Annual Report • Mar 29, 2019
Annual Report
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2018
Improving our future
To deliver competitive and sustainable solar energy globally, to protect our environment and to improve quality of life through innovative integration of reliable technology
Predictable Working together Driving results Changemakers
| Scatec Solar in brief | 4 |
|---|---|
| Value chain | 6 |
| Market development | 7 |
| CEO letter | 8 |
| Our people | 10 |
| Sustainability highlights | 12 |
| Report from the Board of Directors | 15 |
| Executive Management | 34 |
| Board of Directors | 36 |
| Consolidated financial statements Group | 40 |
| Notes to the Consolidated financial statements Group | 46 |
| Parent company financial statements | 112 |
| Notes to the parent company financial statements | 116 |
| Other definitions | 137 |
| Responsibility statement | 138 |
| Alternative Performance Measures | 139 |
| Appendix | 142 |
| Auditor's report | 144 |
Scatec Solar is an integrated independent solar power producer, delivering affordable, rapidly deployable and sustainable source of clean energy worldwide. As a long-term player, Scatec Solar develops, builds, owns, operates and maintains solar power plants, and has solid installation track record of more than 1 GW.
The company has a total of 1.7 GW in operation and under construction in Argentina, Brazil, the Czech Republic, Egypt, Honduras, Jordan, Malaysia, Mozambique, Rwanda, South Africa and Ukraine.
With an established global presence and a significant project pipeline, the company is targeting a capacity of 3.5 GW in operation and under construction by end of 2021. Scatec Solar is headquartered in Oslo, Norway and listed on the Oslo Stock Exchange under the ticker symbol 'SSO'.
Market capitalisation at year-end NOK BILLION
Proportionate Revenues & EBITDA NOK MILLION
| FY 2016 |
|---|
| 1,174 |
| 376 |
| 147 |
| -84 |
| 1,918 |
| 356 |
| 104 |
| 1,085 |
| 833 |
| 0.04 |
| 791 |
1) See Other definitions appendix for definition.
2) See Alternative Performance Measures appendix for definition.
3) Refer to Note 2 Operating Segments in the consolidated financial statement for a reconciliation between proportionate and consolidated financials.
The solar market is growing strongly. With further technology improvements and cost reductions for solar components, industry analysts are expecting significant market growth in the years to come.
Source: Bloomberg New Energy Finance, Q1 2019 PV Market Outlook and New energy outlook 2018.
Bloomberg New Energy Finance (BNEF) expects global power demand to grow by 57% from 2018 to 2050, representing investments of about USD 11.5 trillion in new power generation. Of this, more than 70%, or USD 250 billion per year is forecasted to be invested in wind and solar.
According to BNEF it was installed 107 GW of solar globally in 2018. This represents total investments of USD 131 billion.
In the short term, the solar market volume is expected to grow by 20% to 130 GW by 2021. The highest growth is forecasted to come from new markets in Latin America, the Middle East and Southeast Asia. The investments required to realise a typical utility-scale solar plant is expected reach 80 cents per Watt in 2019, a decline of 45 % from 2015.
As the cost of solar power continues to decline, policy makers around the world are increasingly looking to solar to cover their power needs and create growth. In emerging economies, governments look at private/public partnerships as an attractive model where multilateral development banks and private players provide funding to realise new solar projects at a fast pace. Several development banks have long-standing presence and experience in emerging markets and are mandated to provide non-recourse project financing. These markets continue to represent interesting opportunities for Scatec Solar and forms a strong fundament for growth in the years to come.
Annual solar installations are expected to reach 130 GW by 2021
2018 enters history as a year of growth and several record achievements for Scatec Solar. It was also the start of another highly ambitious period of growth with new targets of 3.5 GW in operation or under construction by the end of 2021.
Growth is not an objective, but an enabler to meet what we set out to achieve. To continuously keep Scatec Solar on track, I frequently remind myself of what Scatec Solar's mission is: To deliver competitive and sustainable solar energy globally, to protect our environment and to improve quality of life through innovative integration of reliable technology.
I firmly believe that we continued delivering in line with our mission in 2018.
Firstly, we grew our asset portfolio in operation by 262 MW to 584 MW in 2018, driven by new solar plants in commercial operation in Brazil, Honduras and Malaysia. The dedication and efforts of our teams to reach these important milestones were impressive. As was the continued support from our multitude of partners, including suppliers, investment partners, development financing institutions and – at the core of everything we do – our customers. Our partnerships are essential to Scatec Solar's business model and progress.
From an environmental perspective, our operating solar power plants avoided about 650,000 tons of greenhouse gas emissions in 2018, underlining the positive climate impact of our company.
Secondly, we secured strong conversion of new projects from pipeline and backlog into construction. At year-end, 1,071 MW of new projects were under construction in eight countries. Starting construction of new projects greatly benefits the local communities we operate within, not only through local job and value creation, but also through implementation of sustainability programmes that improve standards in local communities close to our project sites. It is important to us that each local community benefits from the solar power plant beyond the building and operations of the plant. I encourage you to read more about how we work with sustainability as an integrated part of our business in the 2018 Sustainability report.
Moreover, when operating in emerging markets, sustainability efforts are integral to achieve business success and financial growth. In 2018, we almost tripled our revenues from 2017, reaching proportionate revenues of NOK 4,725 million in 2018. EBITDA grew to NOK 961 million, up from 792 million in 2017.
The key asset to delivering such growth is our people. In 2018, we expanded our global team by 68 highly skilled employees to 246. However, numbers alone do not create success. Empowered employees from diverse backgrounds are key to innovation and growth. Their creativity and agility enable us to stay one step ahead of the competition. I was therefore highly encouraged by the results from the employee survey conducted in the autumn of 2018, where 87 percent of our employees believe Scatec Solar is a great place to work and 93 percent are proud to tell others they work here.
Such results make me proud to be CEO of Scatec Solar. They also give me reassurance that we are equipped to meet the highly ambitious future growth targets we defined in mid-2018. From today's 1,700 MW in operation and under construction, we have set a target to reach 3,500 MW by the end of 2021. With a solid pipeline and backlog of 4,700 MW at year-end 2018, we are on track to reach this target.
Our record achievements in 2018 within several areas give us a solid basis to further develop our business and continue growing sustainably in 2019 and beyond. The solar market is the fastest growing renewable energy source and we see significant opportunities to utilise our track record, business model and new technologies to realise new projects. As set out in the beginning of this letter, Scatec Solar's mission is clear, and we will constantly strive to improve our performance and simultaneously create positive spin-off effects to the communities we operate within and the planet we live on.
Raymond Carlsen (CEO)
We expanded our global team by 68 highly skilled employees in 2018 to 246, representing 32 different nationalities.
2018 has been a year of strong growth delivered by our dedicated people and teams. This is also reflected in our organisation which we have strengthened within all functions and regions. In 2018, we expanded our global team by 68 highly skilled employees to 246, whereof women account for 33 %. In addition to our own employees, we had about 183 professionals hired in to deliver on our projects in 2018. A range of onboarding activities have successfully been implemented to integrate every new hire into our diverse organisation counting 32 different nationalities.
This year, we will continue our work to take further advantage of this diversity, adding knowledge, skills, gender and personality to the equation. If we can further capitalise on the combined strengths of these assets, we are set for an even stronger organisation that continues to deliver successful projects in complex environments.
To further strengthen continuous development of Scatec Solar's people and teams, additional systems were implemented in 2018. These tools enable efficient administration of global HR processes to ensure high quality in all phases of training and development of a growing organisation. During the second half of 2018, 16 different courses were offered to all employees. This offering is continuously updated and aligned with the needs of the business and employees.
Performance management in Scatec Solar is a continuous process to reinforce a value based high performance culture with passionate and empowered employees. The core of the performance, management and appraisal (PDA) process is the continuous dialogue between line manager and employee. The PDA process is mandatory for all employees and we track this to full completion every year.
We conducted our first global employee survey in 2018. The overall results were strong, and the scores reflecting employee pride were the highest. The survey provides good insight into areas we can improve as well as areas where we can further utilise our strengths. Global follow-up of the findings, including improvement objectives and supporting actions, will be ongoing throughout 2019.
Scatec Solar's operations stretches across 19 countries and four continents. Even though we are growing at a high pace, we remain an agile and lean organisation. We utilise our strengths throughout the complete value chain and deliver record achievements together with our long-term partners. This combination will continue to be key for our future success. South Africa Norway Malaysia
Grid connected 262 MW in 2018 - more than doubled our installed capacity
emissions reduced from our solar plants in operation in 2018
3.5 GW Targeting 3.5 GW in operation and under construction by the end of 2021
Zero serious injuries Delivered 6.3 mill working hours with no serious injuries
in projects under construction – the majority local and unskilled labour
Diversity Our total global workforce is represented by 32 nationalities
Grid connected the Los Prados plant in Honduras after social unrest locally, in large part caused by misinformation and resolved through a stronger social team and improved dialog and interactions with the communities.
Livelihoodrestoration programme for 220 local households in Mozambique in line with IFC's Performance Standards
with Environmental & Social management to ensure compliance of all contractors and business partners with international standards and requirements in Egypt and other ongoing projects
Read more about Scatec Solar's sustainability efforts in the Sustainability Report 2018 available on https://annualreport2018.scatecsolar.com/
A summary of key operational and financial highlights of the year 2018
Article continues
| NOK MILLION | FY 2018 | FY 2017 |
|---|---|---|
| PROPORTIONATE FINANCIALS 1) | ||
| Total revenues and other income | 4,725 | 1,680 |
| Power Production | 622 | 544 |
| Operation & Maintenance | 81 | 69 |
| Development & Construction | 4,005 | 1,054 |
| Corporate | 17 | 13 |
| EBITDA | 961 | 792 |
| Power Production | 492 | 454 |
| Operation & Maintenance | 34 | 28 |
| Development & Construction | 488 | 361 |
| Corporate | -53 | -50 |
| Operating profit (EBIT) | 773 | 632 |
| Profit/(loss) | 398 | 326 |
| Net interest-bearing debt | 4,214 | 2,013 |
| Power production (GWh) | 318 | 282 |
| SSO proportionate share of cash flow to equity | 481 | 265 |
| CONSOLIDATED FINANCIALS 2) | ||
| Revenues and other income | 1,213 | 1,492 |
| EBITDA | 902 | 1,241 |
| Basic earnings per Share (NOK) | 1.29 | 3.36 |
| Power Production (GWh) | 681 | 627 |
1) With proportionate financials, Scatec Solar reports its share of revenues, expenses, profits and cash flows from its subsidiaries without eliminations, based on Scatec Solar's economic interest in the subsidiaries.
2) Refer to note 3 Operating segments in the consolidated financial statements for a reconciliation between proportionate and consolidated financials.
Pursuant to Section 3-3 of the Norwegian Accounting Act, the Board of Directors confirm that the Financial Statements have been prepared under the assumption that the Scatec Solar Group is a going concern and that this assumption was appropriate at the date of approval of the Financial Statements. The Group reports its Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) with Norwegian Kroner (NOK) as reporting currency. The notations Scatec Solar, Scatec Solar Group, and the Group are used interchangeably throughout the document.
Scatec Solar reports on three operating business segments: Power Production (PP), Operation & Maintenance (O&M), and Development & Construction (D&C), as well as Corporate and Eliminations.
Revenues and costs related to deliveries of D&C and O&M services to companies deemed to be controlled by Scatec Solar are eliminated in the Consolidated Group Financial Statements.
To improve reporting transparency on underlying value creation across Scatec Solar's business activities the Company has introduced reporting on proportionate financials. With proportionate financials Scatec Solar reports its share of revenues, expenses, profits and cash flows from its subsidiaries based on Scatec Solar's economic interest in the subsidiaries. Proportionate reporting is in line with how the Management Team assesses the performance of the segments.
The 2018 proportionate revenues increased almost threefold from 2017, mainly explained by a significant increase in Development & Construction (D&C) activities. Furthermore, power revenues increased in the year based on reaching commercial operation for the Los Prados (Honduras), Gurun (Malaysia) and Apodi (Brazil) power plants. Revenues and profitability in the other business segments remained fairly stable.
Operating expenses increased in 2018, mainly driven by operating expenses of the new plants in operation.
D&C activities contributed with NOK 488 million of a total EBITDA of NOK 961 million for the year. EBITDA for the full year increased strongly compared to last year, mainly explained by higher contruction activities. The 2017 D&C EBITDA included a NOK 375 million gain on the partial sale of the Apodi project in Brazil.
Scatec Solar's proportionate share of cash flow to equity was NOK 481 million in 2018, up from NOK 265 million in 2017.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Revenues and other income | 4,725 | 1,680 |
| Operating expenses | -360 | -276 |
| EBITDA | 961 | 792 |
| D&A and impairment | -188 | -160 |
| EBIT | 773 | 632 |
| Cash flow to equity | 481 | 265 |
| PERCENT | 2018 | 2017 |
|---|---|---|
| EBITDA margin | 20% | 47% |
| EBIT margin | 16% | 38% |
Power Production revenues reached NOK 622 million (544) in 2018. The segment had an installed capacity of 584 MW at the end of 2018 and reached production on a proportionate basis of 318 GWh compared with 282 GWh in 2017. The increase in production volumes and revenues is mainly driven by new power plants reaching commercial operation, asset management services rendered to new power plants as well as Scatec Solar's increased ownership share in the South African plants with effect from September 2018.
The increase in operating expenses from last year is explained by the new plants set in operation, as well as commencement of asset management activities for plants under construction. As asset management services yield lower margin than sale of electricity, the EBITDA margin for 2018 was reduced compared to last year.
Scatec Solar's proportionate share of cash flow to equity from Power Production was NOK 157 million in 2018, up from NOK 143 million in 2017.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Revenues and other income | 622 | 544 |
| Operating expenses | -130 | -90 |
| EBITDA | 492 | 454 |
| D&A and impairment | -164 | -156 |
| EBIT | 328 | 298 |
| Cash flow to equity | 157 | 143 |
| PERCENT | 2018 | 2017 |
|---|---|---|
| EBITDA margin | 79% | 83% |
| EBIT margin | 53% | 55% |
| MWH | 2018 | 2017 |
|---|---|---|
| MWh produced | 681 | 627 |
| -net to Scatec Solar | 318 | 282 |
Revenues in the Operation & Maintenance (O&M) segment reached NOK 81 million (69) in 2018.
The revenue growth in 2018 is explained by commencement of O&M operations in Malaysia, Brazil and Honduras, as well as the catch-up of previously unrecorded revenues for two of the plants in Jordan.
Operating expenses amounted to NOK 48 million (41) in 2018. The increase is mainly due to costs related to
preparations for growth in the contract portfolio and normal recurring maintenance activities.
EBITDA reached NOK 34 million (28) in 2018, corresponding to an EBITDA margin of 41% (40%).
Scatec Solar's proportionate share of cash flow to equity from O&M was NOK 26 million in 2018, up from NOK 22 million in 2017.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Revenues and other income | 81 | 69 |
| Operating expenses | -48 | -41 |
| EBITDA | 34 | 28 |
| D&A and impairment | -1 | -1 |
| EBIT | 33 | 27 |
| Cash flow to equity | 26 | 22 |
| PERCENT | 2018 | 2017 |
|---|---|---|
| EBITDA margin | 41% | 40% |
| EBIT margin | 40% | 39% |
Revenues in Development & Construction (D&C) reached NOK 4,005 million (1,054) in 2018.
Activities in the segment increased significantly from 2017 to 2018 as financial close close was achieved and construction started for projects in South Africa, Mozambique, Argentina, Malaysia and Ukraine. Further, during 2018 construction was completed for Gurun in Malaysia, Apodi in Brazil and Los Prados in Honduras.
Revenues in the (D&C) segment are reflecting project development margin and progress on projects under construction.
The gross margin reached 15 % in line with earlier guidance. The gross margin in 2017 was positively affected by the NOK 375 million gain on the partial sale of the Apodi project in Brazil.
EBITDA reached NOK 488 million (361).
Scatec Solar's proportionate share of cash flow to equity from D&C was NOK 383 million in 2018, up from NOK 167 million in 2017.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Revenues and other income | 4,005 | 1,054 |
| Cost of sales | -3,404 | -612 |
| Gross profit | 601 | 442 |
| Operating expenses | -113 | -82 |
| EBITDA | 488 | 361 |
| D&A and impairment. | -21 | -3 |
| EBIT | 467 | 358 |
| Cash flow to equity | 383 | 167 |
| PERCENT | 2018 | 2017 |
|---|---|---|
| Gross margin | 15% | 42% |
| EBITDA margin | 12% | 34% |
| EBIT margin | 12% | 34% |
Corporate activities mainly relate to corporate and management services. The segment reported an operating loss of NOK -55 million (-51) in 2018
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Revenues and other expenses | 17 | 13 |
| Operating expenses | -70 | -63 |
| EBITDA | -53 | -50 |
| D&A and impairment | -2 | -1 |
| EBIT | -55 | -51 |
| Cash flow to equity | -85 | -65 |
Revenues in the corporate segment refers to management fees charged to the other operating segments for corporate services rendered across the Group and remains fairly stable from year to year. Corporate incurred NOK 70 million in operating expenses, an increase of 11% compared to last year. The increase reflects higher business activity for the group overall requiring additional resources across all corporate functions. These functions include management and corporate services such as finance, legal, HR, IT, corporate communication and sustainability.
