) female mem- bers and at least thirty percent (30%) male members. Besides the Diversity Policy, the Company has also adopted rota- tion schedule and succession policy to provide continuity and avoid extended vacancies in the positions of the Supervisory Board / Au- dit Committee. Photon Energy’s succession plan is designed to en- sure that the proper function and necessary fulfilment of the Supervisory Board is met in case of vacancy due to retirement, res- ignation, death or pursuing new business opportunities. In the event of an emergency departure, resignation or other va- cancy in the Supervisory Board, the Chairman of the Supervisory Board, if unavailable, the Chairman of the Audit Committee, if una- vailable, any other member of the Supervisory Board shall convene an extraordinary meeting of the Supervisory Board within latest one month from the day of such vacancy to discuss the functioning of the Supervisory Board and a new distribution of tasks within the Supervisory Board/Audit Committee. In line with the Supervisory Board Profile and the required diversity of the Supervisory Board members, the Supervisory Board shall propose a new suitable candidate to the General Meeting as soon as practicable. The General Meeting shall appoint a new candidate in accordance with the Articles of Association. The whole policy can be found on the Company websites ( Mi- crosoft Word - rotation schedule and succession policy (pho- tonenergy.com) Board of Directors Due to the size of the Board of Directors, which historically con- sisted of two founding members only, it was not possible to apply the same diversity policy to the Board of Directors. The current Board of Directors is comprised of two male members (100% male). The Company aims to have an adequate balanced composition of the Board of Directors. However, also in view of the limited size of the Board of Directors, the selection and appoint- ment are primarily based on expertise, experience, backgrounds and skills necessary for the position. During the course of the year 2022 the Supervisory Board defined diversity policy for the Board of Directors, which will serve as a guidance in the recruitment process, in case there is a need to ap- point new members to the Board of Directors. Supervisory Board will take gender diversity into account as much as possible in future appointments and shall aim at a representation of at least 30% of either gender in the Board of Directors. 67 Whistleblowing The Company set up a misconduct whistleblowing portal (SpeakUp Line_in which concerns about ethical and other misconduct can be reported by all stakeholders (both internal and external). The hot- line is independently operated, confidential and anonymous and is available in all areas and languages where the Company operates. All reports are assessed by the Compliance team and then addressed on a case-by-case basis. The Compliance department and the Board of Directors reviews the process and reports and ensures that there are arrangements in place in the event an inde- pendent investigation is needed and also a follow-up action is taken. Company’s Shares The Company’s issued share capital amounts to EUR 612,385.21, divided among 61,238,521 issued shares, each of a nominal value of EUR 0.01. There are no restrictions on the transfer of shares and no special control rights relating to the shares. No restriction of the voting rights attached to the shares exists, except for the voting rights attached to shares held by the Company as treasury shares which cannot be voted in accordance with Article 29.7 of the Arti- cles of Association. The Company has instituted a share buyback program based on the Board of Director’s resolution, dated 16 December 2022 which was adopted pursuant to a previous authorization by the General Meeting on 31 May 2022. It is applicable with respect to a maxi- mum of 250,000 shares, up to a maximum of PLN 3,750,000, and shall last no longer than until 19 June 2023. The Board of Directors engaged Santander Brokerage Office Poland to act as a sole bro- ker. 68 Supervisory Board Report for Year 2022 The Supervisory Board of the Company is responsible for super- vising and advising the Board of Directors. In exercising its role, the Supervisory Board follows the applicable law, the Articles of Asso- ciation of the Company, Dutch and Polish Corporate Code of Conduct, Rules of Procedure of the Supervisory Board, and the Company’s interests. It is a separate body that operates inde- pendently of the Board of Directors. Composition and Diversity Name Age Gender Nationality Date of Initial Appointment Term of Office Function Independence Status 1 Marek Skreta 56 male Swiss 4.12.2020 2024 Chairman of the Supervisory Board Independent Boguslawa Skowronski 66 female Polish, Swiss, U.S. 4.12.2020 2024 Member of the Supervisory Board Independent Ariel Sergio Davidoff 55 male Swiss 31.5.2022 2026 Chairman of the Audit Committee Independent 1 Independence is defined within the meaning of the Dutch Corporate Code In accordance with the applicable law, the General Meeting may appoint the Supervisory Directors for a maximum of four years and his/her term of office shall lapse on the day of the annual General Meeting held in the fourth year after the year of his/her appoint- ment. Two of the Supervisory Directors’ term expires in 2024, one Supervisory Director’s term expires in 2026. A Supervisory Director may be re-appointed once for another period of four years after which he/she may be re-appointed once for a maximum period of two years, which term may be extended once for a maximum pe- riod of two years. A Supervisory Director may serve for a maximum of 12 years in total. The profile of the Supervisory Board member was prepared and adopted by the Supervisory Board on 31 March 2021 and is pub- lished on the Company’s website. The composition of the Supervi- sory Board also complies with the gender, expertise and other requirements as defined in the Supervisory board profile and Dutch law. At least one third of the Supervisory Board is comprised of female members and at least one third is comprised of male members. In order to further diversify the expertise and background of the Supervisory Board, in the 2022 financial year the number of the Supervisory Directors was increased from 2 to 3 members and Mr. Davidoff was appointed as the third member of the Supervisory Board. He also assumed a role of the chairman of the Audit Com- mittee. His term expires two years following the two other mem- bers’ and his appointment will therefore ensure a more staggered succession in line with the Succession and Retirement Plan adopted on October 14, 2022 by the resolution of the Supervisory Board. In 2022 the Supervisory Board has prepared a Diversity & Inclusion Policy for the Board of Directors. The Board of Directors currently is not diverse in terms of gender requirement; however, the senior managers who play a key role in the management of the Company contribute to the gender diversification of the manage- ment. All Supervisory Directors are independent within the meaning of best practise provisions 2.1.7, 2.1.8 and 2.1.9. of the Dutch Corpo- rate Governance Code. Role of the Supervisory Board In accordance with the applicable law and the Rules of Procedure, the Supervisory Board is tasked with the supervision of the policies of the Board of Directors and the general course of affairs of the Company and its affiliated business. The supervision of the Board of Directors includes, inter alia , the strategy of the Company, the financial reporting process, functioning of internal risk manage- ment, maintenance of the Company’s corporate governance structure, liaising with the Company’s external auditor and supervi- sion of preparation of annual accounts. Full account of the Super- visory Board responsibilities is given in Article IV of the Rules of Procedure, published on the Company’s website. The Supervisory Board is authorized to inspect the books and records of the Com- pany and the Board of Directors shall provide the Supervisory Board with information required for the performance of its duties. Meetings In accordance with the Article VII of the Rules of Procedure, the Supervisory Board meets whenever a Supervisory Director consid- ers appropriate and as often as it is required for the proper perfor- mance of the Supervisory Board duties. In any event, the Supervisory Board shall meet at least once a year. The Supervisory Board may also adopt resolutions without holding a meeting pro- vided that all Supervisory Directors have consented to this manner of adopting resolutions and the votes are cast in writing or by elec- tronic means. In the financial year 2022, the Supervisory Board met 6 times. In addition, the Audit Committee met three times. The Supervisory Board also adopted four written resolutions. In the meetings, the Supervisory Board discussed a wide range of topics: ► The financial plan, strategy for the year 2022 and long-term value creation was discussed at the beginning of the finan- cial year (namely, the guidance with respect to the MWps in development and impact of electricity prices on revenue) The Supervisory Board discussed the increase in capacity of connected power plans (and its feasibility of the project pipeline in development by the end of 2024), switch from the various support mechanisms to merchant business model, and other strategies for long-term value creation (such as development of proprietary portfolio vs. acquisi- tion of built or ready-to-built projects; PPAs vs. generation of electricity in proprietary plants etc.); 69 ► Financial results were discussed and analysed on quar- terly basis, including results and margins of the individual Company operational segments; ► Developments on turbulent energy markets in EU and worldwide, and specifically countries where the Company is active. The Supervisory Board discussed the volatility of electricity prices, the potential effect of the conflict in Ukraine, impact of the shutdown of German nuclear power plants, continued disruptions of the supply chain, planned or already introduced governmental caps on electricity prices and windfall taxes in each country and the Company strategies of how to minimize their impact; ► Current operational, financial and legal affairs were ana- lysed, including the acquisition of Lerta and its synergies, dynamic growth in the size of the Company, development of Australian projects with Raygen technology, PFAS pilot project in cooperation with the Department of Defence in Australia. ► Financing of the Group, issue of Green Bonds, EUR cur- rency fixing of the loans as a leverage against rising inter- est rates; ► The Audit Committee discussed the audit plan and the out- come of the audit with the external auditors; ► The chairman of the Audit Committee made an on-site visit and met with the Board of Directors and individual employ- ees/managers and reviewed Company’s internal risk man- agement, controlling, compliance and internal audit procedures (more on this topic below). ► The chairman of the Audit Committee visited the Com- pany’s 2.998 MWp power plant in Zdice, Czech Republic. ► The Supervisory Board, through a written resolution, adopted and published (i) the Supervisory Board Succes- sion and Retirement Plan, (ii) Diversity Policy for the Board of Directors and (iii) change to the Remuneration Policy. Attendance of Supervisory Board Members Supervisory Board Meetings Boguslawa Skowronski 100% Ariel Sergio Davidoff 100% Marek Skreta 100% Evaluation During an open discussion in the meeting, the Supervisory Direc- tors performed a self-evaluation and also the evaluation of the Board of Directors, individually and as a whole. They agreed that the Supervisory Board operated efficiently and its cooperation with the Board of Directors and the auditors was good. It was concluded that the Supervisory Board as a whole, as well as its individual members, functioned well. The communication from the Board of Directors takes place in a transparent and constructive manner. They further stated that the addition of one more member as the Audit Committee Chairman, Mr. Davidoff, was beneficial for the Company. He orientated himself well and assumed his role promptly. The Supervisory Board has further evaluated the functioning of the Board of Directors as a whole, as well as its individual members in its closed meeting and also in discussions with the Board of Direc- tors. They stated that the communication between the Boards was very good; the discussions were held in an open and transparent atmosphere while maintaining a sufficiently critical review. Both Management Directors were available and active and provided all cooperation and information necessary for successful functioning of the Supervisory Board. Committees In accordance with Article VIII of the Rules of Procedure, the Su- pervisory Board may appoint standing and/or ad hoc committees from among its members which are charged with tasks specified by the Supervisory Board. Currently, due to the small size of the Supervisory Board, the function of each committee is performed by the entire Supervisory Board. Apart from the Audit Committee, which the Supervisory Board created formally on 4 December 2020, no committees were established. Other committees, such as Remuneration Committee or Selection and Appointment Com- mittee, will be established if the need for such committees arises in the future. Up until then, the Supervisory Board will perform all functions as a whole. The Company’s Audit Committee (and its chairman, in particular) undertakes preparatory work for the Supervisory Board’s decision- making regarding the supervision of the integrity and quality of the Company’s financial reporting and the effectiveness of the Company’s internal risk management and control systems. It main- tains contact with the external auditors, and also monitors the Board of Directors in connection with the Company’s funding, tax policy and application of IT technology, especially with respect to cybersecurity. In 2022, the role of the head of the Audit Committee was assumed by Mr. Davidoff who was elected by the general meeting held on 31 May, 2022. In the course of 2022, Audit Committee met three times, in total. The Audit Committee met twice with the external auditor, reviewed the audit plan and was presented with the out- come of the audit. The Supervisory Board, performing a function of the Remuneration and Nomination Committee, prepared the Diversity Policy for the Board of Directors, evaluated the Board of Directors’ and Supervi- sory Board’s remuneration and prepared the Remuneration Report which shall be submitted to the General Meeting. 70 Assessment of the Internal Control, Internal Audit, Risk Management, Compliance Systems The Audit Committee has performed a thorough and continuous review of the internal risk management systems, internal audit function, controlling and legal compliance policies, throughout the year and also during its on-site visit in September 2022. The as- sessment includes the evaluation of the existing processes in place, human resources, its competences, and responsibilities as well as the reporting structure within the organization. The chair- man of the Audit Committee performed the analysis through the consultations with the responsible personnel (the management, the head of accounting and consolidation, internal audit specialists, head of legal, head of compliance). He reviewed the procedures and evaluated whether adequate resources are in place and dis- cussed relevant topics with external auditors. The results of this analysis were discussed with the Board of Directors. It was con- cluded that given the size of the Company, the current measures with respect to internal audit function, internal risk management and control systems are appropriate and satisfactory. The Super- visory Board also noted with satisfaction that a new full-time posi- tion of risk manager was created and filled as of 1 January 2023. The matter will be revisited and assessed during the 2023 financial year given the growing size of the Company and integration of Lerta. Assessment of the Compliance with the Best Corporate Governance Standards Supervisory Board reviewed the compliance report for 2022 and discussed with the Board of Directors the practises which were im- proved during year 2022 and those which still remain as ‘not applied’. The Supervisory Board gave recommendations on measures which shall be taken to further improve the compliance with best practises during the course of the year 2023. Financial Statements 2022 The financial statements were audited by PricewaterhouseCoop- ers Accountants N.V. whose nomination and engagement as the external auditor for 2022 financial year was approved by the Board of Directors in accordance with Article 31.2 of the Articles of Asso- ciation. The Supervisory Board established that the external audi- tor was independent of the Company. The 2022 financial statements were approved by the Supervisory Board on 24 April 2023. The Supervisory Board will submit the financial statements to the Annual General Meeting and will propose that the sharehold- ers adopt them and release the Board of Directors from all liability in respect of its managerial activities and release the Supervisory Board from all liability in respect of its supervision duties. Conclusion It goes without saying that 2022 was an exceptional year in every aspect. While the high energy price continued to plague European households and most industries, the Company benefited from this development. It all but quadrupled its year to year revenues and turned its economic result into profit. The goal for 2023 will be to maintain the Company’s growth and successfully integrate Lerta’s business line and its employees into the Photon Energy Group. On behalf of the Supervisory Board, we would like to thank the Board of Directors and all employees of Photon Energy Group for their commitment and personal contribution to the successful finan- cial year 2022. Amsterdam, 24 April 2023 Marek Skreta Boguslawa Skowronski Ariel Sergio Davidoff Original signed. 71 Remuneration Report The remuneration of the Board of Directors is paid out in accord- ance with the Remuneration Policy, prepared by the Supervisory Board and adopted by the General Meeting on 1st June, 2021. An amendment to the Remuneration Policy was submitted by the Su- pervisory Board to the General Meeting and adopted on May 31, 2022. It aims to attract, motivate and retain qualified and experi- enced individuals and reward them with a competitive remunera- tion package while considering its size and unique characteristics. Gender, age, nationality, race, ethnic origin or other personal characteristics do not play any role in determining remuneration practice. This Remuneration Report comprises information within the mean- ing of articles 2:135b Dutch Civil Code and Section 3.4.1 of the Dutch Corporate Governance Code and is also published as part of the 2022 Annual Report. It is submitted to the General Meeting for an advisory vote. The General Meeting 2022 approved the Re- muneration Report with a 100% vote. Board of Directors Remuneration Fixed Remuneration The Board members take part in the day-to-day activities and they receive a fixed remuneration adequate to the competitive market levels of remuneration. In 2022, the Company did not perform any comparison within a reference group of its international/industry peers in order to determine the remuneration. Since the Board members are also majority shareholders, it has been decided that their compensation for the responsibility and function of the Board members shall be deemed mostly realized through the value creation and share appreciation. In accordance with the Remuneration Policy, the Board members therefore re- ceive remuneration solely as part of their employment by an affili- ated company within the Photon Energy Group and they do not receive compensation for their duties of serving on the Board of Directors for the Group of entities. Furthermore, no emoluments of the Managing Directors, including pension payments were charged to the Company. No service con- tracts with the Company nor any of its Subsidiaries have been pro- vided to a Managing Director that give entitlement to benefits upon termination of employment. Mr. Georg Hotar receives a regular sal- ary as an employee in his function as managing director of Global Investment Protection AG in Switzerland, and Mr. Michael Gartner receives a regular salary as an employee in his function as man- aging director of Photon Energy Australia Pty Ltd. in Australia. The 2022 financial year was marked by turbulences on the energy market and unpredictable regulatory reactions but despite that, the Company made significant progress in strengthening the balance sheet and improving the operational performance. Business performance highlights and Remuneration Comparison 2022 % change 2021 Revenues EUR 95.136 million +161.7% EUR 36.359 million EBITDA EUR 24.308 million +153.6% EUR 9.584 million Net result EUR 6.262 million nm EUR -6.433 million Installed Capacity 91.9 MWp +1.5% 90.5 MWp Remuneration Board of Directors EUR 0.597 million +28.3% EUR 0.466 million Remuneration Employees without Board of Directors EUR 8.490 million +42.6% EUR 5.955 million Number of Employees 220 (283 including 63 Lerta employees) +52.8% (+96.5%) 144 Average remuneration per full time employee EUR 49 thousand 12.4% EUR 44 thousand Variable Remuneration and Stock Options In accordance with the amended Remuneration Policy, an annual variable remuneration (short-term incentive) linked to companies KPIs and adequate to competitive market levels can be awarded to the Board members. The variable remuneration shall be paid after the publication of the audited annual accounts. In alignment with the Company’s strategy, the Supervisory Board, at its discretion, will consider short or longer-term goals and their respective weights and targets for the respective bonus period; a part of the variable remuneration may therefore reflect a period longer than one per- formance year. The Supervisory Board shall also consider the fol- lowing: (i) Company’s strategy; (ii) historical performance and business outlook; (iii) long term value creation; (iv) stakeholders expectations. The Managing Directors currently do not receive stock options or any other rights to acquire shares in the Company. In line with the Remuneration Policy, the interests of the Company in long-term value creation are ensured by the members of the Board of Direc- tors being also the founders and majority shareholders of the Com- pany. As such, the long-term incentive for the Board of Directors is the Company‘s share appreciation. Both directors benefit primarily from the growth of the Company’s value so their interests are aligned with the interest of other (minority) shareholders. No stock options or other rights were granted to the Managing Di- rectors or the employees of the Company in 2022. 72 Claw-backs/Severance Payments No claw-back of remuneration was exercised in 2022. No severance payment was made to the members of the Board of Directors. Overview of the Total Remuneration of the Board of Directors In thousands of EUR Total fixed compensation Total variable compensation Ratio Fixed/Total Compensation Stock options granted Georg Hotar, Managing Director and CEO 2022 350 97 78.3% 0 2021 321 0 100.0% 0 Michael Gartner, Managing Director and CTO 2022 150 0 100.0% 0 2021 144 0 100.0% 0 The internal pay ratio, as average compensation of the Board members in relation to the average annual compensation per full time employee of the Company for the financial year 2022 in- creased due to the bonus payment and was 6.1 in 2022 (5.3 in 2021). The Company’s shares were not listed on the public regulated mar- kets before January 2021, and therefore, the Company was not obliged to publish the Remuneration Report in the financial years prior to 2021. For this reason, the Company can only publish com- parisons with last financial year. Comparison of Internal Pay Ratio Year Internal Pay Ratio 2022 6.1 2021 5.3 Loans The following loans have been granted to the Managing Directors by the Company or the Company’s affiliated entity. In thousands of EUR Total Loan Amount in 2022 % change Total Loan Amount in 2021 Georg Hotar, Managing Director and CEO 594 6.8% 556 Michael Gartner, Managing Director and CTO 91 8.3% 84 The loans bear an interest rate of 3% and are short term for a period of up to 12 months. The Company or its affiliated entity also provided loans to the entities fully owned by the Managing Directors. In thousands of EUR Total Loan Amount in 2022 % change Total Loan Amount in 2021 Solar Age Investments B.V. 1,148 16.2% 988 Solar Power to the People Cooperatief U.A. 614 237.4% 182 * Company jointly controlled by Mr Georg Hotar and Michael Gartner ** Company controlled by Mr Georg Hotar The loans bear an interest rate of 3% and are short term for a period of up to 12 months. 73 Supervisory Board Remuneration The Remuneration Policy aims at providing a competitive compen- sation package to attract, motivate and retain qualified Supervisory Directors while considering the Company’s size and its unique characteristics. This is essential for executing the Company’s strat- egy and safeguarding and promoting its long-term value and sus- tainability. Supervisory Board members receive fixed remuneration for their responsibilities that does not depend on the Company‘s results in order to protect their independence when supervising the manner in which the Board members implement the long-term value creation strategy. These responsibilities are part of the mem- bership of the Supervisory Board and its Audit Committee and the position of Chairman of the Supervisory Board and/or Audit Com- mittee. The certainty of the fixed compensation also allows Supervisory Board members in their supervisory role to focus on the long-term interest and sustainability of the Company. Each member of the Supervisory Board is entitled to reimbursement by the Company for all expenses incurred by him/her in connection with performing his/her duties as the Supervisory Board member. Due to its small size, all members of the Supervisory Board perform functions of the Audit and other Committees. Therefore, the chair- man of the Supervisory Board and the chairman of the Audit Com- mittee are not entitled to an extra compensation for the performance of their function. The Company does not grant loans, advance payments or guaran- tees to members of the Supervisory Board. Overview of the Supervisory Board Remuneration In thousands of EUR Total fixed compensation in 2022 Total fixed compensation in 2021 Boguslawa Skowronski 15 15 Marek Skreta 15 15 Ariel Sergio Davidoff 8.75 n/a * Mr. Davidoff’s term of office commenced on 31 May 2022. Lord Howe Island, Australia Financials 77 Photon Energy N.V. Financial Statements For the Year Ended 31 December 2022 Photon Energy N.V. Financial Section Annual Report 2022 Financial Statements for the Year Ended 31 December 2022 78 Table of Contents Photon Energy N.V. Consolidated Financial Statements For the Year Ended 31 December 2022 80 Consolidated Statement of Comprehensive Income for the Year Ended 31 December 81 Consolidated Statement of Financial Position as of 31 December 82 Consolidated Statement of Changes in Equity for the Year Ended 31 December 83 Consolidated Statement of Cash Flows for the Year Ended 31 December 84 Notes to the Consolidated Financial Statements For the Year Ended 31 December 2022 85 1. Reporting Entity 86 2. Basis of Preparation 86 2.1 Statement of Compliance 86 2.2 Basis of Measurement 86 2.3 Functional Currency 86 2.4 Use of Estimates and Judgments 86 2.4.1 Consolidation of Special Purpose Entities 87 2.4.2 Recognition of Deferred Tax Asset 87 2.4.3 Recognition of Revenues from Contracts with Customers 87 2.4.4 ECL Measurement 87 2.4.5 Key Assumptions Used in Measurement of Fair Value of Other Financial Investments 87 2.4.6 Impairment of Goodwill 87 2.4.7 Initial Recognition of Intangible Assets 87 2.4.8. Useful Economic Life of Tangible and Intagible Assets and Right of Use 88 2.4.9. Business Combination 88 3. Application of New and Revised EU IFRSs 88 3.1 New and Revised EU IFRSs Affecting Amounts Reported in the Current Year (and/or Prior Years) 88 3.2 New Accounting Pronouncements 88 4. Significant Accounting Policies 89 4.1 Basis of Consolidation 89 4.1.1 Business Combinations 89 4.1.2 Subsidiaries 89 4.1.3 Loss of Control 90 4.1.4 Investments in Associates and Jointly Controlled Entities (Equity-accounted Investees) 90 4.1.5 Transactions Eliminated on Consolidation 90 4.2 Foreign Currency 90 4.2.1 Foreign Currency Transactions 90 4.2.2 Foreign Operations 90 4.2.3 Cash and Cash Equivalents/Liquid Assets 90 4.2.4 Borrowing Costs 90 4.3 Financial Instruments 90 4.3.1 Non-derivative Financial Assets 91 4.3.2 Non-derivative Financial Liabilities 91 4.3.3 Derivative Financial Instruments 91 4.3.4 Cash Flow Hedges that Qualify for Hedge Accounting 91 4.3.5 Share Capital 92 4.4 Property, Plant and Equipment 92 4.4.1 Recognition and Measurement 92 4.4.2 Depreciation 92 4.5 Right-of-use Assets 92 4.6 Intangible Assets 93 4.6.1 Goodwill 93 4.7 Impairment 93 4.8 Inventories 93 4.9 Provisions 93 4.9.1 Warranties 93 4.10 Lease Liabilities 93 4.11 Revenue Recognition 94 4.11.1 Revenue from Electricity Generation 94 4.11.2 Revenue from Sale of Goods 94 4.11.3 Revenues from Sale of Services 94 4.11.4 Revenue from Engineering, Procurement and Construction (EPC) 94 4.12 Finance Income and Financial Expenses 95 4.13 Employee Benefits 95 4.14 Government Grants 95 4.15 Income Tax 95 4.16 Earnings Per Share 95 4.17 Segment Reporting 95 4.18 Changes in Presentation of Financial Information 96 5. Determination of Fair Values 96 5.1 Property, Plant and Equipment 96 5.2 Inventories 97 5.3 Financial Instruments – Other Financial Assets and Derivatives 97 6. Financial Risk Management 97 6.1 Risk Management Framework 97 6.2 Sovereign Risk 97 6.3 Operational Risk 97 6.4 Currency Risk 98 6.5 Credit Risk 98 6.6 Liquidity Risk 98 6.7 Interest Risk 98 6.8 Force Majeur Risk 98 7. Operating Segments 99 8. Business combination 102 8.1 Valuation of Lerta 103 8.2 Steps of the acquisition 103 9. Acquisitions of Subsidiary and Non-controlling Interests; Financial Information for the Joint Ventures 105 9.1 Establishment of New Subsidiaries 105 9.2 Acquisitions of Subsidiaries 105 9.3 Financial Information for the Joint Ventures 106 Photon Energy N.V. Financial Section Annual Report 2022 Financial Statements for the Year Ended 31 December 2022 79 10. Revenue 108 11. Other Income 109 12. Raw Materials and Consumables Used 109 13. Solar Levy 110 14. Personnel Expenses 110 15. Other Expenses 110 16. Impairment Charges 111 17. Financial Income and Financial Expense 111 18. Income Tax Expense 112 18.1 Income Tax Recognized in Profit or Loss 112 18.2 Reconciliation of Effective Tax Rate 112 19. Property, Plant and Equipment 113 20. Right-of-use Assets and Lease Liabilities 115 21. Goodwill 116 22. Intangible Assets 117 23. Other Financial Investments 118 24. Deferred Tax Assets and Liabilities 120 25. Inventories 121 26. Trade and Other Receivables, Loans to Related Parties 121 27. Assets and Liabilities Arising from Contracts with Customers 123 28. Liquid Assets 124 29. Capital and Reserves 124 30. Earnings Per Share 127 31. Loans and Borrowings 128 32. Provisions 131 33. Trade and Other Payables 131 34. Current Income Tax Receivables / Current Tax Liability 131 35. Derivative Financial Instruments 132 36. Financial Risk Management 132 36.1 Liquidity Risk 132 36.2 Credit Risk 133 36.3 Interest Rate Risk 133 36.4 Currency Risk 134 37. Fair Value Disclosures 135 37.1 Recurring Fair Value Measurements 135 37.2 Assets and Liabilities Not Measured at Fair Value but for Which Fair Value is Disclosed 138 38. Presentation of Financial Instruments by Measurement Category 139 39. Related Parties 139 40. Group Entities 141 41. Contingent Assets and Liabilities, Commitments 146 42. Subsequent Events 146 Standalone Financial Statements For the Year Ended 31 December 2022 148 Company Balance Sheet as of 31 December 2022 149 Company Income Statement for the Financial Year Ended 31 December 2022 150 Notes to the Company Financial Statements For the Year Ended 31 December 2022 151 43. Accounting Information and Policies 152 43.1 Basis of Preparation 152 43.2 Financial Fixed Assets 152 44. Financial Fixed Assets 152 45. Accounts Receivable from Group Companies 154 46. Current Assets 155 47. Shareholders’ Equity 156 47.1 Reconciliation of Movement in Capital and Reserves 156 47.2 Share Capital and Share Premium 157 48. Long-Term Debt 158 49. Current Liabilities 160 50. Financial Instruments 160 50.1 General 160 50.2 Fair Value 160 50.3 Liquidity risk 161 51. Net Turnover 161 52. Other Operating Expenses 161 53. Other Interest Income and Similar Income 162 54. Other Interest Expense and Similar Expense 162 55. Share in Results from Participating Interests 162 56. Employee Benefits and Information 162 57. Fees of the Auditor 163 58. Related Parties 163 58.1 Transactions with Key Management Personnel 163 59. Cash Flow Statement 164 Other Information 165 I. Provisions in the Articles of Association Governing the Appropriation of Profit 166 II. Independent Auditor’s Report 166 80 Photon Energy N.V. Consolidated Financial Statements For the Year Ended 31 December 2022 Photon Energy N.V. Financial Section Annual Report 2022 Consolidated Financial Statements for the Year Ended 31 December 2022 81 Consolidated Statement of Comprehensive Income for the Year Ended 31 December In thousands of EUR Note 2022 2021 Revenue 10 95,136 36,359 Other income 11 552 418 Raw materials and consumables used 12 -43,929 -12,729 Solar levy 13 -1,969 -883 Personnel expenses 14 -9,534 -6,742 Other expenses 15 -15,947 -6,839 Earnings before interest, taxes, depreciation & amortisation (EBITDA) 24,309 9,584 Depreciation 19,20,22 -8,949 -10,670 Impairment charges 16 -684 -231 Gain (loss) on disposal of investments 9.3 0 464 Gain on derecognition of associate 8 2,182 0 Share of profit equity-accounted investments (net of tax) 9.3 127 141 Results from operating activities (EBIT) 16,985 -712 Financial income 17 362 245 Financial expenses 17 -9,535 -6,770 Gains less losses on derecognition of financial liabilities at amortised costs 17 -114 -420 Revaluation of derivatives 17 1,027 1,730 Profit/loss before taxation (EBT) 8,725 -5,927 Income tax due/deferred 18 -2,463 -506 Profit/loss from continuing operations 6,262 -6,433 Profit/loss 6,262 -6,433 Other comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss Revaluation of property, plant and equipment 19,29 433 738 Revaluation of other investments 23 605 2,657 Items that will be reclassified subsequently to profit or loss Foreign currency translation difference - foreign operations 29 -1,943 2,769 Derivatives (hedging) 29,35 2,310 2,347 Items that will be reclassified subsequently to profit or loss – related to JV Derivatives (hedging) 29,35 5 17 Other comprehensive income 1,410 8,528 Total comprehensive income 7,672 2,095 Profit/loss attributable to: Attributable to the owners of the company 6,309 -6,404 Attributable to non-controlling interest -47 -29 Profit/loss for the year 6,262 -6,433 Total comprehensive income attributable to: Attributable to the owners of the company 7,719 2,124 Attributable to non-controlling interest -47 -29 Total comprehensive income 7,672 2,095 Earnings per share Earnings per share (basic) (in EUR) 30 0.111 -0.118 Earnings per share (diluted) (in EUR) 30 0.105 -0.107 Total comprehensive income per share (in EUR) 30 0.135 0.035 The notes on pages 85 to 147 are an integral part of these financial statements. Photon Energy N.V. Financial Section Annual Report 2022 Consolidated Financial Statements for the Year Ended 31 December 2022 82 Consolidated Statement of Financial Position as of 31 December In thousands of EUR Note 31 December 2022 31 December 2021 Assets Goodwill 21 15,446 0 Intangible assets 22 7,479 844 Property, plant and equipment 19 145,549 127,492 Right of use- leased assets 20 3,449 2,138 Long term advances 26 780 98 Investments in equity-accounted investees 9.3 1,509 1,626 Long-term receivable from derivatives 26 5,087 0 Other receivables - non-current 26 543 529 Deferred tax asset 24 1,601 0 Other non-current financial assets 23 7,816 9,736 Non-current assets 189,259 142,463 Inventories 25 20,328 2,197 Contract asset 27 1,154 1,131 Trade receivables 26 9,624 3,756 Other receivables 26 9,039 5,327 Loans to related parties 26,39 2,447 1,811 Current income tax receivable 34 0 303 Prepaid expenses 597 268 Liquid assets 28 21,358 39,362 Cash and cash equivalents 11,271 32,506 Liquid assets with restriction on disposition 6,373 3,629 Precious metals 3,714 3,227 Current assets 64,547 54,155 Total assets 253,806 196,618 Equity & Liabilities Equity 29 Share capital 600 600 Share premium 40,524 31,443 Revaluation reserve 38,326 40,251 Legal reserve 13 13 Hedging reserve 4,355 2,039 Currency translation reserve 2,363 2,022 Retained earnings -15,408 -24,680 Other capital funds 29 38 38 Treasury shares held 29 -139 -38 Equity attributable to owners of the Company 70,672 51,688 Non-controlling interests -197 -150 Total equity 70,475 51,538 Liabilities Loans and borrowings 31 58,446 41,106 Issued bonds 31 76,511 57,223 Lease liability 20 2,914 1,676 Other non-current liabilities 31 230 373 Provisions 32 566 545 Deferred tax liabilities 24 11,125 10,199 Non-current liabilities 149,792 111,122 Loans and borrowings 31 7,259 4,354 Issued bonds 31 3,670 24,107 Trade payables 33 11,988 2,275 Other payables 33 6,610 2,202 Contract liabilities 27 592 423 Lease liability 20 712 597 Current tax liabilities 18,34 2,708 0 Current liabilities 33,539 33,958 Total liabilities 183,331 145,080 Total equity and liabilities 253,806 196,618 The notes on pages 85 to 147 are an integral part of these financial statements. Photon Energy N.V. Financial Section Annual Report 2022 Consolidated Financial Statements for the Year Ended 31 December 2022 83 Consolidated Statement of Changes in Equity for the Year Ended 31 December In thousands of EUR Note Share capital Share premium Statutory reserve fund Revaluation reserve Currency translation reserve Hedging reserve Other capital funds Own treasury shares Retained earnings TOTAL Non- controlling interests TOTAL EQUITY Restated balance as at 1 January 2021 28 600 23,946 13 40,679 -2,580 -325 87 -87 -22,098 40,235 -121 40,114 Profit/loss for the year 0 0 0 0 0 0 0 0 -6,404 -6,404 -29 -6,433 Increase in revaluation of PPE 19,29 0 0 0 738 0 0 0 0 0 738 0 738 Change in fair value of derivatives 29 0 0 0 0 0 2,347 0 0 0 2,347 0 2,347 Change in fair value of other investments (FVOCI) 23,29 0 0 0 2,657 0 0 0 0 0 2,657 0 2,657 Foreign currency translation differences 29 0 0 0 0 2,769 0 0 0 0 2,769 0 2,769 Change in fair value of derivatives (JV share) 35 0 0 0 0 0 17 0 0 0 17 0 17 Other comprehensive income 0 0 0 3,395 2,769 2,364 0 0 0 8,528 0 8,528 Total comprehensive income 0 0 0 3,395 2,769 2,364 0 0 -6,404 2,124 -29 2,095 New shares placed with share premium 29 0 7,497 0 0 0 0 -49 49 0 7,497 0 7,497 Other movements 29 0 0 0 0 1,832 0 0 0 0 1,832 0 1,832 Recycled from revaluation reserve to retained earnings 29 0 0 0 -3,822 0 0 0 0 3,822 0 0 0 BALANCE at 31 December 2021 29 600 31,443 13 40,251 2,022 2,039 38 -38 -24,680 51,688 -150 51,538 Profit/loss for the year 0 0 0 0 0 0 0 0 6,309 6,309 -47 6,262 Increase in revaluation of PPE 19,29 0 0 0 433 0 0 0 0 0 433 0 433 Change in fair value of derivatives 29 0 0 0 0 0 2,310 0 0 0 2,310 0 2,310 Change in fair value of other investments (FVOCI) 23,29 0 0 0 605 0 0 0 0 0 605 0 605 Foreign currency translation differences 29 0 0 0 0 -1,943 0 0 0 0 -1,943 0 -1,943 Change in fair value of derivatives (JV share) 35 0 0 0 0 0 5 0 0 0 5 0 5 Other comprehensive income 0 0 0 1,038 -1,943 2,315 0 0 0 1,410 0 1,410 Total comprehensive income 0 0 0 1,038 -1,943 2,315 0 0 6,309 7,719 -47 7,672 Acquisition of subsidiary 8 0 8,781 0 0 0 0 0 0 0 8,781 0 8,781 Other movements 29 0 300 0 0 2,285 0 0 -101 0 2,484 0 2,484 Employee share scheme 29 0 0 0 0 0 0 0 0 0 0 0 0 Recycled from revaluation reserve to retained earnings 29 0 0 0 -2,963 0 0 0 0 2,963 0 0 0 BALANCE at 31 December 2022 29 600 40,524 13 38,326 2,363 4,355 38 -139 -15,408 70,672 -197 70,475 The notes on pages 85 to 147 are an integral part of these financial statements. Photon Energy N.V. Financial Section Annual Report 2022 Consolidated Financial Statements for the Year Ended 31 December 2022 84 Consolidated Statement of Cash Flows for the Year Ended 31 December In thousands of EUR Note 2022 2021 Cash flows from operating activities Profit/loss for the year before tax 8,725 -5,927 Adjustments for: Depreciation 19,20,22 8,949 10,670 Share of profit of equity-accounted investments 9 -127 -141 Impairment charges 26 684 0 Gain on disposal of financial investments 9 0 -464 Net finance costs 17 8,259 5,215 Other non-cash items -5,991 4,346 Changes in: Trade and other receivables 26 -7,544 -1,478 Gross amount due from customers for contract work 27 -23 -106 Prepaid expenses 26 -157 -7 Inventories 25 -17,890 -1,187 Trade and other payables 33 9,690 -2,351 Income tax paid (advances) 33 -1,728 -2,349 Net cash from operating activities 2,847 6,221 Cash flows from investing activities Acquisition of property, plant and equipment 19,22 -27,576 -8,619 Acquisition of subsidiaries, associates, JV 9 -6,214 0 Acquisition of other financial asset - precious metals 28 -277 -2,849 Acquisition of other investments 23 -120 -4,325 Proceeds from sale of investments 9 757 1,560 Net cash used in investing activities -33,430 -14,233 Cash flows from financing activities Proceeds from issuance of ordinary shares 29 0 7,754 Proceeds from borrowings 31 29,086 15,416 Transfer to/from restricted cash account 28 -2,785 397 Repayment of borrowings 31 -6,649 -19,898 Repayment of principal element of lease liability 20,31 -668 -577 Proceeds from issuing bonds 31 22,500 56,092 Payment of placement fee/exchange bonus fee for bonds issued 17,31 -331 -1,202 Repayment of long term liabilities/bonds 31 -23,719 -21,281 Interest payments 31 -8,281 -6,076 Proceeds from terminated derivatives 17 195 0 Net cash from financing activities 9,348 30,625 Net decrease/increase in cash and cash equivalents -21,235 22,613 Cash and cash equivalents at 1 January 32,506 9,893 Cash and cash equivalents at 31 December 28 11,271 32,506 The notes on pages 85 to 147 are an integral part of these financial statements. 