Unless otherwise indicated, the below information describes the development for the continuing operations of the Scatec Solar Group in 2018, and the corresponding figures for 2017.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Revenues | 1,213 | 1,492 |
| EBITDA | 902 | 1,241 |
| Operating profit (EBIT) | 629 | 993 |
| Profit before income tax | 323 | 461 |
| Profit/(loss) for the period | 226 | 438 |
| Profit/(loss) to Scatec Solar | 140 | 339 |
| Profit/(loss) to non-controlling interests | 86 | 99 |
Scatec Solar reported net revenues of NOK 1,213 million (1,492) in 2018, mainly reflecting sales of electricity from solar power plants in the Czech Republic, South Africa, Rwanda, Honduras, Malaysia and Jordan. Included in the
revenues and net profit for 2017 was a gain of NOK 375 million related to the partial sale of the Apodi project in Brazil to Equinor. Revenues from power sales increased compared to 2017, and the increase is mainly explained by start of commercial operation of the Los Prados and Gurun power plants in September and December 2018 respectively. For the remaining power plants, the change in production volume from last year is small and driven by regular operational variability.
Net income from associated companies was NOK 63 million in 2018, compared to negative NOK 7 million in 2017. The increase is explained by increased activity for the two joint venture projects in Brazil and Argentina.
The Group has in recent periods invested in both early stage development activities and also strengthening of the organisation following start-up of several new construction projects. This mainly explains the growth in operating expenses compared to last year.
Consolidated operating expenses amounted to NOK 311 million (250) for 2018. The increase compared to last year is mainly explained by operating expenses on the new plants in operation and higher number of full time employees.
During 2018, the Company's research and development activities did not qualify for cost recognition according to accounting standards, hence no such costs have been recognised in 2018 or 2017.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) reached NOK 902 million in 2018, a decrease from an EBITDA of NOK 1,241 million in 2017. The decreased profitability compared to last year is primarily due to the gain from the partial sale of the Apodi project in Brazil recognised in 2017.
Depreciation, amortisation and impairment amounted to NOK 273 million in 2018, compared to NOK 248 million in 2017. The increase is mainly explained by depreciation of solar plants that have been grid connected in 2018.
Operating profit (EBIT) ended at NOK 629 million in 2018, down from NOK 993 million in 2017.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Financial income | 197 | 51 |
| Financial expenses | -518 | -524 |
| Foreign exchange gains/(losses) | 15 | -60 |
| Net financial expenses | -306 | -532 |
Net financial items amounted to negative NOK 306 million in 2018, compared to negative NOK 532 million in 2017.
Financial income was NOK 197 million (51) for 2018, of which NOK 50 million (51) is reflecting interest income on cash balances. The remaining part relates to forward exchange contracts (FEC) that were set up in order to eliminate currency exchange risk in the Upington projects in South Africa. The FEC's are carried at fair value and fluctuate with changes in the exchange rates throughout the contract period.
Financial expenses mainly consist of interest expenses on non-recourse financing, and are in line with 2017.
Foreign exchange gains, which mainly relates to revaluation of intercompany balances, increased from negative NOK 60 million in 2017 to NOK 15 million in 2018.
The effective tax rate was 30% for the full year 2018. The underlying tax rates in the companies in operation are in the range of 0% to 33%. In some markets, Scatec Solar receives special tax incentives intended to promote investments in renewable energy. The average effective tax rate fluctuates from year to year mainly based on construction progress. For further details, refer to Note 14 Tax.
Non controlling interests (NCI) represent financial investors in solar power plants. The allocation of profits between NCI and Scatec Solar is impacted by the fact that NCI only have shareholdings in solar power plants, while Scatec Solar also carries the cost of project development, construction, operation & maintenance and corporate functions.
Other comprehensive income comprises items that may subsequently be reclassified to profit or loss, amounted to negative NOK 36 million (-14). in 2018. This relates to
after-tax net movement of cash flow hedges of NOK 54 million (-45) and foreign currency translation differences of NOK 18 million (31).
Total comprehensive income was thus NOK 190 million for 2018, of which NOK 136 million was attributable to Scatec Solar, while NOK 53 million is attributable to non-controlling interests. This compares to a total comprehensive income of NOK 424 million for 2017, of which NOK 336 million was attributable to to Scatec Solar and NOK 88 million to non-controlling interests.
Net cash flow from consolidated operating activities amounted to NOK 1,248 million (844) in 2018, compared to EBITDA of NOK 902 million. The difference between the operating cash flow and EBITDA is primarily explained by changes in working capital, mainly related to power plants under construction.
Net cash flow from consolidated investing activities was negative NOK 3,809 million (-874), reflecting construction activities related to the plants in Egypt, Mozambique, South Africa, Malaysia, Brazil, Argentina, Ukraine and Honduras.
Net cash flow from financing activities amounted to NOK 2,934 million (1,640), impacted by proceeds from nonrecourse- and NCI financing of NOK 2,855 million (1,974) and NOK 624 million (31) respectively, partly offset by interest and down payments on non-recourse financing of NOK 854 million (707). Further, dividends of NOK 287 million (259) were paid in 2018 and the group raised NOK 596 million (373) from the private placement that was successfully completed in 2018.
In total, the Group's cash balance increased by NOK 373 million (1,610). Of the total cash balance of NOK 3,303 million (2,863), NOK 2,197 million (2,117) was restricted cash in power plant companies, NOK 67 million (58) represented other restricted cash while NOK 1,039 million (688) represented free cash.
Scatec Solar's proportionate share of cash flow to equity, defined as EBITDA minus interest expenses, normalised debt instalments and tax (i.e. before changes in net working capital), is an alternative performance measure that seeks to estimate the Group's ability to generate funds for equity investments in new solar power plant projects and/or for shareholder dividends over time, refer to Dividend Policy and Note 7 – Cash and cash equivalents. Scatec Solar's proportionate share of cash flow to equity totalled NOK 481 million (265) in 2018.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Power production | 157 | 143 |
| Operation & Maintenance | 26 | 22 |
| Development & Construction | 383 | 167 |
| Corporate | -85 | -65 |
| Total | 481 | 265 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Property, plant and equipment | 9,008 | 5,618 |
| Other non-current assets | 1,407 | 961 |
| Total non-current assets | 10,415 | 6,580 |
| Other current assets | 1,139 | 797 |
| Cash and cash equivalents | 3,303 | 2,863 |
| Total current assets | 4,442 | 3,661 |
| Total assets | 14,857 | 10,240 |
Total assets amounted to NOK 14,857 million at year-end 2018, up from NOK 10,240 million at the end of 2017. The increase primarily reflects commencement of construction activities for the projects in Egypt, Mozambique, South Africa, Malaysia, Brazil, Argentina, Ukraine and Honduras.
Overall, non-current assets totalled NOK 10,415 million (6,580), of which NOK 9,008 million was Property, Plant & Equipment (PP&E). Current assets amounted to NOK 4,442 million (3,661), with cash and cash equivalents amounting to NOK 3,303 million (2,863). Part of the cash holdings is subject to restrictions or is collateralised, while free unrestricted cash was NOK 1,039 million (688) at the end of 2018.
Current and non-current financial assets and liabilities in the balance sheet relates to interest rate derivatives in the Egyptian and South African power plant companies. Other power plants are funded through fixed rate interest loans. Other current assets and liabilities mainly relate to working capital items such as prepayments and accruals.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Equity | 2,475 | 1,887 |
| Non-current non-recourse project financing | 8,643 | 6,164 |
| Other non-current liabilities | 1,940 | 1,254 |
| Total non-current liabilities | 10,583 | 7,418 |
| Current non-recourse project financing | 364 | 317 |
| Other current liabilities | 1,436 | 619 |
| Total current liabilities | 1,800 | 935 |
| Total liabilities | 12,383 | 8,353 |
| Total equity and liabilities | 14,857 | 10,240 |
| Book equity ratio | 16.7% | 18.4% |
Total equity stood at NOK 2,475 million (1,887) at the end of 2018, corresponding to an equity ratio of 17% (18%). The consolidated equity ratio is negatively affected by inclusion of non-recourse debt in power plant companies at full amount while the value of consolidated assets is reduced by the internal margins generated through the project development and construction activities.
Total non-current liabilities amounted to NOK 10,583 million (7,418) at the end of 2018, of which non-recourse project financing accounted for NOK 8,643 million (6,164) and bond debt of NOK 743 million (741). Total current liabilities came in at NOK 1,800 million (935), of which NOK 364 million (317) was in non-recourse project financing.
Scatec Solar ASA prepares its financial statements according to Norwegian Generally Accepted Accounting Principles (NGAAP). Scatec Solar ASA is a holding company comprising parts of corporate services, management and group finance. In addition, Scatec Solar ASA provides certain services related to project development and construction for its subsidiaries.
Scatec Solar ASA reported revenues of NOK 1,661 million and operating profit (EBIT) of NOK 60 million in 2018, compared to revenues of NOK 488 million and operating loss (EBIT) of NOK 82 million in 2017.
Revenues increased from 2017 to 2018 due to new construction projects as well as increased sale of development projects.
All revenues are group internal and based on agreements established between Scatec Solar ASA and its subsidiaries, joint ventures and associated companies. The scope of the agreements includes delivery of the main components of the solar power plants (inverter system, modules and structures) and management services as well as services related to project development and construction, including but not limited to permitting, financial modelling, production of bidding documents, debt and equity financing, evaluation of tax issues, structuring of securities and guarantees, legal services, advice on tendering of components as well as grid connection studies.
Operating expenses increased to NOK 152 million, from NOK 138 million in 2017, reflecting the increased number of employees and activities supporting the Company's growth plan.
Profit after tax reached NOK 122 million, compared to a profit after tax of NOK 2 million in 2017.
Total equity for the parent company Scatec Solar ASA stood at NOK 1,636 million at 31 December 2018, up from NOK 1,022 million in 2017. Total assets amounted to NOK 5,043 million at 31 December 2018, up from NOK 3,105 million a year earlier. The increase reflects increased funding to group companies and new projects.
Scatec Solar ASA had 77 permanent full-time employees in 2018, up from 62 in 2017. The sickness leave rate in 2018 was 2%, broadly in line with previous years. Scatec Solar ASA focuses on equal opportunities irrespective of gender. There should be no discrimination related to gender in cases such as compensation, promotion or recruitment. In Scatec Solar ASA females made up 46% of the employees in 2018, up from 44% last year.
Scatec Solar's diverse workforce represents 32 nationalities and 246 employees. The strengthening of the organisation has continued across all key regions and functions, with focus on further developing the successful cross functional teams to support further growth.
To further strengthen continuous development of people and teams, additional systems were implemented in 2018. These tools enable efficient administration of global HR procesess to ensure high quality in all phases of training and development of a growing organisation.
Further information on diversity and equal opportunity is available in the Company's 2018 Sustainability report.
Sustainability is an integral part of Scatec Solar's business model, which in itself represents a positive contribution towards meeting the climate challenge and bridging the global energy gap. We generate clean, cost-effective and reliable electricity. We strive to conduct our business in a responsible manner across all operations guided by several internationally recognised frameworks and principles.
We are committed to develop and operate our solar projects in line with the IFC Performance Standards and the Equator Principles and we collaborate with partners that have the same high standards for the projects and their potential impact. We develop Environmental and Social Impact Assessments and Action Plans for all our projects, which are carefully monitored internally and externally by our project and financing partners. Scatec Solar became a member of the UN Global Compact in 2018. This reinforces our global commitment to responsible business conduct in the four areas: labour conditions, human rights, environment and anti-corruption.
In 2018, we reviewed our selection of Sustainable Development Goals (SDGs) after stakeholder feedback from external forums and internal engagements. Although we believe that Scatec Solar contributes to many of the SDGs, we focus on fewer goals for greater impact. The result of the review is that we have moved from six prioritised SDGs to four: Goal 7 "Affordable and Clean Energy", Goal 8 "Decent work and economic growth" and Goal 17 "Partnerships for the Goals" are the three primary goals to which we aim to contribute the most. We have also incorporated Goal 4 "Quality Education" as a core focus for our local development programmes.
Scatec Solar's reporting on sustainability work and performance is in accordance with the Global Reporting Initiatives (GRI) Standards. The next section provides a summary of our sustainability work and results in 2018. We also refer to our Sustainability Report 2018.
Health and Safety is a key priority for Scatec Solar and the Company is continuously working to achieve the goal of zero harm to personnel, materials and the environment. We take responsibility, set requirements and monitor HSSE performance in the development, construction and
operations phase of our projects. We define and communicate the health and safety standards to our employees and contractors.
We delivered approximately 6.3 million working hours with no fatalities or serious injuries with disabilities in 2018. The year was characterised by significant expansion with high level of construction activities across 10 projects in Brazil, Honduras, Argentina, Malaysia, South Africa, Mozambique, Egypt and Ukraine. The Injury Rate* excluding first aid injuries amounted to 4.4 per million working hours, up from 3.4 in 2017. None of the recordable injuries were classified as serious injuries. We continuously work to improve our reporting and monitoring of HSSE related incidents. During the year, we recruited close to 6,000 workers for the construction periods, of which the majority were local and unskilled. The sickness leave rate remained moderate 0.7 % worldwide (2.1% in 2017) broadly in line with previous years.
We work systematically to strengthen our approach to security management and emergency preparedness. Measures in 2018 included bi-annually emergency drill exercises with the management and updates of training modules for all employees.
Scatec Solar works systematically to prevent corruption and unethical practices in all projects and operations. We always perform due diligence of potential partners and suppliers through a screening process from structured intelligence to identify heightened risk or blacklisted individuals and organisations. Some of our main financial collaborators such as Norfund, the International Finance Corporation (IFC), member of the World Bank Group, and other leading Development Banks are widely acknowledged for having high ethical standards and rigorous due diligence requirements.
We have a whistleblower function available to all employees, suppliers, partners and clients of the company through internal channels and our corporate website. This mechanism includes a hotline available 24/7 operated by a neutral third party. All whistleblowers have the option to be anonymous. Four reports were received anonymously by BDO through the whistleblower function in 2018, of which three related to corruption and one related to discrimination. All reports were investigated according to the established investigation procedure and no breach of policies or regulations was detected. Scatec Solar has implemented mandatory anticorruption training for all employees and specific anti-corruption and integrity due diligence training for particularly
exposed business units such as supply chain and business development.
Human rights and social issues are key elements in our project work. Such issues can relate to labour rights, land resettlement, local community acceptance, and health and safety.
In 2018, we implemented a livelihood restoration programme for 220 local households in Mozambique in line with the IFC Performance Standards. We still have initiatives ongoing to make sure we follow up on the people most affected by the project. We also grid connected the Los Prados plant in Honduras after experiencing social unrest and issues with local community acceptance. Measures to handle these challenges included a strengthening of our local social staff and implementation of strong community and stakeholder efforts on a regular basis.
Scatec Solar has a publicly available grievance mechanism for all projects through the corporate website and at each local project site. The grievance mechanism is targeted towards individuals, communities and companies who have feedback or concerns regarding our projects. It is a channel to present issues to the administration of the projects and is directly supervised by our corporate sustainability unit. We registered 92 grievances in 2018. The majority of the grievances come from projects under development or construction, which usually represents the phases with most feedback and concerns from stakeholders of the projects. 90% of the grievances were solved by engaging with the local communities on a regular basis and communicating our processes and principles. At the end of 2018, nine grievances were still in process of being resolved. Five of these were resolved during the first month of 2019. The remaining four are still being addressed and processed according to our procedures, and are expected to be resolved within the next quarter.
To further strengthen our work related to human rights and social issues, we will develop a corporate human rights policy in line with United Nation's Guiding Principles on Business and Human Rights in 2019.
Our solar plants contribute to the reduction of greenhouse gas emissions in every country where we operate. In 2018 we have continued the work of measuring our own carbon footprint. The total greenhouse gas emissions from Scatec Solar in 2018 were estimated to 2,792 tons of CO2 with
the majority coming from air travels. At the same time, we estimate that our operating solar plants contributed to reduced CO2 emissions of about 650,000 tons in 2018. This figure will more than double when our projects currently under construction are grid connected.