85 Notes to the Consolidated Financial Statements For the Year Ended 31 December 2022 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 86 1. Reporting Entity Photon Energy N.V. (“Photon Energy” or the “Company”), ID 51447126, is a joint-stock company incorporated under the laws of Netherlands on 9 December 2010. The statutory seat of the Com- pany is Barbara Strozzilaan 201, 1083HN Amsterdam. The consol- idated financial statements of the Company as at and for the year ended 31 December 2022 comprise the Company and its subsidi- aries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in jointly controlled entities. Photon Energy N.V. is the Group’s ultimate parent company. It is a a joint-stock company incorporated and domiciled in Netherlands. Principal place of business on the Company is Netherlands. Photon Energy NV’s shares are listed on the regulated markets of the Warsaw and Prague Stock Exchanges, as well as on the Quo- tation Board of the Frankfurt Stock Exchange. Trading of the shares on regulated markets on the Warsaw Stock Exchange and Prague Stock Exchange commenced on 5 January 2021. Trading of the Company’s shares on the Quotation Board of the Open Market of the Frankfurt Stock Exchange (FSX) commenced on 11 January 2021. The bonds are traded on the Open Market of the Frankfurt Stock exchange, and on the stock exchanges in Berlin, Hamburg, Han- nover, Munich and Stuttgart. The Group is mainly engaged in the development of photovoltaic power plants. This activity involves securing suitable sites by pur- chase or long-term lease, obtaining all licenses and permits, the design, procurement and installation of photovoltaic equipment, fi- nancing, operations and maintenance. Photon Energy pursues a comprehensive strategy of focusing both on green-field and rooftop installations while trying to cover the largest possible part of the value chain and lifecycle of the power plant. In addition, the Group launched a new service line Water which offers comprehensive services in the fields of contaminated land and ground water reme- diation and water purification. 2. Basis of Preparation 2.1 Statement of Compliance The consolidated financial statements have been prepared in ac- cordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (“EU IFRSs”) and title 9 Book 2 of the Netherlands Civil code. It represents the international ac- counting standards adopted in the form of European Commission Regulations in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council. The consolidated financial statements were authorised for issue by the Board of Directors on 24 April 2023. Going Concern The Consolidated financial statements have been prepared on a going concern basis, resulting from the Management’s assessment of the Company’s ability to continue its operations for the foresee- able future. The Management based its assessment on an evalua- tion of, among others, the company’s financial position, expected future cash flows and market developments. As of 31 December 2022, liquid assets amounted to EUR 21.358 million. The Manage- ment also considered the Company’s ability to obtain financing, taking into account the company’s credit standing. Expected future cash flows are based on the latest forecasts. These forecasts take into account internal and external developments relevant in the as- sessment of the ability of the Company to continue as a going con- cern, including but not limited to market developments, developments in the macro-economic environment and climate-re- lated developments. The Management’s assessment did not lead to uncertainties in relation to the Company’s ability to continue as a going concern 2.2 Basis of Measurement The consolidated financial statements have been prepared on his- torical cost basis except for the following material items in the state- ment of financial position: ► Property, plant and equipment – photovoltaic power plants are measured at revalued amounts (for revaluation details refer to the note 19) ► Financial instruments, except for derivatives, FVPL and FVOCI financial investments, are measured at amortised costs ► Derivatives, FVPL and FVOCI financial investments are measured at fair value. 2.3 Functional Currency These financial statements are presented in EUR. The functional currencies used in the Group are CZK for Czech subsidiaries, EUR for Dutch, German and Slovak companies, CHF for Swiss subsidiary, HUF for Hungarian entities AUD for Australian subsidiaries ROM for Romanian entities and PLN for Polish enti- ties. All financial information presented in EUR has been rounded to the nearest thousand . 2.4 Use of Estimates and Judgments The preparation of the consolidated financial statements in con- formity with EU IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the pe- riod in which the estimates are revised and in any future periods affected. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes or below: ► Note 5.1 – Key assumptions used in discounted cash flow projections related to the valuation of the photovol- taic power plants ► Note 2.4.1. – Professional judgement used in assess- ment of control of investments as a basis for consolida- tion ► Note 2.4.2. – Recognition of deferred tax asset ► Note 2.4.3. – Recognition of revenues from construc- tions contracts Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 87 ► Note 2.4.4. – ECL measurement ► Note 2.4.5 – Key assumptions used in measurement of fair value of other financial investments ► Note 2.4.6.- Impairment of goodwill ► Note 2.4.7.- Initial recognition of intangible assets ► Note 2.4.8.- Useful economic life of tangible and intangi- ble assets and right of use ► Note 2.4.9.- Business combination Other factors, such as climate-related risks, do not have significant impact on Group’s operations.and do not lead to a significant risk of material adjustments and therefor are not considered to be sig- nificant judgements. The power plants are not affected by global warming itself. Potential increase of damages by thundersorms are covered by insurance, which cost is minor. Due to the geographical diversification of the power plants there is no risk that a material part of the portfolio could be damaged at the same time. 2.4.1 Consolidation of Special Purpose Entities The Group includes also special purpose entities (SPEs) where it does not have any direct or indirect shareholdings. These SPEs are consolidated if, based on an evaluation of the substance of its relationship with the Group and the SPE’s risks and rewards, the Group concludes that it controls the SPE. SPEs controlled by the Group were established under terms that impose strict limitations on the decision-making powers of the SPEs’ management and that result in the Group receiving the majority of the benefits related to the SPEs’ operations and net assets, being exposed to the majority of risks incident to the SPEs’ activities and retaining the majority of the residual or ownership risks related to the SPEs or their assets. Based on new contractual agreements, the Company has the right to apply a call option for purchase of a 100% share in the RL SPVs in case of full repayment of external loans, security loans, and all the other financial liabilities of PENV towards RL and the Financing bank, plus payment of the future purchase price for the transfer of share in the SPEs. On December 2021 the Company has repaid all outstanding financial liabilities towards RL and as of 17 January 2022 the Group has exercised its call options. See the list of SPEs in note 40. 2.4.2 Recognition of Deferred Tax Asset The recognised deferred tax assets represent income taxes recov- erable through future deductions from taxable profits and are rec- orded in the consolidated statement of financial position. Deferred income tax assets are recorded to the extent that realisation of the related tax benefit is probable. This includes temporary difference expected to reverse in the future and the availability of sufficient future taxable profit against which the deductions can be utilised. The future taxable profits and the amount of tax benefits that are probable in the future are based on the medium-term business plan prepared by management and extrapolated results thereafter. The business plan is based on management expectations that are be- lieved to be reasonable under the circumstances. More information relating to not-recognised deferred tax assets are presented in note 24. 2.4.3 Recognition of Revenues from Contracts with Customers Revenues from contracts are recognised for engineering, procure- ment, and construction (EPC) contracts to external customers. The management estimates progress towards complete satisfaction of that performance obligation. The stage of completion is measured by reference to the contract costs incurred up to the reporting date as a percentage of total estimated costs for each contract. When the outcome of a construction contract cannot be estimated relia- bly, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. The Group regularly reviews and validates the methods that are used for the progress estimation. 2.4.4 ECL Measurement Measurement of ECLs is a significant estimate that involves deter- mination methodology, models and data inputs. Details of ECL measurement methodology are disclosed in note 25. The Group regularly reviews and validates the models and inputs to the mod- els to reduce any differences between expected credit loss esti- mates and actual credit loss experience . 2.4.5 Key Assumptions Used in Measurement of Fair Value of Other Financial Investments Other financial investments are stated at its fair value based on valuation models prepared by management. These models and the assumptions underlying them are regularly reviewed by the man- agement. Management considers that the valuation of its other fi- nancial investment is currently subject to an increased degree of judgement and an increased likelihood that actual proceeds on a sale may differ from the carrying value. For the investment in Valuetech,the profit share of the equity value of the participations in ValueTechs is considered as of the reporting date with deduct a 30% transaction discount (covering cost and price discounts) from this value. Other financial investments include primarily ordinary and prefer- ence shares and related share options held (see also note 23). The principal assumptions underlying the estimation of the fair value are following: ► Market price of the shares ► Probability of the realisation of the share options granted and expected market price of the shares to be purchased at the realisation of the share options ► Discount rate reflecting required return on investment on this type of the Group’s investments These valuations are regularly compared to actual market data and most recent actual similar transactions made on the relevant mar- ket. 2.4.6 Impairment of Goodwill Goodwill is reviewed at least annually for impairment. Any impair- ment loss is recognised as an expense immediately and is not sub- sequently reversed. For the purpose of impairment testing, goodwill is allocated to groups of individual Cash-Generating Units (CGUs) expected to benefit from the combination. If the recovera- ble amount of the CGU is less than the carrying amount of goodwill allocated to it, the resulting impairment loss is applied first to the allocated goodwill and then to the other assets on a pro-rata basis of the carrying amount of each asset. Reversals of impairment losses on goodwill are not permitted . 2.4.7 Initial Recognition of Intangible Assets Intangible assets measured in fair value are recognized in the value calculated based on the discounted cash-flow model and will be regularly amortized in line with the utilization of the underlying con- tracts during the period of 2023-2027. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 88 2.4.8. Useful Economic Life of Tangible and Intagi- ble Assets and Right of Use Useful economic life of the intangible assets is determined in line with the underlying contracts, in case of the demand response con- tracts, it is a 5 years period for 2023-2027. Right of use economic life is determined to be in line with the period of the contract signed for the lease of an underlying asset. Useful economic life of the tangible asset is usually defined for the period of the future estimated cash-flows, usually up to 25-30 years in case of the photovoltaic powerplants. 2.4.9. Business Combination Estimates relating to the calculation of fair values of acquired as- sets, liabilities and contingent liabilities are required within the con- text of business combinations. Where intangible assets are identified, estimates are necessary for the determination of fair val- ues by means of discounted cash flows, including the duration, amount of future cash flows, and discount rate. When making esti- mates in the context of purchase price allocations on major acqui- sitions, the Group does not expect changes in these fair value estimates to have a significant impact on the recognised assets and liabilities over the remaining measurement period. 3. Application of New and Revised EU IFRSs 3.1 New and Revised EU IFRSs Affecting Amounts Reported in the Current Year (and/or Prior Years) Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Concep- tual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effec- tive for annual periods beginning on or after 1 January 2022). The amendments address issues that arise from the implementa- tion of the reforms, including the replacement of one benchmark with an alternative one. There are no impact on the Group’s con- solidated financial statements and no impacts are expected. 3.2 New Accounting Pronouncements Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 Jan- uary 2023 or later, and which the Group has not early adopted. Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12 (is- sued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023). The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and decommissioning obligations. In specified circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. Previously, there had been some uncertainty about whether the exemption applied to transactions such as leases and decom- missioning obligations – transactions for which both an asset and a liability are recognised. The amendments clarify that the exemp- tion does not apply and that entities are required to recognise de- ferred tax on such transactions. The amendments require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The Group is currently assessing the im- pact of the amendments on its consolidated financial statements and no significant impacts are expected. Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). These narrow scope amendments clarify that liabilities are classi- fied as either current or non-current, depending on the rights that exist at the end of the reporting period. The Group is currently as- sessing the impact of the amendments on its consolidated financial statements and no impacts are expected. Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (is- sued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023). The amendment to IAS 1 on classification of liabilities as current or non-current was issued in January 2020 with an original effective date 1 January 2022. However, in response to the Covid-19 pan- demic, the effective date was deferred by one year to provide com- panies with more time to implement classification changes resulting from the amended guidance. The Group is currently as- sessing the impact of the amendments on its consolidated financial statements and no impacts are expected. Amendments to IAS 8: Definition of Accounting Esti- mates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023). The amendment to IAS 8 clarified how companies should distin- guish changes in accounting policies from changes in accounting estimates. The Group is currently assessing the impact of the amendments on its consolidated financial statements. Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 Feb- ruary 2021 and effective for annual periods beginning on or after 1 January 2023). IAS 1 was amended to require companies to disclose their material accounting policy information rather than their significant account- ing policies. The amendment provided the definition of material ac- counting policy information. The amendment also clarified that accounting policy information is expected to be material if, without it, the users of the financial statements would be unable to under- stand other material information in the financial statements. The amendment provided illustrative examples of accounting policy in- formation that is likely to be considered material to the entity’s fi- nancial statements. Further, the amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed. However, if it is disclosed, it should not obscure material Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 89 accounting policy information. To support this amendment, IFRS Practice Statement 2, ‘Making Materiality Judgements’ was also amended to provide guidance on how to apply the concept of ma- teriality to accounting policy disclosures.The Group is currently as- sessing the impact of the amendments on its financial statements. IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing prac- tices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insur- ance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk- adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-mak- ing, an entity will be recognising the loss immediately. The Group is currently assessing the impact of the amendments on its consol- idated financial statements. Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual peri- ods beginning on or after 1 January 2023). The amendments include a number of clarifications intended to ease implementation of IFRS 17, simplify some requirements of the standard and transition. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental prin- ciples of the standard. The Group is currently assessing the impact of the amendments on its consolidated financial statements. New accounting Pronouncements are aligned with the EU En- dorsement Status Report of 22.09.2022. 4. Significant Accounting Policies The accounting policies set out below have been applied consist- ently to all periods presented in these consolidated financial state- ments and have been applied consistently by Group entities. 4.1 Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. 4.1.1 Business Combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: ► fair values of the assets transferred ► liabilities incurred to the former owners of the acquired business ► equity interests issued by the group ► fair value of any asset or liability resulting from a contingent consideration arrangement, and ► fair value of any pre-existing equity interest in the subsidi- ary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired en- tity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the: ► consideration transferred , ► amount of any non-controlling interest in the acquired en- tity, and ► acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contin- gent consideration is classified either as equity or a finan- cial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss. If the business combina- tion is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. 4.1.2 Subsidiaries Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated finan- cial statements from the date that control commences until the date that control ceases. Income and expenses and other comprehensive income of subsid- iaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effec- tive date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is at- tributed to the owners of the Company and to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 90 When necessary, adjustments are made to the financial state- ments of subsidiaries to bring their accounting policies into line with Group accounting policies . 4.1.3 Loss of Control Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising from the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted in- vestee or as other financial asset depending on the level of influ- ence retained. 4.1.4 Investments in Associates and Jointly Con- trolled Entities (Equity-accounted Investees) Associates are those entities in which the Group has significant in- fluence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds 20 percent or more of the voting power of another entity. Joint ven- tures are arrangements that the Company controls jointly with one or more other investors, and over which the Company has rights to a share of the arrangements net assets rather than direct rights to underlying assets and obligations for underlying liabilities. Investments in associates and jointly controlled entities are ac- counted for using the equity method (equity-accounted investees) and are recognized initially at cost. The cost of the investment in- cludes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income, after adjust- ments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. Share of profit equity-accounted investments (net of tax) is pre- sented in Result from operating activities. When the Group’s share of losses exceeds its interest in an equity- accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee . 4.1.5 Transactions Eliminated on Consolidation Regarding subsidiaries all intra-group transactions, balances, in- come and expenses are eliminated in full on consolidation. Regarding equity-accounted investees (see note 4.1.4 ) part of a margin on sales to these entities is eliminated. This part is calcu- lated as a percentage of margins equal to the percentage of the entity's shares owned by the Group. 4.2 Foreign Currency 4.2.1 Foreign Currency Transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denomi- nated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The for- eign currency gain or loss on monetary items is the difference be- tween amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year . Non-monetary assets and liabilities denominated in foreign curren- cies that are measured at fair value are retranslated to the func- tional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the ex- change rate at the date of the transaction. Foreign currency differ- ences arising on retranslation are recognized in profit or loss. 4.2.2 Foreign Operations The assets and liabilities of foreign operations (those in the Czech Republic, Switzerland, Hungary, Romania, Poland and Australia as of 31 December 2022 and 2021) are translated into Euro at ex- change rates at the reporting date. The income and expenses of foreign operations are translated into Euro at exchange rates at the dates of the transactions. Loans between the Group entities and related foreign exchange gains or losses are eliminated upon consolidation. However, where the loan is between the Group entities that have different functional currencies, the foreign exchange gain or loss cannot be eliminated in full and is recognised in the consolidated profit or loss, unless the loan is not expected to be settled in the foreseeable future and thus forms part of the net investment in foreign operation. In such a case, the foreign exchange gain or loss is recognised in other comprehensive income. 4.2.3 Cash and Cash Equivalents/Liquid Assets Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. Cash and cash equiva- lents are carried at amortised cost (AC) because: (i) they are held for collection of contractual cash flows and those cash flows repre- sent SPPI, and (ii) they are not designated at fair value through profit or loss (FVTPL). Restricted balances are disclosed in the notes to cash and cash equivalents (note 28) for the purposes of the consolidated state- ment of cash flows. The debt service and project reserve accounts are excluded from cash and cash equivalents as they serve as col- lateral for the lending banks and can only be used with the approval of the lending banks. Gold ingots purchased by the Group, are initially recognised at costs and subsequently measured at fair value through profit or loss. 4.2.4 Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is de- ducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognized in profit or loss in the pe- riod in which they are incurred. 4.3 Financial Instruments Financial instruments are only used to mitigate risks and are not used for trading purposes. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 91 4.3.1 Non-derivative Financial Assets Recognition and Derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Regular way purchases and sales of financial assets are accounted for at trade date. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, dis- charged, cancelled or expires. Classification and Initial Measurement of Financial As- sets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: ► amortised cost ► fair value through profit or loss (FVTPL) ► fair value through other comprehensive income (FVOCI). All income and expenses relating to financial assets that are rec- ognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade re- ceivables which is presented within Impairment charges. Financial Assets at Amortised Cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL nor FVOCI): ► they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows ► the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and inter- est on the principal amount outstanding After initial recognition, these are measured at amortised cost us- ing the effective interest method. Financial Assets at Fair Value Through Profit or Loss (FVTPL) or/and at Fair Value Through Other Compre- hensive Income (“FVOCI”) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are catego- rised as FVOCI. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those desig- nated and effective as hedging instruments, for which the hedge accounting requirements apply. Financial Assets Impairment – Credit Loss Allowance for Expected Credit Loss (ECL) Trade and other receivables, loans issued and contract assets are presented in the consolidated statement of financial position net of the allowance for ECL . The Group applies simplified approach for impairment of trade re- ceivables and contract assets. Financial Assets – Write-off Financial assets are written-off, in whole or in part, when the Group exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off rep- resents a derecognition event. 4.3.2 Non-derivative Financial Liabilities Classification and Initial Measurement of Financial Li- abilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liabil- ity at fair value through profit or loss. Subsequently, financial liabil- ities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instru- ments). All interest-related charges and, if applicable, changes in an instru- ment’s fair value that are reported in profit or loss are included within finance costs or finance income. Financial Liabilities – Derecognition Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). An exchange between the Group and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabil- ities, are accounted for as an extinguishment of the original finan- cial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. If the ex- change or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is at- tributed to a capital transaction with owners. 4.3.3 Derivative Financial Instruments Derivative financial instruments, including interest rates swaps, are carried at their fair value. All derivative instruments are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of derivatives that do not meet the requirements for application of hedge accounting are in- cluded in profit or loss for the year. 4.3.4 Cash Flow Hedges that Qualify for Hedge Ac- counting The Group decided to apply hedge accounting in accordance with IFRS 9. The Group designates certain derivatives prospectively as either a hedge of the fair value of a recognised asset or liability (fair Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 92 value hedge), or a hedge of future cash flows attributable to a rec- ognised asset or liability or a forecasted transaction (cash-flow hedge). Hedge accounting is used for derivatives designated in this way, provided that certain criteria, including defining the hedging strategy and hedging relationship before hedge accounting is ap- plied and ongoing documentation of the actual and expected effec- tiveness of the hedge, are met. Changes in the fair value of derivatives that qualify as effective fair- value hedges are recorded in the income statement, along with the corresponding change in fair value of the hedged asset or liability that is attributable to that specific hedged risk. Changes in the fair value of derivatives that qualify as effective cash-flow hedges are recorded as revaluation reserve from assets and liabilities in equity and are transferred to the income statement and classified as an income or expense in the period during which the hedged item affects the income statement. 4.3.5 Share Capital Ordinary Shares Ordinary shares are classified as equity. Consideration received above the nominal value of the ordinary shares is classified in eq- uity as Share premium. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects . Treasury Shares Where the Company or its subsidiaries purchase the Company’s equity instruments, the consideration paid, including any directly attributable incremental costs, net of income taxes, is deducted from the equity attributable to the Company’s owners until the eq- uity instruments are reissued, disposed of or cancelled. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity at- tributable to the Company’s owners. 4.4 Property, Plant and Equipment 4.4.1 Recognition and Measurement Photovoltaic power plants are stated in the consolidated statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated de- preciation and subsequent accumulated impairment losses. Reval- uations are performed at sufficient regularity so that the carrying amounts do not differ materially from those that would be deter- mined using fair values at the end of each reporting period. The need for revaluations is assessed every quarter. For fair value determination see note 5.1. Any revaluation surplus arising on the revaluation of such photo- voltaic power plant is recognized in other comprehensive income and accumulated in equity, except to the extent that the surplus reverses a revaluation deficit on the same asset previously recog- nized in profit or loss. Any deficit on the revaluation of such photo- voltaic power plants is recognized in profit or loss except to the extent that it reserves a previous revaluation surplus on the same asset, in which case the debit to that extent is recognized in other comprehensive income. Photovoltaic power plants, which the Company consolidates, in the course of construction are carried at cost, less any recognized im- pairment loss. The cost of self-constructed assets includes the cost of materials and direct labor plus any other costs directly attributa- ble to bringing the assets to a working condition for their intended use and capitalized borrowing costs. Such properties are reported as Property, plant, equipment - Assets in progress and are classi- fied to Property, plant and equipment - Photovoltaic power plants when completed and ready for use. These assets are completed and ready for use when the power plant is connected to the elec- tricity network and all technical parameters necessary for electricity production are completed. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use . Additional costs capitalized in the value of the asset are included in the regular review of power plants value as done on quarterly basis. The costs of maintenance, repairs, renewals or replacements which do not extend productive life are charged to operations as incurred. The costs of replacements and improvements which ex- tend productive life are capitalized. The cost of replacing part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. Included in the property plant and equipment are non separable intangible assets mainly relating to the rights to build and operate photovoltaic power plants in a specific country. Because the items are non separable, the rights are included in property, plant and equipment. Fixtures and equipment are stated at cost less accumulated depre- ciation and accumulated impairment losses. Cost includes ex- penditure that is directly attributable to the acquisition of the asset. The gain or loss on disposal of an item of fixtures and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is rec- ognized net within other income/other expenses in profit or loss. 4.4.2 Depreciation Depreciation is recognized so as to write off the costs or revalued amount of property, plant and equipment (other than land and prop- erties under construction) less their residual values over their use- ful lives, using the straight-line method. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Depreciation of revalued photovoltaic power plants is recognized in profit or loss. Every quarter the amount equal to the difference between depreciation based on the revalued carrying amount of photovoltaic power plants and depreciation based on asset’s origi- nal cost is transferred directly to retained earnings. On the subse- quent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Land is not depreciated. The estimated useful lives for the current and comparative years are as follows (based on the professional judgement combining the Feed in Tariff period and useful estimated live of the components and technology used in the power plants): ► Photovoltaic power plants 20-30 years ► Fixtures and equipment 3–10 years 4.5 Right-of-use Assets The group leases land, various offices and vehicles. Contracts may contain both lease and non-lease components. The group allo- cates the consideration in the contract to the lease and non-lease component based on their relative stand-alone prices. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 93 Assets arising from a lease are initially measured on a present value basis. Right of use assets are measured at cost comprising the following: ► the amount of the initial measurement of lease liability, ► any lease payments made at or before the commencement date less any lease incentives received, ► any initial direct costs, and ► cost to restore the asset to the conditions required by lease agreements. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets’ useful lives. Depreciation on the items of the right-of-use assets is calcu- lated using the straight-line method over their estimated useful lives as follows: ► Lands and easements lease term, 15-35 years ► Cars lease term, 5 years 4.6 Intangible Assets The Group’s intangible assets have definite useful lives and primar- ily include capitalised computer software and patents. Development costs that are directly associated with identifiable and unique software or patents controlled by the Group are recorded as intangible assets if an inflow of incremental economic benefits exceeding costs is probable. All other costs associated with com- puter software, e.g. its maintenance, are expensed when incurred. Intangible assets are amortised using the straight-line method over their useful lives: ► Capitalised SW development costs 3 years If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less costs of disposal. Separately acquired trademarks and licences are shown at histori- cal cost. Trademarks, licences and customer contracts acquired in a business combination are recognised at fair value at the acquisi- tion date. They have a finite useful life of 5 years and are subse- quently carried at cost less accumulated amortisation and impairment losses. 4.6.1 Goodwill Goodwill is measured initially as described under “Consolidated fi- nancial statements “ in note 4.1.1. Goodwill is not amortised but it is tested for impairment annually. Goodwill is allocated to the cash- generating units, or groups of cash-generating units, that are ex- pected to benefit from the synergies of the business combination. Such units or groups of units represent the lowest level at which the Group monitors goodwill and are not larger than an operating segment. The Group tests goodwill for impairment at least annually and whenever there are indications that goodwill may be impaired. The carrying value of the cash-generating unit containing 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 is recognised immediately as an expense and is not subsequently re- versed. Gains or losses on disposal of an operation within a cash generat- ing unit to which goodwill has been allocated include the carrying amount of goodwill associated with the disposed operation, gener- ally measured on the basis of the relative values of the disposed operation and the portion of the cash-generating unit which is re- tained. 4.7 Impairment Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recover- able amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible rever- sal of the impairment at the end of each reporting period . 4.8 Inventories Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inven- tories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and sell- ing expenses. 4.9 Provisions A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. 4.9.1 Warranties A provision for warranties is recognized when the underlying ser- vices are sold, i.e. when the construction contracts are finished. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities . 4.10 Lease Liabilities Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments (including in-substance fixed payments), less any lease incentives receivable. There are no variable payments that are based on an index or a rate, no amounts expected to be payable by the Group under residual value guarantees nor purchase option for which the Group is reasonably certain to exercise that option. Extension and termination options are included in some property leases across the Group. These terms are used to maximise oper- ational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination op- tions held are exercisable only by the Group and not by the respec- tive lessor. Extension options (or period after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is gen- erally the case for leases of the Group, the Group’s incremental Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 94 borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, collateral and conditions. To determine the incremental borrowing rate, the Group: ► where possible, uses recent third-party financing re- ceived by the individual lessee as a starting point, ad- justed to reflect changes in financing conditions since third party financing was received, ► uses a build-up approach that starts with a risk-free in- terest rate adjusted for credit risk, and ► makes adjustments specific to the lease, e.g. term, coun- try, currency and collateral. Lease payments are allocated between principal and finance costs. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remain- ing balance of the liability for each period. Payments associated with short-term leases of equipment and ve- hicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture with value of EUR 4 thousand or less . 4.11 Revenue Recognition Revenue is income arising in the course of the Group’s ordinary activities. The Group recognises revenues from the following activ- ities: ► Revenue from electricity generation ► Revenue from engineering, procurement and construc- tion (EPC) ► Revenue from sale of goods (solar panels, inverters and related technologies) ► Revenue from sale of services (e.g. maintenance, tech- nical-administrative; installation) Revenue is recognised in the amount of transaction price. Trans- action price is the amount of consideration to which the Group ex- pects to be entitled in exchange for transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. Revenue is recognised net of discounts, value added taxes, export duties and similar mandatory payment. 4.11.1 Revenue from Electricity Generation Revenues from sale of electricity are coming from the sale of elec- tricity produced and sold to the local electricity distributor. Invoices are issued/ revenues are recognised only when the electricity is delivered to the distribution net in the volume reviewed and ac- cepted by the distributors. No element of financing is deemed pre- sent as the sales are made with credit terms of 30 days, which is consistent with market practice. Government grants for power generation intended as a compensa- tion for the price of power, are recognised under revenue from elec- tricity generation. Solar levy of 10% applied to electricity produced in the Czech Re- public is presented separately in costs. 4.11.2 Revenue from Sale of Goods Sales are recognised when the control over the goods has trans- ferred to the customer. This transfer of control is clearly defined in the contractual conditions. Group as a supplier does not provide in major of the cases any other separate performance as part of the delivery. In minor cases, the storage services, transportation, or ar- rangement of customs duty is provided and invoiced individually, however this is provided only on the individual basis and represents an immaterial part of the overall revenues within the sale of tech- nology division. No element of financing is deemed present as the sales are made with credit terms of 30-60 days, which is consistent with market practice. In most cases, the Company requires advance payments (partial or 100%) for the sales of goods. Advances received are recognised as contract liability. If the Group provides any additional services to the customer after contract over goods has passed, revenues from such services is considered to be separate performance obligation and is recog- nised over the time the service is rendered. 