Scatec Solar began preparations in 2018 to report to the Carbon Disclosure Project (CDP). This will lead to more transparency from disclosure of how we manage risks and opportunities posed by climate change and emission related targets and performance.
The Board of Scatec Solar has made a strong commitment to ensure trust in the Company and to enhance shareholder value through effective decision-making and improved communication between the management, the Board of Directors and the shareholders. The Company's framework for corporate governance is intended to decrease business risk, maximise value and utilise the Company's recourses in an efficient, sustainable manner, to the benefit of shareholders, employees and society at large. The corporate governance framework of the Company is subject to annual reviews and discussions by the Board of Directors. The Company will continue to comply with the Norwegian Code of Practice for Corporate Governance and the Board of Directors' Corporate Governance report is available on the Company's website under the Investor section.
Scatec Solar ASA is listed on the Oslo Stock Exchange under the "SSO" ticker. The share capital of Scatec Solar is NOK 2,843,841.80 divided on 113,753,672 shares, each with a nominal value of NOK 0.025. All shares are of the same class and with equal voting and dividend rights. Per 31 December 2018, the number of shareholders were 6,259. Refer to Note 23 - Share capital, shareholder information and dividend for further information.
Scatec Solar puts a strong emphasis on informing all interested parties about important news and the Company's developments through annual reports and quarterly presentations, stock exchange notices and other updates. More information can be found in the investor section of Scatec Solar's website at www.scatecsolar.com/Investor.
The Group's objective is to pay shareholders consistent and growing cash dividends. Scatec Solar's dividend policy is to, over time, pay its shareholders dividends representing 50% of free cash distributed from the producing power plant companies. For 2018, NOK 216 million has been distributed from the power plant companies.
In line with the dividend policy, the Board of Directors have resolved to propose to the Annual General Meeting of Scatec Solar that a dividend of NOK 0.95 per share should be paid for 2018.
Scatec Solar has extensive policies and procedures in place as part of its operating system to actively manage risks related to the various parts of the Company's operations. Key policies are reviewed and approved by the Board of Directors annually. The regular follow up of these policies is carried out by Scatec Solar management team, the finance function, legal and other relevant functions.
The Company is exposed to a variety of operational, political and financial risks through its business activities. The main business is related to projects and most of the risks are identified, reported and actively managed through all phases of the projects. All projects report status on risk management as part of their monthly reporting process. On Group level, an annual review of risks is performed by the Executive Management Team based on regular risk reporting from the projects and functions and reported to the Board of Directors.
The main economic risks going forward relate to the performance of existing power plants, timely completion of solar power plants under construction and progress in the transitioning of projects in backlog through financial close and into construction.
The business of the Company is project related and most of the risks that the business is exposed to is contained and actively managed within individual projects. The market risk mainly relates to the attractiveness of solar projects in the various markets as derived from development in power prices, including feed-in-tariffs in key markets, relative to the prices of key components such as solar modules. Scatec Solar manages this risk through balancing the commitments on sourcing of projects and components with the commitments on the off-take and financing of the final systems, and through developing a robust portfolio of attractive project opportunities in different markets.
The Company has established a solid project pipeline, but further growth of the business will depend on a number of factors such as project availability, access to competitive financing, component availability and pricing, price development for alternative sources of energy and the regulatory framework in the relevant markets.
Scatec Solar operates in several regions of the world with complex risk environments. This primarily relates to political, compliance, integrity and security risk. The Company mitigates these risks through comprehensive due diligence processes whereby country risk, permits, project agreements, partners, execution plans, security and all other relevant aspects of the project are carefully assessed. These assessments are done in close cooperation with a number of advisors including global risk and security consultancies.
Scatec Solar acknowledges cybercrime to be a potential risk to the company. This risk is mitigated proactively by pushing out security patches to all computers and network equipment in addition to continuous monitoring the equipment for security issues. Scatec Solar's IT partner's Security Operations Center (ISOC) monitors all data traffic passing through the firewalls 24/7 in addition to surveillance of the general threat level across Scatec Solar's global networks the global networks.
Scatec Solar holds assets and operates in many jurisdictions, and the Company's operations are subject to international and national laws and regulations applied by various government authorities in connection with obtaining licenses and permits, government guarantees and other obligations regulated by law.
Regulatory authorities exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licenses and permits and in monitoring licensees' compliance with the terms thereof. Commercial practices and legal and regulatory frameworks differ significantly between jurisdictions and are subject to change at any time. As a result, it may be difficult to ensure compliance with changes in regulatory requirements in the jurisdictions where the Company operates, and this can have an adverse effect on the Group's operations, business, financial performance and prospects.
Scatec Solar has entered into long-term fixed price contracts for the sale of electricity from all its current solar power plants and the entry into such contracts is a prerequisite for financing and construction of the projects in the backlog and pipeline. All existing electricity sales contracts are entered into with state-owned utilities typically under regulation of various state programme to promote renewable energy. As a consequence, Scatec Solar is to a certain degree subject to political risk in the countries it operates.
The Company mitigates political risk in emerging markets through partnerships with multilateral development banks as project finance lenders and/or through establishing project risk insurance cover from the World Bank and others.
Through its business activities, Scatec Solar is mainly exposed to currency risk, credit risk, liquidity risk and to some extent interest rate risk. Financial risk management is based on the objective of reducing negative cash flow effects and to a less extent negative accounting effects of these risks. For description and management of financial risk, refer to Note 4 – Financial risk management.
The solar market is growing strongly, and Scatec Solar is continuously developing a large project pipeline across a number of markets and is well positioned for continued solid growth over the years to come.
In May 2018, the Company announced a target to reach 3,500 MW in operation or under construction by year-end 2021. Scatec Solar had 584 MW in operation, 1,071 MW under construction, 225 MW in project backlog and 4,545 MW in project pipeline at year-end 2018.
Project backlog is defined as projects with a secure off-take agreement and assessed to have more than 90% likelihood of reaching financial close and subsequent realisation.
The table below shows the projects under construction and in backlog with details on capital expenditure and annual production.
| CAPACITY | CAPEX (100%, | ANNUAL PRODUCTION |
DEBT | SSO ECONOMIC |
||
|---|---|---|---|---|---|---|
| LOCATION | (MW) | CURRENCY 1) | MILLION) | (100%, GWH) | LEVERAGE | INTEREST |
| In Operation | 584 | 9,526 | 1,091 | 55% | ||
| Under Construction | ||||||
| BenBan, Egypt | 400 | USD | 450 | 870 | 75% | 51% |
| Upington, South Africa | 258 | ZAR | 4,760 | 650 | 77% | 46% |
| Jasin & Merchang, Malaysia | 132 | MYR | 823 | 186 | 80% | 100% |
| Guanizuil, Argentina | 117 | USD | 95 | 310 | 60% | 50% |
| Redsol, Malaysia | 47 | MYR | 200 | 65 | 75% | 100% |
| Rengy, Ukraine | 47 | EUR | 52 | 60 | 70% | 51% |
| Mocuba, Mozambique | 40 | USD | 80 | 75 | 72% | 52% |
| Kamianka, Ukraine | 30 | EUR | 35 | 39 | 70% | 100% |
| Total Under Construction | 1,071 | NOK | 11,215 | 2,257 | 58% | |
| Backlog | ||||||
| Segou, Mali | 33 | EUR | 52 | 60 | 75% | 51% |
| Los Prados II, Honduras | 18 | USD | 20 | 35 | 70% | 70% |
| Ukraine | 174 | EUR | 193 | 221 | 70% | 65% |
| Total Backlog | 225 | NOK3 | 2,588 | 316 | 64% | |
| Total | 1,880 | NOK3 | 23,330 | 3,664 | 58% |
1) Currency' specifics of PPA tariff, capex and project finance debt.
2)All exchange rates to NOK are as of 31 December 2018.
Total annual revenues from the 1,880 MW in operation, under construction and in backlog is expected to reach NOK 3,600 million based on 20-25-year Power Purchase Agreements (PPAs).
Scatec Solar will build, own and operate all power plants in the project backlog and pipeline.
In April 2017, Scatec Solar and partners signed six 25-year PPAs for projects in "Round 2" of the FiT programme in Egypt totalling 400 MW (DC). Total investments for the solar plants are estimated at USD 450 million and the plants are expected to generate annual revenues of about USD 60 million over the 25-year contract period. Scatec Solar is partnering with local developers, KLP Norfund Investments and Africa50
for equity investments in the projects. Construction started in the second quarter 2018 and grid connection is expected during second half of 2019.
In April 2015 Scatec Solar was awarded preferred bidder status for three projects in Upington in the fourth bidding round under REIPPP (Renewable Energy Independent Power Producer Programme) in South Africa. Scatec Solar will build, own and operate the solar power plants with a 42% shareholding. Norfund holds 18%, the surrounding Community of Upington 5% and an investor under the South African Black Empowerment Prograom holds the remaining 35% of the equity. Financial close for the projects was reached in April 2018. A consortium of commercial banks and Development Finance Institutions with Standard Bank in the lead are providing non-recourse project finance to the project.
Construction activities are on track with grid connection expected towards the end of 2019.
In December 2016 Scatec Solar partnered with a local ITRAMAS-led consortium that had signed three 21-year PPAs with the country's largest electricity utility, Tenaga Nasional Berhad (TNB). Financial close and construction start for the three solar plants were in October 2017. Project debt financing was raised through an Islamic Green Bond of MYR 1,000 million. Commercial operation for the first solar plant, Gurun was reached in December 2018. Commercial operation for the two other solar plants has been delayed and is expected to be achieved in second quarter 2019.
In June 2018, Scatec Solar together with Equinor signed an agreement with the Portuguese company Martifer Renewables for the acquisition of the Guanizuil IIA project in Argentina. The project was awarded a PPA in November 2017 and the partners signed the 20-year PPA in November 2018. Total capital expenditure is estimated at USD 103 million and the plant will be owned 50% by Scatec Solar and 50% by Equinor. Scatec Solar will be project lead in a jointly owned construction company while Equinor will provide a construction bridge loan covering 60% of the capex required for the project. The partners have started a process to secure suitable long-term project financing to the project. Construction started late 2018 with expected commercial operation by the end of 2019.
In July 2018, Scatec Solar entered into agreements with Rengy Development, securing projects with capacity of 47 MW in the south of Ukraine. Financial close and start of construction were in December 2018. Total investments are estimated at EUR 52 million and Scatec Solar owns 51% of the project and Rengy Development Group holds the balance. EBRD and the Black Sea Trade and Development Bank (BSTDB) signed credit agreements of 50% each of the non-recourse debt financing of the project. The credit facilities amount to EUR 36 million and covers 70% of the total project costs. The project will be realised under the country's 10-year Feed-in-Tariff scheme and public land will be leased for an extended time-period as the plants are expected to deliver power also beyond the Feed-in-tariff period. Construction started late 2018 with commercial operation expected during 2019.
In December 2017, Scatec Solar were awarded the Redsol project under Malaysia's second large scale solar tender round. The power plant is expected to deliver 67 GWh of electricity per year with annual revenues of approximately USD 6 million. Scatec Solar closed financing for the project in December 2018 with a total investment of approximately USD 47 million. BNP Paribas will provide the non-recourse project finance facility for the project, covering 73% of the project cost. Construction started late 2018 with grid connection expected in fourth quarter 2019.
In October 2016, Scatec Solar and Norfund signed a PPA securing the sale of solar power over a 25-year period to the state-owned utility Electricidade de Mozambique (EDM). Scatec Solar will build, own and operate the solar power plants with a 52.25% shareholding. Norfund and EDM will hold the remaining part of the equity. Financial close was in March 2018 with debt financing from IFC, the International Finance Corporation, a member of the World Bank Group, and the Emerging Africa Infrastructure Fund. Construction activities continues according to plan with expected grid connected during first half of 2019.
In June 2018, Scatec Solar signed agreements securing the 30 MW Kamianka project in central Ukraine with a total investment of EUR 35 million. Financial close was in December 2018. EBRD and FMO, the Dutch development bank signed credit agreements for the non-recourse debt financing of the project. The credit facilities amount to EUR 24.5 million and covers 70% of the total project costs.The project will be realised under the country's 10-year Feed-in-Tariff scheme and public land will be leased for an extended time-period as the solar power plant is expected to deliver power also beyond the Feed-in-tariff period. Construction started early 2019 with commercial operation expected in fourth quarter 2019.
During 2018, Scatec Solar signed agreements securing projects with total capacity of 251 MW in Ukraine. Two of these projects secured financing in 2018 and moved into construction. All the projects will be realized under the country's Feedin-Tariff scheme and the portfolio is expected to produce about 220,000 MWh per year. The plants are expected to deliver power also beyond the 10-year Feed-in-tariff period.
Total capex for the projects is estimated to EUR 193 million. The project finance process has been initiated with the European Bank of Reconstruction and Development (EBRD) and FMO in lead. Grid connection of the plants is expected towards the end of 2019.
Scatec Solar will be the lead equity investor in the projects and is targeting to secure additional equity partners for the projects. Further, Scatec Solar will be the Engineering, Procurement and Construction (EPC) provider and provide Operation & Maintenance as well as Asset Management services to the power plants.
In July 2015, Scatec Solar ASA together with its development partners International Finance Corporation (IFC) and Power Africa 1, signed a 25-year PPA with Energie du Mali (EDM).
IFC and African Development Bank (AfDB) will provide the non-recourse project finance for the project. The project has also been awarded a USD 25 million concessional loan from the Climate Investment Funds under the Scaling Up Renewable Energy Program. The lenders, IFC and the African development Bank, have approved the project finance for the project. Scatec Solar and partners are working to obtain final approvals from the Government of Mali on the project agreements.
Scatec Solar will build, own and operate the solar power plant with a 51% shareholding. IFC Infraventures and Power Africa will hold the remaining part of the equity.
In October 2015 Scatec Solar and Norfund acquired the Los Prados project holding a 20-year PPA with Empresa Nacional de Energía Eléctrica (ENEE), the state-owned utility. The project is owned 70 % by Scatec Solar and 30 % by KLP Norfund Invest.
The 35 MW Phase I of the project was grid connected and reached commercial operation at the end of third quarter 2018. The 18 MW Phase II will be realised after required grid upgrades have been completed by ENEE.
In addition to projects in backlog Scatec Solar holds a solid pipeline of projects totalling 4,454 MW across four key regions. The pipeline has developed favourably over the last year through systematic project development efforts in a
number of markets where both governments and corporate off-takers are seeking to source solar energy.
Historically, about 50% of projects in pipeline have been realised. The pipeline projects are in different stages of development and maturity, but they are all typically in markets with an established government framework for renewables and for which project finance is available (from commercial bank or a multilateral development bank). The project sites have typically been secured and Scatec Solar is in a position to participate in bilateral negotiations for a long-term power sales agreement with an off-taker, feed-intariff schemes, or tender processes.
| CAPACITY (MW) | |
|---|---|
| Latin America | 833 |
| Africa | 2,186 |
| Europe & Central Asia | 523 |
| South East Asia | 912 |
| Total pipeline | 4,454 |
Scatec Solar's development efforts in Latin America is mainly focused on Brazil and Argentina. Scatec Solar is partnering with Equinor in these markets.
Argentina is targeting to further expand its RenovAR programme. PPAs have already been awarded to renewable energy projects of more than 4 GW. Over the past 18 months, approximately 1.5 GW of solar projects have been awarded in two consecutive utility scale solar auctions. Brazil is a wellestablished market for renewable energy with about 1 GW of solar capacity installed and another 1 GW under construction.
In both markets Scatec Solar is seeking to acquire project rights from previous tender rounds, secure sites for participation in upcoming tenders as well negotiating corporate PPAs.
Scatec Solar holds sites representing 516 MW ready to be bid in the upcoming tender rounds in South Africa. A new tender ("round 5") under the REIPPP programme is expected to be launched in 2019.
In addition to South Africa, Scatec Solar is developing a broad pipeline of projects across a number of markets including Egypt, Nigeria, Kenya and in a number of other countries on the continent, in addition to negotiating a number of potential corporate PPAs.
Ukraine, Poland and Pakistan are key markets currently being pursued by Scatec Solar in Europe and Central Asia.
In Ukraine, Scatec Solar is developing projects totalling 163 MW in addition to the 251 MW in project backlog and under construction. Ukraine is committed to integrate with the EU energy system with ongoing electricity market reforms and aiming to replace nuclear reactors and reduce supply of Russian gas with a target of 11% renewables by 2020.
In Pakistan, the 150 MW project portfolio in Sindh were awarded a "costs plus tariff" of 52.6 USD/MWh in January 2018. Scatec Solar and Nizam Energy has applied for the issuance of the power purchase agreement and the implementation agreement.
Malaysia, Bangladesh and Vietnam are key markets for Scatec Solar in South East Asia. In Malaysia it is expected the new government will maintain the same level of ambition for the renewable energy sector as before. Scatec Solar continues to prepare for the next tender round as well as pursuing a number of bi-lateral opportunities.
In Bangladesh, the first project developed by Scatec Solar of 60 MW has been approved by the Prime Minister and a tariff level has been awarded. Scatec Solar is now working with the authorities to finalise project agreements. In parallel, Scatec Solar is developing other projects and is in total working on a portfolio of about 310 MW.
In Vietnam, the government is expected to announce a new feed-in tariff level shortly. Scatec Solar is currently working on a portfolio of about 400 MW of projects in the country to be positioned for the future feed-in tariff in Vietnam.
The solar market is continuing to grow with annual solar installations expected to increase from 105 GW in 2018 to 130 GW in 2021. Scatec Solar is developing a large and broad project pipeline across a number of markets and is well positioned to achieve profitable growth over the years to come.
The Company's growth strategy remain firm and is supported by four key priorities;
Scatec Solar will continue to build on its proven track record and business model to realise attractive project opportunities. With 584 MW in operation, 1,071 MW under construction and 4,500 MW in project pipeline, Scatec Solar is on track towards the target of increasing installed capacity to above 3,500 MW by end 2021.
For 2019, power production is expected to reach 1,050- 1,150 GWh from plants in operation at year end 2018, compared to 681 GWh in 2018. Production volumes will grow significantly as plants under construction are being grid connected and starting commercial operations during 2019. Scatec Solar's proportionate cash flow to equity from Power Production and Operations & Maintenance for plants now in operation and under construction is expected to reach NOK 500 – 550 million compared to NOK 183 million in 2018.
No events have occurred after the balance sheet date with significant impact on the financial statements for 2018.
Oslo, 14 March 2019
The Board of Directors of Scatec Solar ASA
John Andersen Jr. (Chairman) John Giverholt Mari Thjømøe
Jan Skogseth Gisele Marchand Raymond Carlsen (CEO)
Chief Executive Officer
Raymond Carlsen became CEO of Scatec Solar in 2009. Carlsen was previously partner and responsible for developing Aker ASA's portfolio of Energy related businesses. He was also responsible for Aker Solutions' Subsea, a USD 2 billion revenue business with 5,000 employees and operations in more than 15 countries. He has more than 30 years of industrial experience from management positions. Carlsen holds a Master of Science degree from Florida Institute of Technology.
Number of shares in Scatec Solar: 2,815,434 Number of share options: 141,952
Chief Financial Officer
Mikkel Tørud became CFO of Scatec Solar in 2014. Tørud was previously SVP of Business Development and Investor Relations and member of Group Management in REC. Prior to REC he was commercial advisor in BP and management consultant in PA Consulting Group. He has extensive experience from finance, investor relations, corporate communications and business development. Tørud holds a Master of Science degree in Industrial Economics and Technology Management from the Norwegian University of Science and Technology.
Number of shares in Scatec Solar: 298,817 Number of share options: 105,540
EVP & General Counsel
Snorre Valdimarsson became EVP & General Counsel of Scatec Solar in 2009. Valdimarsson previously worked at the law firm Selmer DA, focusing on M&A, finance and capital markets. He has extensive experience in structuring infrastructure transactions, hereunder M&A, development, construction, project finance and equity funding of renewable energy projects. Valdimarsson holds a Master in Law form the University of Bergen, Norway.
Number of shares in Scatec Solar: 16,124 Number of share options: 81,653
EVP Solutions
Pål Helsing became EVP of Solutions of Scatec Solar in 2015. Helsing was previously President of Kongsberg Oil and Gas Technologies AS and a member of the Kongsberg Group Executive Management Team. Before that, he held several executive positions within Aker Solutions. Helsing holds a Bachelor of Science Civil from Glasgow University and a Business Economics degree from BI Norwegian Business School.
Number of shares in Scatec Solar: 4,877 Number of share options: 32,131
* The number of shares and share options are quoted per 28 March 2019.
EVP Sustainable Business & HSSE
Roar Haugland became EVP of Sustainable Business & HSSE of Scatec Solar in 2010. He has more than 20 years of experience from leading positions in Business Development, Sales and Management from large multinational companies like HP and IBM. Haugland holds a Master of Science in Mechanical Engineering from the Norwegian University of Science and Technology.
Number of shares in Scatec Solar: 251,439 Number of share options: 81,360
EVP Project Development & Project Finance
Terje Pilskog became EVP for Project Development & Project Finance of Scatec Solar in 2013. He was previously SVP of REC Systems and Business Development in Germany. Prior to REC, he was Associated Partner at the management consulting company McKinsey & Co. Pilskog holds a Master of Science in Business Administration from BI Norwegian Business School.
Number of shares in Scatec Solar: 512,784 Number of share options: 91,875
Toril Haaland became EVP of People & Organisation of Scatec Solar in 2018. She has more than 20 years of leading HR experience from major international companies, latest General Electric Company. Prior to GE she served 8 years with Hewlett Packard. Haaland holds degrees in Leadership, Business and HR from BI Norwegian Business School.
Number of shares in Scatec Solar: 877 Number of share options: 27,288
EVP Power Production
Torstein Berntsen became EVP of Power production of Scatec Solar in 2014. He was previously the CFO in Scatec Solar ASA and Scatec AS. Prior to this Berntsen was Senior Manager at Ernst and Young and he previously held the position as Audit Manager at Arthur Andersen. Berntsen holds a Master of Science in Business Administration and is a state authorised public accountant from the Norwegian School of Economics (NHH).
Number of shares in Scatec Solar: 695,486 1) Number of share options: 87,126
1) Together with related parties, Berntsen holds a total of 696,381 shares in Scatec Solar.
Mr. Andersen Jr. is the CEO of Scatec AS and has been Chairman of the Board since May 2014. He is the former Chief Operating Officer of the REC Group, where he held several top management positions during his 12 years with the company. Prior to REC, he worked in Borregaard Industrier. Mr. Andersen holds a Master of Business and Economics from BI Norwegian Business School.
Current Board positions: Chair: Norsun, Norsk Titanium, Thor Energy. Number of shares in Scatec Solar: 0 1)
Board Member
Mrs. Thjømøe runs her own investment and consultancy company and has executive experience from the energy- and financial sector, in particular with governance, strategy, business development, project evaluations and financial markets. She was previously CFO and functioning CEO for Norwegian Property ASA, CFO for KLP Insurance and SVP in Equinor ASA. Mrs. Thjømøe holds a Master of Business and Economics from BI Norwegian Business School and she is a Chartered Financial Analyst from the Norwegian School of Economics (NHH).
Current Board positions: Chair: The Danish insurance group Tryg AS, TF Bank AB. Board member: Hafslund E-CO AS, ice ASA, Norconsult AS, Nordic Mining ASA and Sintef. Number of shares in Scatec Solar: 27,338
Board Member
Mr. Skogseth has more than 35 years of experience from the Oil, Gas and Renewable industries ranging from oil companies to supplier industries, both in Norway and internationally. He was President and CEO for Aibel from 2008 to 2017, and played a key role in establishing new presence and business for the company on several continents. Mr. Skogseth holds a Master of Science Mechancal Engineering from South Dakota School of Mines and Technology.
Current Board positions: Board member: Sparebank 1 SR Bank ASA, Gassco AS and PSW Group AS. Number of shares in Scatec Solar: 22,000
Board Member
Mrs. Marchand has been CEO of the law firm Haavind AS since 2014. She has extensive executive experience from positions in several financial institutions like Eksportkreditt, the Government Pension Fund and DNB ASA with responsibility for the private – and corporate market in Norway. Mrs. Marchand holds a Master of Business from Copenhagen Business School.
Current Board positions: Chair: Gjensidige Insurance ASA, Selvaag Bolig ASA, Norgesgruppen Finans Holding AS and Boligbygg KF. Board member: Norgesgruppen ASA, Eiendomsspar AS and Victoria Eiendom AS. Number of shares in Scatec Solar: 0
Board Member
Mr Giverholt served as CEO and Member of Group Executive Board of Ferd AS until 2017. Before that he was CFO of Ferd AS and is a member of the Advisory Board of Ferd Holding AS. He has extensive experience from leading positions in Norsk Hydro, Arthur Andersen & Co, Orkla ASA and DNB ASA. Mr.Giverholt holds a B.Sc. from the University of Manchester, and is a state authorised public accountant from the Norwegian School of Economics (NHH).
Current Board positions: Chair: Gammel Nok AS, Ortomedic AS. Board member: Gjensidige Forsikring ASA, Awilhelmsen AS, Aars AS and Ferd Sosiale Entreprenører AS. Number of shares in Scatec Solar: 4,000
| Consolidated statement of profit or loss | 40 | |
|---|---|---|
| Consolidated statement of comprehensive income | 41 | |
| Consolidated statement of financial position | 42 | |
| Consolidated statement of financial position | 43 | |
| Consolidated statement of changes in equity | 44 | |
| Consolidated statement of cash flow | 45 | |
| Notes to the Consolidated financial statements Group | 46 | |
| Note 1 | Corporate information | 46 |
| Note 2 | Key sources of estimation uncertainty, judgements and assumptions | 46 |
| Note 3 | Operating segments | 50 |
| Note 4 | Financial risk management | 54 |
| Note 5 | Bonds | 57 |
| Note 6 | Non-recourse financing | 58 |
| Note 7 | Cash and cash equivalents | 63 |
| Note 8 | Guarantees and commitments | 64 |
| Note 9 | Derivative financial instruments | 66 |
| Note 10 | Financial instruments by category | 67 |
| Note 11 | Financial instruments: measurement and market risk sensitivities | 68 |
| Note 12 | Property, plant and equipment | 71 |
| Note 13 | Impairment testing goodwill | 72 |
| Note 14 | Tax | 73 |
| Note 15 | Trade receivables | 75 |
| Note 16 | Trade and other payables | 76 |
| Note 17 | Other non-current and current liabilities | 76 |
| Note 18 | Other non-current and current assets | 77 |
| Note 19 | Other operating expenses | 77 |
| Note 20 | Financial income and expenses | 78 |
| Note 21 | Investments in JVs and associated companies | 79 |
| Note 22 | Earnings per share | 81 |
| Note 23 | Share capital, shareholder information and dividend | 82 |
| Note 24 | Non-controlling interests | 83 |
| Note 25 | Project equity financing provided by co-investors | 89 |
| Note 26 | Employee benefits | 90 |
| Note 27 | Transactions with related parties | 92 |
| Note 28 | Net gain/(loss) from sale of project assets | 93 |
| Note 29 | Consolidated subsidiaries | 94 |
| Note 30 Subsequent events | 96 | |
| Note 31 | Summary of significant accounting policies | 97 |
1 JANUARY – 31 DECEMBER
| NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|
| Revenues | 3 | 1,151 | 1,121 |
| Net gain/loss) from sale of project assets | 3, 12, 21 | - | 378 |
| Net income/(loss) from JVs and associated companies | 3, 21 | 63 | -7 |
| Total revenues and other income | 1,213 | 1,492 | |
| Personnel expenses | 26 | -137 | -107 |
| Other operating expenses | 19 | -174 | -143 |
| Depreciation, amortization and impairment | 12, 13 | -273 | -248 |
| Operating profit | 629 | 993 | |
| Interest and other financial income | 20 | 197 | 51 |
| Interest and other financial expenses | 20 | -518 | -524 |
| Net foreign exchange gain/(loss) | 4, 20 | 15 | -60 |
| Net financial expenses | -306 | -532 | |
| Profit before income tax | 323 | 461 | |
| Income tax (expense)/benefit | 14 | -97 | -23 |
| Profit/(loss) for the period | 226 | 438 | |
| Profit/(loss) attributable to: | |||
| Equity holders of the parent | 140 | 339 | |
| Non-controlling interests | 24 | 86 | 99 |
| Basic earnings per share (NOK) | 22 | 1.29 | 3.36 |
| Diluted earnings per share (NOK) | 22 | 1.28 | 3.35 |
1 JANUARY – 31 DECEMBER
| NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|
| Profit/(loss) for the period | 226 | 438 | |
| Other comprehensive income: | |||
| Items that may be subsequently reclassified to profit or loss | |||
| Net movement of cash flow hedges | 9 | -74 | -62 |
| Income tax effect | 14 | 20 | 17 |
| Foreign currency translation differences | 28 | 18 | 31 |
| Net other comprehensive income to be reclassified to profit or loss in subsequent periods | -36 | -14 | |
| Total comprehensive income for the year, net of tax | 190 | 424 | |
| Attributable to: | |||
| Equity holders of the parent | 136 | 336 | |
| Non-controlling interests | 53 | 88 |
| NOK MILLION | NOTE | AS OF 31 DECEMBER 2018 |
AS OF 31 DECEMBER 2017 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Deferred tax assets | 14 | 526 | 402 |
| Property, plant and equipment - in solar projects | 12 | 8,956 | 5,580 |
| Property, plant and equipment - other | 12 | 53 | 38 |
| Goodwill | 13 | 24 | 24 |
| Investments in JVs and associated companies | 21 | 745 | 415 |
| Other non-current assets | 18, 27 | 112 | 120 |
| Total non-current assets | 10,415 | 6,580 | |
| Current assets | |||
| Trade and other receivables | 15 | 279 | 239 |
| Other current assets | 18, 27 | 711 | 559 |
| Financial assets | 9 | 149 | - |
| Cash and cash equivalents | 7 | 3,303 | 2,863 |
| Total current assets | 4,442 | 3,661 | |
| TOTAL ASSETS | 14,857 | 10,240 |
| NOK MILLION | NOTE | AS OF 31 DECEMBER 2018 |
AS OF 31 DECEMBER 2017 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Paid in capital | |||
| Share capital | 23 | 3 | 3 |
| Share premium | 1,795 | 1,195 | |
| Total paid in capital | 1,797 | 1,197 | |
| Other equity | |||
| Retained earnings | 8 | 31 | |
| Other reserves | 79 | 82 | |
| Total other equity | 87 | 113 | |
| Non-controlling interests | 24 | 591 | 577 |
| Total equity | 2,475 | 1,887 | |
| Non-current liabilities | |||
| Deferred tax liabilities | 14 | 345 | 185 |
| Non-recourse project financing | 6 | 8,643 | 6,164 |
| Bonds | 5 | 743 | 741 |
| Financial liabilities | 9 | 115 | 29 |
| Other non-current liabilities | 17, 27, 28 | 738 | 299 |
| Total non-current liabilities | 10,583 | 7,418 | |
| Current liabilities | |||
| Trade and other payables | 16 | 162 | 216 |
| Income tax payable | 14 | 34 | 19 |
| Non-recourse project financing | 6 | 364 | 317 |
| Financial liabilities | 9 | 9 | 27 |
| Other current liabilities | 17, 27 | 1,230 | 356 |
| Total current liabilities | 1,800 | 935 | |
| Total liabilities | 12,383 | 8,353 | |
| TOTAL EQUITY AND LIABILITIES | 14,857 | 10,240 |
The Board of Directors of Scatec Solar ASA
John Andersen Jr. (Chairman) John Giverholt Mari Thjømøe
Jan Skogseth Gisele Marchand Raymond Carlsen (CEO)
| OTHER RESERVES | ||||||||
|---|---|---|---|---|---|---|---|---|
| NOK MILLION | SHARE CAPITAL |
SHARE PREMIUM |
RETAINED EARNINGS |
FOREIGN CURRENCY TRANSLATION |
HEDGING RESERVES |
TOTAL | NON CONTROLLING INTERESTS |
TOTAL EQUITY |
| At 1 January 2017 | 2 | 819 | -222 | 84 | 2 | 685 | 628 | 1,313 |
| Profit for the period | - | - | 339 | - | - | 339 | 99 | 438 |
| Other comprehensive income | - | - | 1 | 21 | -24 | -3 | -11 | -14 |
| Total comprehensive income | - | - | 340 | 21 | -24 | 336 | 88 | 424 |
| Share-based payment | - | 3 | - | - | - | 3 | - | 3 |
| Share capital increase | - | 380 | - | - | - | 380 | - | 380 |
| Transaction cost, net after tax | - | -7 | - | - | - | -7 | - | -7 |
| Dividend distribution | - | - | -73 | - | - | -73 | -185 | -259 |
| Capital increase from NCI 1) | - | - | - | - | - | - | 33 | 33 |
| Step-by-step acquisition | - | - | -13 | - | - | -13 | 13 | - |
| At 31 December 2017 | 3 | 1,195 | 31 | 105 | -23 | 1,310 | 577 | 1,887 |
| Profit for the period | - | - | 140 | - | - | 140 | 86 | 226 |
| Other comprehensive income | - | - | -1 | 18 | -21 | -3 | -32 | -36 |
| Total comprehensive income | - | - | 139 | 18 | -21 | 136 | 54 | 190 |
| Share-based payment | - | 5 | - | - | - | 5 | - | 5 |
| Share capital increase | - | 606 | - | - | - | 606 | - | 606 |
| Transaction cost, net after tax | - | -10 | - | - | - | -10 | - | -10 |
| Dividend distribution | - | - | -81 | - | - | -81 | -206 | -286 |
| Purchase of NCIs shares in group companies | - | - | -82 | - | - | -82 | -22 | -104 |
| Capital increase from NCI 1) | - | - | - | - | - | - | 188 | 188 |
| At 31 December 2018 | 3 | 1,795 | 8 | 123 | -44 | 1,884 | 591 | 2,475 |
1) The total capital increase from non-controlling interests to project entities consists of shareholder loans and equity. The amount of shareholder loans is NOK 0 million (2017: NOK 2 million). All payments related to these loans are at the discretion of the project companies. Accordingly, as the loans do not contain any contractual obligation to pay cash or other financial assets, the shareholder loans are presented as equity in the financial statements of the Group.