4.11.3 Revenues from Sale of Services Revenues from sale of services (e.g. maintenance, technical-ad- ministrative; installation) are recognised on regular and recurring basis for a fixed fee agreed in the contract, additionally to this ad- hoc interventions are invoiced based on the actual usage of the on call service intervention. In this case, the invoice is issued only on the basis of the accepted protocol confirming the services were re- ally provided to the customer and were accepted. Part of this inter- vention and service provided can be also provision/usage of miscellaneous material that is at the end part of the total invoice. However, this is not provided independently without the related ser- vice so it cannot be considered as a separate performance obliga- tion. No element of financing is deemed present as the sales are made with credit terms of 30 days, which is consistent with market practice. 4.11.4 Revenue from Engineering, Procurement and Construction (EPC) Construction services are provided based on engineering, procure- ment and construction (EPC) contracts either to internal or external customers. In the contract, milestones for invoicing are clearly de- fined. The EPC provider commits himself to the construction and delivery of the power plant with the regular warranty for quality of the work delivered. No long-term extraordinary guarantees that could be considered as a separate obligation under IFRS 15 are provided. EPC services represent one single performance obliga- tion as EPC services are distinct to a customer and cannot be sep- arated from each other. Revenues from EPC are recognised over the time and include the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments. In accordance with contract terms, the Group has an enforceable right to payment for perfor- mance completed to date. For each performance obligation satisfied over time, the Group rec- ognised revenue by measuring the progress towards complete sat- isfaction of that performance obligation using the input method. The Group is entitled to invoice the customers when defined milestones are achieved. The Group recognises contract assets for construc- tion work delivered. Invoiced amount of contract assets is reclassi- fied to trade receivable upon its invoicing. In case the payment for the milestones exceed the amount of costs recognised based on the input method, the Group recognises a contract liability. No sig- nificant financing component is deemed in EPC contracts, as the time period between revenue recognition based on input method Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 95 and the milestone payment is always shorter that one year, in most cases with credit terms from 30 to 90 days. 4.12 Finance Income and Financial Expenses Financial income comprises interest income on loans. Interest in- come is recognized in profit or loss using the effective interest rate method. Financial expenses comprise interest expense on borrowings, bank account fees and net foreign currency losses. Interest ex- pense is recognized using the effective interest rate method. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss. Borrowing costs incurred by the Group directly at- tributable to the construction of power plants is capitalized in the cost of the related asset until the date of its completion. Foreign currency gains and losses are reported on a net basis and recognised in profit and loss. 4.13 Employee Benefits Wages, salaries, contributions to the state pension and social in- surance funds in the Czech Republic, Slovakia, Hungary, Poland, Romania, Netherlands, Switzerland and Australia, paid annual leave and sick leave, bonuses, and non-monetary benefits (such as health services and kindergarten services) are accrued in the year in which the associated services are rendered by the employ- ees of the Group. Beside the contributions to the statutory defined contribution schemes, there are no other obligations of the Group beyond these contributions. The Group also provides an Employee Share Purchase program to some of its employees. Under this program, the employees receive an automatic monthly bonus of 10% to their gross salary and the difference between after-tax amounts of 100% and 110% of the base salary is used for the purchase of shares. Employees are not allowed to sell their shares acquired through the program as long as they are employees. The 10% bonus to the gross salary as well as related social and health contribution are recorded and expense in each respective period. 4.14 Government Grants Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss for the year as other income over the period neces- sary to match them with the costs that they are intended to com- pensate. Compensations from government agencies related to revenue from fixed feed-in-tariffs, where applicable, are included in Revenue from electricity generation, as they represent part of the Group’s core activity clearly linked to the model of PVP revenue from sales of electricity. 4.15 Income Tax Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized in respect of temporary differences be- tween the carrying amounts of assets and liabilities for financial re- porting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for: ► Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combi- nation and that affects neither accounting nor taxable profit or loss; ► Temporary differences related to investments in subsidiar- ies and jointly controlled entities to the extent that it is prob- able that they will not reverse in the foreseeable future; and ► Taxable temporary differences arising on the initial recog- nition of goodwill. A deferred tax liability is recognized for assets revaluation reported in other comprehensive income and other temporary differences. Assets revaluation represents the revaluation of photovoltaic power plants described in note 4.4.1 . Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the re- porting date. Deferred tax assets and liabilities are offset if there is a legally en- forceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is proba- ble that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 4.16 Earnings Per Share The Group uses ordinary shares only. The Group presents basic earnings per share and total comprehensive income per share data. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the total number of ordinary shares outstanding during the year. Total comprehensive income per share is calculated by dividing the total comprehensive income attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Total diluted comprehensive income per share is calculated by di- viding the total comprehensive by the total number of ordinary shares outstanding during the year. 4.17 Segment Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transac- tions with any of the Group’s other components. All operating seg- ments’ operating results are reviewed regularly by the Group’s management and directors to make decisions about resources to be allocated to the segment and to assess its performance, and for Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 96 which discrete financial information is available. Reportable seg- ments whose revenue, result or assets are ten percent or more of all the segments are reported separately. Reportable segments in- cluding information on how operating segments are aggregated are included in note 7. Segment results that are reported include items directly attributable to a segment as well as those that can be allocated on a reasona- ble basis. Unallocated items comprise mainly corporate assets (pri- marily the Company’s office premises), head office expenses, and other minor expenses non-allocable to any of the segments . Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible as- sets other than goodwill . 4.18 Changes in Presentation of Financial In- formation There were no changes presentation of financial information dur- ing the year. 5. Determination of Fair Values A number of the Group’s accounting policies and disclosures re- quire the determination of fair value, for both financial and non-fi- nancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assump- tions made in determining fair values is disclosed in the notes spe- cific to that asset or liability. 5.1 Property, Plant and Equipment The fair value of items of plant, equipment, fixtures and fittings is based on the market approach, using quoted market prices for sim- ilar items when available, or the income approach (an internally generated discounted cash-flow model) if there is no market-based evidence of the fair value. Otherwise, the depreciated replacement cost approach will be used, when appropriate. The depreciated re- placement cost estimates reflect adjustments for physical deterio- ration as well as functional and economic obsolescence. For photovoltaic power plants comparable market prices are not sufficiently available due to a lack of transactions in some markets and a lack of public available specific data of such transactions. The market values of power plants significantly vary dependent on a large number of parameters, which are usually not sufficiently disclosed. Those parameters are among others the actual feed-in- tariff and its duration, actual and expected production output, used technology components, contracted operating cost of the power plant, financing structure, conditions and financing cost, etc. Most investors use the income approach also as a basis to determine a purchase price for a transaction. Based on the aforementioned lack of reliable and comparable market data, the income approach is used by the Company as a more relevant method. Under this ap- proach the fair value of photovoltaic power plants is based on an internally generated discounted cash flow models, discounted at weighted average cost of capital. For PVPs the future cash flows are calculated for the period equaling the estimated useful life (30 years in Australia, 25 years in the Czech Republic, Slovakia and Hungary) and are based on Feed-in-Tariffs or expected electricity and certificate prices on the relevant markets and on the expected after-tax cost of debt and expected cost of equity. On a quarterly basis, management reviews the expected costs of debt of individual projects vis-à-vis actual interest cost, financial market conditions, and interest rate for a 15-year state bond. On a quarterly basis, management also reviews expected cost of equity for the period of the cash flow model. The initial valuations are done as of the date of put in use of an individual power plant, and each model is periodically reviewed and any potential change in inputs is considered. As of 31 December 2022 the cash flow projections are prepared for 25 years in Czech Republic, Slovak Republic and Hungary, equal to the expected technical and commercial life time of the projects. Main other inputs used in the models are the fol- lowing: overall project budget, taxes, interest rates, reserve funds, feed in tariff or electricity market price assumptions, OPEX, CAPEX and degradation factor assumption. The revaluation reserve created, based on the DCF models, is an- nually released to the retained earnings in the amount equal to the depreciation calculated from the amount of revaluation (see also Note 4.4.2 Depreciation). Since 2014 the Group uses the DCF Equity valuation method which is based on a Discounted Cash Flow method. This method includes the future cash flows available to the shareholders/providers of eq- uity of photovoltaic projects (i.e. after all debt repayments and in- terests) that are later discounted by respective discount rates. The valuation of the project keeps in mind the risk profile of future cash flows and the way the project is financed. The risk profile is represented by a discount rate (cost of equity levered). Due to ex- istence of senior project financing the cost of equity calculated by CAPM (capital asset pricing model) formula is adjusted by Miller- Modigliani formula to achieve the most precise cost of equity lev- ered for each project respecting it unique capital structure. Quarterly discounting is applied that follows the fact that debt re- payments are happening on quarterly basis. This is effecting the overall change in financing structure and indirectly effecting cost of equity levered. Changes in the Valuation Parameters in 2021 In Q3 2021 Czech Republic and Slovakia introduced changes to the feed-in-tariffs valid as of 1 January 2022. In July 2021 the Slovak parliament approved an amendment to the energy law introducing an extension of the feed-in-tariffs for PV power plants commissioned in 2009 to 2011 from 15 years to 20 years. This measure was accompanied by a reduction in the appli- cable feed-in tariffs, which are assessed for each individual PV power plant, taking into account additional investment costs and higher operations and maintenance costs related to the extended technical life. The new feed-in-tariffs were set with the objective of being neutral to the present value of the assets. The Group up- dated the DCF models for Slovakia to reflect these changes and it resulted in an increase of fair value of property, plant and equip- ment by EUR 334 thousand (net impact to the revaluation reserve of property, plant and equipment by EUR 270 thousand and EUR 105 thousand for the JV share on revaluation reserve of property, plant and equipment). In September 2021, the Lower Chamber of Parliament of the Czech Republic passed a new law regarding the support of renewable en- ergy sources (RES) which empowered government to set maxi- mum project internal rates of returns (IRR) for the various supported RES of between 8.4% and 10.6% for the respective sup- port periods. For PV power plants commissioned in the years 2009 and 2010, an additional 10% solar levy has been approved. As Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 97 such, 2009 power plants will pay 10% and 2010 power plants will pay a total of 20% (increased from the previously applied rate of 10%) starting from 1 January 2022. The Group updated the DCF models for Czech Republic to reflect these changes and it resulted in a decrease of fair value of property, plant and equipment by EUR 3,843 thousand (net impact to the revaluation reserve of property, plant and equipment of EUR 3,229 thousand). See also note 19 and 29. Changes in the Valuation Parameters in 2022 In June 2022 the Hungarian government issued a decree introduc- ing a 65% tax on the excess revenues (that is above the feed-in- tariff/contract-for-difference price of EUR 85 per MWh) generated by licensed PV power plants (required for installations with a grid connection capacity exceeding 500 KW AC) which had either ex- ited one of the support schemes or had been awarded a METÁR license in auction but did not execute the contract-for-difference with the designated Hungarian state entity, for the financial years 2022 and 2023. On that basis, seven power plants with a total in- stalled capacity of 9.86 MWp (representing 19.3% of the Com- pany’s capacity in Hungary) have been and will continue being affected by the excess revenue tax. All other power plants in Hun- gary are exempt from this tax. The Group updated the DCF models for Hungary to reflect these changes and it resulted in a decrease of fair value of property, plant and equipment by EUR 567 thousand compensated in increase of fair value of property, plant and equipment in other countries with overall zero effect on the whole portfolio. Introduced windfall taxes in other countries do not affect the proprietary portfolio of the Group . 5.2 Inventories The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to com- plete and sell the inventories. 5.3 Financial Instruments – Other Financial Assets and Derivatives Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the number of instruments held by the entity. This is the case even if a market’s normal daily trading volume is not suf- ficient to absorb the quantity held and placing orders to sell the po- sition in a single transaction might affect the quoted price. Valuation techniques such as discounted cash flow models or mod- els based on recent arm’s length transactions or consideration of financial data of the investees are used to measure fair value of certain financial instruments for which external market pricing in- formation is not available. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are meas- urements at quoted prices (unadjusted) in active markets for iden- tical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or lia- bility, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs) . 6. Financial Risk Management 6.1 Risk Management Framework The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and proce- dures, aims to develop a disciplined and constructive control envi- ronment in which all employees understand their roles and obligations. 6.2 Sovereign Risk The Company’s results can be adversely affected by political or regulatory developments negatively impacting on the income streams of projects in the portfolio. A number of countries have al- ready succumbed to retroactive measures reneging on existing agreements, guarantees and legislation by imposing levies, can- celling contracts or renegotiating terms unilaterally or by other measures reducing or in the worst-case cancelling Feed in Tariffs (FiT) for renewable energy investments. Legal remedies available to compensate investors for expropriation or other takings may be inadequate. Lack of legal certainty exposes projects in the portfolio to increased risk of adverse or unpredictable actions by govern- ment officials, and also makes it more difficult for us to enforce ex- isting contracts. In some cases these risks can be partially offset by agreements to arbitrate disputes in an international forum, but the adequacy of this remedy may still depend on the local legal system to enforce the award. 6.3 Operational Risk The economic viability of energy production using photovoltaic power plants installations depends on FiT systems. The FiT system can be negatively affected by a number of factors including, but not limited to, a reduction or elimination in the FiT or green bonus per KWh produced, an elimination or reduction of the indexation of the FiT and a shortening of the period for which the FiT applies to pho- tovoltaic installations. On the investment side the Company faces uncertainty in relation to the approval process for the construction of photovoltaic installations, grid connection and the investment cost per KWp of installed capacity. The operating and financial re- sults of the Company can be seriously affected by a sudden or sig- nificant change in the regulatory environment in each of the countries where the Company or its subsidiaries conduct business. During the fourth quarter of 2010, the Czech parliament and the Czech government approved several changes in the legal frame- work governing certain aspects of the photovoltaic and other indus- tries. Those changes included mainly: (i) a 3 years solar levy, newly introduced into the Czech tax system, of 26% on the revenues of photovoltaic power plants above 30kW of installed capacity, com- pleted in the years 2009 and 2010, (ii) the abolishment of a six-year corporate income tax exemption for photovoltaic power plants, and (iii) a tenfold increase of the contractual fees previously agreed be- tween the photovoltaic power plant operators and the state Land Fund for the extraction of certain classes of land from the state fund. In September 2013, additional prolongation of the solar levy was approved. The percentage was decreased to 10% and applicability Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 98 of this tax prolonged till end of the useful economic life of the power plants. In September 2021, an additional 10% solar levy was introduced in the Czech Republic for the powerplants put in operation in 2009 and 2010 (see 5.1 above). From 2016 and 2017 the Group opted for its Czech power plants for the green bonus scheme and for the years 2018 onwards the management decided to opt again for the feed-in-tariff. For 2022 the Group opted for the green bonus scheme again. In July 2021, the Slovak Republic decided to prolong and reduce the feed-in-tar- iff for the power plants connected in 2010 and 2011 (see 5.1 above). 6.4 Currency Risk The Group is exposed to a currency risk on sales, purchases and borrowings that are denominated in a currency other than the re- spective functional currencies of Group entities. The transactions of the Group entities are mainly denominated in CZK, EUR, AUD, CHF, RON, PLN and HUF. The Group does not manage the foreign currency risk by the use of FX derivatives, it rather uses natural hedging by actively managing FX positions. It is not done in a formalised way. 6.5 Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers, including the electricity distributors. 6.5.1. Trade and Other Receivables The Group’s exposure to credit risk is influenced mainly by individ- ual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, includ- ing the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. In most cases, the Company requires advance payments (partial or 100%) for the delivery of electricity in order to minimise the credit risk. Additionally, in case of new customers, the company looks for market references of the potential customers that are available in public resources. The collections are regularly monitored by the re- sponsible employees and any significant overdue receivables are discussed with the management of the company. Management of the company is responsible for the decision whether allowance is to be created or any other steps need to be performed. The Group establishes an allowance for impairment that repre- sents its estimate of expected losses in respect of trade and other receivables. 6.5.2 Liquid Assets / Cash and Cash Equivalents The Group held liquid assets of EUR 21,358 thousand at 31 De- cember 2022 (2021: EUR 39,362 thousand), which represents its maximum credit exposure on these assets. Liquid Assets consist of following items: In thousands of EUR 2022 2021 Cash and cash equivalents 11,271 32,506 Liquid assets with restriction on disposition 6,373 3,629 Precious metals 3,714 3,227 Liquid assets 21,358 39,362 The cash and cash equivalents and liquid assets with restriction on disposition are held with banks and financial institution counterpar- ties. Only those banks and financial institutions, which were ap- proved by the members of the board of directors, can be used by the Group. Some of the cash held by the Czech, Slovak, Hungarian and Aus- tralian SPVs having received external financing is restricted only for certain transactions, e.g. debt service, or maintenance service for inverters. Further have been issued bank guarantees by Photon Energy Australia Pty Ltd., Photon Energy Engineering Australia Pty Ltd., Photon Energy Corporate Services CZ s.r.o. and by Greenford Solar srl. for which the banks requested security deposits. Total amount of this restricted cash by these companies is EUR 6,373 thousand as at 31 December 2022 (2021: EUR 3,629 thousand), see also note 28. 6.6 Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as pos- sible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without in- curring unacceptable losses or risking damage to the Group’s rep- utation. 6.7 Interest Risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. It is measured by the extent to which changes in market interest rates impact on net interest expense. The Company uses interest rate derivatives for managing the interest rate risk. Slovak and refinanced Hungarian SPVs, consolidated in full or by using the equity method by the Group, own interest rate derivatives used for hedging. The purpose of the derivatives is to hedge against movement of interest rates. Concluding the derivative con- tract was one of conditions required by financing bank as defined in the Loan contract. The change in fair value of these derivatives is recognized via eq- uity of the Company and the result is shown in Derivatives reserve of the Company’s equity. The Czech SPVs owned interest rate derivatives. Concluding the derivative contract was one of conditions required by the financing bank as defined in the Loan contract. The change in value of these derivatives is recognized via Profit and loss as they do not meet criteria for the hedging derivatives. With the early repayment of the bank loans by the Czech SPVs the derivatives were liquidated end of December 2021. 6.8 Force Majeur Risk Force majuer risks like like the pandemic of the Corona virus may impact the business activity of the Group. For example with the outbreak of the Corona virus the Group has implemented continuity plans as well as health and safety procedures to ensure that all employees and contractors are safe and compliant with govern- ment directives. The Group is technological (IT systems, commu- nication, back ups) and organizational (e.g. home offices) capable to adjust to external events impacting the regular operation. In all main markets of the Group highly skilled local teams will remaining focused on minimizing the impact on the ongoing business as well as various growth initiatives. The extent of the negative impact will depend on the further nature and length of such events in the coun- tries where the Group is active . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 99 6.9 Inflation Risk State support, especially feed-in tariffs, is indexed in the cases of Czech and Hungarian projects; i.e. they are subject to inflationary adjustment that is defined by a specific band. In case of high infla- tion, there is consequently a risk that the running operative costs increase while the yields will not be adjusted accordingly. In pro- jects that are not supported by the state there is a different risk - namely that by lower inflation the calculated market prices for elec- tricity will not develop as it was planned. The occurrence of any of the mentioned risks can have a negative impact on the financial situation, of the Group. Capital Management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and eq- uity balance. The Group’s overall strategy will unwind accordingly to the further negotiations with the Group's creditors. The Group’s net debt to equity ratio at the reporting date was as follows: In thousands of EUR 2022 2021 Total liabilities 183,331 145,080 Less: Liquid assets 21,358 39,362 Net debt 161,973 105,718 Total equity 70,475 51,538 Net debt to equity ratio at 31 December 2.29 2.05 Equity ratios: 2022 2021 Full Equity ratio 27.8% 26.2% Adjusted Equity ratio (for bond governance) 32.0% 28.6% There were no changes in the Group’s approach to capital man- agement during the year. 7. Operating Segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues or incur ex- penses, including revenues and expenses that relate to transac- tions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s management and Board of directors to make decisions about re- sources to be allocated to the segment and to assess its perfor- mance, and for which discrete financial information is available. The chief operating decision maker (CODM) has been identified as the Board of Directors and the CFO of the Group. The Board of Directors identified the following segments to be re- ported: ► Solutions : Development, engineering and construction services of-turn-key photovoltaic systems’ installations for external clients and Photon Energy). This segment was for- merly named Energy Solutions and included as well whole- sale of technology, which became due to its size an own reportable segment. Further activities of project develop- ment were taken out of this segment and are reported now under “Others”, since the nature of the activity changed from purely internal development for our own projects to project development for external partners, ► Technology : Wholesale, import and export of FVE com- ponents, ► Investments : Investment into photovoltaic power plants and generation of revenues from production of electricity and recognition of Other comprehensive income from re- valuation of newly connected power plants (this segment includes SPV that finished building of photovoltaic power plants and those that are connected to the distribution net- work and produce electricity). ► Operations & Maintenance : Operations, maintenance and PVPP supervision. This segment includes also the ser- vices of Inverter Cardio and Monitoring and Control, ► Other segments : Other, not related to any of the above mentioned segments. Others include project development, water technology and remediation services and other less significant activities. None of these activities meets any of the quantitative thresholds for determining reportable seg- ments in neither 2022 nor 2021. Segment results that are reported include items directly attributable to a segment as well as those that can be allocated on a reasona- ble basis. Interest income, interest expense and income tax charges are allocated directly to the segments. Segment capital expenditure is the total cost incurred during the reporting period to acquire property, plant and equipment, and intangible assets other than goodwill. From 1.1.2023 onwards, we will start showing a new segment ("New Energy") covering the new Lerta business in the segment reporting. Factors that Management Used to Identify the Report- able Segments The Group’s segments are strategic business units that focus on different business activities. They are managed separately be- cause each business unit requires different processes. Measurement of Operating Segment Profit or Loss, Assets and Liabilities The Group’s management and directors review financial infor- mation prepared based on IFRS as adopted by EU adjusted to meet the requirements of internal reporting. The financial infor- mation does not differ from IFRS as adopted by EU. The Group’s management and directors evaluate the segments based on total comprehensive income which is considered to be the key measure. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 100 Information About Reportable Segment Profit or Loss, Assets and Liabilities Information About Reportable Segments Operating segments for the period from 1 January 2022 to 31 December 2022 In thousands of EUR Solutions Technology Investments Operations and Maintenance Other Total for segments before elimination Elimination Consolidated financial information External revenues from the sale of products, goods & services 5,389 50,786 35,239 2,854 868 95,136 0 95,136 Internal revenues from the sale of products, goods & services 10,049 14,100 49 2,196 7,725 34,119 -34,119 0 Total revenues 15,438 64,886 35,288 5,049 8,593 129,255 -34,119 95,136 Other external income -12 7 11 30 516 552 0 552 Raw materials and consumables used -4,492 -55,014 -33 -426 -78 -60,043 16,114 -43,929 Solar levy 0 0 -1,969 0 0 -1,969 0 -1,969 Personnel expenses and other expenses -7,731 -3,175 -5,302 -4,737 -12,990 -33,935 8,453 -25,482 EBITDA 3,203 6,705 27,994 -83 -3,959 33,860 -9,552 24,308 Depreciation -52 -41 -7,419 -619 -817 -8,949 0 -8,949 Impairment charges -1 -657 0 -20 -5 -684 0 -684 Gain (loss) on disposal of investments 0 0 0 0 0 0 0 0 Gain on derecognition of associate 0 0 0 0 2,182 2,182 0 2,182 Profit/loss share in entities in equivalency 0 0 127 0 0 127 0 127 Results from operating activities (EBIT) 3,150 6,006 20,702 -723 -2,600 26,536 -9,552 16,984 Financial income 440 7 392 275 4,128 5,242 -4,879 362 Interest expense -530 -342 -4,237 -475 -8,556 -14,140 4,879 -9,261 Other net financial expenses 177 -30 -571 90 59 -275 0 -275 Gains less losses on derecog. of fin. liab. recog.at amortised costs 0 0 0 0 -114 -114 0 -114 Revaluation of derivatives 0 0 413 0 614 1,027 0 1,027 Profit/loss before taxation (EBT) 3,237 5,641 16,699 -833 -6,468 18,276 -9,552 8,724 Income Tax (income and deferred) -932 -708 -790 -27 -7 -2,463 0 -2,463 Profit/loss after taxation 2,305 4,933 15,909 -860 -6,475 15,813 -9,552 6,261 Other comprehensive income 113 82 2,415 -29 -1,171 1,410 0 1,410 Total comprehensive Income 2,418 5,016 18,324 -889 -7,646 17,223 -9,552 7,670 Assets 50,625 41,186 172,409 18,200 199,579 481,998 -228,172 253,826 Liabilities -46,555 -29,043 -110,410 -26,970 -189,308 -402,286 218,955 -183,331 Investments in JV accounted for by equity method 0 0 1,509 0 0 1,509 0 1,509 Additions to non-current assets 0 0 26,216 511 23,062 49,789 0 49,789 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 101 Operating segments for the period from 1 January 2021 to 31 December 2021 In thousands of EUR Solutions Technology Investments Operations and Maintenance Other Total for segments before elimination Elimination Consolidated financial information External revenues from the sale of products, goods & services 5,594 8,315 19,402 2,572 476 36,359 0 36,359 Internal revenues from the sale of products, goods & services 4,551 906 1,287 1,888 2,692 11,325 -11,325 0 Total revenues 10,145 9,221 20,690 4,460 3,168 47,684 -11,325 36,359 Other external income 174 5 10 21 209 418 0 418 Raw materials and consumables used -9,123 -7,479 -1,893 -1 893 -669 -21,057 8,328 -12,729 Solar levy 0 0 -883 0 0 -883 0 -883 Personnel expenses and other expenses -3,701 -282 -767 -2,422 -8,837 -16,009 2,428 -13,581 EBITDA -2,505 1,464 17,156 167 -6,128 10,154 -570 9,584 Depreciation -40 -6 -9,191 -732 -701 -10,670 0 -10,670 Impairment charges 0 0 -231 0 0 -231 0 -231 Gain (loss) on disposal of investments 0 0 0 0 464 464 0 464 Profit/loss share in entities in equivalency 0 0 141 0 0 141 0 141 Result from operating activities (EBIT) -2,545 1,459 7,876 -566 -6,365 -142 -570 -712 Financial income 86 48 452 468 2,318 3,371 -3,126 245 Interest expense -304 -108 -3,088 -365 -5,836 -9,701 3,126 -6,575 Other net financial expenses -160 41 -983 29 879 -195 0 -195 Gains less losses on derecog. of fin. liab. recog.at amortised costs 0 0 0 0 -420 -420 0 -420 Revaluation of derivatives 0 0 488 0 1,242 1,730 0 1,730 Profit/loss before taxation (EBT) -2,924 1,439 4,744 -434 -8,182 -5,357 -570 -5,926 Income Tax (income and deferred) 14 -26 -458 -15 -20 -506 0 -506 Profit/loss after taxation -2,909 1,412 4,286 -449 -8,202 -5,863 -570 -6,433 Other comprehensive income -18 25 6,336 -122 2,307 8,528 0 8,528 Total comprehensive Income -2,927 1,438 10,622 -572 -5,896 2,665 -570 2,095 Assets 20,351 5,009 144,679 14,770 188,085 372,894 -176,276 196,618 Liabilities -19,870 -4,369 -101,327 -24,303 -174,407 -324,276 179,196 -145,080 Investments in JV accounted for by equity method 0 0 1,626 0 0 1,626 0 1,626 Additions to non-current assets 0 46 8,493 80 3,795 12,414 0 12,414 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 102 7. Operating Segments (Continued) All the operational segments are managed on an international ba- sis (not on a country level). In 2022 the Group operated in the Czech Republic, Slovak Republic, Germany, Hungary, Australia, Switzerland, Romania, Poland, Mongolia, South Africa and the Netherlands with headquarters in the Netherlands. In 2022, revenues were generated in all above mentioned markets, except of the Netherlands, Mongolia and South Africa. Non-current assets (power plants) are located in the Czech Republic, Slovak Republic, Hungary, Romania and Australia. For the booking of transactions between the segments, the same rules for the recognition are applied as for the third parties. Geographical information below, including revenues based on the geographical location of entities generating the revenues and segment assets based on the geographical location of the assets is presented in notes 10 and 19 . Major Customer The Group has many customers. For the companies selling elec- tricity, there is usually only one distribution company, which buys produced electricity in a region. These local electricity distributors further deliver and resell electricity to final customers. Distributors are obliged to purchase all of the electricity production for the price based on Feed in Tariff prices. The Group as such is not dependent on any individual customer. During 2022 the Group commissioned a powerplant in Hungary where electricity is sold directly into the wholesale electricity market and the revenues from sale of this electricity are based on actual market prices. Revenues from customers over 10% of total revenues In thousands of EUR 2022 2021 Lerta Energy HU Kft 13,904 - OTE, a.s. 9,617 - E.ON Energie, a.s. - 5,859 MAVIR Zrt. - 4,285 Total revenue from customers over 10% of total revenues 23,521 10,144 Total revenue 95,136 36,359 did not exceed 10% of total revenues Revenues from Lerta Energy HU Kft and OTE a.s. (2021: E.ON Energie, a.s. and MAVIR Zrt.) are presented in segment Investments and represent revenues from sale of electricity from various PVPs. Revenues from Lord Howe Island Board are presented in segment Solutions and represent EPC revenues . 8. Business combination Lerta Spółka Akcyjna is a joint -stock company organized under the laws of Poland, with its office at Naramowicka 76, 61- 622 Poznań, Poland, registered in the register of entrepreneurs of the National Court Register kept by District Court Poznań – Nowe Miasto i Wilda in Poznań, VIII Commercial Division of the National Court Register, under number KRS 0000848411 (hereinafter referred to as “Lerta”). Lerta is an energy startup on a mission to become the biggest clean energy company free of generation assets. Lerta enables energy consumers and generators to maximize profits or savings with ef- fective, AI-based management of aggregated in Virtual Power Plant (“VVP”) assets on several markets simultaneously. Lerta fully owns directly nine subsidiaries in five countries (herein- after referred to as “Lerta Group”). Those subsidiaries are: Nr Subsidiary Name Short Country 1 Lerta Poland Sp. z o.o. LPL Poland 2 Lerta Power Poland Sp. z o.o. LPPL Poland 3 Lerta JRM Sp. z o.o. LJRM Poland 4 Lerta Technology Sp. z o.o. LTECH Poland 5 Lerta Energy S.r.l. LROM Romania 6 LERTA Magyarország Kft. LMAG Hungary 7 Lerta Energy HU Kft. LHUK Hungary 8 Lerta Czech Republic s.r.o. LCR Czechia 9 Lerta Lithuania UAB LLIT Lithuania Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 103 8.1 Valuation of Lerta Discounted cash flow valuation method The valuation of Lerta was based on the Discounted cash flow (DCF) method and results in the preliminary net present value of the free cash flows generated during the forecasted period and the preliminary net present value of the terminal value in the total amount of PLN 188.7 million (EUR 40.5 million) as included in the preliminary purchase price allocation, which corresponds to PLN 10.95 (EUR 2.35) per one Lerta share. The purchase price for Lerta shares which was agreed at PLN 5.80 (EUR 1.25) per one share results in a 47% discount towards the valuation based on the DCF valuation method. 8.2 Steps of the acquisition As of 24 November 2022, the Company acquired all shares which were owned by three financial investors i.e., 5,594,202 shares rep- resenting 32.48% in the capital of Lerta. The sale/purchase price was agreed between the parties at PLN 5.80 per share and amounted in the total contractual value of PLN 32.446 million (EUR 6.5 million). Upon completion of this transaction Photon Energy Group increased its shareholding in Lerta from 24.27% up to 56.75%. Additionally, a side letter was signed between the Com- pany and the founders of Lerta to protect the Founders interest until the final acquisition of their shares by the Company. In this side letter the Company agrees to not take over control of Lerta by not taking any actions that would imply control as long as such invest- ment agreement between the founders and the Company is signed. On 20 December 2022 the Company concluded an investment agreement with the founders of Lerta, and certain executive con- tracts to this agreement. Under the terms of this agreement, an ad- ditional equity stake of 7,449,750 shares, representing 43.25% of Lerta’s equity was acquired by the Company for a combination of a PLN 2.16 million (EUR 464 thousand) cash consideration, the transfer of 2,300,110 treasury shares in the Company and 1,238,521 Company shares to be newly issued in an in-kind con- tribution. As of 31 December 2022, Photon Energy N.V. acquired 4,972,708 shares in Lerta in the exchange of 2,300,110 treasury shares in the Company and PLN 2.16 million (EUR 464 thousand) paid in cash to the Founders. As a result, the Company increased its shareholding in Lerta to 85.62%. Between 24 November 2022 and 31 December 2022 Photon En- ergy has not appointed or recalled a member to the supervisory board, nor requested to appoint or recall a member to the board of directors. Photon Energy has also not taken any other measures that could be considered as taking over control of Lerta. Manage- ment of Lerta was in the full responsibility of the Founders as being members of the board of directors. Based on the above the assumed date of taking over control of Lerta Group is considered as 31 December 2022 when Photon En- ergy increased its shareholding from 56.75% to 85.62%. Photon gained full control effectively as at 31 December 2022. The transfer of the outstanding consideration was deferred to the year 2023, when remaining 14.38% have been taken over in a in-kind contri- bution of Lerta shares against the issuance of new shares of the Company in February 2023. The original value of Lerta previously presented as Associate for 24.27% stake was EUR 3,202 thousand . Date Step Amount In thousands of EUR 24/11/2022 Original value of Lerta 3,202 24/11/2022 Cash transfers 6,720 Total 9,922 As at 31 December 2022, the date of taking over control of Lerta Group, the investment in the acquiree held prior to the acquisition was remeasured to its fair value at the acquisition date and a gain of EUR 2,182 thousand was recognised as a gain in profit and loss income. As at 31 December 2022, the value of 100% share in the Lerta Group was calculated as follows: Date Step Amount In thousands of EUR 31/12/2022 Value of Lerta as of 24 November 2022 9,922 31/12/2022 Cash transfers 464 31/12/2022 Value of shares issued 5,700 31/12/2022 Revaluation 2,182 31/12/2022 In-kind contribution against issuance of new shares 3,081 Total 21,349 The total value of 100% share in Lerta was calculated to EUR 21,349 thousand in the preliminary purchase price allocation. There is no non-controlling interest calculated and booked as a re- sult of the transaction with the owners, share swaps have been posted to the share premium. In the preliminary purchase price allocation, the fair values of as- sets and liabilities acquired are based on discounted cash flow models. Based on it, the following items were included in the pur- chase price allocation: ► Demand response contracts The fair value of Demand response contracts in the preliminary pur- chase price allocation activated as intangible asset was evaluated at EUR 6,047 thousand with attributable deferred tax liability of EUR 1,149 thousand. The fair value in the preliminary purchase price allocation was cal- culated based on secured demand response contracts for the years 2023 to 2027. Expected cash flows were discounted at a rate of 13.61%. Starting from 1 January 2023 the demand response contracts will be amortized in line with the utilization of the contracts . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 104 Goodwill calculated in the preliminary purchase price allocation in the amount of EUR 15,005 thousand arises from the main syner- gies described below. The integration of Lerta into Photon Energy Group represents the fusion of physical and digital energy to create a customer-centric renewable energy utility that will be uniquely positioned to effec- tively address the pain points of energy generators, energy users and transmission system operators. Energy generators will be able to benefit from an integrated approach to asset operation and man- agement as well as cost-efficient market access, including balanc- ing services. Energy users will be able to manage and optimise their costs from a combination of on-site generation and off-site supply. This will include the benefit of energy storage and the mon- etisation of their demand flexibility. Transmission systems opera- tors will be provided with flexible supply, DSR and ancillary services to the power grid. The impact on Photon Energy Group’s strategic and operational priorities following the Transaction will include: ► Capacity building and product development for the efficient delivery of a ‘one-stop shop’ offering that combines assets, services and IT solutions to establish Photon Energy Group as the preferred partner for commercial and indus- trial customers in the CEE region and Australia on their journey from passive energy users to proactive energy flex- umers. ► A significant acceleration in the deployment of utility-scale and on-site energy storage capacities both as an EPC sup- plier as well as an investor, leveraging the Group’s experi- ence in Australia such as the Lord Howe Island hybrid - energy system and the planned utility-scale hybrid plant in Boggabri, New South Wales. ► Close monitoring of the emergence of markets for grid flex- ibility and other ancillary services worldwide and evaluation of opportunities as they emerge, which may lead to rela- tively low-risk and low-cost market entries into new loca- tions currently not served by the Company. Details of net assets acquired and goodwill in the preliminary purchase price allocation arising are as follows: In thousands of EUR 31 December 2022 Total net assets acquired 1,445 Capacity market contracts (note 22) 6,047 Deferred tax liability -1,149 Goodwill arising from the acquisition 15,005 Total net assets acquired 21,349 Main classes of assets and liabilities recognised in fair value in the preliminary purchase price allocation because of acquisition are as follows: In thousands of EUR Fair value 31 December 2022 Software 356 Goodwill 461 Equipment 326 Inventory 290 Loans, accounts receivables, prepayments 4,679 Bank and cash 1,060 Provisions and accruals -379 Loans and trade payables -5,348 Capacity market contracts (note 22) 6,047 Deferred tax liability -1,149 Goodwill arising from the acquisition 15,005 Total net assets acquired 21,349 In thousands of EUR 2022 Total purchase consideration and previously held interest in the acquiree 15,964 Less: Non-cash consideration -8,781 Outflow of cash and cash equivalents on acquisition 7,183 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 105 9. Acquisitions of Subsidiary and Non-controlling Interests; Financial Information for the Joint Ventures 9.1 Establishment of New Subsidiaries During 2022, Photon Energy N.V. (directly or via its subsidiaries) incorporated the following subsidiaries: ► On 10 June 2022, Photon Energy N.V. became 100% shareholder of Photon Energy Solutions AG. ► On 10 June 2022, Photon Energy N.V. became 100% shareholder of Photon Property AG ► On 16 September 2022, Photon Energy Solutions CZ a.s. became 100% shareholder of PESPV 1 s.r.o.. ► On 16 September 2022, Photon Energy Solutions CZ a.s. became 100% shareholder of PESPV 2 s.r.o.. During 2021, Photon Energy N.V. (directly or via its subsidiaries) incorporated the following subsidiaries: ► On 22 March 2021, Photon Energy N.V. became 99% shareholder of Photon Energy Project Development XXK in Mongolia ► On 21 April 2021, Photon Energy N.V. became 100% shareholder of Photon Renewable Energy Pty. Ltd. In South Africa ► On 17 May 2021, Photon Energy Project Development XXK became 100% shareholder of PEPD Solar XXK. in Mongolia ► On 25 June 2021, Photon Energy N.V. became 100% shareholder of Solar Age SPV 1 Pty. Ltd. In South Africa ► On 17 November 2021, Photon Energy N.V. became 100% shareholder of Photon Energy AUS SPV 12 Pty. Ltd., ► On 13 December 2021, Photon Energy N.V. became 100% shareholder of Debden Solar Sp. z o.o. ► On 13 December 2021, Photon Energy N.V. became 100% shareholder of Beckton Solar Sp. z o.o. ► On 14 December 2021, Photon Energy N.V. became 100% shareholder of Alperton Solar Sp. z o.o. ► On 21 December 2021, Photon Energy N.V. became 100% shareholder of Ealing Solar Sp. z o.o. ► On 21 December 2021, Photon Energy N.V. became 100% shareholder of Chigwell Solar Sp. z o.o. 9.2 Acquisitions of Subsidiaries During 2022, Photon Energy N.V. (directly or via its subsidiaries) acquired the controlling share in the Lerta S.A. and its subsidiaries as described in note 8 Business combination. Also, 100% share in originally 51% owned joint venture Photon AUS SPV 6 was ac- quired during the year. During 2021 there were no acquisitions of subsidiaries. Other Developments in 2022 ► On 17 January 2022, KORADOL AG became 100% shareholder of Photon SPV 3 s.r.o.. Photon SPV 4 s.r.o., Photon SPV 6 s.r.o., Photon SPV 8 s.r.o., Photon SPV 10 s.r.o., Exit 90 SPV s.r.o., Onyx Energy s.r.o., Onyx Energy projekt II s.r.o., and Kaliopé Property s.r.o.. ► On 10 February 2022, ALFEMO AG became 90% share- holder and KORADOL AG became 10% shareholder of Siria Solar S.r.l.. ► On 24 February 2022, Photon Energy Projects became 95% shareholder and Photon Energy Solutions CZ be- came 5% shareholder of Deptford Solar Srl.. ► On 28 February 2022, Photon Energy Projects became 95% shareholder and Photon Energy Soluions CZ be- came 5% shareholder Kenton Solar Srl., Lancaster Solar Srl., and Perivale Solar Srl.. ► On 7 March 2022, Photon Energy Projects became 95% shareholder and Photon Energy Soluions CZ became 5% shareholder of Weston Solar Srl. and Harlow Solar Srl.. ► On 14 March 2022, Photon Energy Projects became 95% shareholder and Photon Energy Soluions CZ be- came 5% stakeholder of Brentford Solar Srl., Camber- well Solar Srl., Romford Solar Srl., and Stratford Solar Srl.. ► On 18 March 2022, Photon Energy N.V. became 95% shareholder and Photon Energy Projects became 5% shareholder of Photon Energy Engineering Romania SRL.. ► On 22 March 2022, PE Solar Technology Ltd. was suc- cessfully dissolved. ► On 6 April 2022, Photon Energy Solutions s.r.o. was re- named to Photon Energy Engineering s.r.o.. ► On 27 April 2022, Photon SPV 1 s.r.o. was renamed to Photon Energy Solutions CZ s.r.o. ► On 24 May 2022, Solar Age Polska S.A. was renamed to Photon Energy Solutions PL S.A.. ► On 1 July 2022, Photon Energy Solutions CZ s.r.o. suc- cessfully changed its name (and legal form) to Photon Energy Solutions CZ a.s.. ► On 2 September 2022, Photon Energy Operations CZ s.r.o. PRAGA SUCURSALA BUCURESTI was success- fully deregistered. ► On 5 October 2022, Photon AUS SPV 12 Pty. Ltd. has changed its name to Photon New Energy Pty. Ltd.. ► On 19 October 2022, Photon Energy Solutions CZ a.s. became 100% shareholder of Photon Energy Solutions s.r.o.. ► On 20 October 2022, Photon Energy Solutions HU Kft has changed its name to Photon Energy Engineering HU Kft.. ► On 30 December 2022, ALFEMO AG has changed its name to Photon Energy Investment AG. Other Developments in 2021: ► On 5 February 2021, Photon Energy N.V. became 100% shareholder of Photon Water Australia Pty. Ltd ► On 11 February 2021, Photon Energy N.V. became 12,01% shareholder of Lerta S.A . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 106 ► On 8 March 2021, Photon Energy N.V. acquired by share swap additional 40.01% and subsequently held 65% stake of MARYVALE SOLAR FARM Pty. Ltd. In ex- change Photon Energy N.V. swapped it’s 49.00% shares of GUNNING SOLAR FARM Pty. Ltd. and it’s 24.99% shares of SUNTOP Stage 2 Solar Farm Pty. Ltd. ► On 8 June 2021, Photon Energy N.V. became 100% shareholder of Photon Remediation Technology N.V. ► On 21 June 2021, MEDIÁTOR Ingatlanközvetítő és Hirdető Kft. was successfully renamed to MEDIÁT OR PV Plant Kft., ► On 21 June 2021, PROMA Mátra Ingatlanfejlesztési Kft. was successfully renamed to PROMA Mátra PV Plant Kft., ► On 14 October 2021, Photon Energy Projects s.r.o. be- came 1% shareholder of Photon Energy Romania Srl. - transfer from PEO NL B.V. ► On 28 October 2021, Global Investments Protection AG has sold its 99% interests in Photon Energy Peru S.A.C., ► On 28 October 2021, Photon Energy N.V. has sold its 1% interests in Photon Energy Peru S.A.C. ► On 25 November 2021, Becontree Solar Srl. was suc- cessfully renamed to Photon Energy Operations Roma- nia Srl., – change of shareholders structure where 95% shares is now owned by Photon Energy Operations N.V., remaining 5% shares holds Photon Energy Operations CZ s.r.o. ► On 20 December 2021, was registered merger of Photon Energy Engineering Europe GmbH and Photon Energy Technology EU GmbH into Photon Energy Technology EU GmbH., Energy Engineering Europe GmbH ceased to exist as of 1 January 2021 ► On 21 April 2021, Photon Energy N.V. became 100% shareholder of Photon Renewable Energy Pty. Ltd., ► On 17 May 2021, Photon Energy Project Development XXK. became 100% shareholder of PEPD Solar XXK., ► On 8 June 2021, Photon Energy N.V. became 100% shareholder of Photon Remediation Technology N.V., 9.3 Financial Information for the Joint Ventures The table below summarises the movements in the carrying amount of the Group’s investments in joint ventures. In thousands of EUR 2022 2021 Joint ventures Joint ventures Carrying amount at 1 January 1,626 2,641 Share of profit of joint ventures 127 141 Acquisition of joint ventures 0 302 Disposal of joint ventures 0 -1,412 Share of other comprehensive income of joint ventures 73 122 Dividends received from joint ventures -191 -168 Carrying amount at 31 December 1,509 1,626 Joint ventures Investments in equity-accounted investees amounting to EUR 1,509 thousand (2021: EUR 1,626 thousand) represent the nomi- nal share in the joint ventures owned by the Group. In 2021, Photon Energy has exchanged its 49% stake in the Gun- ning Solar Farm and 25% stake in the Suntop2 Solar Farm for 74% stake in Maryvale Solar Farm. Following the acquisition, the Group sold its 35% stake in Maryvale to its former JV partner Polpo. After the transaction, the Company possessed a 65% stake in Maryvale Solar Farm. In December 2021 the Company sold its remaining 65% stake in Maryvale Solar Farm Pty. Ltd . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 107 2022: In thousands of EUR Photon SK SPV 1 Solarpark Myjava Solarpark Polianka Total Definition joint venture joint venture joint venture Share 50% 50% 50% Equity of the entity 1,107 806 1,105 3,016 Share on equity 553 403 552 1,509 Net profit -78 -94 -82 -252 Share of profit -39 -48 -41 -127 Cash and cash equivalents 81 54 60 194 Current assets 156 132 124 412 Long-term assets 1,844 1,377 1,922 5,148 Current liabilities -238 -235 -218 -698 Long-term liabilities -294 -184 -375 -853 Depreciation 97 108 95 300 Interest expense 20 17 22 61 Revenues -271 -295 -263 -829 Total comprehensive income (loss) -5 8 -37 -32 * The Group does not have a control over the entity as all decision have to be done unanimously 2021: In thousands of EUR Photon SK SPV 1 Solarpark Myjava Solarpark Polianka PE AUS SPV 6 Total Definition joint venture joint venture joint venture joint venture Share 50% 50% 50% 51% Equity of the entity 1,170 856 1 232 -300 2,958 Share on equity 585 428 616 -3 1,626 Net profit 112 80 86 0 278 Share of profit 56 40 43 0 141 Cash and cash equivalents 200 209 270 1 679 Current assets 211 222 290 0 723 Long-term assets 1,940 1,486 2,017 0 5,443 Current liabilities -661 -586 -704 -260 -2,212 Long-term liabilities -380 -249 -419 0 -1,048 Depreciation 161 215 141 - 517 Interest expense 25 23 28 - 76 Revenues -416 -434 -375 -2 -1,228 Total comprehensive income (loss) -23 91 81 - 149 * The Group does not have a control over the entity as all decision have to be done unanimously All of the entities included in the above table are accounted for us- ing the equity method of consolidation as at 31 December 2022 and 31 December 2021. In case of the Slovak companies, the joint ventures can distribute profit only after agreement of the financing bank and the approval of the co-owner of the entity (via the general meeting) . Disposals in 2022 ► There were no disposals in 2022. The Company has only changed the consolidation method of Lerta S.A. and sub- sequently its subsidiaries due to the change of the owner- ship percentage and related change of control. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 108 Disposals in 2021 Net assets held by the companies and net gain/loss on the disposal in 2021 can be presented as follow: In thousands of EUR Suntop Solar Farm Gunnning Solar Farm Maryvale Solar Farm Total Total consideration received in cash 0 0 1,560 1,560 Net assets 0 0 -1,096 -1,096 Gain/loss on disposal 0 0 464 464 No consideration was received in cash and the shares were exchanged for shares in Maryvale . 10. Revenue The Group derives revenue from the transfer of goods and services at a point in time and over time in the following major product lines and geographical regions: Timing of revenues: In thousands of EUR 2022 2021 At a point of time 50,786 8,315 Over time 44,008 25,584 Total revenue from contracts with customers 94,794 33,899 Compensations for sales from electricity generation 342 2,460 Total revenue 95,136 36,359 Revenues by major revenue types: In thousands of EUR 2022 2021 Sale of goods and technologies 50,786 8,315 Sale of electricity and certificates 34,897 16,942 Revenues from EPC contracts 5,389 5,594 Rendering of services 3,722 3,048 Total revenue from contracts with customers 94,794 33,899 Compensations for sales from electricity generation 342 2,460 Total revenue 95,136 36,359 The Group uses various revenue models for PVP generating reve- nues from sale of electricity – fixed feed in tariffs, contracts for dif- ference, and going forward the merchant model (sale of electricity into the wholesale market at actual market prices). Revenues from sales of electricity from fixed feed-in-tariffs in 2022 amounted to EUR 13,363 thousand (2021: EUR: 16,893 thou- sand), revenues from sales of electricity from contract for difference revenue model amounted to EUR 0 thousand (2021: EUR 1,909 thousand) and revenues from sales of electricity for market price amounted to EUR 23,286 thousand (2021: EUR 601 thousand). Total amount of subsidies returned under the contract for difference scheme in 2022 was EUR 1,780 thousand (2021: EUR 19 thou- sand) as the average market price of electricity sold to the market exceeded the agreed price. As the Group operates in regulated business under various models for PVP revenues from sales of electricity, the Group invoices the revenues from sale of electricity to different partners, including gov- ernment agencies which in fact do not receive any generated elec- tricity, such as the short-term electricity market operator OKTE, a.s. (“OKTE”) in Slovakia. Total amount of compensations for sales from electricity generation invoiced to OKTE in 2022 amounted to EUR 342 thousand (2021: EUR 2,460 thousand) and from MAVIIR in Hungary negative EUR 1,780 thousand (2021: EUR 19 thou- sand). Even though the revenues were invoiced in 2022 and 2021 to gov- ernment agency, the Group does not consider them to be govern- ment grants and recognised them as revenues from sale of electricity as these revenues are representing core activity of the Group and are clearly linked to revenue model that is determined for each PVP . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 109 Revenues by geographical split: In thousands of EUR 2022 2021 Czech Republic 68,257 20,468 Hungary 17,473 6,683 Australia 6,483 5,574 Slovak Republic 1,916 861 Germany 574 31 Other 88 282 Romania 3 0 Total revenue from contracts with customers 94,794 33,899 Compensations for sales from electricity generation – Slovak Republic 342 2,460 Total revenue 95,136 36,359 Increase in total revenues in 2022 is mainly a result of higher electricity generation and higher electricity prices and significantly higher volume of technology sold. Increase in revenues in 2022 from the sale of electricity is also attributable to increased production capacity due to full year recognition of new power plants in various regions in Hungary and Australia. 11. Other Income In thousands of EUR 2022 2021 Miscellaneous 287 78 Grants received 234 99 Settlement agreement/insurance compensation 31 38 Covid compensation 0 203 Total Other income 552 418 Other income in miscellaneous category includes EUR 221 thousand income from other financial investment of the Group-Valuetech. 12. Raw Materials and Consumables Used Main expense’ classes represent material consumed and cost of goods sold. In thousands of EUR 2022 2021 Goods (modules, invertors, etc) -42,600 -12,463 Material consumed -1,329 -266 Raw materials and consumables used -43,929 -12,729 Raw materials and consumables consist mainly of material and goods used for technology sales and necessary for construction of photovoltaic power plants. Its increase is mainly caused by higher technology sales and higher consumption of material during 2022. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 110 13. Solar Levy In thousands of EUR 2022 2021 21%/11% solar levy -1,969 -883 Solar levy -1,969 -883 For detailed information about the solar levy refer to note 6.3. Solar levy represent 21%/11% levy imposed on the solar electricity produced in the Czech Republic. Solar levy is calculated and settled on a monthly basis. 14. Personnel Expenses In thousands of EUR 2022 2021 Wages and salaries -7,661 -5,527 Social and health insurance -1,575 -988 Pension costs -298 -227 Personnel expenses -9,534 -6,742 Pension costs represent contributions to state defined pension contributions schemes. On 31 December 2022 the Group employed 220 employees. 4 were employed in Slovakia by Slovak entities; 17 were employed in Hungary, 23 in Australia; 15 in Poland, 19 in Romania, 2 in Swit- zerland and 1 in the Netherlands. The remaining 139 employees were employed in the Czech Republic. Out of 220 employees, 2 of them were the Board members, 26 senior and mid level manage- ment and 192 professional and administration employees. In addi- tion, 63 employees on employment contract and 29 employees on different types of contract joined the group with the acquisition of Lerta Group as of the end of the year. Those employees are mainly employed in Poland. On 31 December 2021 the Group employed 144 employees. 4 were employed in Slovakia by Slovak entities; 16 were employed in Hungary, 21 in Australia; 10 in Poland, 4 in Romania, 1 in Swit- zerland, and 1 in the Netherlands. The remaining 87 employees were employed in the Czech Republic. Out of the 144 employees, 2 of them were the Board members, 42 senior and mid level man- agement and 100 professional and administration employees. Key management compensation including salaries, bonuses and social and health insurance is disclosed in note 39 Related parties. 15. Other Expenses In thousands of EUR 2022 2021 3rd party services received -5,920 -2,850 Construction subcontractors -services -2,863 -310 Warehousing and Freight -2,632 -259 Legal costs -834 -426 Balancing/scheduling/service costs -692 -336 Accounting services -563 -482 Travel & Accommodation costs -378 -179 Cars – fuel and maintenance -326 -233 Audit costs -284 -211 Projects write off -253 -122 Miscellaneous -1,202 -1,431 Total Other expenses -15,947 -6,839 Miscellaneous expenses comprise of other taxes, penalties and other minor expenses. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 111 16. Impairment Charges In thousands of EUR 2022 2021 Net creation of bad debt provisions -684 -206 Write off receivables 0 -25 Total Impairment charges -684 -231 In 2022, the Group created 100% allowance for the customer EkoFachowcy Sp. z. o. o. in the total amount of EUR 653 thousand because of its filing for insolvency. The Group created specific impairment provision to receivables from Slovak distribution companies relating to the so-called G-com- ponent in total amount of 23 thousand (2021: EUR 227 thousand) . The remaining part of the bad debt provisions represents various small irrecoverable receivable from several entities. 17. Financial Income and Financial Expense In thousands of EUR 2022 2021 Interest revenue calculated using the effective interest method 162 125 Revaluation of precious metals 200 120 Financial income 362 245 Interest expense on loans & borrowings calc. using effective interest method -9,260 -6,576 Foreign exchange gains and losses (net) -275 -194 Financial expense -9,535 -6,770 Gains less losses on derecognition of financial liabilities – bonds -114 -420 Gains less losses on derecognition of financial liabilities recognised at amortised costs -114 -420 Net result from revaluation of trading derivatives 1,027 1,730 Revaluation of derivatives 1,027 1,730 * Interest revenue calculated using the effective interest method includes interest revenue from financial assets carried at amortised costs only. Incremental bank costs, such as arrangement and refinancing fees, are reflected in the amortised amount of financial liabilities using effective interest rate method. The Group did not capitalise any borrowing costs in 2022 (2021: EUR 171 thousand borrowing costs arising from financing directly attributable to the construction of Leeton on Fivebough power- plants). Gains less losses on derecognition of financial liabilities in 2022 amounted to 114 EUR. In 2021 amount of EUR 420 thousand rep- resent exchange bonus paid to the existing bondholders for the ex- change of the EUR bond (see also note 31) and in 2022, exchange bonus was equal to EUR 114 thousand. Net result from revaluation of derivatives represent change in fair value of derivatives for which no hedge accounting is applied (see also note 35) of EUR 217 thousand in 2022 (2021: EUR 488 thou- sand). These derivatives were terminated as of the end of 2022. Change in FV of share options presented as FVPL financial assets of EUR 558 thousand (2020: EUR 1,242 thousand) is also included in Net result from revaluation of trading derivatives, see also note 23. Revaluation of the other investment in EUR 605 thousand is included in Net result from revaluation of trading derivatives, see also note 23. Net result in revaluation of precious metals represents change in fair value of gold held by the Group . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 112 18. Income Tax Expense 18.1 Income Tax Recognized in Profit or Loss In thousands of EUR 2022 2021 Current tax expense Current year -4,738 -1,438 Deferred tax expense Deferred tax on temporary differences 2,275 932 Total tax expense -2,463 -506 For movement in deferred tax arising on temporary difference see note 24. 18.2 Reconciliation of Effective Tax Rate In thousands of EUR 2022 2021 Profit (+)/ Loss (-) before income tax 8,725 -5,927 Theoretical tax return / charge (25%) -2,181 1,482 Effects of different tax rates in other countries 2,667 -356 Unrecognised tax losses of the period -2,813 -1,426 Use of prior year losses (previously not recognised) 84 -390 Recognition of deferred tax assets previously not recognised 65 184 Permanent differences -285 0 Total tax expense -2,463 -506 Theoretical tax rate of 25% represent tax rate applicable to the Netherlands, which is the country of incorporation of Photon Energy NV. The Group has accumulated tax losses for which no deferred tax asset has been recognised, see also note 24. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 113 19. Property, Plant and Equipment In thousands of EUR Land Photovoltaic power plant Other equipment In progress Total Net carrying amounts Gross revalued amount at 1 January 2021 4,473 162,341 1,192 9,697 177,703 Accumulated depreciation at 1 January 2021 0 -51,076 -297 0 -51,373 Net carrying amounts 1 January 2021 4,473 111,265 895 9,697 126,330 Other Additions/Transfers 696 14,152 436 -6,791 8,493 Revaluation increase (note 29) 0 1,181 0 0 1,181 Depreciation for the year 0 -9,178 -325 0 -9,503 Effect of movements in exchange rates 0 845 0 146 991 Net carrying amounts Gross revalued amount at 31 December 2021 5,169 182,473 1,628 3,052 192,322 Accumulated depreciation at 31 December 2021 0 -64,208 -622 0 -64,830 Net carrying amounts 31 December 2021 5,169 118,265 1,006 3,052 127,492 Net carrying amounts 1 January 2022 5,169 118,625 1,006 3,052 127,852 Other Additions/Transfers 142 1,018 673 25,056 26,889 Acquisition of subsidiary 0 0 361 0 361 Revaluation increase (note 29) 0 475 0 0 475 Disposal of property, plant and equipment 0 0 0 0 0 Depreciation for the year 0 -7,419 -408 0 -7,827 Effect of movements in exchange rates 7 -1,736 -112 0 -1,841 Net carrying amounts Gross revalued amount at 31 December 2022 5,318 182,230 2,550 28,108 218,206 Accumulated depreciation at 31 December 2022 0 -71,627 -1,030 0 -72,657 Net carrying amounts 31 December 2022 5,318 110,603 1,520 28,108 145,549 Non-current assets by geographical location (i) In thousands of EUR 2022 2021 The Czech Republic 52,055 54,276 Hungary 47,905 48,396 Romania 27,126 1,178 Poland 25,383 3,670 Australia 23,580 22,800 The Slovak Republic 11,102 12,077 Netherlands 67 66 Total 187,217 142,463 Note: (i) Non-current assets presented consist mainly of property, plant and equipment (lands, photovoltaic power plants, other equipment, and assets under construction), other non-current assets . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 114 Revaluation details by power plants: In thousands of EUR Photovoltaic power plants kWp Original costs less accu mulated depreciation as at 31 December 2022 Revalued amount less accumulated depreciation as at 31 December 2022 Original costs less accumulated depreciation as at 31 December 2021 Revalued amount less accumulated depreciation as at 31 December 2021 Breclav 347 321 815 419 852 Mostkovice 926 713 3,016 1,072 3,151 Svatoslav 1,231 925 3,362 1,338 3,512 Slavkov 1,159 1,068 3,611 1,494 3,773 Zvikov 2,031 1,563 6,970 2,344 7,282 Dolni Dvoriste 1,645 1,371 5,212 1,969 5,445 Radvanice 2,305 1,977 7,149 2,818 7,468 Komorovice 2,354 1,887 7,703 2,749 8,047 Zdice 1 1,499 1,200 5,258 1,776 5,493 Zdice 2 1,499 1,232 4,759 1,783 4,972 Blatna 700 840 932 912 1,003 Mokra Luka II 963 1,046 1,348 1,146 1,448 Mokra Luka III 963 1,027 1,391 1,130 1,495 Jovice V 979 954 1,136 1,038 1,220 Jovice VI 979 953 1,134 1,037 1,218 Babina II 999 1,150 1,150 1,238 1,238 Babina III 999 1,156 1,157 1,245 1,245 Prsa 999 1,180 1,264 1,279 1,362 Fertod I 528 461 431 475 491 Tiszakecske 5,512 3,284 4,010 3,414 4,569 Almasfuzito 5,494 3,177 4,074 3,304 4,634 Nagyecsed 2,067 1,310 1,506 1,364 1,711 Fertod II 3,487 2,240 2,645 2,336 3,004 Kunszentmarton I 1,394 980 1,065 1,019 1,209 Taszar 2,103 1,440 1,669 1,500 1,895 Monor 5,552 3,058 4,459 3,220 5,065 Tata 5,375 4,179 4,655 4,350 5,284 Malyi 2,085 1,766 1,627 1,828 1,845 Kunszentmarton II 1,386 999 1,016 1,038 1,152 Puszpokladany 14,118 9,375 12,986 9,910 14,727 Leeton and Fivebough 14,522 11,377 15,638 11,945 16,123 Tolna 1 1,358 950 1,326 1,007 1,501 Facankert 1,358 988 1,449 0 0 88,916 66,146 115,921 73,497 123,434 Revalued amount of EUR 115,921 thousand as at 31 December 2022 (31 December 2021: EUR 123,434 thousand) includes net carrying amount of photovoltaic power plants and value of land connected to the photovoltaic power plants of EUR 4,889 thousand as at 31 December 2022 (31 December 2021: EUR 5,169 thou- sand) which are included under Land. In 2021, due to legislative changes in Czech Republic and Slo- vakia, the Group updated the DCF models to reflect the conditions valid as of 1 January 2022, which resulted in net decrease of fair value of the property, plant and equipment in Czech Republic and Slovakia by EUR 3,509 thousand including the impact of deferred tax (EUR 2,895 thousand excluding the impact of deferred tax, (see note 5.1.) During Q2 2022, the Group performed revaluation of a newly con- nected power plant in Hungary resulting in increase of the value of property, plant, and equipment by EUR 475 thousand including the the impact of deferred tax (EUR 432 thousand excluding the impact of deferred tax). Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 115 In 2022 the Group did not capitalize any borrowing cost (2021: EUR 171 thousand) into Property, plant and equipment. Assets pledged As at 31 December 2022 the following properties with a carrying amount of EUR 111,149 thousand (2021: EUR 71,939 thousand) are subject to a registered pledges to secure bank loans (see note 31 ). All other restrictions and pledges, including information on re- stricted cash accounts are included in notes 28 and 41. ► Property, plant and equipment – Land in an amount of EUR 611 thousand (2021: EUR 333 thousand) pledged to UniCredit Bank Czech Republic and Slovakia a.s., EUR 1,094 thousand (2021: EUR 1,189 thousand) to K&H Bank and EUR 292 thousand (2021: EUR 371) to CIB Bank. ► Property, plant and equipment – Photovoltaic power plants in an amount of EUR 54,202 thousand (2021: EUR 9,897 thousand) pledged to UniCredit Bank Czech Republic and Slovakia a.s., EUR 23,540 thousand (2021: EUR 26,807 thousand) pledged to K&H Bank Hungary and EUR 15,216 thousand (2021: EUR 17,219 thousand) pledged to CIB Bank. Property, plant and equipment – Photovoltaic power plants in an amount of EUR 15,638 thousand (2021: EUR 16,123) were pledged in Australia. Property, plant and equipment under construction Property, plant and equipment under construction equaled to the amount of EUR 28,108 thousand (2021: EUR 3,052 thousand) comprising mainly of power plants under construction in Hungary and Romania (2021: Hungary and Romania). Sale of property, plant and equipment There were no sales of property, plant and equipment in 2022 nor 2021. 20. Right-of-use Assets and Lease Liabilities The Group leases land, offices and vehicles. Rental contracts are typically made for fixed periods of 36 months to 15 years. In thousands of EUR Land Buildings Vehicles Total Carrying amount as at 1 January 2021 1,367 905 2 2,274 Additions 0 52 0 52 Depreciation charge -104 -473 -2 -578 Effect of translation to presentation currency 18 373 0 390 Carrying amount as at 31 December 2021 1,281 857 0 2,138 Additions 576 1,120 205 1,901 Depreciation charge -128 -515 0 -643 Effect of translation to presentation currency 51 1 0 52 Carrying amount as at 31 December 2022 1,781 1,463 205 3,449 The Group recognised lease liabilities as follows: In thousands of EUR 31 December 2022 31 December 2021 Short-term lease liabilities 712 597 Long-term lease liabilities 2,914 1,676 3,626 2,273 Interest expense included in financial expenses of 2022 was EUR 139 thousand (2021: EUR 65). The value of short-term leases and leases of low-value assets in 2022 equalled to EUR 253 thousand . Total cash outflow for leases in 2022 was EUR 807 thousand (2021: EUR 642 thousand). Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 116 21. Goodwill Goodwill in the preliminary purchase price allocation in the amount of EUR 15,005 thousand is result of the business acquisition. The integration of Lerta into Photon Energy Group represents the fusion of physical and digital energy to create a customer-centric renew- able energy utility that will be uniquely positioned to effectively ad- dress the pain points of energy generators, energy users and transmission system operators. Energy generators will be able to benefit from an integrated approach to asset operation and man- agement as well as cost-efficient market access, including balanc- ing services. Energy users will be able to manage and optimise their costs from a combination of on-site generation and off-site supply. This will include the benefit of energy storage and the mon- etisation of their demand flexibility. Transmission systems opera- tors will be provided with flexible supply, DSR and ancillary services to the power grid. The impact on Photon Energy Group’s strategic and operational priorities following the Transaction will include: ► Capacity building and product development for the efficient delivery of a ‘one-stop shop’ offering that combines assets, services and IT solutions to establish Photon Energy Group as the preferred partner for commercial and indus- trial customers in the CEE region and Australia on their journey from passive energy users to proactive energy flex- umers. ► A significant acceleration in the deployment of utility-scale and on-site energy storage capacities both as an EPC sup- plier as well as an investor, leveraging the Group’s experi- ence in Australia such as the Lord Howe Island hybrid - energy system and the planned utility-scale hybrid plant in Boggabri, New South Wales. Close monitoring of the emergence of markets for grid flexibility and other ancillary services worldwide and evaluation of opportunities as they emerge, which may lead to relatively low-risk and low-cost market entries into new locations currently not served by the Com- pany . In thousands of EUR Note Goodwill Total Carrying amount as at 31 December 2021 0 0 Additions/transfers 0 0 Acquisition of subsidiary 8 15,466 15,466 Amortisation charge 0 Effect of movements in exchange rates 0 0 Carrying amount as at 31 December 2022 15,466 15,466 Cost 15,466 15,466 Accumulated amortisation 0 0 Effect of movements in exchange rates 0 0 Carrying amount as at 31 December 2022 15,466 15,466 For the purpose of the preliminary valuation of the Lerta S.A. Group and subsequent calculation of the goodwill, the Board of Directors used the Discounted Cash Flow Method (the “Method”) based on a 5-year business plan of Lerta, i.e. for years 2023-2027 and as- suming going concern basis after the forecasting period. The valu- ation date is 31 December 2022. The terminal value is calculated on the assumption that the terminal free cash flow will continue to increase at 5% p.a. Such a terminal growth rate is determined by the current economic environment of high inflation rates and high interest rates in the region of Central and Eastern Europe. Following key assumptions were used for the business plan of Lerta: Revenues were planned by service provided whereas for the trading business the Company assumed external trading sales of 50 MW in 2023 growing to 550 MW of PV capacity in 2027. For the trading business a gross profit margin of 2.65% in 2023 decreasing to 2.00% in 2027 was considered. For the PV system installation business, it was assumed to double business in the years 2023 and 2024 and continue its growth in the following years by 1.5 times per year. The gross profit margin is expected to be around 13% during the planning hoizont. For the dynamically growing demand re- sponse services growth rates of 173% in 2023 and 184% in 2024 decreasing to 17% in 2027 were assumed. For these services a gross profit margin of 35% was considered. Operating expenses consists of mainly remuneration expenses, external services such as legal, consulting, accounting and other IT and administrative expenses and are expected to increase by 47% in 2023, 41% in 2024 and 11% afterwards in line with the growing business. The discount rate used to discount free cash flows amounted to 22.14% and was calculated using the highest discount rate of the countries in which Lerta is operating in, e.g. Romania. The discount rate per country was calculated by taking the risk-free interest rate for each European market where Lerta is operating i.e. Czech Re- public, Poland, Romania and Hungary and adding a specific mar- ket risk premium respective for each market using the average of beta factors for two sectors: renewable energy and construction sectors. Additional 5% of risk premium was added to reflect the start-up phase of Lerta’s business. Goodwill impairment test The preliminary total value of Lerta Group as calculated based on the Discounted cash flow (DCF) valuation method is PLN 188.7 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 117 million (EUR 35,503 thousand). The purchase for 100% of the shares for Lerta was agreed at PLN 99.9 million (EUR 21,484 thou- sand) representing in a 39% discount towards the valuation based on the DCF valuation method. The recoverable amount of goodwill is significantly higher than the carrying amount and there was no indication for impairment identified . Sensitivities in DCF Sensitivity tests were performed to asses the impact of changes in some key assumptions like the discount rate and the change of the growth rate of the terminal value (TV). The below analysis shows impact of change in the used Discount rates by +/-3% on the enterprise value in absolute and relative figures as of 31.12.2022: In thousands of EUR Discount rate +3% Discount rate +3% in % Discount rate -3% Discount rate -3% in % Lerta Valuation -11,001 -27.4% 16,175 39.9% The below analysis shows impact of change in growth rate of the terminal value by +/-3% on the enterprise value in absolute and relative figures as of 31.12.2022: In thousands of EUR TV Growth rate +3% TV Growth rate +3% in % TV Growth rate -3% TV Growth rate -3% in % Lerta Valuation 7,226 17.8% -5,073 -12.5% Carrying value was calculated as a “value in use” based on the DCF model and key assumptions described above. 22. Intangible Assets In thousands of EUR Intangible assets in course of development Software Capacity market contracts Total Carrying amount as at 31 December 2020 33 1,227 0 1,260 Additions/transfers 126 0 0 126 Amortisation charge 0 -589 0 -589 Effect of movements in exchange rates 0 47 0 47 Carrying amount as at 31 December 2021 159 685 0 844 Cost 159 1,864 0 2,023 Accumulated amortisation 0 -1,179 0 -1,179 Carrying amount as at 31 December 2021 159 685 0 844 Additions/transfers 0 356 0 356 Acquisition of subsidiary 353 317 6,047 6,717 Amortisation charge 0 -479 0 -479 Effect of movements in exchange rates 0 41 0 41 Carrying amount as at 31 December 2022 512 920 6,047 7,479 Cost 512 2,537 6,047 9,096 Accumulated amortisation 0 -1,658 0 -1,658 Effect of movements in exchange rates 0 41 0 41 Carrying amount as at 31 December 2022 512 920 6,047 7,479 Intangible assets in course of development of EUR 512 thousand at 31 December 2022 represents mainly externally developed new software for monitoring and O&M services (Ignition Scada) and technology for webshop, and also software internally developed by Lerta for their internal purposes. Capacity market contracts in the preliminary amount of EUR 6,047 thousand represent activated intangibles acquired together with acquisition of Lerta described in note 8 Business combination and activated based on the DCF model. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 118 23. Other Financial Investments Other non-current investments include following investments: In thousands of EUR 2022 2021 Other financial investments Other financial assets at FVTPL 1,698 1,242 Other financial assets at FVOCI 6,118 8,494 Total non-current financial assets 7,816 9,736 The table below discloses investments in equity securities at 31 December 2022 by measurement categories and classes: In thousands of EUR Other financial assets at FVTPL Other financial assets at FVOCI Total Other financial investments Corporate shares - 6,118 6,118 Share options 1,698 - 1,698 Total Other financial investments at 31 December 2022 1,698 6,118 7,816 The table below discloses investments in equity securities at 31 December 2021 by measurement categories and classes: In thousands of EUR Other financial assets at FVTPL Other financial assets at FVOCI Total Other financial investments Corporate shares - 6,759 6,759 Share options 1,242 - 1,242 Shares not yet registered - 1,735 1,735 Total Other financial investments at 31 December 2021 1,242 8,494 9,736 (a) Other financial assets at FVOCI – Corporate shares At 31 December 2022, the Group designated investments dis- closed in the following table as equity securities at FVOCI. The FVOCI designation was made because the investments are expected to be held for strategic purposes rather than with a view to profit on a subsequent sale, and there are no plans to dispose of these investments in the short or medium term . In thousands of EUR Fair value at 31 December 2022 Dividend income recognised for the year Other financial assets at FVOCI Investment in Raygen Resources Pty Ltd ordinary shares 3,534 0 Investment in Raygen Resources Pty Ltd preference shares 1,978 0 Investment in ValueTech Fund shares 605 0 Total Other financial assets at FVOCI 6,118 0 At 31 December 2021, the Group designated investments dis- closed in the following table as equity securities at FVOCI. The FVOCI designation was made because the investments are expected to be held for strategic purposes rather than with a view to profit on a subsequent sale, and there are no plans to dispose of these investments in the short or medium term . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 119 In thousands of EUR Fair value at 31 December 2021 Dividend income recognised for the year Other financial assets at FVOCI Investment in Raygen Resources Pty Ltd ordinary shares 3,434 0 Investment in Raygen Resources Pty Ltd preference shares 1,921 0 Investment in Lerta SA ordinary shares 1,404 0 Shares not yet registered (Lerta SA) 1,735 0 Total Other financial assets at FVOCI 8,494 0 At 31 December 2022 securities at FVOCI include equity securities which are not publicly traded. Due to the nature of the local financial markets, it is not possible to obtain current market value for these investments. For these investments, fair value is estimated by reference to subscription value of additional shares placed. Refer to note 37. Reconciliation of movements in Other financial assets at FVOCI follows: In thousands of EUR Valuetech Investment in Raygen Resources Pty Ltd Investment in Lerta SA Total Other financial assets at FVOCI as at 1 January 2021 0 1,138 904 2,042 Additional investments in other financial assets at cost 0 1,897 163 2,060 Revaluation recognised in OCI (note 29) 0 2,320 337 2,657 Shares not yet registered 0 0 1,735 1,735 Other financial assets at FVOCI as at 31 December 2021 0 5,355 3.139 8,494 Revaluation recognised in OCI 605 0 0 605 Fx impact 0 158 63 221 Derecognition (change of consolidation method) 0 0 -3,202 -3,202 Other financial assets at FVOCI as at 31 December 2022 605 5,513 0 6,118 In 2022, The Group has increased its shaholding in Lerta S.A. to 85.62%. The transaction is described in detail in note 8. Due to the change of the consolidation method, Lerta is no longer presented in the Other investments. At the year-end 2022, the Group has revalued its share in the Val- uetech fund based on the equity value of the participations in the Valuetech books. The revaluation presented in OCI equaled to EUR 605 thousand. During 2021 the Group acquired 127,173 preference shares of Raygen Resources Pty Ltd and its share on equity of the entity re- mained almost unchanged at 7.60% (2020: 7.85%). As at 31 December 2020 the investments represented 250,000 ordinary shares of Raygen Resources Pty Ltd. Raygen is a company spe- cialising in high-efficiency concentrated PV generation with thermal absorption and storage. During 2021 the Group acquired additional 214,286 shares of Lerta SA and its share on equity of the entity remained unchanged at 12.01% (2020: 12.01%). Following the set-off of convertible loan agreement in December 2021, the Group acquired additional 2,500,000 newly issued shares of Lerta S.A., but these were regis- tered only after the year end, see also note 42 subsequent events. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 120 24. Deferred Tax Assets and Liabilities Movement in temporary differences during the year: In thousands of EUR Balance as at 1 January 20 21 Recognized in profit or loss Recognized in OCI of which Fx translation Recognized in OCI of which DT from revaluation Balance as at 31 December 2021 Recognized in profit or loss Recognized in OCI of which Fx translation Recognized in OCI of which DT from revaluation Balance as at 31 December 202 2 Accumulated tax losses carried forward 0 0 0 0 0 95 0 0 95 Internal margins eliminated 0 0 0 0 0 1,506 0 0 1,506 Total recognised deferred tax asset 0 0 0 0 0 1,601 0 0 1,601 Internal margins eliminated 0 0 0 0 0 69 0 0 69 Accumulated tax losses carried forward 187 184 0 0 371 -188 0 0 183 Revaluation reserve – Derivatives 0 0 0 -211 -211 0 0 -251 -462 Intangible assets 0 0 0 0 0 0 0 -1,149 -1,149 Property, plant and equipment -10,072 748 -485 -548 -10,359 793 -156 -44 -9,766 Net deferred tax asset/(liability) -9,885 932 -485 -759 -10,199 2,275 -156 -1,444 -9,524 Recognised deferred tax asset 0 0 0 0 0 1,601 0 0 1,601 Recognised deferred tax liability -9,885 932 -485 -759 -10,199 674 -156 -1,444 -11,125 Recognised deferred tax liability is arising mainly from revaluation of property, plant and equipment. Deferred tax liability is initially recognised against equity (revaluation reserve) upon revaluation of PPE (see also 5.1 and 17). Corresponding release of recognised deferred tax liability is recognised in OCI and subsequently recy- cled to retained earnings. Majority of deferred tax balances are expected to be recovered or settled after more than 12 months after the reporting period and therefore the whole deferred tax liability is presented as Non Cur- rent Liability. In 2022 the Group reassessed the probability of generation of suf- ficient taxable profits prior to their expiry and recognised deferred tax assets of EUR 278 thousand arising from part of the tax losses carried forward that are expected to be utilised. Recognised de- ferred tax asset relates mainly to tax losses to be utilised in Czech Republic, Hungary and Germany. Deferred tax liability relates to temporary differences in PPE mainly in Czech Republic, Slovakia and Hungary. Additionally, the Group recognised also deferred tax asset from internal margins eliminated of EUR 1,575 thousand. In 2022, deferred tax asset from internal margins eliminated was created in the amount of EUR 1,601 thousand. This deferred tax asset relates to the intercompany eliminations of margin from con- struction of the powerplants for the group entities. On the consoli- dated level, this margin is eliminated, but it is taxable on the local level and the temporary difference thus creates a deferred tax as- set. In addition to recognised deferred tax liability, the Group also has unrecognised deferred tax assets mainly attributable to following: In thousands of EUR Note 2022 2021 Unrecognised deferred tax asset resulting from: Fair value of hedging derivatives (to be recognised against equity) 35 0 9 Provisions and other temporary differences 0 42 Accumulated tax losses 4,469 2,397 Unrecognised deferred tax asset 4,469 2,448 No deferred tax assets arising from these temporary differences has been recognized in the financial statements as it is either not probable that sufficient taxable profits will be generated prior to the expiry of unused tax losses or as the Group is not able to reliably assess the amounts and timing of future taxable profits. The potential deferred tax assets have been calculated using the tax rates valid in individual countries where accumulated tax losses arise (Czech Republic, Slovakia, Germany, Netherlands, Switzer- land, Australia, Romania and Hungary). Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 121 As of 31 December 2022 the Group has unused tax losses carry forward of EUR 21,858 thousand for which no deferred tax assets have been recognised. Out of these tax losses, EUR 1,369 thou- sand expire in 2023, EUR 9,465 thousand expire in the period 2024-2026, EUR 10,000 thousand expire in the period 2027-2031 and EUR 1,024 thousand have an unlimited expiry date. As of 31 December 2021 the Group had unused tax losses carry forward of EUR 18,004 thousand for which no deferred tax assets have been recognised. Out of these tax losses, EUR 914 thousand were to expire in 2022, EUR 7,071 thousand in the period 2023- 2025, EUR 9,465 thousand in the period 2026-2030 and EUR 553 thousand had an unlimited expiry date. 25. Inventories In thousands of EUR 2022 2021 Goods 18,190 2,197 Spare parts 2,138 0 Inventories 20,328 2,197 Goods consist mainly of photovoltaic panels, inverters, batteries and other system components for photovoltaic power plants. The cost of inventories recognized as an expense in Raw materials and consumables used during the year in respect of continuing operations amounted to EUR 43,929 thousand (31 December 2021: EUR 12,463 thousand). Amount of EUR 4,493 thousand of goods represents goods in transit based on Incoterms . 26. Trade and Other Receivables, Loans to Related Parties Trade and other receivables In thousands of EUR Note 2022 2021 Trade receivables (gross) 10,671 4,147 Other than trade receivables 1,420 1,576 Loans provided to related parties 39 2,447 1,811 Fair value of derivatives 35 5,087 2,302 Less credit loss allowance -1,047 -391 Advances paid (deposits) – current and non current 1,322 Total financial assets with trade and other receivables 19,900 9,445 Advances paid – current and non current 5,165 1,872 VAT receivables 2,455 106 Total non-financial assets with trade and other receivables 7,620 1,978 Total trade and other receivables, loans to related parties 27,520 11,423 Trade receivables of EUR 10,671 thousand less credit loss allow- ance of EUR 1,047 thousand (2021: EUR 4,147 thousand) include mainly current and overdue receivables from sale of electricity, O&M services and sales of technologies. Other than trade receiv- ables include mainly other receivables from reinvoicing, loans pro- vide to non-related parties and other receivables in total amount of EUR 1,420 thousand (2021: EUR 1,576 thousand). Current and non-current advances paid of EUR 6,487 thousand (2021: EUR 1,872 thousand) include mainly advances paid for pur- chase of technology and non-current advances paid by Lerta Group for auction in amount of EUR 781 thousand and refundable advance of Lerta Energy HU kft. of EUR 541 thousand (line ad- vances paid-deposits current and non-current). Remaining portion of advances presented separately in amount of EUR 5,165 thou- sand includes paid non-current advances related to Resolar provi- sion of EUR 542 thousand (2021: EUR 529 thousand) which will be settled upon liquidation of panels in accordance with require- ment of EU and Czech regulation in 2030, see also note 32, and other current advance for goods and services of EUR 4,623 thou- sand (2021: 1,343 thousand). Fair value of derivatives of EUR 5,087 thousand is presented as long-term receivable as the derivatives are related to the long-term financing. Receivables of EUR 1 thousand were written off during 2022 (2021: EUR 25 thousand which were not provided for). Loans provided to related parties represent mainly loans provided to Solar Age Investments B.V. and other related parties that are not eliminated in the consolidation of PENV. For more information on related party transactions, see also note 39 . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 122 The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allow- ance for all trade receivables, other receivables, and receivables from related parties. To measure the expected credit losses, re- ceivables have been grouped based on shared credit risk charac- teristics and the days past due. The expected loss rates are based on the payment profiles of cus- tomers/counterparty over a period of 36 month before each bal- ance sheet date and the corresponding historical credit losses experienced within this period. The historical loss rates are ad- justed to reflect current and forward-looking information on macro- economic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these fac- tors. The credit loss allowance for trade receivables and other receiva- bles is determined according to provision matrix presented in the table below. The provision matrix is based the number of days that an asset is past due, adjusted for forward looking information. The credit loss allowance for Loans provided to related parties is determined according to internal analysis of recoverability of Loans provided to related parties, based on this analysis no ECL provi- sions were created as at 31 December 2022 and 31 December 2021. In thousands of EUR 31 December 2022 31 December 2021 Loss rate Gross carrying amount Lifetime ECL Net carrying value Loss rate Gross carrying amount Lifetime ECL Net carrying value Trade receivables Current 0.15% 6,182 -9 6,172 0.15% 2,595 -3 2,592 Less than 30 days overdue 0.15% 3,007 -5 3,002 0.70% 988 -7 981 30 to 90 days overdue 0.20% 367 -1 366 2.00% 24 0 24 90 to 360 days overdue 1% 85 -1 84 3.00% 108 -3 105 Over 360 days overdue 100% 379 -379 0 87.00% 432 -377 55 Specific allowance 100% 653 -653 0 Total for trade receivables 10,672 -1,047 9,624 4,147 -390 3,757 Other receivables 0.05% 1,420 0 1,420 0.15% 1,577 -1 1,57 6 Total 12,092 -1,047 11,044 5,724 -391 5,723 Specific ECL for receivables overdue for more than 360 days as at 31 December 2022 was based on present value of future cash flow of related receivables. Current receivables have increased significantly because of acquisition of Lerta as described in Note 8. Specific allowance was created for the customer EkoFachowcy Sp.z.o.o. because of its filing for insolvency (see also Note 16) . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 123 The following table explains the changes in the credit loss allowance for trade receivables under simplified ECL model between the beginning and the end of the annual period: In thousands of EUR 2022 2021 Allowance for credit losses on trade and other receivables as at 1 January 391 173 New originated 684 2 Released due to write off -1 -25 Changes in estimates and assumptions 0 229 Total credit loss allowance charge in profit or loss for the period 0 206 Foreign exchange movements -27 12 Allowance for credit losses on trade and other receivables as at 31 December 1,047 391 27. Assets and Liabilities Arising from Contracts with Customers The Group has recognised following assets and liabilities arising from contracts with customers: In thousands of EUR 2022 2021 Current contract assets from contracts with customers 1,154 1,131 Loss allowance 0 0 Total current contract assets 1,154 1,131 Contract liabilities – advances from customers 592 423 Total current contract liabilities 592 423 Contract assets represents un-invoiced part of recognised revenue based on progress towards complete satisfaction. Invoiced amount of contract assets is reclassified to trade receivable upon its invoic- ing. At 31 December 2022 the most significant part of the contract asset was represented by New Woodonga project in Australia of EUR 897 thousand and several Polish projects (2021: North East Water project of EUR 753 thousand). The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allow- ance for contract assets. To measure the expected credit losses, contract assets have been grouped based on shared credit risk characteristics and the days outstanding as unbilled. The contract assets relate to unbilled work in progress and have substantiall y similar risk characteristics as the trade receivables for the same types of contracts. The expected loss rates are based on the past data collected over a period of 36 month (2021: 36 months) prior to the end of the re- porting period and the corresponding historical losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the gross domestic product and the unemploy- ment rate of the countries in which it sells its goods and services to be the most relevant indicators, and accordingly adjusts the histor- ical loss rates based on expected changes in these variables. The credit loss allowance for contract assets as at 31 December 2022 is determined according to provision matrix presented in the table below . In thousands of EUR 31 December 2022 31 December 2021 Loss rate Gross carrying amount Lifetime ECL Net carrying value Loss rate Gross carrying amount Lifetime ECL Net carrying value Contract assets Outstanding as unbilled for less than 90 days 0.05% 1,154 0 1,154 0.2% 1,131 0 1,131 Total 0.05% 1,154 0 1,154 0.2% 1,131 0 1,131 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 124 28. Liquid Assets For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and at banks. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows : In thousands of EUR 2022 2021 Cash and cash equivalents 11,271 32,486 Cash with restriction on disposition 6,373 3,629 Cash on hand 0 20 Precious metals 3,714 3,227 Liquid assets 21,358 39,362 Cash with restriction on disposition includes mainly DSRA (debt service reserve accounts) and MRA (maintenance reserve ac- counts) for Czech, Slovak, Hungarian and Australian SPVs (2021: without Czech SPVs) and guarantees issued. Part of the movement on Cash with restriction on disposition re- lated to operating activities of the Group in 2022 in amount of EUR 30 thousand (2021: EUR 79 thousand) was presented as Change in trade and other receivables. Movement in Cash with restriction on disposition relating to borrowings of EUR -2,785 thousand (2021: EUR 397 thousand) was presented in Cash flows from fi- nancing activities. 29. Capital and Reserves Share capital and share premium Ordinary shares In shares 2022 2021 On issue at 1 January 60,000,000 60,000,000 On issue at 31 December – fully paid 60,000,000 60,000,000 The Company’s issued share capital is EUR 600,000 divided into 60,000,000 shares with a nominal value of EUR 0.01 each. The share capital is fully paid-up. Ordinary shares All shares rank equally with regard to the Company’s residual as- sets. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the shareholders’ meetings of the Company. Treasury shares At 31 December 2022 treasury shares included 1,332,797 ordinary shares of the Company (2021: 3,747,635 ordinary shares) owned directly by the Company. These ordinary shares carry no voting rights at the Shareholders Meeting. Share premium represents the excess of contributions received over the nominal value of shares issued. Proceeds from allocation of treasury shares to employees in excess to nominal value of shares are also recorded in Share premium. Nominal value of sold treasury shares is recorded against Treasury shares reserve. On 25 June 2021, the Company announced the results of an offer- ing of its existing treasury shares addressed to qualified investors. In total, 5 million shares were placed at a price of PLN 7.0, which corresponds to the gross amount of PLN 35.0 million. Total pro- ceeds of EUR 7,766 thousand from the placement net of placement costs of EUR 442 thousand were recorded in Share premium . Share buy back programme As fo 16 December 2022 the Board of Directors signed a resolution to commence a share buy back programme starting on 19 Decem- ber 2022 and lasting for 6 month i.e. until 19 June 2023 but no longer than until the funds allocated by the Company for this pur- pose are exhausted. The amount of funds allocated for the implementation of the pro- gramme shall not exceed PLN 3,750,000. The total number of shares to be purchased under the programme may not exceed 250,000 shares, which constitutes 0.42% of the Company’s share capital as of 16 December, 2022. Purchase of shares as part of the programme may not take place at a price higher than stipulated in General Meeting Resolution No 8 as of 31 May 2022 i.e. an aver- age of closing prices of shares during the five trading days prior to the date of the purchase published by the Warsaw Stoch Exchange plus 10%, which is a maximum level approved by the Board of Di- rectors and reviewed by the Supervisory Board. The Company signed an agreement with the Investment Firm, who will act as a sole broker acquiring shares in line with terms and conditions of the programme, provided that the maximum number of Shares that may be acquired during one trading session may not exceed 25% of the average daily trading volume from the last 20 trading ses- sions preceding the date of the share purchase transaction, and the purchase of shares may not take place at a price higher than the price of the last independent transaction or – if higher – the highest current independent purchase offer in a trading system, in which the purchase is made . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 125 During year 2022, the Company purchased 26,247 shares (0.04% of share capital) for the total amount of 339,369.96 zl (EUR 72,643) and at the average price of 12.93 zl (EUR 2.77) . Movement in share capital can be analysed as follow: In thousands of EUR Ordinary shares Share premium Treasury shares Total At 1 January 2021 600 23,946 -87 24,459 Treasury shares allocated to employees 0 173 0 173 Treasury shares allocated to qualified investors 0 7,324 49 7,373 At 31 December 2021 600 31,443 -38 32,005 Treasury shares allocated to employees 0 151 -101 50 Other movement 0 149 0 149 Acquisition of subsidiary (note 9) 0 8,781 0 8,781 Treasury shares allocated to qualified investors 0 0 0 0 At 31 December 2022 600 40,524 -139 40,985 As of 31 December 2022 the shareholder structure was as follows: Shareholder No. of shares % of capital No. of votes at Shareholders Meeting % of votes at Shareholders Meeting Solar Future Cooperatief U.A. 21,775,075 36.29% 21,775,075 37.12% Solar Power to the People Cooperatief U.A. 20,492,057 34.15% 20,492,057 34.93% Photon Energy N.V. 1,332,797 2.22% 0 0.00% Free float 16,400,071 27.33% 16,400,071 27.95% Total 60,000,000 100.00% 58,667,203 100.00% As of 31 December 2021 the shareholder structure was as follows: Shareholder No. of shares % of capital No. of votes at Shareholders Meeting % of votes at Shareholders Meeting Solar Future Cooperatief U.A. 21,775,075 36.29% 21,775,075 38.71% Solar Power to the People Cooperatief U.A. 20,843,375 34.74% 20,843,375 37.05% Photon Energy N.V. 3,747,635 6.25% 0 0.00% Free float 13,633,915 22.72% 13,633,915 24.24% Total 60,000,000 100.00% 56,252,365 100.00% Mr. Michael Gartner and Mr. Georg Hotar are the only members of the Company’s Board of Directors. Mr. Michael Gartner indirectly owns 37.12 % of the votes, via Solar Future Cooperative U.A. and directly 0.04% of votes at the Share- holders Meeting. Mr. Georg Hotar indirectly owns 34.93 % of votes, via Solar Power to the People Coöperatief U.A. and directly 0.13% of votes at the Shareholders Meeting . The Free float includes shares allocated to the employee share purchase programme and also shares allocated as purchase price for acquisition of subsidiary as described in Note 8. The disposition rights to these shares are limited and employees can dispose of these shares only under specific conditions. The other reserves relate to the legal reserve; the revaluation of property, plant and equipment – photovoltaic power plants the hedging reserve and the currency translation reserve. Refer below . In thousands of EUR 2022 2021 Legal reserve fund 13 13 Revaluation reserve 38,326 40,251 Currency translation reserve 2,363 2,021 Hedging reserve 4,355 2,039 Other capital funds 38 38 Total reserves 45,095 44,362 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 126 Legal reserve fund The Legal reserve fund is a reserve fund previously required by the Czech commercial law and Slovak commercial law. It has been created from the prior years’ profit of the Czech and Slovak entities based on the approval of the general meeting . The statutory reserve fund amounts to EUR 13 thousand at 31 De- cember 2022 (2021: EUR 13 thousand). Revaluation reserve In thousands of EUR Revaluation reserve – PPE Revaluation reserve – Other financial investments Revaluation reserve total Balance as at 1 January 2021 40,680 0 40,680 Increase of revaluation reserve (note 19) 1,181 2,657 3,838 Increase of revaluation reserve – deferred tax recognised -548 0 -548 Share on increase on revaluation of properties – JV 105 0 105 Move from revaluation reserve to retained earnings -3,822 0 -3,822 Other movements -2 0 -2 Balance as at 31 December 2021 37,594 2,657 40,251 Increase of revaluation reserve (note 19) 432 605 1,038 Increase of revaluation reserve – deferred tax recognised 0 0 0 Share on increase on revaluation of properties – JV 0 0 0 Move from revaluation reserve to retained earnings -2,963 0 -2,963 Other movements 1 0 1 Balance as at 31 December 2022 35,064 3,262 38,326 The revaluation reserve arises on the revaluation of photovoltaic power plants (PVP). In 2022, Facankert project has been activated with the total other comprehensive income booked in the amount of EUR 432 thou- sand. Additionally to this, the Group has recognized and revalued other financial investments in Valuetech fund with a total increase in value of EUR 605 thousand. In 2021, due to legislative changes in the Czech Republic and Slo- vakia, the Group updated the DCF models to reflect the conditions valid as of 1 January 2022. These changes resulted in an increase of EUR 271 thousand of revaluation reserve for the property, plant and equipment located in Slovakia and a decrease of revaluation reserve for the property, plant and equipment located in Czech Re- public by EUR 3,229 thousand (see also note 19). The Group also recognised increase in group’s share on revaluation reserve of property, plant and equipment for equity accounted investments in Slovakia of EUR 105 thousand . In addition, the Group performed revaluation of newly connected power plants in Australia in Q3 2021 and Hungary in Q4 2021 re- sulting in an increase revaluation reserve of property, plant, and equipment by EUR 3,591 thousand. The revaluation reserve is being released to the retained earnings during the duration of Feed-in-Tariff-currently 25 years in the Czech Republic, 25 years in Slovakia (increased to 25 years as of 2022, before 15 years) and up to 25 years in Hungary and up to 30 years in Australia. The amount equal to the amount of depreciation coming from re- valuation recycled to retained earnings in 2022 equals to EUR 2,626 thousand (2021: EUR 3,822 thousand). The revaluation reserve as such cannot be distributed only the amounts released to retained earnings can be distributed to the shareholder. Foreign currency translation reserve In thousands of EUR 2022 2021 Balance at beginning of year 2,021 -2,580 Foreign currency differences arising from the translation of financial statements and foreign exchange gains or losses arising from net investments 342 4,601 Balance at end of year 2,363 2,021 The foreign currency translation reserve comprises all foreign cur- rency differences arising from the translation of the financial state- ments of operations using different currency from Euro. It relates to Czech Republic, Hungary, Switzerland, Romania and Australia. In accordance with accounting policies are foreign exchange gains or losses arising from net investments in foreign operations also recognized in other comprehensive income. This reserve cannot be distributed . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 127 Derivatives hedging reserve In thousands of EUR 2022 2021 Balance at beginning of year 2,039 -325 Change in fair value of hedging derivatives – fully consolidated entities (note 33) 2,310 2,348 Share on change in fair value of hedging derivatives of JV 5 17 Balance at end of year 4,355 2,039 Derivatives hedging reserve cannot be distributed . Other capital funds In line with the acquisition of treasury shares free of charge in 2013 the Company recognised Other capital funds of EUR 100 thou- sand. Nominal value of sold treasury shares is recorded against Other capital funds . Dividends There were no dividends declared and paid by the Company in 2022 and 2021. 30. Earnings Per Share In EUR 2022 2021 Basic earnings per share 0.111 -0.118 Diluted earnings per share 0.105 -0.107 Total comprehensive income per share Basic TCI per share 0.135 0.039 Diluted TCI per share 0.128 0.035 Basic and diluted earnings per share The calculation of basic earnings per share at 31 December 2022 was based on the profit attributable to ordinary shareholders of EUR 6,309 thousand (2021: loss EUR -6,404 thousand) and a weighted average number of ordinary shares outstanding of 56,608 thousand (2021: 54,359 thousand). Share on profit of equity-accounted investees amounted to EUR 127 thousand (2021: EUR 141 thousand). Basic and diluted total comprehensive income per share The calculation of total comprehensive earnings per share and di- luted total comprehensive earnings per share at 31 December 2022 and 2021 was based on the total comprehensive income of EUR 7,672 thousand (2021: EUR 2,095 thousand) attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding of 56,608 thousand (2021: of 54,359 thou- sand) . Weighted average number of ordinary shares There were no new shares issued in 2022 nor 2021. The number of shares at the year-end 2022 and 2021 was 60,000,000 . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 128 31. Loans and Borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. In thousands of EUR 2022 2021 Non-current liabilities Issued bonds 76,511 57,223 Long-term secured bank loans 58,446 41,106 Long term lease liability 2,914 1,676 Long-term portion of other loans 230 373 Total 138,101 100,378 Current liabilities Issued bonds 3,670 24,107 Current portion of long-term secured bank loans, including accrued interest 7,259 4,354 Short-term lease liability 712 597 Total 11,641 29,058 Total loans & borrowings 149,742 129,436 Reconciliation of liabilities arising from financing activities The table below sets out an analysis of liabilities from financing activities and the movements in the Group’s liabilities from financing activities for each of the periods presented. The items of these liabilities are those that are reported as financing in the statement of cash flows: In thousands of EUR Borrowings Issued bonds Lease liabilities Other lia bilities from financing activities Total Liabilities from financing activities at 1 January 2021 50,151 46,739 2,405 401 99,696 Cash flows Loan drawdowns / New issues of bonds 15,416 56,092 0 0 71,508 Placement costs paid 0 -782 0 0 -782 Repayments of principal -19,898 -21,281 -577 0 -41,756 Interest payments -2,224 -3,751 -65 -36 -6,076 Capitalized interest -171 0 0 0 -171 Non-cash changes Interest expense, including capitalized interest 2,395 4,251 65 36 6,747 Other non-cash movements 0 0 52 0 52 Foreign exchange adjustments -209 62 393 -28 218 Liabilities from financing activities at 31 December 2021 45,460 81,330 2,273 373 129,436 Cash flows Loan drawdowns / New issues of bond 29,086 22,500 0 0 51,586 Placement costs paid 0 -331 0 0 -331 Repayments of principal -6,649 -23,719 -668 -102 -31,138 Interest payments -2,244 -5,898 -139 0 -8,281 Non-cash changes 0 Interest expense, including capitalized interest 2,710 6,213 139 0 9,062 Other non-cash movements 0 0 1,901 0 1,901 Foreign exchange adjustments -2,658 86 120 -41 -2,493 Liabilities from financing activities at 31 December 2022 65,705 80,181 3,626 230 149,742 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 129 Terms and debt repayment schedule Terms and conditions of outstanding loans were as follows: In thousands of EUR Currency Nominal interest rate Year of maturity 31 December 2022 31 December 2021 Credit limit Utilised Credit limit Utilised Secured bank loan (Unicredit) CZK 3M PRIBOR + 1.9% 31.12.2029 18,701 18,701 0 0 Secured bank loan (Unicredit) EUR 3M EURIBOR + 2.35% 31.12.2025 9,017 9,017 0 0 Secured bank loan (Unicredit) EUR 3M EURIBOR + 1.55% 30.6.2025 – 30.9.2027 3,763 3,763 0 0 Secured bank loan (Unicredit) EUR 3M EURIBOR + 2.7–3.1% 28.6.2024 0 0 2,220 2,220 Secured bank loan (Unicredit) EUR 3M EURIBOR + 2.7–2.9% 31.12.2024 0 0 2,538 2,538 Secured bank loan (K&H) HUF 3M BUBOR + 2.2–2.5% 28.6.2034 31.3.2035 11,779 11,779 22,643 21,629 Secured bank loan (K&H) EUR 3M EURIBOR + 2.5-2.8% 28.6.2034 31.3.2025 7,882 7,882 0 0 Secured bank loan (CIB) HUF 3M BUBOR + 2.5% 31.12.2035 5,386 5,386 14,415 14,415 Secured bank loan (CIB) EUR 3M EURIBOR + 2.75% 30.6.2032 4,384 4,384 0 0 Secured bank loan (Infradebt) AUD 3M BBSW (min 0,5%)+2,35-3,25% 31.12.2025 4,295 4,295 4,618 4,618 Accrued fees and interest 0 498 0 40 Total interest bearing liabilities 65,207 65,705 46,434 45,460 The exposure of the Group’s borrowings to interest rate changes and the contractual re-pricing dates at the end of the reporting pe- riod are disclosed in note 36. All secured bank loans are pledged by SPVs’ assets of power plants including real estate if any and technology receivables gen- erated by power plants. In case of secured bank loans all power plants are cross-collateralized within the financing banks, see also note 19. In June 2022, Photon Energy prolonged its non-recourse project financing of its power plants in Slovakia with UniCredit Bank Czech Republic and Slovakia a.s.. The loan amounts was kept un- changed, only the repayment schedules were prolonged on aver- age by 22 month in line with the lowered and prolonged feed-in- tarrif. In August 2022, Photon Energy switched the unhedged part of its HUF financing with CIB Bank, a subsidiary of Italian Intesa Sanpaolo Group and the second largest commercial bank in Hun- gary, to EUR. The switched amount was EUR 4,497 thousand. In September 2022, Photon Energy switched the unhedged part of its HUF financing with K&H bank, the Hungarian subsidiary of Bel- gian KBC Group N.V. and one of Hungary’s largest banking and financial services firms to EUR. The switched amount was EUR 6,876 thousand. In addition Photon Energy has drawn down the available frame of HUF 409 million in EUR representing an addi- tional EUR 1,006 thousand . In October 2022, Photon Energy secured non-recourse project fi- nancing for nine of its power plants with 14.6 MWp in the Czech Republic with UniCredit Bank Czech Republic and Slovakia a.s.. The financing, which totals EUR 28.1 million, is split into financing in Euros for EUR 9.7 million and in Czech crowns for CZK 451 mil- lion (EUR 18.4 million). The facilities are being provided for a period of up to 7 years and 3 months, ie. Until 31 December 2029. During 2021, Photon Energy did not secure any additional bank financing. Compliance with Covenants The Group is subject to certain covenants related primarily to its borrowings. Non-compliance with such covenants may result in negative consequences for the Group including growth in the cost of borrowings and declaration of default. The Group was substantially in compliance with all financial cove- nants set by the lenders as of 31 December 2022 except for debt service cover ratio with one of the lenders. This does not represent an event of default under the borrowings or permit the lender to immediately recall borrowings but may require remediating actions in the form of mandatory prepayment (cash sweep) with value of EUR 11 thousand as of 31 December 2022. The Group was in compliance with all covenants of 31 December 2021. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 130 Issued bonds In thousands of EUR Amortised amount Fair value 2022 2021 2022 2021 Current liabilities EUR bond 2017/22 0 23,735 0 24,350 CZK bond 2016/23 3,146 0 3,127 0 Green bond 2021/27 524 0 0 0 Non-current liabilities Green bond 2021/27 76,511 54,602 70,284 57,201 EUR bond 2017/22 0 0 0 0 CZK bond 2016/23 0 2,993 0 2,832 Total 80,181 81,330 73,411 84,383 In November 2021, the Group has issued an EUR green bond with annual coupon of 6.50% and maturity in November 2027 (six-year maturity). The EUR green bond 2021/27 was offered to bondhold- ers of the existing 2017/2022 EUR bond in form of an exchange offer and as a result, EUR 21,281 thousand were exchanged. The principal amount of EUR 50,000 thousand was oversubscribed and the overall volume of the new green bond was increased to EUR 55,000 thousand. Total amount of placement costs paid for the is- suance/exchange of the Green bond amounted to EUR 1,202 thou- sand. Exchange bonus paid to existing bondholder of EUR 420 thousand was recognised in Gains less losses on derecognition of financial liabilities while the remaining amount of EUR 782 thou- sand is included in the amortised amount of the Issued bonds and will be recognised as interest expense from Issued bonds using effective interest rate. The EUR green bonds 2021/27 are traded on the unregulated mar- ket segments of the Stock Exchanges in Frankfurt, Berlin, Ham- burg, Hannover, Munich, Düsseldorf and Stuttgart. The net proceeds of the transaction are allowed to be used only for financ- ing and expanding eligible assets in accordance with its Green Fi- nancing Framework. In October 2017, the Group had issued EUR bonds with an annual coupon of 7.75% and maturity in October 2022. The outstanding nominal amount as of 31 December 2021 was EUR 24,419 thou- sand, being due for repayment in October 2022, and was pre- sented in Current liabilities. The EUR bonds 2017/22 were traded on the unregulated market segments of the Stock Exchanges in Frankfurt, Berlin, Hamburg, Hannover, Munich, Düsseldorf and Stuttgart as well. In May 2022, the Company tapped its EUR green bond 2021/27 in the amount of EUR 10,000 thousand to a total outstanding amount of EUR 65 million. In October 2022 and November 2022, the Com- pany tapped the bond in the amount of another EUR 12,500 thou- sand to a total outstanding amount of EUR 77,500 thousand. The bonds from the second tap in autumn, were also offered to bondholders of the existing 2017/2022 corporate bonds in form of an exchange offer with a 1.5% loyalty premium plus the difference in net accrued interest on each exchanged bond. After the ex- change the outstanding volume of the corporate EUR bond 2017/22 was EUR 15.232 million and was fully repaid together with the final interest payment to the bondholders on 27 October 2022. Total amount of placement costs paid for the tapping/exchange of the Green bond amounted to EUR 451 thousand. Exchange bonus paid to existing bondholder of EUR 114 thousand was recognised in Gains less losses on derecognition of financial liabilities while the remaining amount of EUR 337 thousand is included in the amortised amount of the Issued bonds and will be recognised as interest expense from Issued bonds using effective interest rate. CZK bond 2016/23 issued in October 2016 has an annual coupon of 6%, with an outstanding nominal amount of EUR 3,146 thousand as of 31 December 2022 (2021: EUR 3,052 thousand) which is due in December 2023 and has been presented in Current liabilities. CZK bonds 2016/23 are traded on the unregulated market segment of the Prague Stock Exchange. Accrued interest of EUR 524 thousand at 31 December 2022 for EUR Green bond (2021: EUR 372 thousand) is presented within current liabilities. The fair values are based on cash flows discounted using a rate based on the borrowing rate of 6,78% (applicable credit spread) + risk free rate for relevant currency (2021: 6,78%) and are within level 2 of the fair value hierarchy. Other long-term financing Other long-term financing of EUR 230 thousand (2021: EUR 373 thousand) that includes mainly consumer loans received for car fi- nancing and other long-term liabilities. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 131 32. Provisions Movements in provisions for liabilities and charges are as follows: In thousands of EUR 2022 2021 Carrying amount as at 1 January 545 520 Foreign exchange impact 21 25 Carrying amount as at 31 December 566 545 Provision for liabilities and charges includes provision for ecologi- cal liquidation and recycling of solar panels created in accordance with European directive and Czech legislation. For all solar panels purchased before 2013, all responsibilities connected to recycling of solar panels are with the PVP operators. In accordance with the legislation, the Group paid contribution to the selected provider responsible for liquidation of solar panels of EUR 566 thousand (2021: EUR 545 thousand), paid contributions are presented as non-current advances paid in Other receivables – non-current, see note 26. There are no similar obligations connected to the liquida- tion of solar panels in Slovakia, Hungary nor Australia. 33. Trade and Other Payables In thousands of EUR Note 2022 2021 Trade payables 11,988 2,275 Other payables 4,349 1,023 Total financial liabilities with trade and other payables 16,337 3,298 Payables to employees 1,292 552 Other liabilities 969 626 Total non-financial liabilities with trade and other payables 2,261 1,178 Total trade and other payables 18,598 4,476 Trade payables of EUR 11,988 thousand (2021: EUR 2,275 thou- sand) include mainly regular trade payables and payables for sup- ply of goods and services to the Group. Other payables of EUR 4,349 thousand include accrued liabilities mainly related to the de- livery of goods in transit . 34. Current Income Tax Receivables / Current Tax Liability Current income tax payables of EUR 2,708 thousand (2021: receiv- able EUR 303 thousand) represent tax liability for profitable entities (mainly SK, CZ, HU SPVs and few operating Romanian and Hun- garian entities decreased by tax advances for income tax paid mainly in Hungary, Czech Republic, Romania and Slovakia . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 132 35. Derivative Financial Instruments In thousands of EUR 31 December 2022 31 December 2021 Contracts with positive fair value Contracts with negative fair value Contracts with positive fair value Contracts with negative fair value Interest rate swaps, fair values, at the end of reporting period Trading derivatives 217 0 0 0 Hedging derivatives 4,981 -106 2,351 -49 Value of interest rate swaps 5,198 -106 2,351 -49 Net value of interest rate swaps 5,092 -106 2,302 0 Other Derivative Financial Instruments Shares options (note 23) 1,699 0 1,242 0 Net Value of Other Derivative Financial Instruments 1,699 0 1,242 0 Interest rate swaps are derivative financial instruments entered into by the Group are generally concluded with financing banks on standardised contractual terms and conditions. Derivatives have potentially favourable (assets) or unfavourable (liabilities) condi- tions as a result of fluctuations in market interest rates, foreign ex- change rates or other variables relative to their terms. The aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time. In accordance with accounting policies described in note 4.3.3, changes in fair value of derivatives for which no hedge accounting is in place are recognized in profit and loss, changes in fair value of hedging derivatives are recognized in other comprehensive in- come. The Company determines whether an economic relationship exists between the cash flows of the hedged item and hedging instrument based on an evaluation of the qualitative characteristics of these items. The company considers whether the critical terms of the hedged item and hedging instrument closely align when assessing the presence of an economic relationship. The Company evaluates whether both hedging instrument and hedged items are concluded in the same currency and, therefore, are subject to the same risk, whether the nominal amount of the hedging instrument and hedged items are identical and whether the maturity dates are identical. 36. Financial Risk Management The major financial risks faced by the Company are those related to credit exposures, exchange rate and interest rate. The primary function of financial risk management is to establish risk limits and to ensure that any exposure to risk stays within these limits. These risks are managed in the following manner. 