Share premium includes net share premium paid as part of capital increases, as well as a share-based payment transaction reserve used to recognise the value of equity-settled and share-based payment transactions provided to employees, including key management personnel, as part of their remuneration.
The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
The hedging reserve includes mark-to-market revaluation reserve on derivatives used in the Group's cash flow hedging.
| Cash flow from operating activities Profit before taxes 323 461 Taxes paid 14 -65 -17 Carry-back tax payment received 14 - 8 Depreciation and impairment 12,13 273 248 Net gain/loss sale of fixed assets 12 5 - Net income from associated companies/sale of project assets 21 -63 -371 Interest and other financial income 20 -197 -51 Interest and other financial expenses 20 518 524 Unrealised foreign exchange (gain)/loss 20 -15 -56 -41 (Increase)/decrease in trade and other receivables 15 -7 (Increase)/decrease in other current/non-current assets 18 -366 -421 Increase/(decrease) in trade and other payables 16 -55 187 Increase/(decrease) in other current liabilities 17 851 154 Increase/(decrease) in financial assets/liabilities and other changes 79 185 Net cash flow from operating activities 1,248 844 Cash flows from investing activities Interest received 77 51 Investments in property, plant and equipment 12 -3,565 -673 Net investments in subsidiaries and associated companies 21, 24 -321 -252 Net cash flow used in investing activities -3,809 -874 Cash flow from financing activities Proceeds from non-controlling interest shareholder financing 1) 624 31 -588 Interest paid -476 Proceeds from non-recourse project financing 6 2,855 1,974 Repayment of non-recourse project financing 6 -266 -231 Share capital increase 23 596 373 Proceeds from corporate bond issue 5 - 750 Repayment of corporate bond - -523 -81 Dividends paid to equity holders of the parent company 23 -73 Dividends and other distributions paid to non-controlling interest 23 -206 -185 Net cash flow from financing activities 2,934 1,640 Net increase/(decrease) in cash and cash equivalents 373 1,610 67 Effect of exchange rate changes on cash and cash equivalents 116 Cash and cash equivalents at beginning of the period 2,863 1,137 Cash and cash equivalents at end of the period 7 3,303 2,863 Cash in power plant companies in operation 7 730 793 Cash in power plant companies under development/construction 7 1,467 1,324 Other restricted cash 7 67 58 Free cash 7 1,039 688 Total cash and cash equivalents 3,303 2,863 Hereof presented as: Cash and cash equivalents 3,303 2,863 |
NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|---|
1) Include both equity contributions and shareholder loans
Scatec Solar ASA was founded in 2007 and is incorporated and domiciled in Norway. The address of its registered office is Karenslyst Allé 49, NO-0279 OSLO, Norway.
Scatec Solar ASA ("the Company"), its subsidiaries and investments in associated companies and joint ventures ("the Group" or "Scatec Solar") is a leading independent solar power producer. The Company is pursuing an integrated business model across the complete lifecycle of utility-scale solar photovoltaic (PV) power plants including project development, financing, construction, ownership and
operation and maintenance (refer to note 3 – Operating segments). Information on the Group's structure is provided in Note 29 – Consolidated subsidiaries.
The Company is listed on the Oslo Stock Exchange. For further details on shareholder matters, refer to note 23.
The consolidated financial statements for the full year 2018 were authorised for issue in accordance with a resolution by the Board of Directors on 14 March 2019.
The Company is pursuing an integrated business model across the complete lifecycle of utility-scale solar photovoltaic (PV) power plants including project development, financing, construction, ownership and operation and maintenance
In connection with the preparation of the Company's consolidated financial statements, management has made assumptions and estimates about future events and applied judgements that affect the reported values of assets, liabilities, revenues, expenses and related disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The assumptions, estimates and judgements are based on historical experience, current trends and other factors that the Company's management believes to be
relevant at the time the consolidated financial statements are prepared. The Company's management believes the following critical accounting policies represent the more significant judgements and estimates used in the preparation of the consolidated financial statements.
In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:
To be able to fully utilise the business model, Scatec Solar seeks to obtain operational control of the power plant companies
Scatec Solar's value chain comprises all downstream activities such as project development, financing, construction, operations as well as having an asset management role through ownership of the solar power plants. Normally Scatec Solar enter into partnerships for the shareholding of the power plant companies owning the power plants. To be able to fully utilise the business model, Scatec Solar seeks to obtain operational and financial control of the power plant companies. Operational control is obtained through governing bodies, shareholder agreements and other contractual arrangements. Other contractual arrangements may include Scatec Solar's role as the developer of the project, EPC provider (construction), operation and maintenance service provider and asset management service provider.
Scatec Solar would normally seek to undertake the following distinct roles in its projects:
In 2012 Scatec Solar established three power plant companies in South Africa for the purpose of constructing and operating the Kalkbult, Linde and Dreunberg solar power plants under the South African Renewable Energy Independent Power Producer Programme. Through holding companies, Scatec Solar indirectly owns 45% of these power plant companies. During 2014 Scatec Solar and two other shareholders established a power plant company in Rwanda for the purpose of constructing and operating the ASYV solar power plant. Scatec Solar has a shareholding of 54% as part of a shareholder agreement. During 2015 Scatec Solar completed the construction of the Agua Fria (Honduras) solar power plant. Scatec Solar holds 40% of the power plant company. In 2016 the construction of the three plants in Jordan (ORYX/EJRE/GLAE) were completed. Scatec Solar has a shareholding of 90% and 50.1% in the power plant companies respectively. During 2016 five power plant
companies in Egypt, one in Honduras and one in Mozambique were incorporated and consolidated for the first time. Scatec Solar has an economic interest of 51% in the Egyptian projects, a shareholding of 70% in the Honduran Los Prados power plant and a shareholding of 52.25% in the Mocuba power plant in Mozambique. During first quarter 2017 three power plant companies in Malaysia were consolidated for the first time, and during the third quarter the same year the construction of the power plants commenced. Scatec Solar's investment is held through redeemable convertible preference shares which will constitute a shareholding of 49% upon conversion, which will take place 5 years after COD. In the third quarter 2017 Scatec Solar also signed an agreement to establish a 50/50 joint venture in Brazil with Equinor. The joint venture will build, own and operate large scale solar power plants. As of the effective date of the agreement, Scatec Solar lost sole control (as defined by IFRS 10 for consolidation purposes) of the power plant companies and full consolidation ceased. The investments are equity consolidated as Scatec Solar and Equinor are considered to be in joint control of the investees. Following the Brazil project, Scatec Solar and Equinor signed an agreement to establish a new 50/50 joint venture in Argentina. Construction started late 2018 with expected commercial operation by the end of 2019. The investment is equity consolidated as Scatec Solar and Equinor are considered to be in joint control of the investees. Further, the Upington project in South Africa reached financial close in April 2018, and Scatec Solar's shareholding is 42%. Construction activities are on track with grid connection expected towards the end of 2019. In December 2018, Scatec Solar and partners reached financial close for the Rengy project in the Mykolaiv region in the south of Ukraine with a total investment of EUR 52 million. Scatec Solar owns 51% of the project.
Even though none of the projects Scatec Solar is involved with are identically structured, the five roles/activities described above constitute the main and relevant activities which affect the variable return. When assessing whether Scatec Solar controls a power plant company as defined by IFRS 10 Consolidated Financial Statements, all facts and circumstances, including the above agreements are analysed. For the power plant companies referred to above, except from the joint venture arrangement with Equinor, Scatec Solar has concluded that it through its involvement controls the entities. Scatec Solar has considered that it has the current ability to direct the relevant activities of the entities and has the ability to affect the variable returns through its power over the companies. The assessment of whether Scatec Solar controls the investee is performed upon first
time consolidation and is renewed annually or more often, if and when facts that could impact the conclusion change.
In the event where Scatec Solar had concluded that it did not control the companies in question, but has significant influence, they would have been consolidated using the equity method. As such the operations of the companies would have been presented on one line on a net basis in both the statements of financial position and profit or loss. Further, transactions originating from project development, construction activities, operations and maintenance, asset management as well as shareholder funding have not been fully eliminated. Consequently, the presentation of the operations of the group would significantly differ from the previous presentation. Cash in and out flows as well as value creation is not affected.
At inception of an arrangement, Scatec Solar assesses whether the arrangement is or contains a lease. The Group distinguishes between lease contracts and capacity contracts. Lease contracts provide the right to use a specific asset for a period of time. Capacity contracts confer the right to and the obligation to pay for availability of certain capacity volumes. Such capacity contracts that do not involve specified single assets that do not involve substantially all the capacity of an undivided interest in a specific asset or capacity contracts that have a contractually fixed price are not considered by the Group to qualify as leases. In doing this assessment the Group applies the conditions set forth by IFRIC 4. The Group's portfolio of PPAs comprise agreements with no indexation, partial indexation, full indexation and stepped pricing. With regards to the interpretation of the requirement "contractually fixed price per unit" Scatec Solar considers the contract price fixed also when the price is subject to inflation adjustment. With the exception of the power plants in Jordan and Malaysia, all of the existing PPAs are considered capacity contracts. The Jordanian and Malaysian PPAs have a pricing mechanism which requires power produced above a certain cap to be made available at significant discounts. As such the price is not absolutely fixed and the PPAs are accounted for as leases. This does not have an impact on the presentation of the operations in the statements of financial position or profit or loss.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available
when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the financial statements when the changes in assumptions occur.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
The Group has NOK 1,966 million (2017: NOK 2,591million) of tax losses carried forward. When assessing the probability of utilising these losses several factors are considered. These factors include, if the entity in question has a history of losses, if there is an expiration date on the entity's ability to carry the losses forward, if the losses may be used to offset taxable income elsewhere in the Group and if there are any tax planning opportunities available. The majority of the Group's tax losses are related to favourable tax rules for depreciation of solar power plants and its reversal is merely a timing effect. At year-end 2018 the Group has recorded a valuation allowance of NOK 24 million (2017: NOK 13 million) related to tax losses carried forward.
If the Group was able to recognise all unrecognised deferred tax assets, profit and equity would have increased by NOK 24 million. Further details on taxes are disclosed in Note 14 - Tax.
Depreciation of the Group's solar power plants commences when the plant is available for use, i.e. normally when it is grid connected and producing electricity. When determining the useful life of a plant, the following factors are considered:
The power plants currently in operation have 20 to 25 years Power Purchase Agreements (PPA) with the off takers. Whether or not these agreements will be extended is not currently known. Based on the markets in which Scatec Solar is currently operating solar power plants, it is management's assessment that, of the four factors described above, the length of the PPAs is the decisive factor impacting/limiting the useful life of the plants. Consequently, the Group depreciates the solar power plants over the length of the PPAs. This assessment is made on a plant by plant basis.
The technical life of the plants is not deemed to be a limiting factor and there is access to quality services and personnel to secure the required level of maintenance and repair.
Scatec Solar has made significant investments in operating solar power plants and projects under development/ construction. These assets are tested for impairment to the extent that indicators of impairment exist. Factors which
trigger impairment testing include but is not limited to political changes, macroeconomic fluctuations, changes to the Group's strategy, project delays, spending beyond budget, the power plant underperforming in terms of production, changes to tariffs and similar. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from comparable transactions for similar assets or bids received by the Group. The value in use calculation is based on a DCF model. The cash flows are derived from the financial model covering the lifetime of the project (i.e. normally 20 to 25 years) and do not include terminal value. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows. The key assumptions used to determine the recoverable amount for the assets subject to impairment testing are disclosed and further explained in Note 12 and 13.
Operating segments align with internal management reporting to the Group's chief operating decision maker, defined as the Executive management team. The operating segments are determined based on differences in the nature of their operations, products and services. Scatec Solar manages its operations in four segments; Power Production (PP), Operation & Maintenance (O&M), Development & Construction (D&C) and Corporate.
Financing and operation of solar power plants is ring-fenced in project companies with a non-recourse project finance structure - where Scatec Solar contributes with the required equity, either alone or together with co-investors. This implies that the project debt is only secured and serviced by project assets and the cash flows generated by the project, and that there is no obligation for project equity investors to contribute additional funding in the event of a default. Free cash flows after debt service are distributed from these project companies to Scatec Solar and any other project equity investors in accordance with the shareholding and the terms of the project financing contracts.
The Power Production segment manages the Group's power producing assets and derives its revenue from the production and sale of solar generated electricity based on long-term Power Purchase Agreements or Feed-in-Tariffs.
The Operation and Maintenance segment delivers services to ensure optimised operations of the Group's and third party's solar power plants through a complete and comprehensive range of services for technical and operational management. Revenues are based on service agreements with a periodic base fee, as well as a potential performance bonus.
The Development and Construction segment derives its revenue from the sale of development rights and construction services to project entities set up to operate the Group's solar
power plants. These transactions are primarily made with entities that are under the control of the Group and hence are being consolidated. Revenues from transfer of development rights are recognised upon the transfer of title.
Revenues from construction services are based on fixed price contracts and are recognized based on a measure of progress on the contract. The company completed construction of 35MW Los Prados plant in Honduras, 162MW Apodi plant in Brazil and the 65MW Gurun plant in Malaysia, in September 2018, November 2018 and December 2018, respectively.
Development & Construction revenues were recognised for projects in Brazil, Malaysia, South Africa, Ukraine, Mozambique, Egypt, Honduras and Argentina in 2018. Projects under construction currently stands at 1,071 MW per reporting date. The backlog of projects with secured offtake of future power production is currently at 225 MW, while the project pipeline consists of several projects with a combined capacity of 4,454 MW.
Corporate consists of the activities of corporate and management services.
From first quarter 2018 the segment financials are reported on a proportionate basis. A reconciliation between proportionate financials and consolidated financials are provided in the tables below. Comparative information in this note for prior years has been restated. The management team assesses the performance of the operating segments based on a measure of gross profit and operating profit, hence interest income/expense is not disclosed per segment. The measurement basis for the segment data follows the accounting policies used in the consolidated financial statement for 2018 as described in Note 31 - Summary of significant accounting policies.
No operating segments have been aggregated to form these reporting segments.
| PROPORTIONATE FINANCIALS | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2018 NOK MILLION |
POWER PRODUCTION |
OPERATION & MAINTENANCE |
DEVELOPMENT & CONSTRUCTION |
CORPORATE | TOTAL | RESIDUAL OWNERSHIP INTERESTS 1) |
ELIMINATIONS 2) | CONSOLIDATED FINANCIALS |
| External revenues | 584 | - | - | - | 584 | 567 | - | 1,151 |
| Internal revenues | 38 | 81 | 4,006 | 17 | 4,142 | 282 | -4,424 | - |
| Net gain/(loss) from sale of project assets |
- | - | - | - | - | - | - | - |
| Net income/(loss) from JV and associates |
- | - | -1 | - | - | - | 63 | 63 |
| Total revenues and other income |
622 | 81 | 4,005 | 17 | 4,725 | 849 | -4,361 | 1,213 |
| Cost of sales | - | - | -3,404 | - | -3,404 | -4 | 3,409 | - |
| Gross profit | 622 | 81 | 601 | 17 | 1,321 | 845 | -953 | 1,213 |
| Personnel expenses | -18 | -23 | -55 | -42 | -138 | - | 1 | -137 |
| Other operating expenses | -112 | -24 | -58 | -28 | -223 | -52 | 101 | -174 |
| EBITDA | 492 | 34 | 488 | -53 | 961 | 792 | -851 | 903 |
| Depreciation and impairment |
-164 | -1 | -21 | -2 | -188 | -147 | 62 | -273 |
| Operating profit (EBIT) | 328 | 33 | 467 | -55 | 773 | 645 | -789 | 629 |
| PROPORTIONATE FINANCIALS | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2017 NOK MILLION |
POWER PRODUCTION |
OPERATION & MAINTENANCE |
DEVELOPMENT & CONSTRUCTION |
CORPORATE | TOTAL | RESIDUAL OWNERSHIP INTERESTS 1) |
ELIMINATIONS 2) | CONSOLIDATED FINANCIALS |
| External revenues | 532 | - | - | - | 532 | 589 | - | 1,121 |
| Internal revenues | 12 | 69 | 682 | 13 | 776 | 27 | -803 | - |
| Net gain/(loss) from sale of project assets |
- | - | 378 | - | 378 | - | - | 378 |
| Net income/(loss) from JV and associates |
- | - | -6 | - | -5 | 2 | -4 | -7 |
| Total revenues and other income |
544 | 69 | 1,054 | 13 | 1,680 | 618 | -807 | 1,492 |
| Cost of sales | - | - | -612 | - | -612 | 22 | 590 | - |
| Gross profit | 544 | 69 | 442 | 13 | 1,068 | 640 | -217 | 1,492 |
| Personnel expenses | -15 | -15 | -43 | -36 | -108 | - | 1 | -107 |
| Other operating expenses | -75 | -27 | -40 | -28 | -169 | -68 | 93 | -143 |
| EBITDA | 454 | 28 | 361 | -50 | 792 | 572 | -123 | 1,241 |
| Depreciation and impairment |
-156 | -1 | -3 | -1 | -160 | -155 | 67 | -248 |
| Operating profit (EBIT) | 298 | 27 | 358 | -51 | 632 | 418 | -56 | 993 |
1) Residual ownerships interests share of the proportionate financials in subsidiaries where SSO do not have 100% economic interest.
2) Eliminations made in the preparation of the groups IFRS consolidated financials.
In presenting information based on geographical areas, revenues from external customers are attributed to the country of the legal entity recording the sales. The allocation of property, plant and equipment is based on the geographical location of the assets. Projects that have not yet reached construction are allocated to the parent company being the main developer. Geographical data for the years ended 31 December 2018 and 2017 is presented below.
| EXTERNAL REVENUE 3) | ||
|---|---|---|
| NOK MILLION | 2018 | 2017 |
| South Africa | 753 | 743 |
| Jordan 4) | 133 | 137 |
| Honduras | 128 | 112 |
| Czech Republic | 115 | 99 |
| Rwanda | 18 | 31 |
| Malaysia 4) | 4 | - |
| The Netherlands | - | 378 |
| USA | - | 1 |
| Total | 1,151 | 1,499 |
3) Includes external revenues and net gain/(loss) from sale of project assets based on consolidated financials.
4)Accounted for as operational lease income. Refer to further information in note 2 Key sources of estimation uncertainty, judgments and assumptions
| PROPERTY, PLANT AND EQUIPMENT | ||
|---|---|---|
| NOK MILLION | 2018 | 2017 |
| Malaysia | 2,034 | 379 |
| South Africa | 1,931 | 2,154 |
| Egypt | 1,562 | 360 |
| Honduras | 1,536 | 1,097 |
| Jordan | 916 | 867 |
| Czech Republic | 387 | 422 |
| Mozambique | 315 | 39 |
| Rwanda | 148 | 147 |
| Norway | 117 | 114 |
| Ukraine | 57 | - |
| The Netherlands | 3 | 2 |
| Mali | 2 | 1 |
| France | 1 | 1 |
| UAE | - | 30 |
| Mexico | - | 3 |
| USA | - | 2 |
| Total | 9,009 | 5,618 |
The predominant share of the Group's recurring revenues comes from the Power Production segment and relates to sale of electricity from solar power plants in South Africa, Jordan, Honduras, Czech Republic, Rwanda and Malaysia.
In South Africa, revenues (3 plants which commenced operations in 2013 and 2014) are earned under 20-year Power Purchase Agreements (PPA) with Eskom Holdings (South African incumbent utility), which was awarded under the Renewable Independent Power Producer Procurement Programme (REIPPPP) administrated by the Department of Energy. Eskom's financial commitments under the PPA are guaranteed by the South African National Treasury under the Inter-Governmental Framework Agreement.
The Czech power plants commenced operations in 2009 (1 plant) and 2010 (3 plants), and have entered into power purchase agreements with utilities CEZ Distribuce and EON Distribuce, based on the terms of the Czech Energy Act and Czech Renewable Energy Act. This legislation requires the utilities to purchase the power produced from renewable energy sources for a period of 20 years at the Feed-in-Tariff (FiT) prescribed by law and applicable regulation, adjusted annually.
The ASYV power plant in Rwanda commenced operations in 2014. The power is sold under a 25-year Power Purchase Agreement with the state-owned utility EWSA, with an annual price adjustment of 100% of Rwandan CPI. EWSA's
financial commitments under the PPA are guaranteed by the Government of Rwanda represented by its Ministry of Finance and Economic Planning under the Government Guarantee Agreement.
The Agua Fria power plant in Honduras commenced operations 2015. The electricity is sold under a 20-year Power Purchase Agreement with the utility Empresa Nacional de Energia Electricia (ENEE). The financial commitments of ENEE under the PPA are guaranteed by the sovereign guarantee executed by the Honduran attorney general and the secretary of finance, approved by the National Congress of Honduras.
The Oryx, GLAE and EJRE power plants in Jordan commenced operations respectively in 2016. The electricity is sold under a 20-year Power Purchase Agreement with National Electric Power Company (NEPCO). NEPCO's financial commitments under the PPA are guaranteed by the Government of Jordan represented by its Ministry of Finance under the Government Guarantee Agreement.
The Los Prados plant in Honduras commenced operation in 2018. The electricity is sold under a 20-year power purchase agreement with the state-owned utility Empresa Nacional de Energía Eléctrica (ENEE). The financial commitments of ENEE under the PPA are guaranteed by the sovereign guarantee executed by the Honduran attorney general and the secretary of finance and approved by the National Congress of Honduras.
The Apodi plant in Brazil commenced operation in 2018. The electricity is sold under a 20-year Power Purchase Agreement with the Brazilian Power Commercialization Chamber (CCEE). The financial commitments of CCEE under the PPA are guaranteed by the Government of Brazil represented by its Ministry of Mines & Energy (MME) under the federal decree 6.353/2008.
The Gurun plant in Malaysia commenced operation in 2018. The electricity is sold under a 21-year Power Purchase Agreements with the country's largest electricity utility, Tenaga Nasional Berhad (TNB). The PPA is not guaranteed by the Government as TNB is a reputable AAA rated listed company in Malaysia.
For revenue earned from sale of project assets, refer to note 28 Net gain/(loss) from sale of project assets.
Through its business activities Scatec Solar is exposed to the following financial risks:
Guidelines for risk management have been approved by the Board of Directors and are carried out by Scatec Solar's group finance department in cooperation with the individual operational units. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Scatec Solar is exposed to various market risks, including fluctuations in commodity prices, foreign currency rates
and interest rates that can affect the revenues and costs of operating, investing and financing.
Scatec Solar's sales of electricity constitute a material share of its revenues. As a result, the Group's business, financial position, results of operation and cash flow are affected by changes in the electricity prices. The Group seeks to reduce the effect of price fluctuation by entering into long-term, fixed price contracts. Currently, the Group has no exposure to price risk related to electricity sold at market spot rate as all contracts are based on Feed-in-Tariffs (FiTs) or Power
Purchase Agreements (PPAs). Some of the off-take agreements that have been entered into for the projects in the Company's portfolio do not contain inflation-based price increase provisions or provisions that only partially allows for inflation-based increases. Some of the countries in which the Company operates, or into which the Company may expand in the future, have in the past experienced high inflation.
While this is further influenced by government support schemes, the future development of the PV industry in general, and the Company in particular, will to a significant degree depend on the development in electricity market prices over time. Electricity prices depend on a number of factors including, but not limited to, availability and costs of primary energy sources (including oil, coal, natural gas and uranium), and the development in cost, efficiency and equipment investment need for other electricity producing technologies, including other renewable energy sources.
A decline in the costs of other sources of electricity, such as fossil fuels or nuclear power, could reduce the wholesale price of electricity. A significant amount of new electricity generation capacity becoming available could also reduce the wholesale price of electricity. Broader regulatory changes to the electricity market (such as changes to integration of transmission allocation and changes to energy trading and transmission charging) could have an impact on electricity prices. A decline in the market price of electricity could materially adversely affect the financial attractiveness of new projects.
Scatec Solar operates internationally and is subject to currency risks arising from foreign currency transactions and exposures. As the Group reports its consolidated results in NOK, any change in exchange rates between NOK and its subsidiaries' functional currencies, primarily with respect to changes in USD, ZAR, EUR, MYR, BRL, EGP and CZK, affects its other comprehensive income and consolidated statement of financial position when the results of those subsidiaries are translated into NOK for reporting purposes. There is also an accounting exposure related to translation effects for intercompany balances. As the Group expands its operations with projects in new markets the currency risk exposure increases. Exchange rate risk also arises when subsidiaries enter into transactions denominated in currencies other than their own functional currency and through assets and liabilities related to working capital and monetary items being denominated in various currencies.
The Group is on an overall level managed as a NOK company for currency management purposes, with primary focus on NOK cash flow. The general policy of the Group is not to hedge foreign currency exposure based on long term cash flows from the power plant companies operating the solar power plants. Subsidiaries with functional currency other than NOK do not hedge NOK positions versus their own functional currency. The Group may in the future evaluate to transfer to a USD company for currency management purposes, as the Group's portfolio of projects under construction and in operation grows with the majority of power purchasing agreements being USD based, USD indexed, or inflation adjusted in local currency. For the Group's power plant entities, currency risk is managed separately with the basis of its functional currency and expected cash flows. This is because the SPVs are set up with ring-fenced financing and have significant non-controlling interests. To the extent the Group hedges foreign currency exposure, it is based on cash flow considerations and not with regards to foreign currency translation effects in the financial statements. However, the Company's segment revenues, cost of sales and gross profit may be subject to significant currency fluctuations, inter alia with respect to construction contracts, however the construction contracts are normally structured as multi-currency contracts to achieve a natural hedging of cost of sales.
For currency risk sensitivities, refer to Note 11 - Financial instruments: measurement and market risk sensitivities.
Scatec Solar is exposed to interest rate fluctuation risks through funding and cash management activities. Liquid assets have primarily floating interest rates. The interest rate risk management objective is to minimise borrowing costs and to keep the volatility of future interest payments within acceptable limits. Based on various scenarios, the Group manages its cash flows interest rate risk by either using longterm financing at fixed rates or using floating to fixed interest rate swaps. Such interest rate swaps have the economic effect of converting financing from floating rates to fixed rates.
The non-recourse financing (denominated in CZK) that is established in the Czech power plant entities are at fixed interest rates, whereas the non-recourse financing (denominated in ZAR) in the South African power plant entities are primarily at floating interest rates. To hedge the exposure related to floating interest rates, the Group uses interest rates swaps designated as hedging instruments.
The Group's solar power plant in Rwanda is financed through fixed rate non-recourse USD loans. The debt financing of the Agua Fria project in Honduras is USD denominated nonrecourse debt at fixed rate. The projects in Jordan have 70% of the total non-recourse financing at a fixed rate. The projects in Malaysia have secured MYR denominated, fixed interest non-recourse financing through issuance of the world's largest green Islamic bond, whereas the non-recourse financed projects in Brazil have BRL denominated inflation indexed interest rates. The non-recourse construction bridge loan of the power plant in Argentina is at fixed interest rate until 18 months after scheduled commercial operation date. For the projects under construction in Egypt and Mozambique, interest rate swaps have been used as hedging instruments, bringing the two projects to fixed rate financing at 70% and 80% respectively.
In 2017 Scatec Solar successfully completed a NOK 750 million senior unsecured green bond issue with maturity in November 2021. The bonds carry an interest of 3-month NIBOR + 4.75%. The interest rate is not hedged.
For more information on the Group's financial liabilities, refer to Note 5 – Bonds and Note 6 - Non-recourse financing.
For interest-risk sensitivities refer to Note 11 - Financial instruments: measurement and market risk sensitivities. Based on the current Group interest bearing debt portfolio, the interest rate hedge ratio (weighted average) is 85% for the period 2018-2028.
Liquidity risk is the risk that Scatec Solar will not be able to meet obligations associated with financial liabilities when due. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities. Cash flow forecasts are prepared, and adequate utilised financing facilities are monitored. Due to the dynamic nature of the underlying business, the Group maintains flexibility in funding by maintaining availability under committed credit facilities. In 2017, the Group secured funding through issuance of a NOK 750 million senior unsecured bond. In first quarter 2018, the Group entered into a USD 60 million Revolving Credit Facility with Nordea and ABN Amro as lenders. The facility can be drawn in USD, NOK, EUR or an optional currency agreed with the banks. The Group also entered into a USD 5 million overdraft facility with Nordea Bank in second quarter 2018. Scatec Solar has per 31 December 2018 not drawn on the revolving credit facility or the overdraft facility. As of 31 December 2018, the Group has total short-term
contractual commitments of approximately NOK 2,036 million. For further information on contractual commitments, refer to note 8 - Guarantees and commitments.
For information on, and the maturity of the Group's financial liabilities refer to Note 5 – bonds and Note 6 - Non-recourse financing.
In some of the countries where Scatec Solar operates governments have imposed regulations on repatriation of funds out of the country. This may halt or delay flow of funds between group companies under certain circumstances. Scatec Solar has not experienced any significant delays to date and are seeking to minimise such risk through investigations of the relevant jurisdictions and regulations and adapt accordingly.
A break-down of free and restricted cash is provided in Note 7 – Cash and cash equivalents.
Credit risk is the risk that Scatec Solar's customers or counterparties will cause the Group financial loss by failing to honour their obligations. The Group is exposed to third party credit risk in several instances, including, without limitation, with respect to off-take partners who have committed to buy electricity produced by or on behalf of the Company, suppliers and/or contractors who are engaged to construct or operate assets held by the Group, property owners who are leasing land to the Company, banks providing financing and guarantees of the obligations of other parties, insurance companies providing coverage against various risks applicable to the Group's assets, and other third parties who may owe sums or obligations to the Group.
All of the electric power generated by the Group's current portfolio of projects in operation or under construction is, or will be, sold under long-term off-take agreements with public utilities or other partners, or under Feed-in Tariff ("FiT") arrangements, Power Purchase Agreements (PPAs) or similar support mechanisms governed by law. If, for any reason, any of the counterparties to these contracts are unable or unwilling to fulfil their related contractual obligations or if they refuse to accept delivery of power delivered thereunder or if they otherwise terminate such agreements prior to the expiration thereof, our assets, liabilities, business, financial condition, results of operations and cash flows could be materially and adversely affected. For the Group's current projects under operation, all such counterparties are supported by government guarantees or have obligations
regulated by law. However, there is still a risk of legislative or other political action that may impair their contractual performance.
The Group's main credit risks arise from credit exposures with customer accounts receivables and deposits with financial institutions. Some of the markets in which the Group operates has in recent years suffered significant constraints which have led to a large number of bankruptcies, involving also well-established market participants. Should this trend continue, the Group will be further exposed to third party credit risk.
Theoretically, the Group's maximum credit exposure for financial assets is the aggregated statement of financial position carrying amounts of financial loans and receivables before provisions for bad debt, as well as cash and cash equivalents, equalling NOK 4,554 million at 31 December 2018.
Refer to Note 15 – Trade receivables for information on the provision for bad debt related to trade receivables.
In 2017 Scatec Solar completed a NOK 750 million senior unsecured green bond issue with maturity in November 2021. The bonds carry an interest of 3 months NIBOR +
4.75%, to be settled on a quarterly basis. The bond is listed on the Oslo Stock Exchange.
During the term of the bonds, Scatec Solar shall comply with the following financial covenants at all times:
Per 31 December 2018, Scatec Solar was in compliance with all bond covenants. The book equity of the recourse group, as defined in the loan agreement, was NOK 3,095 million per year end, and the debt to capitalization ratio was 19% per year end.
During 2018, an interest amounting to NOK 44 million was expensed (2017: 41 million).
The loan is carried at amortised cost with the total fees of NOK 9 million being amortised over the 4-year period until maturity.
Refer to the loan agreement available on www.scatecsolar. com/investor/debt for further information and definitions.
Refer to Note 7 – Cash and cash equivalents, for description of other sources of corporate funding
Scatec Solar uses non-recourse financing for constructing and/or acquiring assets, exclusively using as guarantee the assets and cash flows of the special purpose vehicle carrying out the activities financed. Compared to corporate financing, non-recourse financing has certain key advantages, including a clearly defined and limited risk profile. In this respect, the banks recover the financing solely through the cash flows
generated by the projects financed. For four of the five companies operating in the Czech Republic, the non-recourse financing agreements include a cross default clause within the Czech group.
The table below specifies non-recourse financing at 31 December 2018 and 2017.