36.1 Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The table below shows liabilities at 31 December 2022 and 31 De- cember 2021 by their remaining contractual maturity. The amounts disclosed in the maturity table are the contractual undiscounted cash flows. Such undiscounted cash flows differ from the amount included in the statement of financial position because the state- ment of financial position amount is based on discounted cash flows. Financial derivatives are settled on net basis. Foreign cur- rency payments are translated using the spot exchange rate at the end of the reporting period . 31 December 2022 In thousands of EUR Carrying amount 1 – 12 months 1 – 2 years 2 – 5 years More than 5 years Contractual cash flows Financial liabilities Secured bank loans 65,705 12,789 12,157 37,027 39,987 101,960 Derivatives -5,092 -2,394 -2,380 -5,592 -1,850 -12,216 Bonds 80,181 8,341 5,038 92,613 0 105,991 Lease liability 3,626 865 731 1,236 1,912 4,744 Other L-T loans 230 0 230 0 0 230 Trade and other payables 16,337 16,337 0 0 0 16,337 Total future payments, including future principal and interest payments 160,987 35,938 15,776 125,284 40,049 217,046 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 133 31 December 2021 In thousands of EUR Carrying amount 1 – 12 months 1 – 2 years 2 – 5 years More than 5 years Contractual cash flows Financial liabilities Secured bank loans 45,460 6,282 6,163 16,532 30,452 59,429 Bonds 81,330 29,315 6,780 10,725 58,575 105,395 Lease liability 2,273 593 345 712 913 2,563 Other LT loans 373 249 124 0 0 373 Trade and other payables 3,298 3,298 0 0 0 3,298 Total future payments, including future principal and interest payments 132,734 39,737 13,412 27,970 89,940 171,058 It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts . 36.2 Credit Risk Exposure to Credit Risk Credit risk is the risk that counterparty fails to discharge an obliga- tion to the Group. The Group’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets in the consolidated statement of financial position. Credit risk in respect of cash balances held with banks and depos- its with banks are managed via diversifications of bank deposits and only with the major reputable financial institutions with rating by S&P between A- and BBB+. IFRS 9 allows entities to apply a ‘simplified approach’ for trade re- ceivables and contract assets. The simplified approach allows en- tities to recognise lifetime expected losses on all these assets without the need to identify significant increases in credit risk. For trade and other receivables, receivables from related and con- tract assets that do not contain a significant financing component, the Group recognises a lifetime expected loss allowance. The Group applies a provision matrix that applies the relevant loss rates to the trade receivable balances. See also note 26 for more . 36.3 Interest Rate Risk The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes, but may reduce or create losses in the event that unex- pected movements arise. Management monitors on a daily basis and sets limits on the level of mismatch of interest rate repricing that may be undertaken . The table below summarises the Group’s exposure to Interest rate risks. The table presents the aggregated amounts of the Group’s financial assets and liabilities at carrying amounts, categorised by the earlier of contractual interest repricing or maturity dates. In re- spect of interest-bearing financial liabilities, the following table indi- cates their effective interest rates at the balance sheet date and also due date of loans based on the valid repayment schedules . In thousands of EUR Demand and less than 1 month From 1 to 6 months From 6 to 12 months More than 1 year Not specified Total 31 December 2022 Total financial assets 35,390 0 0 5,868 7,816 49,074 Total financial liabilities 16,344 65,737 3,184 77,188 3,626 166,079 Net interest sensitivity gap at 31 December 2022 19,046 -65,737 -3,184 -71,320 4,190 -117,005 31 December 2021 Total financial assets 48,807 0 0 0 9,736 58,543 Total financial liabilities 3,308 45,512 24,169 57,472 2,273 132,734 Net interest sensitivity gap at 31 December 2021 45,499 -45,512 -24,169 -57,472 7,463 -74,191 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 134 Actual interest expense related to bank loans and borrowings in- curred by the Company in 2022 was EUR 2,706 thousand (2020: EUR 2,224 thousand) related to the loans drawn in the amount of EUR 65,705 thousand (31 December 2021: EUR 45,460 thou- sand). Information on variable interest rates for all bank loans re- ceived is included in note 31. At 31 December 2022, if interest rates at that date had been 100 basis points lower (2021: 100 basis points lower) with all other var- iables held constant, profit for the year would have been EUR 657 thousand (2021: EUR 455 thousand) higher, mainly as a result of lower interest expense on variable interest liabilities. If interest rates had been 100 basis points higher (2021: 100 basis points higher), with all other variables held constant, profit would have been EUR 657 thousand (2021: EUR 455 thousand) lower, mainly as a result of higher interest expense on variable interest liabilities. Bonds issued bear fixed interest rate risk and therefore are not sub- ject to interest rate risk . 36.4 Currency Risk The Company’s functional currency of its major subsidiaries is EUR, CZK, AUD, RON and HUF. Foreign exchange risk is associ- ated with sales and purchases of goods and services and loans received denominated in local currencies. The table below summarises the Group’s exposure to foreign cur- rency exchange rate risk at the end of the reporting period : In thousands of EUR At 31 December 2022 At 31 December 2021 Monetary financial assets Monetary financial liabilities Derivatives Net position Monetary financial assets Monetary financial liabilities Derivatives Net position EUR 10,264 -108,507 -106 -98,349 32,865 -85,897 -49 -53,081 CZK 3,480 -24,647 66 -21,101 3,607 -3,942 0 -335 HUF 14,388 -20,418 5,126 -904 4,418 -37,032 2,351 -30,263 AUD 11,411 -7,063 0 4,348 11,765 -5,442 0 6,323 CHF 21 0 0 21 27 0 0 27 PLN 3,393 -2,723 0 670 3,261 0 0 3,261 RON 719 -2,723 0 -2,004 0 0 0 0 Other 313 0 0 313 30 0 0 30 Total 43,989 -166,081 5,086 -117,006 55,973 -132,313 2,302 -74,038 Derivatives presented above are monetary financial assets or mon- etary financial liabilities, but are presented separately in order to show the Group’s gross exposure. The Group has only interest rate derivatives, there are no FX derivatives. The above analysis includes only monetary assets and liabilities. Investments in equities and non-monetary assets are not consid- ered to give rise to any material currency risk . The following table presents sensitivities of profit or loss and equity to reasonably possible changes in exchange rates applied at the end of the reporting period relative to the functional currency of the respective Group entities, with all other variables held constant: In thousands of EUR At 31 December 2022 At 31 December 2021 Impact on profit or loss Impact on equity Impact on profit or loss Impact on equity EUR strengthening by 10% (2021: strengthening by 10%) 0 0 0 0 CZK strengthening by 10% (2021: strengthening by 10%) 1,924 -6 47 0 HUF strengthening by 10% (2021: strengthening by 10%) 548 -466 2,965 -214 AUD strengthening by 10% (2021: strengthening by 10%) -395 0 -678 0 PLN strengthening by 10% (2021: strengthening by 10%) -61 0 -296 0 RON strengthening by 10% (2021: strengthening by 10%) 182 0 0 0 Total 2,198 -472 2,038 -214 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 135 37. Fair Value Disclosures Fair value measurements are analysed by level in the fair value hierarchy as follows: ► Level 1 are measurements at quoted prices (unad- justed) in active markets for identical assets or liabilities, ► Level 2 measurements are valuations techniques with all material inputs observable for the asset or liability, ei- ther directly (that is, as prices) or indirectly (that is, de- rived from prices), and ► Level 3 measurements are valuations not based on ob- servable market data (that is, unobservable inputs). Management applies judgement in categorized financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require signif- icant adjustment, that measurement is a Level 3 meas- urement. The significance of a valuation input is assessed against the fair value measurement in its en- tirety. The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows. For the other financial assets/financial liabilities, the fair value approximates the carrying amount . 37.1 Recurring Fair Value Measurements Recurring fair value measurements are those that the accounting standards require or permit in the statement of financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair value measurements are categorized are as follows: In thousands of EUR 2022 2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Precious metals 3,714 0 0 3,714 3,227 0 0 3,227 Derivatives 5,087 0 5,087 0 2,302 0 2,302 Other financial investments 0 0 7,816 7,816 0 0 9,736 9,736 Non financial assets Property, plant and equipment 0 0 115,921 115,921 0 0 123,434 123,434 Total assets recurring FV measurement at 31 December 3,714 5,087 123,737 132,538 3,227 2,302 133,170 138,699 Financial liabilities Derivatives 0 0 0 0 0 0 0 0 Total assets recurring FV measurement at 31 December 0 0 0 0 0 0 0 0 The valuation technique, inputs used in the fair value measurement for level 3 measurements and related sensitivity to reasonably possible changes in those inputs are as follows: 31 December 2022: In thousands of EUR Fair value Valuation technique Inputs used Range of inputs Reasonable change Sensitivity of FV measurement Non financial assets Property, plant and equipment 115,921 DCF note 5.1 See below See below See below Other financial investments 7,816 MtM note 5.3 See below See below See below Total assets recurring FV measurement at 31 December 123,737 31 December 2021: In thousands of EUR Fair value Valuation technique Inputs used Range of inputs Reasonable change Sensitivity of FV measurement Non financial assets Property, plant and equipment 123,434 DCF note 5.1 See below See below See below Other financial investments 9,736 MtM note 5.3 See below See below See below Total assets recurring FV measurement at 31 December 133,170 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 136 The DCF Equity valuation method is based on a Discounted Cash Flow method. It includes the future cash flows available to the shareholders/providers of equity of photovoltaic projects (i.e. after all debt repayments and interests) that are later discounted by rel- evant discount rates (Levered Cost of Equity). The risk profile is represented by a discount rate (Levered Cost of Equity). Due to existence of senior project finance the cost of equity calculated by CAPM formula is adjusted by Miller-Modigliani formula to achieve the most precise cost of equity levered for each project respecting it unique capital structure. In the valuation model, a quarterly discount is applied. This is based on the fact that debt repayments are happening on quarterly basis. This is effecting the overall change in financing structure and indirectly affecting cost of equity levered. The used Levered Cost of Equity rates to discount estimated cash flows, vary between countries from 9% to 26% for 2022 (2021: 5% to 13%). Other financial investments are stated at its fair value based on valuation models prepared by management. Other financial invest- ments include primarily ordinary and preference shares and related share options held (see also note 23). The principal assumptions, in addition to the market price of the shares, are probability of the realisation of the share options granted and discount rate reflecting required return on investment on this type of the Group’s invest- ments . Sensitivity analysis of DCF for power plants – change in Levered Cost of Equity The below analysis shows impact of change in the used Levered Cost of Equity rates by +/-3% on the enterprise/entity value in absolute and relative figures as of 31.12.2022: In thousands of EUR Discount rate +3% Discount rate +3% in % Discount rate -3% Discount rate -3% in % HU power plants -2,515 -5.2% 3,490 7.2% CZ power plants -2,197 -5.0% 2,778 6.3% SK power plants -1,043 -8.8% 1,313 11.1% AU power plants -2,087 -13.8% 3,252 21.6% The below analysis shows impact of change in the used Levered Cost of Equity rates by +/-3% on the enterprise/entity value in absolute and relative figures as of 31.12.2021: In thousands of EUR Discount rate +3% Discount rate +3% in % Discount rate -3% Discount rate -3% in % HU power plants -3,221 -6.4% 5,240 10.5% CZ power plants -5,789 -12.1% 7,109 14.9% SK power plants -1,591 -10.7% 2,022 13.6% AU power plants -3,109 -19.9% 5,226 33.5% Sensitivity analysis of DCF for power plants – change in production output The below analysis shows impact of change in production output by +/-2% on the enterprise/entity value in absolute and relative figures as of 31.12.2022: In thousands of EUR Production +2% Production +2% in % Production -2% Production -2% in % HU power plants 745 1.5% -748 -1.5% CZ power plants 809 1.8% -808 -1.8% SK power plants 196 2.3% -196 -2.3% AU power plants 308 2.0% -308 -2.0% The below analysis shows impact of change in production output by +/-2% on the enterprise/entity value in absolute and relative figures as of 31.12.2021: In thousands of EUR Production +2% Production +2% in % Production -2% Production -2% in % HU power plants 852 1.7% -863 -1.7% CZ power plants 910 1.9% -910 -1.9% SK power plants 361 2.4% -361 -2.4% AU power plants 316 2.0% -316 -2.0% Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 137 Sensitivity analysis of DCF for power plants – change in electricity and LGC prices The below analysis shows impact of change in electricity prices by +/-10% on the enterprise/entity value for selected power plants in absolute and relative figures as of 31.12.2022: In thousands of EUR Electricity prices +10% Electricity prices +10% in % Electricity prices -10% Electricity prices -10% in % HU power plants–- FIT 19 1.6% -19 -1.6% HU power plants–- Merchant 2,845 6.5% -2,768 -6.3% AU power plants–- prices 944 6.3% -944 -6.3% AU power plants–- LGCs 228 1.5% -228 -1.5% The below analysis shows impact of change in electricity prices by +/-10% on the enterprise/entity value for selected power plants in absolute and relative figures as of 31.12.2021: In thousands of EUR Electricity prices +10% Electricity prices +10% in % Electricity prices -10% Electricity prices -10% in % HU power plants–- FIT 320 0.7% -318 -0.7% HU power plants–- Merchant 175 11.4% -175 -11.4% AU power plants–- prices 1,332 8.5% -1,332 -8.5% AU power plants–- LGCs 253 1.6% -253 -1.6% Sensitivity analysis of MtM of other financial investments – changes in significant estimates The below analysis shows impact of change in significant estimates on the MtM value in absolute and relative figures as of 31.12.2022: In thousands of EUR Market price of the share +10% Market price of the share +10% in % Market price of the share -10% Market price of the share -10% in % Investment in Raygen Resources Pty Ltd 548 7.6% -548 -7.6% In thousands of EUR Discount rate +3% Discount rate +3% in % Discount rate -3% Discount rate -3% in % Investment in Raygen Resources Pty Ltd -66 -0.9% 71 +1.0% In thousands of EUR Probability +10% Probability +10% in % Probability -10% Probability -10% in % Investment in Raygen Resources Pty ltd 255 3.6% -255 -3.6% The below analysis shows impact of change in significant estimates on the MtM value in absolute and relative figures as of 31.12.2021: In thousands of EUR Market price of the share +10% Market price of the share +10% in % Market price of the share -10% Market price of the share -10% in % Investment in Lerta SA 314 10,0% - 314 -10,0% Investment in Raygen Resources Pty Ltd 547 8,3% - 920 -13,9% In thousands of EUR Discount rate +3% Discount rate +3% in % Discount rate -3% Discount rate -3% in % Investment in Raygen Resources Pty Ltd - 125 -1,9% 143 2,2% In thousands of EUR Probability +10% Probability +10% in % Probability -10% Probability -10% in % Investment in Raygen Resources Pty ltd 186 2,8% -186 -2,8% Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 138 37.2 Assets and Liabilities Not Measured at Fair Value but for Which Fair Value is Disclosed Fair values analysed by level in the fair value hierarchy and the carrying value of assets and liabilities not measured at fair value are as follows: In thousands of EUR 2022 2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Financial assets at amortised costs Trade and other receivables 12,366 12,366 0 5,332 0 5,332 Loans provided 2,447 2,447 0 1,811 0 1,811 Other 17,644 17,644 0 36,135 0 36,135 Total assets 32,457 32,457 0 43,278 0 43,278 Financial liabilities Borrowings Bank loan 0 65,705 0 65,705 0 45,460 0 45,460 Issued bonds 0 73,411 0 73,411 0 84,383 0 84,383 Lease liabilities 0 3,626 0 3,626 0 2,273 0 2,273 Other non-current liabilities 0 230 0 230 0 373 0 373 Other financial liabilities Trade and other payables 0 16,337 0 16,337 0 3,298 0 3,298 Total liabilities 0 159,309 0 159,309 0 135,787 0 135,787 All financial assets and financial liabilities have been defined to Level 2. The fair values in level 2 and level 3 of the fair value hierarchy were estimated using the discounted cash flows valuation technique. Financial Assets Carried at Amortised Cost The fair value of floating rate instruments is normally their carrying amount. The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risks and remaining maturities. Discount rates used depend on the credit risk of the counterparty. Liabilities Carried at Amortised Cost The fair value of issued bonds is based on quoted market prices. Fair values of other liabilities were determined using valuation tech- niques. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 139 38. Presentation of Financial Instruments by Measurement Category For the purposes of measurement, IFRS 9 Financial Instruments classifies financial assets into the following categories: (a) financial assets at FVTPL; (b) debt instruments at FVOCI, (c) equity instru- ments at FVOCI and (d) financial assets at AC. Financial assets at FVTPL have two sub-categories: (i) assets mandatorily measured at FVTPL, and (ii) assets designated as such upon initia l recognition. In addition, finance lease receivables form a separate category. The following table provides a reconciliation of financial assets with these measurements: 31 December 2022: In thousands of EUR FVOCI FVPL AC Total Assets Cash and cash equivalents 0 0 11,271 11,271 Liquid assets with restriction on disposition 0 0 6,373 6,373 Precious metals 0 3,714 0 3,714 Other financial assets 6,118 1,698 0 7,816 Trade and other receivables 4,875 217 12,366 17,458 Loans provided 0 0 2,447 2,447 Total financial assets 10,993 5,629 32,457 49,079 As of 31 December 2022, all of the Group’s financial liabilities were carried at amortised costs. 31 December 2021: In thousands of EUR FVOCI FVPL AC Total Assets Cash and cash equivalents 0 0 32,506 32,506 Liquid assets with restriction on disposition 0 0 3,629 3,629 Precious metals 0 3,227 0 3,227 Other financial assets 8,494 1,242 0 9,736 Trade and other receivables 2,302 0 5,332 7,634 Loans provided 0 0 1,811 1,811 Total financial assets 10,796 4,469 43,278 58,543 As of 31 December 2021, all of the Group’s financial liabilities were carried at amortised costs . 39. Related Parties Parties are generally considered to be related if the parties are un- der common control or if one party has the ability to control the other party or can exercise significant influence or joint control over the other party in making financial and operational decisions. In considering each possible related party relationship, attention is di- rected to the substance of the relationship, not merely the legal form . Balances and transactions between the Company and its subsidi- aries which are related parties of the Company have been elimi- nated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. The Company is jointly controlled by Mr. Michael Gartner (via Solar Future Coöperatief U.A.) and Mr. Georg Hotar (via Solar Power to the People Coöperatief U.A.), who are the Company’s directors. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 140 At 31 December 2022, the outstanding balances with related parties were as follows: In thousands of EUR Note Parent companies Joint ventures Key management personnel Gross amount of trade receivables 26 - 107 - Loans issued 26 1,762 - 685 Investments in JV 9 - 1,509 - Loans issued to related parties include loans to Solar Age Investments B.V. and Solar Power to the People U.A. which are short term for a period of up to 12 month and bear interest rate of 3%. At 31 December 2021, the outstanding balances with related parties were as follows: In thousands of EUR Note Parent companies Joint ventures Key management personnel Gross amount of trade receivables 26 - 72 - Loans issued 26 1,170 - 641 Investments in JV 9 - 1,626 - Loans issued to related parties include loans to Solar Age Investments B.V. and Solar Power to the People U.A. which are short term for a period of up to 12 month and bear interest rate of 3%. The income and expense items with related parties for the year ended 31 December 2022 were as follows: In thousands of EUR Note Parent companies Joint ventures Key management personnel Revenue from services rendered - 58 - – Interest income 17 95 - - The income and expense items with related parties for the year ended 31 December 2021 were as follows: In thousands of EUR Note Parent companies Joint ventures Key management personnel Revenue from services rendered - 72 - – Interest income 17 73 - 17 Key Management Compensation Key management includes Directors and Senior management. Members of the board of directors did not receive any compensa- tion during 2022 nor 2021 for their duties serving on the board of directors for the Group of entities. Furthermore, no emoluments of managing directors, including pension obligations were charged to the Company. No service contracts with the Company nor any of its Subsidiaries have been provided to a member of the Board of Directors for benefits upon termination of employment. Mr Georg Hotar receives a regular salary as an employee in his function as managing director of Global Investment Protection AG in Switzer- land and Mr Gartner receives a regular salary as an employee in his function as managing director of Photon Energy Australia Pty Ltd. in Australia. These compensations are in no direct relation to their Board of Director functions. The overall cost of compensations for the key management from their employment relations with the Company or its subsidiaries amounted to EUR 1,119 thousand in 2022 (2021: EUR 727 thousand). The agreements between the key management with the Company or its Subsidiaries do not foresee any stock option plans, severance payments, company pension plans or other deferred compensation. Termination period of the agreements is up to six months. There are no commitments and contingent obligations towards key management personnel at 31 December 2022 nor 31 December 2021. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 141 40. Group Entities Subsidiaries and joint ventures The following entities were in the Group as at 31 December 2022: Name % of share capital held by the holding company Country of registration Seat of the company Consolid. method Legal Owner 1 Photon Energy N.V. (PENV) Holding NL Amsterdam Full Cons. - 2 Photon Energy Operations NL B.V. (PEONL, former Photon Di- 100% NL Amsterdam Full Cons. PEONV 3 Photon Energy Engineering B.V. (PEEBV) 100% NL Amsterdam Full Cons. PENV 4 Photon Energy Operations N.V. (PEONV) 100% NL Amsterdam Full Cons. PENV 5 Photon Remediation Technology N.V. (PRTNV) 100% NL Amsterdam Full Cons. PENV 6 Photon Energy Australia Pty Ltd. 100% AU Sydney Full Cons. PENV 7 Photon Energy AUS SPV 1 Pty. Ltd. 100% AU Sydney Full Cons. PENV 8 Leeton Solar Farm Pty Ltd (former Photon Energy AUS SPV 2 100% AU Sydney Full Cons. PENV 9 Fivebough Solar Farm Pty Ltd. (former Photon Energy AUS SPV 100% AU Sydney Full Cons. PENV 10 Photon Energy AUS SPV 4 Pty. Ltd. 100% AU Sydney Full Cons. PENV 11 Photon Energy AUS SPV 6 Pty. Ltd. 100% AU Sydney Full Cons. PENV 12 Photon Energy Operations Australia Pty.Ltd. 100% AU Sydney Full Cons. PEONV 13 Photon Energy Engineering Australia Pty Ltd 100% AU Sydney Full Cons. PEEBV 14 Photon Remediation Technology Australia Pty Ltd. 100% AU Sydney Full Cons. PRTNV 15 Photon Energy SGA Pty. Ltd. 100% AU Sydney Full Cons. PENV 16 Photon Water Australia Pty. Ltd. 100% AU Sydney Full Cons. PENV 17 Raygen Resources Pty. Ltd. 7.85% AU Sydney Equity PENV 18 Photon New Energy Pty. (former Photon Energy AUS SPV 12 100% AU Sydney Full Cons. PENV 19 Global Investment Protection AG (GIP) 100% CH Zug Full Cons. PENV 20 Photon Energy Investment AG (former ALFEMO AG (ALAG)) 100% CH Zug Full Cons. PENV 21 KORADOL AG (KOAG) 100% CH Zug Full Cons. PENV 22 Photon Energy Solutions AG 100% CH Zug Full Cons. PENV 23 Photon Property AG, 100% CH Zug Full Cons. PENV 24 Photon Energy Corporate Services CZ s.r.o. 100% CZ Prague Full Cons. PENV 25 Photon Energy Solutions CZ a.s.(former Photon Energy Soluti- 100% CZ Prague Full Cons. KOAG 26 Photon SPV 11 s.r.o. 100% CZ Prague Full Cons. KOAG 27 Photon Energy Operations CZ s.r.o. (PEOCZ)1 100% CZ Prague Full Cons. PEONV 28 Photon Energy Control s.r.o. 100% CZ Prague Full Cons. PEOCZ 29 Photon Energy Technology CEE s.r.o. 100% CZ Prague Full Cons. PEEBV 30 Photon Water Technology s.r.o. 65% CZ Prague Full Cons. PENV 31 Photon Remediation Technology Europe s.r.o. (former Charles 100% CZ Prague Full Cons. PENV 32 Photon Energy Engineering s.r.o. (former Photon Energy Soluti- 100% CZ Prague Full Cons. PENV 33 Photon Energy Projects s.r.o. (PEP) 100% CZ Prague Full Cons. PENV 34 Photon Energy Cardio s.r.o. 100% CZ Prague Full Cons. PEOCZ 35 Photon Maintenance s.r.o. (former The Special One s.r.o.) 100% CZ Prague Full Cons. PENV 36 Exit 90 SPV s.r.o. 100% CZ Prague Full Cons. KOAG 37 Onyx Energy s. r. o. 100% CZ Prague Full Cons. KOAG 38 Onyx Energy projekt II s.r.o. 100% CZ Prague Full Cons. KOAG 39 Photon SPV 3 s.r.o. 100% CZ Prague Full Cons. KOAG 40 Photon SPV 4 s.r.o. 100% CZ Prague Full Cons. KOAG 41 Photon SPV 6 s.r.o. 100% CZ Prague Full Cons. KOAG 42 Photon SPV 8 s.r.o. 100% CZ Prague Full Cons. KOAG 43 Photon SPV 10 s.r.o. 100% CZ Prague Full Cons. KOAG 44 Kaliopé Property, s.r.o. 100% CZ Prague Full Cons. KOAG 45 PESPV 1 s.r.o. 100% CZ Prague Full Cons. PESCZ 46 PESPV 2 s.r.o. 100% CZ Prague Full Cons. PESCZ 47 Photon Energy Solutions s.r.o. 100% CZ Prague Full Cons. PESCZ 48 Lerta Czech Republic s.r.o. 85.62% CZ Prague Full Cons. Lerta S.A. 49 Photon Energy Technology EU GmbH 100% DE Neuhagen Full Cons. PENV 50 Photon Energy Corporate Services DE GmbH 100% DE Neuhagen Full Cons. PENV 51 EcoPlan 2 s.r.o. 100% SK Bratislava Full Cons. PENV 52 EcoPlan 3 s.r.o. 100% SK Bratislava Full Cons. PENV 53 Fotonika s.r.o. 100% SK Bratislava Full Cons. PENV 54 Photon SK SPV 1 s.r.o. 50% SK Bratislava Equity PENV 55 Photon SK SPV 2 s.r.o. 100% SK Bratislava Full Cons. PENV Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 142 Name % of share capital held by the holding company Country of registration Seat of the company Consolid. method Legal Owner 56 Photon SK SPV 3 s.r.o. 100% SK Bratislava Full Cons. PENV 57 Solarpark Myjava s.r.o. 50% SK Bratislava Equity PENV 58 Solarpark Polianka s.r.o. 50% SK Bratislava Equity PENV 59 SUN4ENERGY ZVB s.r.o. 100% SK Bratislava Full Cons. PENV 60 SUN4ENERGY ZVC s.r.o. 100% SK Bratislava Full Cons. PENV 61 ATS Energy, s.r.o. 100% SK Bratislava Full Cons. PENV 62 Photon Energy Operations SK s.r.o. 100% SK Bratislava Full Cons. PEONV 63 Photon Energy HU SPV 1 Kft. b.a 100% HU Budapest Full Cons. ALAG 64 Fertod Napenergia-Termelo Kft. 100% HU Budapest Full Cons. ALAG 65 Photon Energy Operations HU Kft. 100% HU Budapest Full Cons. PEONV 66 Photon Energy Engineering HU Kft. (former Photon Energy Solu- 100% HU Budapest Full Cons. PENV 67 Future Solar Energy Kft 100% HU Budapest Full Cons. ALAG 68 Montagem Befektetési Kft. 100% HU Budapest Full Cons. ALAG 69 Solarkit Befektetesi Kft. 100% HU Budapest Full Cons. ALAG 70 Energy499 Invest Kft. 100% HU Budapest Full Cons. ALAG 71 SunCollector Kft. 100% HU Budapest Full Cons. ALAG 72 Green-symbol Invest Kft. 100% HU Budapest Full Cons. ALAG 73 Ekopanel Befektetési és Szolgaltató Kft. 100% HU Budapest Full Cons. ALAG 74 Onyx-sun Kft. 100% HU Budapest Full Cons. ALAG 75 Tataimmo Kft 100% HU Budapest Full Cons. ALAG 76 Öreghal Kft. 100% HU Budapest Full Cons. ALAG 77 European Sport Contact Kft. 100% HU Budapest Full Cons. ALAG 78 ALFEMO Alpha Kft. 100% HU Budapest Full Cons. ALAG 79 ALFEMO Beta Kft. 100% HU Budapest Full Cons. ALAG 80 ALFEMO Gamma Kft. 100% HU Budapest Full Cons. ALAG 81 Archway Solar Kft. 100% HU Budapest Full Cons. PENV 82 Barbican Solar Kft. 100% HU Budapest Full Cons. ALAG 83 Belsize Solar Kft. 100% HU Budapest Full Cons. ALAG 84 Blackhorse Solar Kft. 100% HU Budapest Full Cons. ALAG 85 Caledonian Solar Kft 100% HU Budapest Full Cons. ALAG 86 Camden Solar Kft 100% HU Budapest Full Cons. ALAG 87 Hampstead Solar Kft. 100% HU Budapest Full Cons. ALAG 88 Ráció Master Oktatási 100% HU Budapest Full Cons. ALAG 89 Aligoté Kereskedelmi és Szolgáltató Kft. 100% HU Budapest Full Cons. ALAG 90 MEDIÁTOR PV Plant Kft. (former MEDIÁTOR Ingatlanközvetítő 100% HU Budapest Full Cons. ALAG 91 PROMA Mátra PV Plant Kft. (former PROMA Mátra Ingatlanfej- 100% HU Budapest Full Cons. ALAG 92 Optisolar Kft. 100% HU Budapest Full Cons. ALAG 93 Ladány Solar Alpha Kft. 100% HU Budapest Full Cons. ALAG 94 Ladány Solar Beta Kft. 100% HU Budapest Full Cons. ALAG 95 Ladány Solar Gamma Kft. 100% HU Budapest Full Cons. ALAG 96 Ladány Solar Delta Kft. 100% HU Budapest Full Cons. ALAG 97 ÉGÉSPART Energiatermelő és Szolgáltató Kft 100% HU Budapest Full Cons. ALAG 98 ZEMPLÉNIMPEX Kereskedelmi és Szolgáltató Kf 100% HU Budapest Full Cons. ALAG 99 ZUGGÓ- DŰLŐ Energiatermelő és Szolgáltató Kft 100% HU Budapest Full Cons. ALAG 100 Ventiterra Környezetgazdálkodási és Szolgáltató Kft. 100% HU Budapest Full Cons. ALAG 101 VENTITERRA ALFA Kft. 100% HU Budapest Full Cons. ALAG 102 VENTITERRA BETA Kft. 100% HU Budapest Full Cons. ALAG 103 Hendon Solar Kft. 100% HU Budapest Full Cons. ALAG 104 Mayfair Solar Kft. 100% HU Budapest Full Cons. ALAG 105 Holborn Solar Kft. 100% HU Budapest Full Cons. ALAG 106 Lerta Energy HU Kft. 85.62% HU Budapest Full cons. Lerta S.A. 107 LERTA Magyarország Kft. 85.62% HU Budapest Full cons. Lerta S.A. 108 Lerta Lithuania UAB 85.62% LI Vilnius Full cons. Lerta S.A. 109 Photon Energy Project Development XXK (PEPD) 99% MN Ulaanbaatar Full Cons. PEP 110 PEPD Solar XXK. 100% MN Ulaanbaatar Full Cons. PEPD 111 Photon Energy Solutions PL S.A.(former Solar Age Polska S.A.) 100% PL Warsaw Full Cons. PENV 112 Photon Energy Polska Sp. o.o. 100% PL Warsaw Full cons. PENV 113 Photon Energy Operations PL Sp. o.o. 100% PL Łodz Full cons. PEONV 114 Alperton Solar Sp. o.o. 100% PL Poznań Full cons. PENV 115 Beckton Solar Sp. o.o. 100% PL Poznań Full cons. PENV 116 Debden Solar Sp. o.o. 100% PL Poznań Full cons. PENV Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 143 Name % of share capital held by the holding company Country of registration Seat of the company Consolid. method Legal Owner 117 Chigwell Solar Sp. o.o. 100% PL Poznań Full cons. PENV 118 Ealing Solar Sp. o.o. 100% PL Poznań Full cons. PENV 119 Lerta S.A. 85.62% PL Poznań Full cons. PENV 120 Lerta Poland Sp. o.o. 85.62% PL Poznań Full cons. Lerta S.A. 121 Lerta Power Poland Sp. o.o. 85.62% PL Poznań Full cons. Lerta S.A. 122 Lerta JRM Sp. o.o. 85.62% PL Poznań Full cons. Lerta S.A. 123 Lerta Technology Sp. o.o. 85.62% PL Poznań Full cons. Lerta S.A. 124 Stanford Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 125 Halton Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 126 Aldgate Solar Srl 100% RO Bucharest Full cons. PEP & PEECZ 127 Holloway Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 128 Moorgate Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 129 Redbridge Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 130 Watford Solar Srl 100% RO Bucharest Full cons. PEP & PEECZ 131 Photon Energy Operations Romania Srl. (former Becontree 100% RO Bucharest Full cons. PEONV & PEOCZ 132 Greenford Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 133 Chesham Solar Srl. 100% RO Bucharest Full cons. PEP & PEECZ 134 Photon Energy Romania Srl. 100% RO Bucharest Full cons. PENV & PEP 135 Siria Solar SRL 100% RO Bucharest Full Cons. ALAG&KOAG 136 Brentford Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 137 Camberwell Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 138 Deptford Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 139 Harlow Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 140 Kenton Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 141 Lancaster Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 142 Perivale Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 143 Romford Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 144 Stratford Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 145 Weston Solar SRL 100% RO Bucharest Full cons. PEP & PEECZ 146 Photon Energy Engineering Romania SRL 100% RO Bucharest Full cons. PENV & PEP 147 Lerta Energy S.r.l. 85.62% RO Bucharest Full cons. Lerta S.A. 148 Photon Renewable Energy Pty. Ltd. 100% SA West. Cape Full Cons. PENV 149 Solar Age SPV 1 Pty. Ltd. 100% SA West. Cape Full Cons. PENV * Neuhagen bei Berlin Notes: Country of registration: AU – Australia CH – Switzerland CZ – Czech Republic DE – Germany HU – Hungary NL – Netherlands MN – Mongolia PL – Poland PE – Peru RO – Romania SK – Slovakia SA – South Africa LI - Lithuania Consolidation method: Full Cons. – Full Consolidation Not Cons. – Not Consolidated Equity – Equity Method Photon Energy Operations CZ s.r.o. established a branch office in Romania. PEP & PESCZ – Photon Energy Projects s.r.o. owns 95% and Photon Energy Solution s.r.o. owns 5% The following entities were in the Group as at 31 December 2021: Name % of share capital held by the holding company Country of registration Seat of the company Consolid. method Legal Owner 1 Photon Energy N.V. (PENV) Holding NL Amsterdam Full Cons. - 2 Photon Energy Operations NL B.V. 100% NL Amsterdam Full Cons. PEONV 3 Photon Energy Engineering B.V. (PEEBV) 100% NL Amsterdam Full Cons. PENV 4 Photon Energy Operations N.V. (PEONV) 100% NL Amsterdam Full Cons. PENV 5 Photon Remediation Technology N.V. (PRTNV) 100% NL Amsterdam Full Cons. PENV 6 Photon Energy Australia Pty Ltd. 100% AU Sydney Full Cons. PENV 7 Photon Energy AUS SPV 1 Pty. Ltd. 100% AU Sydney Full Cons. PENV 8 Leeton Solar Farm Pty Ltd 100% AU Sydney Full Cons. PENV 9 Fivebough Solar Farm Pty Ltd 100% AU Sydney Full Cons. PENV 10 Photon Energy AUS SPV 4 Pty. Ltd. 100% AU Sydney Full Cons. PENV 11 Photon Energy AUS SPV 6 Pty. Ltd. 51% AU Sydney Equity PENV 13 Photon Energy Operations Australia Pty.Ltd. 100% AU Sydney Full Cons. PEONV 14 Photon Energy Engineering Australia Pty Ltd 100% AU Sydney Full Cons. PEEBV Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 144 Name % of share capital held by the holding company Country of registration Seat of the company Consolid. method Legal Owner 15 Photon Remediation Technology Australia Pty Ltd. 100% AU Sydney Full Cons. PRTNV 16 Photon Energy SGA Pty. Ltd. 100% AU Sydney Full Cons. PENV 17 Photon Water Australia Pty. Ltd. 100% AU Sydney Full Cons. PENV 18 Photon Energy AUS SPV 12 Pty. Ltd. 100% AU Sydney Full Cons. PENV 19 Global Investment Protection AG (GIP) 100% CH Zug Full Cons. PENV 20 ALFEMO AG (ALFEMO) 100% CH Zug Full Cons. PENV 21 KORADOL AG (KORADOL) 100% CH Zug Full Cons. PENV 22 Photon Energy Corporate Services CZ s.r.o. 100% CZ Prague Full Cons. PENV 23 Photon SPV 1 s.r.o. 100% CZ Prague Full Cons. KORADOL 24 Photon SPV 11 s.r.o. 100% CZ Prague Full Cons. KORADOL 25 Photon Energy Operations CZ s.r.o. (PEOCZ) 1 100% CZ Prague Full Cons. PEONV 26 Photon Energy Control s.r.o. 100% CZ Prague Full Cons. PEOCZ 27 Photon Energy Technology CEE s.r.o. 100% CZ Prague Full Cons. PEEBV 28 Photon Water Technology s.r.o. 65% CZ Prague Full Cons. PENV 29 Photon Remediation Technology Europe s.r.o. 100% CZ Prague Full Cons. PENV 30 Photon Energy Solutions s.r.o. (PESCZ) 100% CZ Prague Full Cons. PENV 31 Photon Energy Projects s.r.o. (PEP) 100% CZ Prague Full Cons. PENV 32 Photon Energy Cardio s.r.o. 100% CZ Prague Full Cons. PEOCZ 33 Photon Maintenance s.r.o 100% CZ Prague Full Cons. PENV 32 Photon Energy Technology EU GmbH 100% DE Neuhagen Full Cons. PENV 33 Photon Energy Corporate Services DE GmbH 100% DE Neuhagen Full Cons. PENV 34 EcoPlan 2 s.r.o. 100% SK Bratislava Full Cons. PENV 35 EcoPlan 3 s.r.o. 100% SK Bratislava Full Cons. PENV 36 Fotonika s.r.o. 100% SK Bratislava Full Cons. PENV 37 Photon SK SPV 1 s.r.o. 50% SK Bratislava Equity PENV 38 Photon SK SPV 2 s.r.o. 100% SK Bratislava Full Cons. PENV 39 Photon SK SPV 3 s.r.o. 100% SK Bratislava Full Cons. PENV 40 Solarpark Myjava s.r.o. 50% SK Bratislava Equity PENV 41 Solarpark Polianka s.r.o. 50% SK Bratislava Equity PENV 42 SUN4ENERGY ZVB s.r.o. 100% SK Bratislava Full Cons. PENV 43 SUN4ENERGY ZVC s.r.o. 100% SK Bratislava Full Cons. PENV 44 ATS Energy, s.r.o. 100% SK Bratislava Full Cons. PENV 45 Photon Energy Operations SK s.r.o. 100% SK Bratislava Full Cons. PEONV 46 Photon Energy HU SPV 1 Kft. b.a 100% HU Budapest Full Cons. ALFEMO 47 Fertod Napenergia-Termelo Kft. 100% HU Budapest Full Cons. ALFEMO 48 Photon Energy Operations HU Kft. 100% HU Budapest Full Cons. PEONV 49 Photon Energy Solutions HU Kft. 100% HU Budapest Full Cons. PENV 50 Future Solar Energy Kft 100% HU Budapest Full Cons. ALFEMO 51 Montagem Befektetési Kft. 100% HU Budapest Full Cons. ALFEMO 52 Solarkit Befektetesi Kft. 100% HU Budapest Full Cons. ALFEMO 53 Energy499 Invest Kft. 100% HU Budapest Full Cons. ALFEMO 54 SunCollector Kft. 100% HU Budapest Full Cons. ALFEMO 55 Green-symbol Invest Kft. 100% HU Budapest Full Cons. ALFEMO 56 Ekopanel Befektetési és Szolgaltató Kft. 100% HU Budapest Full Cons. ALFEMO 57 Onyx-sun Kft. 100% HU Budapest Full Cons. ALFEMO 58 Tataimmo Kft 100% HU Budapest Full Cons. ALFEMO 59 Öreghal Kft. 100% HU Budapest Full Cons. ALFEMO 60 European Sport Contact Kft. 100% HU Budapest Full Cons. ALFEMO 61 ALFEMO Alpha Kft. 100% HU Budapest Full Cons. ALFEMO 62 ALFEMO Beta Kft. 100% HU Budapest Full Cons. ALFEMO 63 ALFEMO Gamma Kft. 100% HU Budapest Full Cons. ALFEMO 64 Archway Solar Kft. 100% HU Budapest Full Cons. PENV 65 Barbican Solar Kft. 100% HU Budapest Full Cons. ALFEMO 66 Belsize Solar Kft. 100% HU Budapest Full Cons. ALFEMO 67 Blackhorse Solar Kft. 100% HU Budapest Full Cons. ALFEMO 68 Caledonian Solar Kft 100% HU Budapest Full Cons. ALFEMO Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 145 Name % of share capital held by the holding company Country of registration Seat of the company Consolid. method Legal Owner 69 Camden Solar Kft 100% HU Budapest Full Cons. ALFEMO 70 Hampstead Solar Kft. 100% HU Budapest Full Cons. ALFEMO 71 Ráció Master Oktatási 100% HU Budapest Full Cons. ALFEMO 72 Aligoté Kereskedelmi és Szolgáltató Kft. 100% HU Budapest Full Cons. ALFEMO 73 MEDIÁTOR PV Plant Kft 100% HU Budapest Full Cons. ALFEMO 74 PROMA Mátra PV Plant Kft. 100% HU Budapest Full Cons. ALFEMO 75 Optisolar Kft. 100% HU Budapest Full Cons. ALFEMO 76 Ladány Solar Alpha Kft. 100% HU Budapest Full Cons. ALFEMO 77 Ladány Solar Beta Kft. 100% HU Budapest Full Cons. ALFEMO 78 Ladány Solar Gamma Kft. 100% HU Budapest Full Cons. ALFEMO 79 Ladány Solar Delta Kft. 100% HU Budapest Full Cons. ALFEMO 80 ÉGÉSPART Energiatermelő és Szolgáltató Kft 100% HU Budapest Full Cons. ALFEMO 81 ZEMPLÉNIMPEX Kereskedelmi és Szolgáltató Kf 100% HU Budapest Full Cons. ALFEMO 82 ZUGGÓ- DŰLŐ Energiatermelő és Szolgáltató Kft 100% HU Budapest Full Cons. ALFEMO 83 Ventiterra Környezetgazdálkodási és Szolgáltató Kft. 100% HU Budapest Full Cons. ALFEMO 84 VENTITERRA ALFA Kft. 100% HU Budapest Full Cons. ALFEMO 85 VENTITERRA BETA Kft. 100% HU Budapest Full Cons. ALFEMO 86 Hendon Solar Kft. 100% HU Budapest Full Cons. ALFEMO 87 Mayfair Solar Kft. 100% HU Budapest Full Cons. ALFEMO 88 Holborn Solar Kft. 100% HU Budapest Full Cons. ALFEMO 89 Photon Energy Project Development XXK (PEPD) 99% MN Ulaanbaatar Full Cons. PEP 90 PEPD Solar XXK. 100% MN Ulaanbaatar Full Cons. PEPD 91 Solar Age Polska S.A. 100% PL Warsaw Full Cons. PENV 92 Photon Energy Polska Sp. Z o.o. 100% PL Warsaw Full cons. PENV 93 Photon Energy Operations PL Sp. z o.o. 100% PL Łodz Full cons. PEONV 94 Alperton Solar Sp. z o.o. 100% PL Poznań Full cons. PENV 95 Beckton Solar Sp. z o.o. 100% PL Poznań Full cons. PENV 96 Debden Solar Sp. z o.o. 100% PL Poznań Full cons. PENV 97 Chigwell Solar Sp. z o.o. 100% PL Poznań Full cons. PENV 98 Ealing Solar Sp. z o.o. 100% PL Poznań Full cons. PENV 99 Stanford Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 100 Halton Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 101 Aldgate Solar Srl 100% RO Bucharest Full cons. PEP & PESCZ 102 Holloway Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 103 Moorgate Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 104 Redbridge Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 105 Watford Solar Srl 100% RO Bucharest Full cons. PEP & PESCZ 106 Photon Energy Operations Romania Srl. 100% RO Bucharest Full cons. PEONV & 107 Greenford Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 108 Chesham Solar Srl. 100% RO Bucharest Full cons. PEP & PESCZ 109 Photon Energy Romania SRL 100% RO Bucharest Full cons. PENV & PEP 110 Photon Renewable Energy Pty. Ltd. 100% SA West. Cape Full Cons. PENV 111 Solar Age SPV 1 Pty. Ltd. 100% SA West. Cape Full Cons. PENV 112 PE Solar Technology Ltd. 100% UK London Full Cons. PENV * Neuhagen bei Berlin Notes: Country of registration: AU – Australia CH – Switzerland CZ – Czech Republic DE – Germany HU – Hungary NL – Netherlands MN – Mongolia PL – Poland PE – Peru RO – Romania SK – Slovakia SA – South Africa UK – United Kingdom Consolidation method: Full Cons. – Full Consolidation Not Cons. – Not Consolidated Equity – Equity Method Photon Energy Operations CZ s.r.o. established a branch office in Romania. PEP & PESCZ – Photon Energy Projects s.r.o. owns 95% and Photon Energy Solution s.r.o. owns 5% Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 146 Other consolidated entities Name % of Consolidated share % of Ownership share Country of registration Seat of the company Legal Owner 1 Kaliope s.r.o. 100% 0% CZ Prague RL 2 Photon SPV 3 s.r.o. 100% 0% CZ Prague RL 3 Photon SPV 8 s.r.o. 100% 0% CZ Prague RL 4 Exit 90 SPV s.r.o. 100% 0% CZ Prague RL 5 Photon SPV 4 s.r.o. 100% 0% CZ Prague RL 6 Photon SPV 6 s.r.o. 100% 0% CZ Prague RL 7 Onyx Energy s.r.o. 100% 0% CZ Prague RL 8 Onyx Energy projekt II s.r.o. 100% 0% CZ Prague RL 9 Photon SPV 10 s.r.o. 100% 0% CZ Prague RL 100% share in the above entities was owned by Raiffeisen – Leasing s.r.o. (“RL”). Although those companies were legally owned by RL, the Group consolidated them under IFRS rules since Photon Energy N.V. was considered as the beneficial owner as it was owner of economic benefits and was directly exposed to economic risks of those companies in 2021 (see also note 2.4.1). In 2022, those entities were transferred to the full ownership of the Group . 41. Contingent Assets and Liabilities, Commitments Legal Proceedings From time to time and in the normal course of business, claims against the Group may be received. On the basis of its own esti- mates and both internal and external professional advice, manage- ment is of the opinion that no material losses will be incurred in respect of claims in excess of provisions that have been made in these consolidated financial statements. Assets Pledged and Restricted At 31 December 2022 and 2021 the Group has the assets pledged as collateral and included in note 19 . Guarantees Guarantees are irrevocable assurances that the Group will make payments in the event that another party cannot meet its obliga- tions. The parent company has issued guarantees in total amount of EUR 41,106 thousand EUR (2021: EUR 11,838 thousand) to subsidiaries creditors. Most of the new guarantees in 2022 were issued in connection with building of the new powerplants in Ro- mania (specifically used only on applications for Set-Up Licenses ANRE). Bank accounts restricted due to guarantees are included in restricted cash presented in note 28 . 42. Subsequent Events Photon Energy completed full takeover of Lerta With reference to the investment agreement signed on 20 Decem- ber 2022 with the founders of Lerta S.A., Photon Energy N.V. has become holder of 100% of the share capital of the company on 1 February 2023. Acting based on a General Meeting authorization from 31 May 2021, the Board of Directors of the Company decided on 1 February 2023 to issue 1,238,521 new shares with a nominal value of EUR 0.01 each. Pursuant to the issuance of the new shares on 1 February 2023, the share capital of the Company has increased from EUR 600,000.00 to EUR 612,385.21. The new shares were issued against a contribution in-kind consist- ing of 2,477,042 shares in Lerta S.A., in line with the above-men- tioned investment agreement. Pursuant to Dutch law, there are no pre-emptive rights of existing shareholders of the Company with respect to the issuance of new shares against a non-cash contri- bution. With this step the acquisition process of Lerta S.A. is com- pleted and Photon Energy has become holder of 100% of the share capital of Lerta S.A. The Board of Directors also resolved that the newly issued shares shall be included in the collective deposit as mentioned in Section 12 of the Dutch Giro Securities Act, and in- tends to undertake all necessary actions to register these new shares with the Czech and Polish depositaries acting as secondary depositaries for the Company’s shares, and undertake all actions that are necessary to apply for the listing and admission to trading of these new shares on the Prague and Warsaw Stock Exchanges and in the Open Market of the Frankfurt Stock Exchange. Working capital credit line for Photon Energy Technol- ogy CEE s.r.o. In January 2023, a new loan agreement between Photon Energy Technology CEE s.r.o. and Unicredit Bank Czech Republic and Slovakia a.s. was signed. This credit line is meant to be used for financing of the working capital needs of the trading business ac- tivities with a credit line of up to EUR 5 million. Photon Energy Commissioned Its First Romanian Util- ity-Scale PV Power Plant On 23 February Photon Energy has completed and grid-connected its first Romanian PV power plant in the municip ality of Șiria. The plant has a capacity of 5.7 MWp. High efficiency bifacial solar mod- ules mounted on single-axis trackers will deliver around 8.7 GWh of renewable energy annually to the grid managed by Enel E-Dis- tributie Banat. The electricity generated by the plant will be sold on the energy market on a merchant basis, without any support or power purchase agreement with an energy offtaker. The Company expects the plant to generate EUR 1.4 million in revenues based Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 147 on the current forward prices for electricity base load in Romania in the next 12 months. Located near Șiria in Romania’s Arad County, the power plant extends over 9.3 hectares of greenfield land and is equipped with some 10,600 solar panels. The power plant is owned and operated by Siria Solar S.R.L., a special pur- pose company fully-owned by Photon Energy Group. Photon Energy Group announced the resignation of Clemens Wohlmuth as CFO On 7 March 2023, the Group announced the resignation of Clem- ens Wohlmuth as the Group’s Chief Financial Officer. Clemens Wohlmuth will remain involved during the handover process until after the conclusion of the Group’s financial audit for the financial year 2022. The Board of Directors appointed Mr. Andrej Horansky as the Photon Energy Group’s new Chief Financial Officer starting 8 March 2023. Andrej is a Slovak national and has gained exten- sive experience in senior finance roles including CFO in the finan- cial services industry (Santander Consumer Finance, Simply Kilcullen Capital Partners, GE Money Bank (Moneta), Generali PPF Holding and Slavia Insurance, energy (Ezpada Group) and automotive retail (AURES Holding). Photon Energy Group Secured EUR 21.9 Million Fi- nancing for Romanian Projects On 17 March 2023, the Group closed a nonrecourse project refi- nancing agreement in the amount of EUR 21.9 million with Austrian Raiffeisen Bank International (RBI) for its portfolio of PV power plants in Romania with a total installed capacityof 31.5 MWp. The signing of the agreement represents the Group’s first project fi- nancing of European PV assets that operate on a merchant basis, selling energy to the market without a power purchase agreement or state support. To date, only the Company’s two merchant utility- scale power plants in Leeton, Australia, which have a combined installed capacity of 14.6 MWp, have obtained non-recourse pro- ject financing. Photon Energy Secured DSR Capacity of 389 MW and Locked-in EUR 24.8 Million in 2024 Revenue On 16 March 2023, the Group’s subsidiaries Lerta JRM Sp. z o.o. and Lerta S.A. (part of the Company’s New Energy Division) have succeeded in the additional 2024 Polish capacity auction with 375 MW of Demand Side Response (‘DSR’). With the previously con- tracted capacity of 14 MW for 2024, the Company’s total DSR ca- pacity of 389 MW will lock-in PLN 116.8 million (EUR 24.8 million) in total DSR revenues for 2024. Photon Energy Group increases Green Bond to EUR 80.0 million On 28 March 2023, the Group announced that it has successfully increased its first 6.50% Photon Energy Green EUR Bond 2021/27 (ISIN: DE000A3KWKY4) to a total amount of EUR 80.0 million. The additional nominal amount of EUR 2.5 million has been placed through a private placement to institutional investors in the UK, Switzerland, Germany, and Austria. Photon Energy Exceeds 100 MWp in IPP Portfolio With Three New Romanian PV Power Plants On 13 April 2023, the Group announced the completion and grid- connection of further three PV power plants near Calafat in Roma- nia's Dolj County. The combined generation capacity of the new installations is 6.0 MWp. High efficiency bifacial solar modules mounted on single-axis trackers will deliver around 9.3 GWh of re- newable energy annually to the grid of Distribuie Energie Oltenia. The electricity generated by the plant will be sold on the energy market on a merchant basis, without any support or power pur- chase agreement with an energy offtaker. The Company expects the plant to generate EUR 1.4 million in revenues based on the current forward prices for electricity base load in Romania over the next 12 months. Located near Calafat in Romania's Dolj County, the power plant extends over 10.2 hectares of greenfield land and is equipped with some 10,800 solar panels. The power plant is owned and operated by a special purpose company fully-owned by Photon Energy Group. 148 Standalone Financial Statements For the Year Ended 31 December 2022 Photon Energy N.V. Financial Section Annual Report 2022 Standalone Financial Statements for the Year Ended 31 December 2022 149 Company Balance Sheet as of 31 December 2022 (before profit appropriation) In thousands of EUR Note 31 December 2022 31 December 2021 Assets A. Fixed assets 79,813 65,725 I. Intangible fixed assets 15,026 36 3. Concessions, licences and intellectual property 22 21 36 4. Goodwill 21 15,005 0 II Tangible fixed assets 0 0 III Financial fixed assets 64,787 65,689 1. Participations in group companies 44 56,055 30,882 2. Receivables from group companies 45 776 25,060 3. Other participating interest 44 7,817 9,747 5. Treasury shares 47 139 0 B. Current assets 114,443 101,883 II Accounts receivable 112,449 81,281 1. Trade debtors 46 11,750 7,953 2. From group companies 45,46 97,516 70,165 4. Other accounts receivable 46 3,150 3,158 6. Prepayments and accrued income 46 33 4 IV Cash at banks and in hand 46 1,994 20,602 Assets 194,257 167,608 Equity and liabilities Note 31 December 2022 31 December 2021 A. Equity 47 107,015 79,336 I. Called-up share capital 600 600 II. Treasury shares 0 -38 III. Share premium 53,636 44,554 IV. Revaluation reserve 19,738 19,037 V. Legal and statutory reserves 13 38 VI Other reserves 2,115 1,533 VII Retained earnings 13,949 9,945 Profit for the year 16,965 3,667 C. Long-term debt 48 78,757 59,403 2. Other bonds and private loans 76,511 57,223 7. Accounts payable to group companies 2,247 2,180 D. Current liabilities 49 8,484 28,869 2. Other bonds and private loans 48 3,670 24,107 5. Trade creditors 626 1,008 7. Accounts payable to group companies 3,870 3,493 11. Other liabilities 141 12 12. Accruals and deferred income 177 249 Equity and liabilities 194,257 167,608 Revaluation reserve and the legal reserves are non-distributable The notes on pages 151 to 164 are an integral part of these financial statements . Photon Energy N.V. Financial Section Annual Report 2022 Standalone Financial Statements for the Year Ended 31 December 2022 150 Company Income Statement for the Financial Year Ended 31 December 2022 In thousands of EUR Note 1 January – 31 December 2022 1 January – 31 December 2021 Revenues 51 5,472 3,269 Other operating income/Capital gain from disposal of financial investments 223 484 Total operating income 5,695 3,753 Costs of raw materials and consumables 0 0 Wages and salaries -29 -77 Impairment of current assets 0 0 Gain on derecognition of associate 8 2,182 Other operating expenses 52 -5,462 -3,717 Total operating expenses -3,309 -3,794 Other interest income and similar income 53 2,587 2,144 Changes in value of fixed asset investments 53,54 615 1,242 Interest expense and similar expenses 54 -7,046 -4,948 Results before tax -1,458 -1,603 Taxes 0 -13 Share in profit/loss of participations 55 18,423 5,283 Net result after tax 16,965 3,667 The notes on pages 151 to 164 are an integral part of these financial statements . 151 Notes to the Company Financial Statements For the Year Ended 31 December 2022 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 152 43. Accounting Information and Policies 43.1 Basis of Preparation The company’s standalone financial statements of Photon Energy N.V., KvK 51447126, (hereafter: the company) have been pre- pared in accordance with Part 9, Book 2 of the Dutch Civil Code. In accordance with sub 8 of article 362, Book 2 of the Dutch Civil Code, the company’s standalone financial statements are prepared based on the accounting principles of recognition, measurement, and determination of profit, as applied in the consolidated financial statements. These principles also include the classification and presentation of financial instruments, being equity instruments or financial liabilities. In case no other policies are mentioned, refer to the accounting policies as described in the accounting policies in the consolidated financial statements of this Annual Report. For an appropriate in- terpretation, the company financial statements of Photon Energy N.V. should be read in conjunction with the consolidated financial statements. All amounts are presented in EUR thousand, unless stated other- wise. The balance sheet and income statement include references. These refer to the notes. The company prepared its consolidated financial statements in ac- cordance with the International Financial Reporting Standards (‘IFRS’) as adopted by the European Union. 43.2 Financial Fixed Assets 43.2.1 Investments in Consolidated Subsidiaries Consolidated subsidiaries are all entities (including intermediate subsidiaries) over which the company has control. The company controls an entity when it is exposed, or has rights, to variable re- turns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsid- iaries are recognised from the date on which control is transferred to the company or its intermediate holding entities. They are derec- ognised from the date that control ceases. The company applies the acquisition method to account for acquir- ing subsidiaries, consistent with the approach identified in the con- solidated financial statements. The consideration transferred for the acquisition of a subsidiary is the fair value of assets transferred by the company, liabilities incurred to the former owners of the ac- quiree and the equity interests issued by the company. The con- sideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in an acquisition are measured initially at their fair values at the ac- quisition date, and are subsumed in the net asset value of the in- vestment in consolidated subsidiaries. Acquisition-related costs are expensed as incurred. Investments in consolidated subsidiaries are measured at net as- set value. Net asset value is based on the measurement of assets, provisions and liabilities and determination of profit based on the principles applied in the consolidated financial statements. Share of profit in consolidated subsidiaries (net of tax) is presented in Share in profit/loss of participations. Other investments include investment of the Company where the Company has no significant influence and other financial instru- ments, and are valued at fair value. Changes in fair value of investments into equity instruments are recognised in Revaluation reserve in equity, changes in fair value of other financial instruments (derivatives) are recognised in Income statement in line Changes in value of fixed asset invest- ments. 43.2.1 Goodwill Goodwill is measured initially as described under “Consolidated fi- nancial statements “ in note 4.1.1. Goodwill is not amortised but it is tested for impairment annually. Goodwill is allocated to the cash- generating units, or groups of cash-generating units, that are ex- pected to benefit from the synergies of the business combination. Such units or groups of units represent the lowest level at which the Group monitors goodwill and are not larger than an operating segment. The Group tests goodwill for impairment at least annually and whenever there are indications that goodwill may be impaired. The carrying value of the cash-generating unit containing 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 is recognised immediately as an expense and is not subsequently re- versed. Gains or losses on disposal of an operation within a cash generat- ing unit to which goodwill has been allocated include the carrying amount of goodwill associated with the disposed operation, gener- ally measured on the basis of the relative values of the disposed operation and the portion of the cash-generating unit which is re- tained . 44. Financial Fixed Assets In thousands of EUR 31 December 2022 31 December 2021 Interests in group companies 56,055 30,882 Other investments 7,817 9,747 Total Financial Fixed Assets 63,872 40,629 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 153 Other non-current investments include following investments: In thousands of EUR Fair value at 31 December 2022 Fair value at 31 December 2021 Investment in Raygen Resources Pty Ltd ordinary shares 3,535 3,434 Investment in Raygen Resources Pty Ltd preference shares 1,978 1,921 Investment in Lerta SA ordinary shares 0 1,405 Investment in Valuetech 605 0 Share options 1,698 1,247 Shares not yet registered 0 1,740 Total Other investments 7,817 9,747 The movements of the Financial Fixed assets can be shown as follows: In thousands of EUR Participating interests in group companies Other investments Shares not yet registered Total Balance at 31 December 2020 30,643 2,042 0 32,685 Share in result of participating interests 5,283 0 0 5,283 Sale of investments -1,014 0 0 -1,014 Other movements 87 0 0 87 Share in PPE revaluation reserve s in participating interest 76 0 0 76 Share in derivatives revaluation in participating interest 2,359 0 0 2,359 Revaluation of investments–- OCI 0 2,657 0 2,657 Revaluation of investments–- PL 0 1,242 0 1,242 Dividend received by Company -6,690 0 0 -6,690 New investments 138 2,066 1,740 3,944 Balance at 31 December 2021 30,882 8,007 1,740 40,629 Share in result of participating interests 18,423 0 0 18,423 Sale of investments -7 0 0 -7 Other movements -132 0 0 -132 Share in PPE revaluation reserve s in participating interest 432 0 0 432 Share in derivatives revaluation in participating interest 2,514 0 0 2,514 Revaluation of investments–- OCI 0 0 0 0 Revaluation of investments–- PL 0 615 0 615 Dividend received by Company -1,783 0 0 -1,783 Capital contribution 1,120 0 0 1,120 Currency reserve -1,932 0 0 -1,932 Derecognition (change of category) 0 -1,411 -1,740 -3,151 New investments 195 605 0 800 Fair value of net assets acquired (Lerta) 6,343 0 0 6,343 Balance at 31 December 2022 56,055 7,817 0 63,872 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 154 2022 A participating legal Company is under Dutch law a participation which exercises significant influence over the operating and finan- cial policies (hereinafter: participation), valued using the equity method. This method means that the carrying amount of the invest- ment is increased or decreased by the share in the results and changes in equity of the associate, less the dividend from the par- ticipation. The carrying amount, the share in the results and changes in equity are determined according to the principles of the holding. Result from the participation is recognised only in the case of net assets value higher than nil. Positive assets value is recog- nised only in case the previous negative value is covered suffi- ciently by the actual positive results from the participation. Therefore, the direct changes in equity in the participations of PE NV are included in the standalone financial statements of the Com- pany. The direct equity movements of the subsidiaries of PENV consist of: 1) Revaluation of assets valued at fair value in the participations (decrease of value of assets) 2) Foreign currency translation differences in the participations 3) Effective portion of hedging derivatives in the participations The Company measures interest in group companies at net asset value. Net asset value is based on the measurement of assets, provisions and liabilities and determination of profit based on the principles applied in the consolidated financial statements. In case the net asset value is negative the Company considers the value of participation to be EUR 1. No impairment provision to the finan- cial fixed assets has been recorded as at 31 December 2022 nor 2021. The unrecognized share of the loss for the period in the par- ticipation valued on the basis of equity accounting that is valued at zero as equal to EUR 3,222 thousand for the period and EUR 11,085 thousand cumulatively . There are no obligations to cover the losses of the subsidiaries be- yond the amount of unpaid share capital and therefore, the value of participations is not further increase by negative equity amounts. Other investments include investment of the Company where the Company has no significant influence and other financial instru- ments, and are valued at fair value. Changes in fair value of investments into equity instruments are recognised in Revaluation reserve in equity, changes in fair value of other financial instruments (derivatives) are recognised in Income statement in line Changes in value of fixed asset invest- ments. The Company, with statutory seat in Amsterdam, is the holding company and has the financial interests as disclosed under note 40. The parent entity is not liable for the deficits of its subsidiaries and therefore no liability resulting from this has been recognized. Business combination performed in 2022 Lerta Spółka Akcyjna is a joint -stock company organized under the laws of Poland and a fully owns directly nine subsidiaries in five countries (hereinafter referred to as “Lerta Group”). The control and 100% ownership was obtained fully as at 31 December 2022. The acquirer has decided not to dispose any of the acquiree activ- ities because of the acquisition. Total consideration paid for the ac- quisition equals to EUR 21,349 thousand. As a result of this transaction, company booked goodwill in amount of EUR 15,005 thousand and fair value of net assets acquired in amount of EUR 6,343 thousand, which relates mostly to the capacity market con- tracts (EUR 6,047 thousand) as described also in the note 8 Busi- ness combination and note 22 Intangible assets . 45. Accounts Receivable from Group Companies In thousands of EUR 31 December 2022 31 December 2021 Accounts receivable from group companies – non current 776 25,060 Accounts receivable from group companies – current 97,516 70,165 Total loans provided 98,292 95,225 Movement schedule for loans provided: In thousands of EUR 2022 2021 Opening balance 95,225 71,972 Newly provided loans 88,030 34,827 Accrued interest 2,502 1,090 Loans repayments/transfers -83,492 -13,367 FX differences -3,973 703 Closing balance 98,292 95,225 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 155 The balance of loans provided consists of the loans provided pri- marily to the companies within the Group and its increase is caused by provision of new funds during the year to the subsidiaries. Inter- est charged by PENV to its subsidiaries is 3% and the loans have mostly a short-term character and are due within one-year. De- crease in non-current accounts receivable from group companies was caused by the early repayment of the portion of the loan, and the outstanding amount is due in more than 1 year period. The credit loss allowance for Loans provided to related parties is determined according to internal analysis of recoverability of these loans. Based on this analysis no ECL provisions were created as at 31 December 2022 and 31 December 2021. 46. Current Assets In thousands of EUR 31 December 2022 31 December 2021 Trade debtors 11,750 7,953 Receivables from group companies 97,516 70,165 Other accounts receivable and prepayments 3,183 3,162 Cash at banks and in hand 1,994 20,602 Total current assets 114,443 101,883 Trade receivables fall due in less than one year, unless otherwise disclosed below. The fair value of the receivables approximates the book value, due to their short-term character. Trade debtors at 31 December 2022 include trade receivables from companies within the Group of EUR 11,750 thousand (2021: EUR 7,953 thousand). Receivable from group companies of EUR 97,516 thousand (2021: 70,165 thousand) represent loans provided to group companies. These loans are due on 31 December 2023 and therefor are pre- sented as current assets, interest charged on these loans is 3% . Other accounts receivable include mainly loans receivables pro- vided outside the Group of EUR 1,841 thousand (2021: 1,929 thou- sand) and other short-term assets of EUR 837 thousand (2021: EUR: 801 thousand) and are due within one year. Receivables from related parties (Georg Hotar and Michael Gart- ner) of EUR 472 thousand (2021: EUR 411 thousand) are included in Other account receivable, see also note 39 of consolidated fi- nancial statements. Interest charged on these loans is 3% and the loans have mostly a short-term character. Cash at bank and in hand are freely disposable . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 156 47. Shareholders’ Equity 47.1 Reconciliation of Movement in Capital and Reserves In thousands of EUR Note Issued share capital Own treasury shares Share premium Revaluation reserve Currency translation reserve Hedging reserve Treasury shares reserve Non- controlling interest Retained earnings Unappro- priated result Total equity Balance at 1 January 2021 600 -87 37,057 15,644 -406 223 87 - 6,320 3,639 63,077 Foreign currency translation differences in participating interest - - - - -640 - - - - - -640 Transfer to retained earnings - - - - - - - - 3,639 -3,639 0 Derivatives - - - - - 2,356 - - - - 2,356 Revaluation of PPE and other investments - - - 3,393 - - - - - - 3,393 Other movements - - - - - - - - -14 - -14 New shares placed with premium - 49 7,497 - - - -49 - - - 7,497 Actual result - - - - - - - - - 3,667 3,667 Balance at 31 December 2021 600 -38 44,554 19,037 -1,046 2,579 38 - 9,945 3,667 79,336 Foreign currency translation differences in participating interest - - - - -1,933 - - - - - -1,933 Transfer to retained earnings - - - - - - - - 3,667 -3,667 0 Derivatives - - - - - 2,515 - - - - 2,515 Revaluation of PPE and other investments - - - 1,037 - - - - - - 1,037 Other movements - 38 300 -336 - - -25 - 336 - 313 Acquisition of subsidiary - - 8,782 - - - - - - - 8,782 Actual result - - - - - - - - - 16,965 16,965 Balance at 31 December 2022 600 - 53,636 19,738 -2,979 5,094 13 - 13,948 16,965 107,015 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 157 47.2 Share Capital and Share Premium Ordinary Shares The Company’s share capital is EUR 600,000 divided into 60,000,000 shares with a nominal value of EUR 0.01 each. The share capital is fully paid-up. Each of the 60,000,000 shares repre- sent one vote at the General Meeting. The holders of ordinary shares (except of Treasury shares) are en- titled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings of the Company. Treasury Shares At 31 December 2022 treasury shares included 1,332,797 ordinary shares of the Company (2021: 3,747,635 ordinary shares) owned directly by the Company in the nominal value of 0.01 EUR per share. There is no pledge imposed on the shares. These ordinary shares carry no voting rights at the Shareholders Meeting. Share premium represents the excess of contributions received over the nominal value of shares issued. Proceeds from allocation of treasury shares to employees in excess to nominal value of shares are also recorded in Share premium. Nominal value of sold treasury shares is recorded against Treasury shares reserve. There are no costs associated with the issue of the shares that could be deducted from the amount of share premium, so all amount of premium is considered to be fully paid for tax purposes. On 25 June 2021, the Company announced the results of an offer- ing of its existing treasury shares addressed to qualified investors. In total, 5 million shares were placed at a price of PLN 7.0, which corresponds to the gross amount of PLN 35.0 million. Total pro- ceeds of EUR 7,766 thousand from the placement net of placement costs of EUR 442 thousand were recorded in Share premium. On 20 December 2022 Photon Energy concluded an investment agreement with the founders of Lerta, i.e. Tomala Investments al- ternatywna spółka inwestycyjna sp. z.o.o. and Krzysztof Drożyński (‘Founders’ and/or each “Founder”) and certain executive contracts to this agreement. Under the terms of this agreement, an additional equity stake of 7,449,750 shares, representing 43.25% of Lerta’s equity was acquired by the Group for a combination of a PLN 2,160 thousand (EUR 462 thousand) cash consideration, the transfer of 2,300,110 treasury shares in Photon Energy and 1,238,521 Photon Energy shares to be newly issued in an in-kind contribution. As of 31 December 2022, Photon Energy N.V. acquired 4,972,708 shares in Lerta in the exchange of 2,300,110 treasury shares in Photon Energy and the above cash consideration to the Founders. As a result Photon Energy increased its shareholding in Lerta to 85.62%. On 1 February 2023, on the basis of a General Meeting authoriza- tion from 31 May 2021, the Board of Directors decided to issue 1,238,521 new shares with a nominal value of EUR 0.01 each. The new shares were issued against a contribution in-kind consisting of 2,477,042 shares in Lerta S.A., in line with the above-mentioned investment agreement. Upon the completion of this transaction Photon Energy Group increased its shareholding in Lerta to 100% while the Founders of Lerta hold jointly approximately 5.78% of Photon Energy’s fully issued share capital. The Founders are sub- ject to a lock-up agreement on their Photon Energy’s shares and have provided representations and warranties commensurate with this type of transaction. Borys Tomala, one of the Founders, will manage the Group’s New Energy Division into which Lerta will be integrated while Krzysztof Drożyński, the other Foun der, will act as Director of Advanced Technologies and remain responsible for the development of the AI-driven Virtual Power Plant software plat- form. The Founders will be subject to an earn-out and management incentive plan which, subject to the achievement of certain eco- nomic parameters by the New Energy Division in the financial year 2025, will entitle them to a maximum of 2,383,846 additional Pho- ton Energy shares. Other movement in the share premium of EUR 300 thousand in- cludes payments to employees paid by shares. Other movement in revaluation reserve and retained earnings of EUR 336 thousand is reclassification of pre-acquistion revaluation of Lerta booked historically in Other comprehensive income and reclassified as part of the acquisition process. Reserves Reserves of the Company consist of the revaluation reserve, the currency translation reserve and the hedging reserve. The revaluation reserve arises on the revaluation of photovoltaic power plant owned by the participation(s) and on the revaluation of fixed financial assets. Revaluation reserve from PPE amounted to EUR 16,813 thousand at 31 December 2022 (31 December 2021: EUR 19,037 thousand) and revaluation reserve arising from reval- uation of other financial investments amounted to EUR 2,925 thou- sand at 31 December 2022 (31 December 2021: EUR 2,657 thousand). Currency translation reserve includes all foreign translation ex- change differences in the participations and amounted to EUR -2,979 thousand at 31 December 2022 (31 December 2021: EUR -1,046 thousand). The hedging reserve includes results from hedging derivatives in the participations and amounted to EUR 5,094 thousand at 31 De- cember 2022 (31 December 2021: EUR 2,580 thousand). Unappropriated Result To the General Meeting of Shareholders the following appropria- tion of the result 2022 will be proposed: the profit of EUR 16,965 thousand to be transferred and added to the retained earnings item in the shareholders’ equity. Unappropriated Result 2022 contains the amount of EUR 127 thou- sand of net profit of joint ventures, where the entity cannot control the distribution of these profits. This represent the legal reserve fol- lowing article 389 subsection 6 of Book 2 of the Dutch Civil Code. This profits are regularly distributed to JV partners. The amount of EUR 146 thousand of net profit of joint ventures retained in 2021 was distributed to the Company in 2022 . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 158 Movement schedule of retained earnings: In thousands of EUR Balance at 1 January 2021 6,320 Movements in 2021 3,625 Closing balance 31 December 2021 9,945 Movements in 2022 4,003 Closing balance 31 December 2022 13,948 Reconciliation of consolidated group equity with company equity In thousands of EUR 31 December 2022 31 December 2021 Group equity 70,475 51,538 Non-controlling interest -197 -150 Group equity attributable to owners of the Company 70,672 51,688 Non-attributable losses of financial interest recognised in equity 36,343 27,648 Shareholders’ equity (Company) 107,015 79,336 In thousands of EUR 31 December 2022 31 December 2021 Group total comprehensive income 7,672 2,095 Profit/loss attributable to non-controlling interest -47 -29 Group total comprehensive income attributable to the owners of the company 7,719 2,124 Non-attributable losses of financial interest recognised in profit and loss 9,246 1,543 Net result (Company) 16,965 3,667 Non-attributable losses of financial interest recognised in equity relate to negative net assets of participations which are included in consoli- dated equity at their value but are not recognised in standalone financial statement of the Company, due to the fact, that value of the partici- pation is set at EUR 1, see also note 44 . 48. Long-Term Debt In thousands of EUR 31 December 2022 31 December 2021 Other bonds – non current 76,511 57,223 Deferred tax 1,149 0 Accounts payable to group companies 2,247 2,180 Total Long-Term Debt 79,907 59,403 As at 31 December 2022 none of the Long term liabilities are due in more than 5 years. As at 31 December 2021 Long term liabilities of 58,575 thousand were due in more than 5 years. Other bonds In thousands of EUR 31 December 2022 31 December 2021 Other bonds – current 3,670 24,107 Other bonds – non current 76,511 57,223 Total 80,181 81,330 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 159 Movement schedule for issued bonds: In thousands of EUR 2022 2021 Opening balance 81,330 46,739 Newly issued bonds 22,500 56,092 Placement cost paid -331 -782 Repayments of principal -23,719 -21,281 Accrued interest 6,213 4,251 Coupon paid -5,898 -3,751 FX differences 86 62 Closing balance 80,181 81,330 In November 2021, the Group has issued new EUR green bond with annual coupon of 6.50% and maturity in November 2027 (six- year maturity). The EUR green bond 2021/27 was offered to bond- holders of the existing 2017/2022 EUR bond in form of an ex- change offer and as a result, EUR 21,281 thousand were exchanged. The principal amount of EUR 50,000 thousand was oversubscribed and the overall volume of the new green bond was increased to EUR 55,000 thousand. Total amount of placement costs paid for the issuance/exchange of the Green bond amounted to EUR 1,202 thousand. Exchange bonus paid to existing bond- holder of EUR 420 thousand was recognised in income statement while the remaining amount of EUR 782 thousand is included in the amortised amount of the Issued bonds and will be recognised as interest expense from Issued bonds using effective interest rate. The EUR green bonds 2021/27 are traded on the unregulated mar- ket segments of the Stock Exchanges in Frankfurt, Berlin, Ham- burg, Hannover, Munich, Düsseldorf and Stuttgart. The net proceeds of the transaction are allowed to be used only for financ- ing and expanding eligible assets in accordance with its Green Fi- nancing Framework. In October 2017, the Group had issued EUR bonds with an annual coupon of 7.75% and maturity in October 2022. The outstanding nominal amount as of 31 December 2021 was EUR 24,419 thou- sand, being due for repayment in October 2022, and was pre- sented in Current liabilities. EUR bonds 2017/22 were traded on the unregulated market seg- ments of the Stock Exchanges in Frankfurt, Berlin, Hamburg, Han- nover, Munich, Düsseldorf and Stuttgart . In May 2022, the Company tapped its EUR green bond 2021/27 in the amount of EUR 10,000 thousand to a total outstanding amount of EUR 65 million. In October 2022 and November 2022, the Com- pany tapped the bond in the amount of another EUR 12,500 thou- sand to a total outstanding amount of EUR 77,500 thousand. The bonds from the second tap in autumn, were also offered to bondholders of the existing 2017/2022 corporate bonds in form of an exchange offer with a 1.5% loyalty premium plus the difference in net accrued interest on each exchanged bond. After the ex- change the outstanding volume of the corporate EUR bond 2017/22 was EUR 15,232 thousand and was fully repaid together with the final interest payment to the bondholders on 27 October 2022. Total amount of placement costs paid for the tapping/ex- change of the Green bond amounted to EUR 451 thousand. Ex- change bonus paid to existing bondholder of EUR 114 thousand was recognised in Gains less losses on derecognition of financial liabilities while the remaining amount of EUR 337 thousand is in- cluded in the amortised amount of the Issued bonds and will be recognised as interest expense from Issued bonds using effective interest rate. CZK bond issued in October 2016 has an annual coupon of 6%, with an outstanding nominal amount of EUR 3,146 thousand as of 31 December 2022 (2021: EUR 3,052 thousand) which is due in December 2023 and has been presented in Current liabilities. CZK bonds 2016/23 are traded on the unregulated market segment of the Prague Stock Exchange. Accrued interest of EUR 524 thousand at 31 December 2022 for EUR Green bond (2021: EUR 372 thousand) is presented within current liabilities . Movement schedule for non current liabilities: In thousands of EUR 2022 2021 Opening balance 2,180 2,064 FX revaluation 67 116 Closing balance 2,247 2,180 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 160 49. Current Liabilities In thousands of EUR 31 December 2022 31 December 2021 Accounts payable from group companies 3,870 1,008 Other bonds and private loans 3,670 24,107 Trade payables 626 3,493 Accruals and deferred income 177 249 Other liabilities 141 12 Total Current Liabilities 8,484 28,869 All current liabilities fall due in less than one year, unless otherwise disclosed below. Other bonds and private loans included in current liabilities as 31 December 2022 include CZK bonds which matures in Decem- ber 2023 and short-term portion of the Green bond. All loans included in the above table are provided by the subsidiar- ies of the entity . Remaining other payables consisted of Company’s liabilities from VAT, liabilities towards employees, advances or resulting from the cash transfers within the Group. Accounts payable from group companies of EUR 3,851 thousand represent loans from group companies. These loans are due on 31 December 2023 and therefor are presented as current liabilities, interest charged on these loans is 3%. The fair value of the accounts payable from group companies ap- proximates the book value, due to their short-term character. 50. Financial Instruments 50.1 General The Group has exposure to the following risks from its use of finan- cial instruments: ► Credit risk. ► Liquidity risk. ► Market risk. In the notes to the consolidated financial statements information is included about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. These risks, objectives, policies and processes for measuring and managing risk, and the management of capital also apply to the company financial statements of Photon Energy N.V. No derivative financial instruments are being used at parent com- pany level. 50.2 Fair Value The fair value of the financial instruments stated on the balance sheet, including cash at bank and in hand and current liabilities, is close to the carrying amount. Fair value of long term liabilities to group companies is close to the carrying amount. Fair value of issued bonds is disclosed below: Issued bonds In thousands of EUR Amortised amount Fair value 2022 2021 2022 2021 Current liabilities CZK bond 2016/23 3,146 0 3,127 0 Green bond 2021/27 524 0 0 0 EUR bond 2017/22 0 23,735 0 24,350 Non-current liabilities EUR bond 2017/22 0 54,602 0 57,201 Green bond 2021/27 76,511 0 70,284 0 CZK bond 2016/23 0 2,993 0 2,832 Total 80,181 81,330 73,411 84,383 Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 161 50.3 Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The table below shows lia- bilities at 31 December 2022 by their remaining contractual ma- turity. The amounts disclosed in the maturity table are the contractual undiscounted cash flows. Such undiscounted cash flows differ from the amount included in the statement of financial position because the statement of financial position amount is based on discounted cash flows. In thousands of EUR Carrying amount 1 – 12 months 1 – 2 years 2 – 5 years More than 5 years Contractual cash flows Financial liabilities Accounts payable to group S-T 3,870 3,986 0 0 0 3,986 Accounts payable to group L-T 2,447 2,596 0 0 2,596 Bonds 80,181 8,341 5,038 92,613 0 105,992 Total future payments, including future principal and interest payments 86,498 12,327 7,634 92,613 0 112,574 51. Revenues In thousands of EUR 2022 2021 Revenues from provision of services 5,472 3,269 Total revenues 5,472 3,269 Revenues from provision of services of EUR 5,472 thousand (2021: 3,269 thousand) represent management services provided to the companies in the Group charged as management fees within the Group. Out of the total revenues, EUR 2,435 thousand was charged in Netherlands, EUR 1,121 thousand was charged in Ro- mania, EUR 719 thousand was charged in the Czech republic, EUR 543 thousand was charged in Hungary, EUR 264 thousand was charged in Slovakia, EUR 218 thousand was charged in Switzerland, the remaining amount of EUR 172 thousand was charged in Poland, Australia and Germany. Gain on derecognition of associate of EUR 2,182 thousand relates to the revaluation of the original share in Lerta entity before the acquisition of the controlling interest as at the year-end as de- scribed in note 8 . 