The table below specifies non-recourse financing at 31 December 2018 and 2017.
| NOK MILLION | INTEREST RATE 3) | MATURITY DATE | 2018 | 2017 |
|---|---|---|---|---|
| Loan facilities (ZAR) - Scatec Solar SA 166 (Pty) Ltd. (Kalkbult) 1) ,2) | 12.38 % | 31.12.2028 | 878 | 1,019 |
| Loan facilities (ZAR) - Simacel 160 (Pty) Ltd. (Dreunberg) 1) ,2) | 12.04 % | 31.12.2029 | 927 | 1,094 |
| Loan facilities (ZAR) - Simacel 155 (Pty) Ltd. (Linde) 1) ,2) | 11.17 % | 30.06.2029 | 457 | 539 |
| Loan facilities (CZK) – Czech portfolio 1) | 5.79 % | 11.05.2029 | 377 | 398 |
| Loan facilities (USD) - Gigawatt Global Rwanda Ltd (ASYV) 1) | 7.82 % | 11.01.2030 | 121 | 126 |
| Loan facilities (USD) – Jordan portfolio 1) | 6.18 % | 10.01.2032 | 776 | 773 |
| Loan facilities (USD) – Produccion De Energia S.A (Aqua Fria) 1) | 7.21 % | 31.12.2026 | 513 | 532 |
| Loan facilities (MYR) – Quantum Solar Park (Semenanjung) SDN. BHD. | 6.02 % | 23.02.2035 | 2,076 | 2,001 |
| Loan facilities (USD) - Aswan portfolio Egypt 1), 2) | 7.24 % | 31.10.2035 | 1,831 | - |
| Loan facilities (USD) - Central Solar de Mocuba, Mozambique 2) | 7.01 % | 31.01.2035 | 267 | - |
| Loan facilities (ZAR) - South Africa Upington 1) | 10.33 % | 31.03.2037 | 785 | - |
| Total non-recourse financial liabilities | 9,007 | 6,480 | ||
| Of which non-current non-recourse financial liabilities | 8,64 | 6,164 | ||
| Of which current non-recourse financial liabilities | 364 | 317 |
1) The rate of interest is a calculated average.
2) The rate of interest is a calculated including interest rate swap agreements and excluding fees.
3) All loans are fixed or swapped to fixed rate interests, except for the loans in South Africa Upington where the interest rates are inflation-linked to match the profile of the PPA indexations.
The project entities' assets are pledged as security for the non-recourse financing. The Group's book value of the pledged solar power plants is NOK 8,744 million (2017 NOK 4,623 million) (after elimination of internal profits), whereas the local book value is NOK 10,300 million (2017 NOK 5,885 million).
The table below specifies the repayment structure of the non-recourse financing.
| NOK MILLION | LOAN REPAYMENT |
INTEREST PAYMENT |
TOTAL |
|---|---|---|---|
| 2019 | 526 | 628 | 1,153 |
| 2020 | 425 | 621 | 1,045 |
| 2021 | 500 | 610 | 1,111 |
| 2022 | 582 | 565 | 1,147 |
| 2023 | 653 | 517 | 1,170 |
| 2024 | 857 | 466 | 1,323 |
| 2025 | 706 | 406 | 1,112 |
| 2026 | 786 | 344 | 1,131 |
| 2027 | 663 | 284 | 947 |
| 2028 | 728 | 226 | 954 |
| 2029 | 666 | 168 | 834 |
| 2030 | 531 | 129 | 660 |
| 2031 | 350 | 98 | 448 |
| 2032 | 329 | 70 | 400 |
| 2033 | 240 | 51 | 291 |
| 2034 | 215 | 37 | 252 |
| 2035 | 160 | 25 | 185 |
| 2036 | 82 | 20 | 103 |
| 2037 | 58 | 12 | 69 |
| 2038 | 12 | - | 12 |
| Total future loan repayment | 9,070 | 5,277 | 14,346 |
Non-recourse financing has key advantages including a clearly defined and limited risk profile
The tables below specify the payment structure of principal and interests per project of the non-recourse financing.
| NOK MILLION | KALKBULT | LINDE | DREUNBERG | CZECH | ASYV | AGUA FRIA |
JORDAN MALAYSIA | EGYPT | MOZAMBIQUE | UPINGTON | TOTAL | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 56 | 30 | 70 | 29 | 5 | 54 | 45 | 147 | 24 | 12 | 54 | 526 |
| 2020 | 73 | 32 | 52 | 31 | 5 | 58 | 47 | 52 | 64 | 26 | -15 | 425 |
| 2021 | 89 | 37 | 64 | 33 | 6 | 60 | 47 | 52 | 76 | 27 | 8 | 500 |
| 2022 | 89 | 40 | 71 | 35 | 6 | 62 | 48 | 105 | 84 | 28 | 13 | 582 |
| 2023 | 89 | 47 | 83 | 37 | 7 | 64 | 51 | 105 | 126 | 31 | 13 | 653 |
| 2024 | 89 | 51 | 89 | 39 | 8 | 68 | 52 | 241 | 173 | 31 | 16 | 857 |
| 2025 | 89 | 43 | 103 | 41 | 10 | 75 | 55 | 52 | 182 | 33 | 23 | 706 |
| 2026 | 99 | 44 | 99 | 44 | 11 | 73 | 58 | 126 | 167 | 35 | 30 | 786 |
| 2027 | 99 | 48 | 91 | 46 | 12 | - | 61 | 63 | 169 | 36 | 36 | 663 |
| 2028 | 104 | 54 | 95 | 49 | 13 | - | 65 | 126 | 174 | 8 | 42 | 728 |
| 2029 | - | 31 | 110 | 21 | 19 | - | 68 | 210 | 160 | - | 48 | 666 |
| 2030 | - | - | - | - | 17 | - | 72 | 220 | 165 | - | 57 | 531 |
| 2031 | - | - | - | - | - | - | 75 | 73 | 141 | - | 60 | 350 |
| 2032 | - | - | - | - | - | - | 42 | 147 | 87 | - | 53 | 329 |
| 2033 | - | - | - | - | - | - | - | 147 | 32 | - | 62 | 240 |
| 2034 | - | - | - | - | - | - | - | 147 | - | - | 69 | 215 |
| 2035 | - | - | - | - | - | - | - | 84 | - | - | 76 | 160 |
| 2036 | - | - | - | - | - | - | - | - | - | - | 82 | 82 |
| 2037 | - | - | - | - | - | - | - | - | - | - | 58 | 58 |
| 2038 | - | - | - | - | - | - | - | - | - | - | 12 | 12 |
| Total future principal |
||||||||||||
| repayment | 878 | 457 | 927 | 405 | 119 | 513 | 786 | 2,097 | 4,824 | 267 | 796 | 9,070 |
| NOK MILLION | KALKBULT | LINDE | DREUNBERG | CZECH | ASYV | AGUA FRIA |
JORDAN MALAYSIA | EGYPT | MOZAMBIQUE | UPINGTON | TOTAL | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 99 | 51 | 104 | 20 | 8 | 33 | 49 | 115 | 132 | 19 | - | 628 |
| 2020 | 92 | 48 | 96 | 18 | 10 | 29 | 46 | 110 | 130 | 18 | 24 | 621 |
| 2021 | 83 | 44 | 90 | 16 | 9 | 25 | 43 | 104 | 126 | 16 | 54 | 610 |
| 2022 | 73 | 39 | 82 | 15 | 9 | 21 | 40 | 99 | 120 | 14 | 53 | 565 |
| 2023 | 63 | 35 | 74 | 13 | 8 | 17 | 37 | 93 | 114 | 12 | 52 | 517 |
| 2024 | 53 | 29 | 65 | 11 | 8 | 13 | 34 | 87 | 105 | 10 | 51 | 466 |
| 2025 | 42 | 23 | 54 | 9 | 7 | 8 | 31 | 81 | 92 | 8 | 51 | 406 |
| 2026 | 32 | 19 | 42 | 7 | 6 | 3 | 27 | 74 | 79 | 6 | 50 | 344 |
| 2027 | 20 | 14 | 31 | 5 | 5 | - | 23 | 67 | 67 | 3 | 48 | 284 |
| 2028 | 9 | 8 | 21 | 3 | 4 | - | 19 | 60 | 55 | 1 | 46 | 226 |
| 2029 | - | 2 | 9 | 0 | 3 | - | 15 | 52 | 42 | - | 44 | 168 |
| 2030 | - | - | - | - | 1 | - | 11 | 44 | 31 | - | 42 | 129 |
| 2031 | - | - | - | - | - | - | 6 | 35 | 19 | - | 38 | 98 |
| 2032 | - | - | - | - | - | - | 1 | 27 | 9 | - | 33 | 70 |
| 2033 | - | - | - | - | - | - | - | 18 | 2 | - | 31 | 51 |
| 2034 | - | - | - | - | - | - | - | 9 | - | - | 27 | 37 |
| 2035 | - | - | - | - | - | - | - | 1 | - | - | 24 | 25 |
| 2036 | - | - | - | - | - | - | - | - | - | - | 20 | 20 |
| 2037 | - | - | - | - | - | - | - | - | - | - | 12 | 12 |
| Total future principal |
||||||||||||
| repayment | 565 | 311 | 667 | 118 | 677 | 148 | 383 | 1,078 | 1,123 | 106 | 700 | 5,277 |
The Facilities Agreement contains financial covenants including, but not limited to: lock-in and default Debt Service Coverage Ratio (DSCR) of 1.30: 1 and minimum (adjusted) Equity Ratio of 20%, as well as funding on debt service reserve account. The Agreement contains further restrictions on, inter alia, environmental compliance, changes of business and certain corporate acts, amendments to the key agreements and insurance policies, new consents, pledges and guarantees, financial indebtedness and giving financial support, capital expenditures and changes of shareholder structure and auditors, as well as a number of undertakings related to e.g. budgets, financial reporting and information.
The Loan Facility and the Common Terms Agreements contain financial covenants including, but not limited to: minimum compliance ratios: DSCR of 1.30 : 1, Loan Life Coverage Ratio (LLCR) of 1.30 : 1 and Project Life Coverage Ratio (PLCR) of 1.40 : 1; 50% distribution cash sweep if DSCR is between 1.30 : 1 and 1.20 : 1; lock-in and full cash sweep ratios: DSCR of 1.20 : 1, LLCR of 1.20 : 1 and PLCR of 1.35 : 1; and default ratios: DSCR of 1.10 : 1, LLCR of 1.15 : 1 and PLCDR of 1.30 : 1 as well as funding on debt service and maintenance reserve accounts. The Agreements contain further restrictions on, inter alia, hedging policies, subsidiaries and new activities, amendments to the key agreements and insurance policies, new consents, pledges and guarantees, financial indebtedness and giving financial support, capital expenditures and changes of shareholder structure and auditors, as well as a number of undertakings related to e.g. budgets, financial and operational reporting and information.
The Loan Facility and the Common Terms Agreements contain financial covenants including, but not limited to: minimum compliance ratios: senior DSCR of 1.30 : 1 (total meaning senior + subordinated DSCR of 1.15 : 1), senior LLCR of 1.30 : 1 (total LLCR of 1.20 : 1), and senior PLCR of 1.40 : 1 (total PLCR of 1.30 : 1); 50% distribution cash sweep if DSCR is between 1.30 : 1 and 1.20 : 1; lock-in and full cash sweep ratios: senior DSCR of 1.20 : 1 (total DSCR of 1.10 : 1), senior LLCR of 1.20 : 1 (total LLCR of 1.15 : 1) and senior PLCR of 1.35 : 1 (total PLCR of 1.25 : 1); and default ratios: senior DSCR of 1.10 : 1 (total DSCR of 1.05 : 1), senior LLCR of 1.15 : 1 (total of LLCR 1.10 : 1) and senior PLR of 1.30 : 1 (total PLCR of 1.20 : 1), as well as funding on debt service and maintenance reserve accounts. The restrictions and undertakings contained in the Facility Agreements are similar to those listed for Scatec Solar Kalkbult (Pty) Ltd RF.
The Loan Facility and the Common Terms Agreements contain financial covenants similar to those mentioned above for Simacel 155 (Pty) Ltd RF. The restrictions and undertakings contained in the Facility Agreements are similar to those listed for Scatec Solar SA 166 (Pty) Ltd.
The loan agreement includes financial covenants requiring that the borrower must ensure that on each Calculation Date from the Financial Completion Date: Historic Audited DSCR and Historic Unaudited DSCR must exceed 1.10 : 1; and Projected Minimum DSCR must exceed 1.10 : 1.
The loan facilities agreement contains financial covenants included, but not limited to: maintain a Minimum Debt Service Coverage of 1.10; maintain a Financial Debt to Total Assets not more than 70%.
The local utility and off-taker under the PPA in Honduras, Empresa Nacional de Energía Eléctrica (ENEE), have had liquidity difficulties for some time, and have on occasions been late in paying for the electricity produced by Independent Power Producers (IPPs) including to Agua Fria, and have accumulated an unpaid balance of a few months. During 2018 this caused a situation where the Minimum Debt Service Coverage requirement was not reached. Due to this an amendment was made to the loan agreement, where the next measurement date was set to 31 March 2019. Accordingly, the company was not in breach with any covenant and the loan was not payable on demand 31 December 2018.
The loan agreement includes financial covenants requiring that the borrower must ensure that on each Calculation Date from the Commercial Operation Date: Historic Unaudited DSCR (HUDSCR) and Forecast Minimum DSCR (PMDSCR) must exceed 1.10 : 1.
The loan agreement contains financial covenants included, but not limited to: maintain a Financial Service Coverage Ratio (FSCR) of minimum 1.25. FSCR with cash post distribution: min 1.5x. FSRA (Finance Service Reserve Account) of 6 months, and to maintain a financial Gearing of no more than 80/20. The agreement contains further restriction on MRA to be funded in stages after COD, no changes to shareholders structure, no other financial indebtedness and no material amendments to project documents.
The Loan Facilities and the Common Terms Agreements contain financial covenants including, but not limited to: Default Ratios: the Six Month Historic DSCR is equal to or exceeds 1.15:1, the Twelve Month Historic DSCR is equal to or exceeds 1.15:1, the Twelve Month Projected DSCR is equal to or exceeds 1.15:1, until the Financial Completion Date the projects maintain a Debt to Equity Ratio of not more than 75:25. Distribution Conditions: Historic and Projected DSCRs exceed 1.20:1
The Agreements contain further restrictions on, inter alia, hedging policies, subsidiaries and new activities, amendments to the key agreements and insurance policies, new consents, pledges and guarantees, financial indebtedness and giving financial support, capital expenditures and changes of shareholder structure and auditors, as well as a number of undertakings related to e.g. budgets, financial and operational reporting and information.
The loan agreement contains financial covenants including, but not limited to: Default ratios: For any calculation period, the historic DSCR must exceed 1.10:1 or LLCR must exceed 1.20:1. Distribution conditions: The prospective and Historic DSCR exceed 1.20:1 and LLCR exceed 1.30:1.
The Agreements contain further restrictions on, inter alia, hedging policies, subsidiaries and new activities, amendments to the key agreements and insurance policies, new consents, pledges and guarantees, financial indebtedness and giving financial support, capital expenditures and changes of shareholder structure and auditors, as well as a number of undertakings related to e.g. budgets, financial and operational reporting and information.
The Loan Facility and the Common Terms Agreements contain financial covenants including, but not limited to: minimum compliance ratios: senior historic DSCR of 1.10 : 1, senior projected DSCR of 1.10 and senior LLCR of 1.15 : 1.
The Agreements contain further restrictions on, inter alia, hedging policies, subsidiaries and new activities, amendments to the key agreements and insurance policies, new consents, pledges and guarantees, financial indebtedness and giving financial support, capital expenditures and changes of shareholder structure and auditors, as well as a number of undertakings related to e.g. budgets, financial and operational reporting and information.
The power plant companies meet the financial covenants at 31 December 2018. Refer to the definitions chapter for description of the abbreviations.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Cash in power plant companies in operation | 730 | 793 |
| Cash in power plant companies under development / construction | 1,467 | 1,324 |
| Other restricted cash | 67 | 58 |
| Free cash | 1,039 | 688 |
| Total cash and cash equivalents | 3,303 | 2,863 |
Cash in power plant companies in operation includes restricted cash in proceeds accounts, debt service reserve accounts, disbursements accounts, maintenance and insurance reserve accounts and similar. These cash and cash equivalents are only available to the Group through distributions as determined by shareholder and non-recourse financing agreements.
Cash in power plant companies under development and construction comprise shareholder financing and draw down on loan facilities to settle outstanding external EPC invoices.