52. Other Operating Expenses In thousands of EUR 2022 2021 Consulting services -4,299 -3,348 Audit and accounting services -288 -221 Investment relations costs -41 -64 Legal -88 -47 Miscellaneous -746 -37 Other Operating Expenses -5,462 -3,717 Audit fees are presented separately in note 57 . Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 162 53. Other Interest Income and Similar Income In thousands of EUR 2022 2021 Interest Income 2,587 1,721 Revaluation of financial participation 615 0 Other Income 0 422 Other Interest Income and Similar Income 3,202 2,144 Interest Income from group companies and related parties amounted in 2022 to EUR 2,587 thousand (2021: EUR 1,656 thousand). Revalu- ation of EUR 615 thousand relates to revaluation of Raygen investment. 54. Other Interest Expense and Similar Expense In thousands of EUR 2022 2021 Interest expense -6,374 -4,485 Exchange bonus paid -114 -420 Other expense -558 -43 Other Interest Expense and Similar Expense -7,046 -4,948 Exchange bonus paid to existing bondholder of EUR 114 thousand was recognised in Other Interest Expense and Similar Expense. Remaining amount of placement fees paid of EUR 337 thousand is included in the amortised amount of the Issued bonds and will be recognised as interest expense from Issued bonds using effective interest rate. (see also note 48) . Interest expense from group companies amounted in 2022 to EUR 126 thousand (2021: EUR 208 thousand). Other expense of EUR 558 thousand (2021: EUR 43 thousand) include mainly FX losses and bank fees . 55. Share in Results from Participating Interests An amount of EUR 18,423 thousand (profit) of share in results from participating interests relates to group companies (2021: profit of EUR 5,283 thousand). 56. Employee Benefits and Information The company has only 1 employee (2021: 1 employee) who is working in the Netherlands. No employees are working outside of the Netherlands. The two members of the board of directors are not employees of the Company and did not receive any compensation during 2022 nor 2021 for their duties serving on the board of directors for the Group of entities. More information on management compensation is included in note 39 of consolidated financial statements and note 54 of standalone financial statements. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 163 57. Fees of the Auditor With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the financial year have been charged by PricewaterhouseCoopers to the Company in 2022: 2022: In thousands of EUR PricewaterhouseCoopers Accountants N.V. Other PricewaterhouseCoopers firms and affiliates Total Statutory audit of annual accounts 126 120 246 Other audit procedures 0 0 0 Tax services 0 0 0 Other non-audit services 6 0 6 With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the financial year have been charged by PricewaterhouseCoopers to the Company in 2021: 2021: In thousands of EUR PricewaterhouseCoopers Accountants N.V. Other PricewaterhouseCoopers firms and affiliates Total Statutory audit of annual accounts 116 98 214 Other audit procedures 0 0 0 Tax services 0 0 0 Other non-audit services 0 0 0 58. Related Parties 58.1 Transactions with Key Management Personnel Key Management Personnel Compensation Key management personnel did not obtain any compensation for their activity for Photon Energy N.V. in 2022 nor 2021. Further in- formation on key management compensation is included in the consolidated financial statements for 2022, note 39 . Key Management Personnel and Director As at 31 December 2022 the directors of the Company control 72.65% (2021: 75.94%) of the voting shares of the Company. The Directors hold positions in other group entities that result in having control or significant influence over the financial or operating poli- cies of these entities. Emoluments of Directors and Supervisory Directors No emoluments, including pension obligations as intended in Sec- tion 2:383(1) of the Netherlands Civil Code were charged in the fi- nancial period to the Company. Photon Energy N.V. Financial Section Annual Report 2022 Notes to the Company Financial Statements for the Year Ended 31 December 2022 164 59. Cash Flow Statement Cash Flow Statement of the Company for the years 2022 and comparison to 2021: In thousands of EUR 2022 2021 Cash flows from operating activities Loss/profit for the year before tax -1,458 -1,603 Adjustments for: Gain on disposal of financial investments 0 -464 Net finance costs 990 3,161 Change in FV of derivatives 0 -1,242 Other non cash items -870 1,358 Changes in: Trade and other receivables -7,523 -17 Trade and other payables 52 1,143 Income tax paid 0 -13 Net cash from operating activities -8,809 2,323 Cash flows from investing activities Acquisition of property, plant and equipment 0 -6 Acquisition of intangibles assets -32 0 Acquisition of subsidiaries, goodwill, including loans provided to group companies -7,183 -24,876 Acquisition of other investments -119 -4,325 Proceeds from sale of investments 757 1,560 Dividends received 1,784 6,690 Net cash used in investing activities -4,793 -20,957 Cash flows from financing activities Proceeds from issuance of ordinary shares 0 7,754 Proceeds from issuing bonds 22,500 56,092 Placement costs paid -331 -1,202 Repayment of long term liabilities/bonds -23,719 -21,281 Interest payments -6,043 -3,962 Interest received 2,587 1,721 Net cash from financing activities -5,006 39,122 Net decrease/increase in cash and cash equivalents -18,608 20,488 Cash and cash equivalents at 1 January 20,602 114 Cash and cash equivalents at 31 December 1,994 20,602 Amsterdam, 24 April 2023 The Board of Directors: Georg Hotar, Director Michael Gartner, Director The Supervisory Board: Marek Skreta, Chairman Bogusława Skowroński, Member Ariel Sergio Davidoff, Member Original signed . 165 Other Information Photon Energy N.V. Financial Section Annual Report 2022 Other Information 166 Other Information I. Provisions in the Articles of Association Governing the Appropriation of Profit According to article 20 of the company’s Articles of Association, the profit is at the disposal of the General Meeting of Shareholders, which can allocate the profit wholly or partly to the general or spe- cific reserve funds. The Company can only make payments to the shareholders and other parties entitled to the distributable profit for the amount the shareholders’ equity are greater than the paid-up and called-up part of the capital plus the legally required reserves. Refer to the note 40 of the Consolidated financial statements . II. Independent Auditor’s Report The independent auditor’s report is set forth on the next pages. PHUADNRAKTQ5-196943974-99 PricewaterhouseCoopers Accountants N.V., Thomas R. Malthusstraat 5, 1066 JR Amsterdam, P.O. Box 90357, 1006 BJ Amsterdam, the Netherlands T: +31 (0) 88 792 00 20, F: +31 (0) 88 792 96 40, www.pwc.nl ‘PwC’ is the brand under which PricewaterhouseCoopers Accountants N.V. (Chamber of Commerce 34180285), PricewaterhouseCoopers Belastingadviseurs N.V. (Chamber of Commerce 34180284), PricewaterhouseCoopers Advisory N.V. (Chamber of Commerce 34180287), PricewaterhouseCoopers Compliance Services B.V. (Chamber of Commerce 51414406), PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. (Chamber of Commerce 54226368), PricewaterhouseCoopers B.V. (Chamber of Commerce 34180289) and other companies operate and provide services. These services are governed by General Terms and Conditions (‘algemene voorwaarden’), which include provisions regarding our liability. Purchases by these companies are governed by General Terms and Conditions of Purchase (‘algemene inkoopvoorwaarden’). At www.pwc.nl more detailed information on these companies is available, including these General Terms and Conditions and the General Terms and Conditions of Purchase, which have also been filed at the Amsterdam Chamber of Commerce. Independent auditor’s report To: the general meeting of shareholders and the supervisory board of Photon Energy N.V. Report on the financial statements 2022 Our opinion In our opinion: • the consolidated financial statements of Photon Energy N.V. together with its subsidiaries (‘the Group’) give a true and fair view of the financial position of the Group as of 31 December 2022 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (‘EU-IFRS’) and with Part 9 of Book 2 of the Dutch Civil Code; • the standalone financial statements of Photon Energy N.V. (‘the Company’) give a true and fair view of the financial position of the Company as of 31 December 2022 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. What we have audited We have audited the accompanying financial statements 2022 of Photon Energy N.V., Amsterdam. The financial statements comprise the consolidated financial statements of the Group and the standalone financial statements. The consolidated financial statements comprise: • the consolidated statement of financial position as of 31 December 2022 • the following consolidated statements for the year ended 31 December 2022: statement of comprehensive income, statement of changes in equity, and statement of cash flows; and • the notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information. The standalone financial statements comprise: • the company balance sheet as of 31 December 2022 • the company income statement for the financial year ended 31 December 2022, and • the notes to the company financial statements for the year ended 31 December 2022, comprising a summary of the accounting policies applied and other explanatory information. The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 2 of 15 The basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of Photon Energy N.V. in accordance with the European Union Regulation on specific requirements regarding statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence), and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics). Our audit approach We designed our audit procedures with respect to the key audit matters, fraud and going concern, and the matters resulting from that, in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The information in support of our opinion, such as our findings and observations related to individual key audit matters, the audit approach fraud risk, and the audit approach going concern was addressed in this context, and we do not provide a separate opinion or conclusion on these matters. Overview and context Photon Energy N.V. is a joint-stock company that mainly specialises in the development, construction, and operation of photovoltaic power plants. The consolidated financial statements of the Group incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries); therefore, we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group, as set out below. As part of designing of our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. We considered where management made important judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. In these considerations, we paid attention to, among other matters, the assumptions underlying the physical and transition risk related to climate change. In Note 2.4 of the financial statements, management describes the areas of judgement in applying accounting policies and the key sources of estimation uncertainty. Given the significant estimation uncertainty and related higher inherent risks of material misstatement in the areas of valuation of photovoltaic power plants, valuation of the call option for the purchase of investments, and purchase price allocation accounting in relation to investment acquisition, we considered those to be a key audit matters as set out in the section ‘Key audit matters’ of this report. Recognition of revenue from construction contracts is not a key audit matter in 2022 based on decreased proportion in the total revenue. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 3 of 15 In 2022, Group management continued assessing possible effects of climate change on its financial position. For more information, please refer to the sections ‘Climate Change-related Risks’, ‘Corporate Social Responsibility’, and ‘Sustainable Investments’ of the Director’s report in which management defined potential physical as well as transitional risks, risk governance, metrics, and investment strategy. We discussed Photon Energy N.V.’s assessment and governance thereof with management and evaluated the potential impact on the financial position, including underlying assumptions and estimates. The expected effects of climate change are not considered a key audit matter. Apart from key audit matters and the impact from the climate change on our audit, as described above, other areas of focus in our audit were related to recognition of revenue from construction contracts, valuation of derivatives, valuation of other investments, classification of the ‘contracts for difference’ revenue model, and consolidation of special purpose entities. We ensured that the audit team included the appropriate skills and competences that are needed for the audit of a photovoltaic power business. We therefore included experts and specialists in the areas of, among others, information technology, taxation, and valuation in our team. The outline of our audit approach was as follows: Materiality • Overall materiality: €594,000. Audit scope • We conducted audit work at the head office of the Group. Because of the centralised structure, the entire Group was audited by one engagement team. • All subsidiaries of the Group (components) were included in the scope of the audit • Audit coverage: We performed the audit of the financial statements for the Group as a whole and tested all material financial statement line items without segregation per the components. Key audit matters • Valuation of the photovoltaic power plants. • Valuation of the call option for the purchase of investments. • Purchase price allocation accounting in relation to investment acquisition. Materiality The scope of our audit was influenced by the application of materiality, which is further explained in the section ‘Our responsibilities for the audit of the financial statements’. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the nature, timing, and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in aggregate, on the financial statements as a whole and on our opinion. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 4 of 15 Overall group materiality €594,000 (2021: €239,000). Basis for determining materiality We used our professional judgement to determine overall materiality. As a basis for our judgement, we used 2.5% of EBITDA. Rationale for benchmark applied We used EBITDA as the primary benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of the users of the financial statements. On this basis, we believe that EBITDA is the most relevant metric for the financial performance of the Group, more clearly representing the operating performance of the Group compared to the highly volatile profit before tax in recent years. Component materiality In relation to ISA 600, we did not allocate the overall group materiality but targeted all material financial statement line items regardless of which component’s transactions it contains. We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons. We agreed with the supervisory board that we would report to them any misstatement identified during our audit above €59,400 (2021: €23,900) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. The scope of our group audit Photon Energy N.V. is the parent company of a Group of companies operating in the Czech Republic, Hungary, Poland, Romania, Slovakia, Australia, and some other countries with limited operational activities. The financial information of these entities is included in the consolidated financial statements of Photon Energy N.V. Please refer to Note 40 of the consolidated financial statements for the details of the Group structure. We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the financial statements for us to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed at component level. We conducted audit work over the financial statements as a whole, including all components and covered all significant financial statements line items and transactions of the Group. The Group accounting function is centralised in Prague and the Group is managed as a single operating unit with multiple segments. The Group applies a centralised IT system for its business processes and financial reporting. By performing the procedures above, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the consolidated financial statements. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 5 of 15 Audit approach fraud risks We identified and assessed the risks of material misstatements of the financial statements due to fraud. During our audit, we obtained an understanding of Photon Energy N.V. and its environment and the components of the internal control system. This included management’s risk assessment process, management’s process for responding to the risks of fraud and monitoring the internal control system, and how the supervisory board exercised oversight, as well as the outcomes. We refer to section ‘Culture and Values’ and ‘Fraud Management’ of the Directors’ Report for description of governance structure and policies in place, on which management relies when managing the risk of fraud. We evaluated the design and relevant aspects of the internal control system with respect to the risks of material misstatements due to fraud and in particular the fraud risk assessment. We evaluated the design and the implementation where we were required by the applicable ISAs and, where considered appropriate, tested the operating effectiveness of internal controls designed to mitigate fraud risks. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets, and bribery and corruption. We assessed whether these factors indicate that a risk of material misstatement due to fraud is present. In doing this, we: • performed an inquiry of supervisory board members as to fraud risks and related party transactions to identify the areas of their concerns in relation to fraud; • inquired with executive management as to whether they have any knowledge of (suspected) fraud, their views on overall fraud risks within the Group and their perspectives on the Groups mitigating controls addressing the risk of fraud. We also discussed management’s process for identifying fraud risks and process for responding to fraud risks; • also assessed the matters reported through the Group’s whistleblowing and complaints procedure and results of management’s investigation and follow-up on such matters; • also inquired with accounting personnel and other employees about known fraud and error risks in the entity and the financial statements; management’s communication to employees of its views on business practices and ethical behavior, whether they have knowledge of any actual, suspected or alleged fraud; • assessed the IT environment around key systems. We paid specific attention to the access safeguards in the IT system and the possibility that these lead to violations of the segregation of duties. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 6 of 15 We identified the following fraud risks and performed the following specific procedures: Identified fraud risks Our audit work and observations Risk of management override of controls It is generally presumed that management is in a unique position to perpetrate fraud because of the available opportunity to manipulate accounting records and prepare fraudulent financial statements by overriding manual controls, such as those related to journal entries, related party transactions, significant accounting estimates, etc. Management measures performance of the group through monitoring EBITDA and revenue, which are considered key performance indicators. A focus on meeting financial targets could provide to management an incentive for bypassing of controls. Where relevant to our audit, we evaluated the design and effectiveness of controls in the processes of generating and processing journal entries. We assessed whether deficiencies in controls may create additional opportunities for fraud and incorporated respective corroborative procedures in our audit approach. We paid specific attention to non-routine transactions and areas of significant management judgement. We also paid specific attention to the access safeguards in the IT system. We considered the outcome of our audit procedures over the estimates and significant accounting areas and assessed whether control deficiencies and misstatements identified could be indicative of fraud. Where necessary, we planned and performed additional auditing procedures to ensure that fraud risks are sufficiently addressed in our audit. We evaluated key accounting estimates and judgements used in accounting areas where management judgement is applied (e.g. the valuation of photovoltaic power plants, the valuation of the call option and purchase price allocation accounting in relation to investment transactions) for biases, including retrospective reviews of prior year’s estimates where available. We performed data analysis focused on journal entries related to the fraud risk factors identified during fraud risk assessment. Where we identified instances of unexpected journal entries, we performed audit procedures. We evaluated whether the business rationale (or lack thereof) of the significant transactions concluded in 2022 suggests that the Group may have entered into those to engage in fraudulent financial reporting or to conceal misappropriation of assets. We incorporated an element of unpredictability in the nature, timing, and extent of audit procedures. We performed substantive testing procedures over the consolidation entries. Our audit procedures did not identify indications of specific fraud or suspicions of fraud with respect to management override of controls. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 7 of 15 Identified fraud risks Our audit work and observations Risk of fraud in revenue recognition As part of our risk assessment and based on a presumption that there are risks of fraud in revenue recognition, we considered the risk of fraud in revenue recognition. This relates to the presumed management incentive that exists to overstate revenue in order to meet financial targets or shareholder expectations. In this context, we consider this as a risk of fraud focussed to overstating revenue through the recording of non-existent transactions or premature revenue recognition. We discussed and inquired with executive management the tone at the top, to assess to what extent not meeting targets have an impact on career opportunities or bonuses within the Company, and whether they have any knowledge of (suspected) fraud. In our conversations, we addressed their views on overall fraud risks within the Group and their perspectives on the Groups mitigating controls addressing the risk of fraud in revenue. Where relevant to our audit, we have evaluated the design of the internal control measures that are intended to mitigate the risk of fraud and error in revenue recognition and assessed the effectiveness of those measures. We also paid specific attention to the processes surrounding the relevant IT systems. Through data analysis, we tested unexpected journal entries and performed relevant testing on revenue transactions throughout the year and the receivable balances at year end. We did not identify specific indications of fraud or suspicion of fraud in respect of revenue recognition. We reviewed lawyer’s letters and correspondence with regulators. During the audit, we remained alert to indications of fraud. We also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance of laws and regulations. Whenever we identify any indications of fraud, we re-evaluate our fraud risk assessment and its impact on our audit procedures. Audit approach going concern As disclosed in Note 2.1 of the financial statements, management performed their assessment of the entity’s ability to continue as a going concern for at least twelve months from the date of preparation of the financial statements and has not identified events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern (hereafter: going-concern risks). Our procedures to evaluate management’s going-concern assessment included, among others: • a review of management’s going-concern assessment and considering whether it includes all relevant information of which we are aware as a result of our audit procedures; • inquiries of executive management as to their knowledge of going-concern risks beyond the period of management’s assessment; • evaluating management’s current budget including cash flows for at least twelve months from the date of preparation of the financial statements taken into account current developments in the industry and all relevant information of which we are aware as a result of our audit; • analysing whether the current and the required financing has been secured to enable the continuation of the entirety of the entity’s operations, including compliance with relevant covenants; • an analysis of the financial position at balance sheet date in comparison to prior year’s year end to assessing whether events or circumstances exist that may lead to a going-concern risk. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 8 of 15 Our procedures did not result in outcomes contrary to management’s assumptions and judgements used in the application of the going concern assumption. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the supervisory board. The key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters. Key audit matter Our audit work and observations Valuation of the photovoltaic power plants Please r efer to Notes 5.1, 19 and 37 of the consolidated financial statements for the related disclosure. As of 31 December 2022, photovoltaic plants represent more than 75% of the total assets of the Group. The Group measures photovoltaic power plants at fair values less depreciation in accordance with IAS 16 Property, plant and equipment and IFRS 13 Fair Value Measurement, which are determined by income approach as photovoltaic power plants market prices are not available. Under this approach , the fair value of photovoltaic power plants is based on the Discounted Cash Flow model (DCF). This valuation is significant to our audit due to complexity and high judgement applied within the assessment process. As of 31 December 2022, the cash flow projections are prepared for the period equaling the estimated useful life (30 years in Australia, 25 years in the Czech Republic, Slovakia, and Hungary) and are based on feed-in-tariffs (period with guaranteed sales price s) or expected electricity and certificate prices on the relevant markets and on the expected after -tax cost of debt and expected cost of equity. Significant assumptions used in the models are the following: • production volume; Among other audit procedures, we performed an evaluation of the Group’s accounting policy and method for valuation of photovoltaic power plants. We checked the appropriateness of the method used under IAS 16 Property, plant and equipment, IFRS 13 Fair Valu e Measurement, and industry norms. We assessed the competence, capabilities , and experience of the management to prepare the valuation and verified their qualifications. W e challenged management’s assumptions with reference to the internal and external su pporting information noting the assumptions used fell within an acceptable range. The e xpected volume of electricity production for selected power plants is agreed to the independent yield studies considering a seasonality factor. We also inspected the technical documentation for the sampled historic production volumes and performed look -back analysis. On a sample basis , we inspected the technical documentation for historic operating, maintenance , and capital expenses. Expected operating and capital expend itures are compared to the external studies and market average considering the size of the selected power plants. T ogether with our valuation experts, we evaluated the reasonableness and appropriateness of the discount rates based on inputs independently sourced from market data and comparable companies. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 9 of 15 Key audit matter Our audit work and observations • operating and capital expenditures; • discount rates; • prices of electricity and large-scale green certificates (LGCs) for merchant models. Measurement using the DCF model is subject to an increased valuation risk as there is a reduced scope for objectivity due to a lack of active market , which requires significant management judgment, estimates , and assumptions, as such inherently susceptible to the risk of material misstatement. Applied measurement methods materially impact the net assets and total comprehensive income for the year. Therefore, we consider valuation of photovoltaic power plants to be a key audit matter. We tested the sensitivity of changes in the significant assumptions and evaluated their impact on the DCF model. We have evaluated the expected prices and large - scale generation certificates (LGCs) toget her with our valuation experts to publicly available forwards/futures prices of electricity in relevant markets. We considered the appropriateness of relevant disclosures provided in the consolidated financial statements (see Notes 5.1, 19 and 37 to the c onsolidated financial statements). Our audit procedures did not result in any material findings with respect to the valuation of photovoltaic power plants and related disclosures at 31 December 202 2. Valuation of the call option for the purchase of investments Refer to Notes 2.4.5, 5.3, 23 and 37 to the consolidated financial statements for the related disclosure We understand that investment in the non - traded company Raygen has a long -term strategic importance for the Company because of its development of promising photovoltaic technology. In 2020 and 2021 , the Company subscribed for Raygen’s ordinary shares and preferential shares. As a part of the subscription agreement, the Company also has a call option for additional shares in cons ideration for the services provided by the Company in respect of developing and completing a Qualifying solar project during a period of five years. The Company has a policy of applying the irrecoverable election to present fair value changes of particula r investments in equity instruments in other comprehensive income (OCI). The call option for additional shares in Raygen is considered as embedded derivative and is presented separately through FVPL . We verified that the evaluation of the call option for the purchase of shares as embedded derivative with fair value measurement through FVPL is in line with IFRS 9. We checked the appropriateness of the method u sed for valuation under IFRS 13 Fair Value Measurement. We assessed the competence, capabilities , and experience of management to prepare the valuation and verified their qualifications. Further more, we challenged management’s assumptions with reference to the internal and external supporting information noting the assumptions used fell within an acceptable range. We have evaluated the expected market price of shares together with our valuation team considering Raygen is a nontraded company. We have inquired with management about the project stage and challenged the probability of reali sation of the share options. Together with our valuation experts , we evaluated the reasonableness and appropriateness of the discount rate based on inputs, independently s ourced from market data and comparable companies. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 10 of 15 Key audit matter Our audit work and observations Fair value is measured in accordance with IFRS 13 Fair Value Measurement. Significant assumptions used in the estimation of fair value of share option are the following: • expected market price of the shares; • probability of realisation of the share options; • discount rate reflecting the rate of return on investment. Applied measurement methods materially impact the value of Other non -current financial assets and Revaluation of derivatives. Therefore, we consider the v aluation of call option for purchase of s hares in Raygen to be a key audit matter. We tested the sensitivity of changes in the significant assumptions and evaluated their impact on the valuation. We considered the appropriateness of relevant disclosures provided in the consolidated financial statements (see Notes 2.4.5, 5.3, 23, and 37 of the consolidated financial statements). Our procedures did not result in any material findings with respect to the fair value of right for additional shares. Purchase price allocation accounting in relation to investment acquisition Refer to Notes 8, 21 and 22 to the consolidated financial st atements for the related disclosure During 2022 , the Company gradually increased its share in Lerta Spółka Akcyjna to 85.62% , giving it the possibility to assume control . The total consideration paid for the acquisition consists of cash and non -cash considerations. The business combination was accounted to according to IFRS 3 using the acquisition method and the purchase price is allocated to the assets acquired and liabilities assumed measured at their respective fair values as defined by IFRS 13. The assets, liabilities, and contingent liabilities acquired were stated at their fair values , which were determined in the course of the preliminary purchase price allocation performed. Fair value step up is primary comprised of capacity market contracts and related deferred tax impact. The preliminary purchase price allocation performed requires the management to make discretionary decisions, estimates , and assumptions. We read the purchase agreements and the agreements under company law a nd analysed the criteria defined in IFRS 10 for the control transfer. We audited management’s assessment of the date when control over Lerta was obtained and verified the date when consolidation will be required. We assessed the methodical approach in identifying the assets acquired and liabilities assumed at the acquisition date . We corroborated the completeness of intangible assets defined by management. We further verified the measurement methods applied and examined the determination of the identifiable assets acq uired as well as of the liabilities and contingent liabilities assumed . We assessed the methodology and key accounting estimates applied to valuation of intangible assets identified by management (i.e. capacity market contracts) and that they are measured as defined by IFRS 13. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 11 of 15 Key audit matter Our audit work and observations Changes in these assumptions may have a material impact on the fair values and accounting. Due to the matter described, we consider the business combination and in particular the purchase price allocation as a key audit matter in our audit. We examined the disclosures on the acquisition made in the notes in accordance with the requirements of IFRS The accounting and measurement methods applied are in accordance with IFRSs (see Notes 8, 21, 22 of the consolidated financial statements ). We consider the underlying assumptions and measurement parameters to be plausible and reasonable. Our procedures did not result in any material findings with respect to accuracy or valuation of purchase price allocation accounting. Report on the other information included in the annual report The annual report contains other information. This includes all information in the annual report in addition to the financial statements and our auditor’s report thereon. Based on the procedures performed as set out below, we conclude that the other information: • is consistent with the financial statements and does not contain material misstatements; and • contains all the information regarding the director’s report and the other information that is required by Part 9 of Book 2 and regarding the remuneration report required by the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code. We have read the other information. Based on our knowledge and the understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing our procedures, we comply with the requirements of Part 9 of Book 2 and section 2:135b subsection 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those procedures performed in our audit of the financial statements. Management is responsible for the preparation of the other information, including the director’s report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code. Management and the supervisory board are responsible for ensuring that the remuneration report is drawn up and published in accordance with sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 12 of 15 Report on other legal and regulatory requirements and ESEF Our appointment We were appointed as auditors of Photon Energy N.V. on 4 December 2020 by the supervisory board. This followed the passing of a resolution by the shareholders at the annual general meeting held on 4 December 2020. Our appointment has been renewed annually by shareholders and now represents a total period of uninterrupted engagement of three years. European Single Electronic Format (ESEF) Photon Energy N.V. has prepared the annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF). In our opinion, the annual report prepared in XHTML format, including the (partially) marked-up consolidated financial statements, as included in the reporting package by Photon Energy N.V., complies in all material respects with the RTS on ESEF. Management is responsible for preparing the annual report, including the financial statements in accordance with the RTS on ESEF, whereby management combines the various components into a single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package complies with the RTS on ESEF. We performed our examination in accordance with Dutch law, including Dutch Standard 3950N ‘Assuranceopdrachten inzake het voldoen aan de criteria voor het opstellen van een 12igital verantwoordingsdocument’ (assurance engagements relating to compliance with criteria for digital reporting). Our examination included, among other things: • obtaining an understanding of the entity’s financial reporting process, including the preparation of the reporting package; • identifying and assessing the risks that the annual report does not comply in all material respects with the RTS on ESEF and designing and performing further assurance procedures responsive to those risks to provide a basis for our opinion, including: o obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance document and the XBRL extension taxonomy files have been prepared in accordance with the technical specifications as included in the RTS on ESEF; o examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF. No prohibited non-audit services To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in article 5(1) of the European Regulation on specific requirements regarding statutory audit of public-interest entities. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 13 of 15 Services rendered The services, in addition to the audit, that we have provided to the Company or its controlled entities, for the period to which our statutory audit relates, are disclosed in Note 57 to the financial statements. Responsibilities for the financial statements and the audit Responsibilities of management and the supervisory board for the financial statements Management is responsible for: • the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code; and for • such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going-concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. Management should disclose in the financial statements any event and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern. The supervisory board is responsible for overseeing the Company’s financial reporting process. Our responsibilities for the audit of the financial statements Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all material misstatements. Misstatements may arise due to fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Materiality affects the nature, timing, and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. A more detailed description of our responsibilities is set out in the appendix to our report. Amsterdam, 24 April 2023 PricewaterhouseCoopers Accountants N.V. Original has been signed by A.G.J. Gerritsen RA Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 14 of 15 Appendix to our auditor’s report on the financial statements 2022 of Photon Energy N.V. In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves. The auditor’s responsibilities for the audit of the financial statements We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements, and independence requirements. Our audit consisted, among other things, of the following: • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control. • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Concluding on the appropriateness of management’s use of the going-concern basis of accounting, and, based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluating the overall presentation, structure, and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction, supervision, and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the Group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the Group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the Group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary. Photon Energy N.V. - PHUADNRAKTQ5-196943974-99 Page 15 of 15 We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In this respect, we also issue an additional report to the audit committee in accordance with article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report. We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related actions taken to eliminate threats or safeguards applied. From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. Photon Energy N.V. Barbara Strozzilaan 201 Amsterdam 1083 HN The Netherlands Corporate number: 51447126 VAT number: NL850020827B01 +31 20 240 25 70 photonenergy.com

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