Other restricted cash comprises restricted deposits for withholding tax, guarantees, VAT and rent, NCI's share of free cash as well as collateralised shareholder financing of power plant companies not yet distributed to the power plant companies.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Free cash at beginning of the period | 688 | 304 |
| Proportionate share of cash flow to equity O&M | 26 | 22 |
| Proportionate share of cash flow to equity D&C | 383 | 167 |
| Proportionate share of cash flow to equity CORP | -85 | -65 |
| Project development capex | -106 | -229 |
| Equity contributions/collateralised for equity commitments in power plant companies | -1,655 | -477 |
| Distributions from power plant companies | 216 | 151 |
| Share capital increase, net after transaction cost and tax | 590 | 373 |
| Dividend distribution | -81 | -73 |
| Net proceeds from bond issuance | - | 227 |
| Working capital / Other | 1,064 | 291 |
| Free cash at end of the period | 1,039 | 688 |
Proportionate share of cash flow to equity is defined as EBITDA less normalised loan and interest repayments, less normalised income tax payments, calculated on the basis of Scatec Solar's economic interest in the subsidiaries.
Equity contributions to power plant companies consist of equity injections and shareholder loans.
Net cash effect from Working Capital/Other is mainly related to ongoing construction projects.
In third quarter 2017 Scatec Solar entered into a guarantee facility and an intercreditor agreement. The guarantee facility has Nordea Bank as agent, Nordea Bank and ABN Amro as issuing banks and Nordea Bank, ABN Amro and Swedbank as guarantee instrument lenders. The guarantee facility is mainly used to provide advanced payment-, performance- and warranty bonds under construction agreements, as well as trade letter of credits. The intercreditor agreement is entered into by Scatec Solar, the issuing banks under the guarantee facility and GIEK. GIEK can issue counter indemnity in favour of the issuing banks on behalf of the relevant instrument lenders.
In first quarter 2018 Scatec Solar entered into a USD 60 million revolving credit facility with Nordea Bank as agent and Nordea Bank and ABN Amro as equal Lenders. The facility can be drawn in USD, NOK, EUR or an optional currency agreed with the banks. Revolving credit facility interest is the interbank offer rate for the drawn period plus a margin of 3.25%. Scatec Solar has not drawn on the revolving credit facility per 31 December 2018.
In second quarter 2018 Scatec Solar entered into a USD 5 million overdraft facility with Nordea Bank. The overdraft interest is the 7-day interbank offer rate plus a margin of 2.5%. Scatec Solar has not drawn on the overdraft facility per 31 December 2018.
In fourth quarter 2017 Scatec Solar issued a NOK 750 million senior unsecured green bond with maturity in November 2021. The bond carries an interest of 3-month NIBOR +
4.75%, to be settled on a quarterly basis. The bond was listed on the Oslo Stock Exchange 6 April 2018 with ticker SSO02 G.
Per 31 December 2018, Scatec Solar was in compliance with all financial covenants for the above facilities. The book equity of the recourse group, as defined in the facility agreements, was NOK 3,095 million per quarter end.
During 2018, interest amounting to NOK 61 million (41) was expensed for the bond, overdraft- and revolving credit facility.
Refer to bond agreement available on www.scatecsolar.com/ investor/debt for further information and definitions.
Scatec Solar is often required to provide advance payment, performance and warranty guarantees in connection with construction activities, as well as bid bonds in connection with tender processes. Advance payment, performance and warranty guarantees are mainly issued in relation to construction contracts entered into with project companies where Scatec Solar has a controlling interest. Advance payment guarantees typically represent 15-25% of construction contract value and performance guarantees typically represents 10-15% of the construction contract value. After the power plant is completed and grid connected the performance guarantee is replaced by a warranty guarantee of typically 5-10% of the contract value and is in
force for the duration of the warranty period typically two years from grid connection. While the total nominal exposure from such guarantees may become significant as the level of construction activities increases in new markets, the exposure is limited in relation to the expected project margins and the contracts relate to construction activities where Scatec Solar has a solid track record. A bid bond is a guarantee issued to the provider in a tender process. Scatec Solar is also providing equity guarantees to project lenders, if project debt is disbursed to project companies before equity. Project companies are in some markets providing development and land lease guarantees.
The guarantee volumes specified below include both guarantees issued from recourse group to project companies (subsidiaries) and guarantees issued to third parties.
The guarantees have the following duration (closing balance of total guarantee exposure):
| NOK MILLION | 2019 | 2020 | 2021 | >2021 |
|---|---|---|---|---|
| Advance payment guarantees | 226 | - | - | |
| Performance guarantees | 563 | 195 | 176 | 102 |
| Warranty guarantees | - | - | 22 | - |
| Bid Bonds | 37 | - | - | 10 |
| Other guarantees | 715 | 169 | 5 | - |
| Total | 1,541 | 364 | 203 | 113 |
The advance payment guarantees, performance guarantees and warranty guarantees are guarantees granted by fully owned subsidiaries in the group to partly owned subsidiaries. Any exercise of these would therefore only affect the allocation of profits or loss and equity between the majority and non-controlling interests in the group. Bid bonds and other guarantees are granted by consolidated subsidiaries to third parties.
The guarantees issued from recourse group entities are issued by Nordea Bank under the guarantee facility with Nordea Bank as agent, and Nordea Bank, ABN Amro and Swedbank as guarantee instrument lenders. The advance payment guarantees, performance guarantees, and warranty guarantees in Malaysia, Egypt, Brazil, Jordan and South Africa are counter guaranteed by The Norwegian Export Credit
Guarantee Agency (GIEK). Financial covenants are equal to financial covenants in the green bond issued in November 2017. Per 31 December 2018, Scatec Solar was in compliance with all bond covenants.
Refer to Note 5 – Bonds, for further information and definitions.
Scatec Solar has contractual obligations primarily through office lease agreements for the operational companies in the group and land lease agreements for the PV power plants in South Africa, Czech, Honduras, Jordan, Rwanda, Ukraine, Malaysia, and Egypt. Further, the group commitments in contracts with suppliers of equipment and sub-EPC services related to the plants under construction in Ukraine, Malaysia, Mozambique, South Africa and Egypt.
| NOK MILLION | 2019 | 2020 | 2021 | >2021 |
|---|---|---|---|---|
| Leases (office rental) | 13 | 13 | 12 | 14 |
| Leases (PV power plant land areas) | 16 | 16 | 16 | 328 |
| Total purchase modules, inverters etc | 1,466 | - | - | - |
| Total purchase services | 570 | - | - | - |
| Total contractual obligations | 2,066 | 30 | 28 | 342 |
To manage certain interest rate and currency risks related to the financing of solar power plants in the project entities, the Group has entered into interest rate swap and forward exchange derivative contracts.
The interest rates swap contracts and forward exchange contracts are classified as derivatives designated as hedging instruments in effective hedges. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The derivative financial instruments are presented on a gross basis in the consolidated statement of financial position, since the Group
did not have the legal right or the intention to offset these cash flows.
The derivative contracts are recognised at fair value in the consolidated statement of financial position with the changes in the fair value recognised directly in the statement of profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income until the transactions they hedge occur. Changes in the fair value relate to daily changes in market prices of the derivative contracts and the volume of contracts.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Interest rate swap contracts | ||
| Current portion | 149 | - |
| Total derivative financial assets | 149 | - |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Interest rate swap contracts | ||
| Current portion | 9 | 16 |
| Non-current portion | 115 | 29 |
| Forward exchange contracts | ||
| Current portion | - | 10 |
| Total derivative financial liabilities | 124 | 55 |
The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2018 were NOK 2,603 million (2017 NOK 1,987 million). The fixed interest rates vary from 7.3% to 8.4%, and the main floating rates is linked to 3-month JBAR.
The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2018 were NOK 1,282 million (2017 NOK -). The fixed interest swap rate is 3.45 %, and the main floating rates is linked to 6-month USD Libor.
The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2018 were NOK 187 million (2017 NOK -). The fixed interest swap rate is 3.30 %, and the main floating rates is linked to 6-month USD Libor.
In 2018, forward exchange contracts (FEC) were set up to eliminate currency exchange risk in the Upington projects in South Africa. The nominal values of the contracts are USD 133 million and EUR 13 million. The FECs are carried at fair value and fluctuate with changes in the exchange rates throughout the contract period.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Opening balance | -41 | 4 |
| Reclassification during the year to profit or loss, gross | 16 | - |
| Reclassification during the year to profit or loss, tax effect | -4 | - |
| Net gain/(loss) during the year of the not-yet matured contracts | -74 | -62 |
| Tax on items recognised in OCI | 17 | 17 |
| Hedging reserve | -87 | -41 |
| Of which equity holders of the parent company | -44 | -23 |
Financial instruments and their carrying amounts are recognised in the consolidated statement of financial position at 31 December, with categories as defined by IFRS 9, as presented below. There are no significant differences between total carrying value and fair value.
| 2018 | |||
|---|---|---|---|
| NOK MILLION | MEASUREMENT CATEGORY | 2018 | 2017 |
| Assets | |||
| Derivatives | |||
| Foreign exchange forward contracts | Fair value through profit or loss | 149 | - |
| Debt instruments | - | ||
| Other debt instruments and receivables | Amortised cost | 823 | 679 |
| Accounts receivable | Amortised cost | 279 | 239 |
| Cash and cash equivalents | Amortised cost | 3,303 | 2,873 |
| Total Financial assets | 4,554 | 3,780 | |
| Total current | 4,440 | 3,660 | |
| Total non-current | 112 | 120 | |
| Liabilities | |||
| Interest bearing loans and borrowings | |||
| Bonds | Amortised cost | 743 | 741 |
| Non-recourse financing loans | Amortised cost | 9,007 | 6,480 |
| Derivatives | |||
| Interest rate swap | Fair value – hedging instruments through OCI | 124 | 55 |
| Other financial liabilities | |||
| Trade and other financial liabilities | Amortised cost | 2,130 | 872 |
| Total financial liabilities | 12,004 | 8,140 | |
| Total current | 1,756 | 7,233 | |
| Total non-current | 10,239 | 916 |
Reconciliation of liabilities arising from financing activities, as defined by IAS 7, is presented below.
| 2018 | NON-CASH CHANGES | |||||
|---|---|---|---|---|---|---|
| NOK MILLION | 2017 | CASHFLOWS | FOREIGN EXCHANGE MOVEMENT |
FAIR VALUE CHANGES |
OTHER/ RECLASSIFI CATIONS |
2018 |
| Long-term borrowings | 6,164 | 2,855 | -160 | - | -215 | 8,643 |
| Bond | 741 | - | - | - | 2 | 743 |
| Short-term borrowings | 317 | -266 | -4 | - | 317 | 364 |
| Derivatives (net) | 55 | - | - | -80 | - | -25 |
| Shareholder loan from non-controlling interests | 128 | 551 | - | - | -115 | 564 |
| Current liabilities to non-controlling interests | 109 | - | 6 | - | -32 | 83 |
| Total liabilities arising from financial liabilities | 7,513 | 3,140 | -158 | -80 | -43 | 10,372 |
The Group mainly uses derivative financial instruments for to hedge financial risk. Derivatives are recognised in the consolidated statement of financial position at fair value. Changes in the fair value of the derivative financial instruments are recognised in the consolidated statement of profit or loss as financial income/(expense) except for the effective portion of cash flow hedges, which is recognised in OCI until the transactions they hedge occur. For further description of the derivatives, refer to Note 9 - Derivative financial instruments.
The following table summarises each class of financial instrument recognised in the consolidated statement of financial position at fair value, split by the Group's basis for fair value measurement. Financial instruments recognised at fair value comprise financial investments and derivative financial instruments as described in Note 9 - Derivative financial instruments.
The fair value of the Group's currency hedges is determined using forward exchange rates at the balance sheet date, with the resulting value discounted to present value (level 2). The fair value of interest interest rate swaps is calculated as the present value of the estimated future cash flows based on the observable yield curves (level 2). The fair value of the Group's derivative financial instruments has been determined by external banks.
| 2018 | NON-CURRENT FINANCIAL |
DERIVATIVE FINANCIAL INSTRUMENTS |
DERIVATIVE FINANCIAL INSTRUMENTS |
TOTAL |
|---|---|---|---|---|
| NOK MILLION | INVESTMENTS | (ASSET) | (LIABILITY) | FAIR VALUE |
| Fair value based on prices quoted in an active market (Level 1) | - | - | - | - |
| Fair value based on price inputs other than quoted prices (Level 2) | - | 149 | -124 | 25 |
| Fair value based on unobservable inputs (Level 3) | 28 | - | - | 28 |
| Total fair value at 31 December 2018 | 28 | 149 | -124 | 53 |
| 2017 NOK MILLION |
NON-CURRENT FINANCIAL INVESTMENTS |
DERIVATIVE FINANCIAL INSTRUMENTS (ASSET) |
DERIVATIVE FINANCIAL INSTRUMENTS (LIABILITY) |
TOTAL FAIR VALUE |
|---|---|---|---|---|
| Fair value based on prices quoted in an active market (Level 1) | - | - | - | - |
| Fair value based on price inputs other than quoted prices (Level 2) | - | - | -55 | -55 |
| Fair value based on unobservable inputs (Level 3) | - | - | - | - |
| Total fair value at 31 December 2017 | - | - | --55 | -55 |
Fair value in level 1 is based on prices quoted in an active market for identical assets or liabilities. At year end 2018 and 2017 there are no financial instruments measured at fair value within this level.
Fair value in level 2 is based on price inputs other than quoted prices, which are derived from observable market transactions. At 31 December 2018 and 2017 this level included the Group's derivative contracts. Fair value of these contracts is calculated by comparing the terms agreed under each derivative contract to the market terms for a similar contract on the valuation date.
Fair value in level 3 is based on unobservable inputs mainly internal assumptions. The internal assumptions are only used in the absence of quoted prices from an active market or other observable price inputs for the financial instruments subject to the valuation. Shares in companies in which Scatec Solar does not have significant influence or control are included in this level.
During the reporting period ending 31 December 2018, there have been no transfers between the fair value levels.
In the following overview, a sensitivity analysis showing how profit and loss, or equity would have been affected by changes in the different types of market risk that the Group is exposed to at 31 December 2018, is presented.
For further information related to market risks and how the Group manages these risks, see Note 4 - Financial risk management.
The sensitivities have been calculated based on what Scatec Solar views to be reasonably possible changes in the foreign exchange rates and interest for the coming year.
At the end of 2018 and 2017, currency risk sensitivities for financial instruments were calculated by assuming a +5/-5% change in the foreign exchange rates that the Group was mainly exposed to; a +5% change refers to a weakening of the transactional currency against the functional currency and a -5% change refers to a strengthening of the transactional currency against the functional currency.
| NOK MILLION | NET GAIN/LOSS |
|---|---|
| At 31 December 2018 | |
| EUR - Net gain/(loss) (- 5% sensitivity) | -22 |
| USD - Net gain/(loss) (- 5% sensitivity) | 57 |
| ZAR - Net gain/(loss) (- 5% sensitivity) | 52 |
| BRL - Net gain/(loss) (- 5% sensitivity) | 6 |
| MYR - Net gain/(loss) (- 5% sensitivity) | -1 |
| EUR - Net gain/(loss) ( + 5% sensitivity) | 22 |
| USD - Net gain/(loss) ( + 5% sensitivity) | -57 |
| ZAR - Net gain/(loss) ( + 5% sensitivity) | -52 |
| BRL - Net gain/(loss) ( + 5% sensitivity) | -6 |
| MYR - Net gain/(loss) ( + 5% sensitivity) | 1 |
| NOK MILLION | PROFIT (LOSS) BEFORE TAXES |
|---|---|
| At 31 December 2017 | |
| EUR - Net gain/(loss) (- 5% sensitivity) | - 24 |
| USD - Net gain/(loss) (- 5% sensitivity) | 22 |
| ZAR - Net gain/(loss) (- 5% sensitivity) | 43 |
| EUR - Net gain/(loss) (5% sensitivity) | 24 |
| USD - Net gain/(loss) (5% sensitivity) | -22 |
| ZAR - Net gain/(loss) (5% sensitivity) | -43 |
The Group has a limited exposure related to interest rate risk through liquid assets and interest-bearing financial liabilities as most of the Group's interest- bearing liabilities carry fixed rates. For further information refer to Note 4 - Financial risk management.
Interest rate sensitivities are assessed by calculating the impact that a +1/-1% change in the interest rates would have on net gain/loss on an annual basis.
| NOK MILLION | ||
|---|---|---|
| At 31 December 2018 | 1% | -1% |
| Net gain/(loss) | 7 | -7 |
| At 31 December 2017 | 1% | -1% |
| Net gain/(loss) | 18 | -18 |
| SOLAR | SOLAR POWER PLANTS UNDER DEVELOPMENT AND |
MACHINERY | ||
|---|---|---|---|---|
| NOK MILLION | POWER PLANTS | CONSTRUCTION | AND EQUIPMENT | TOTAL |
| Accumulated cost at 1 January 2018 | 5,087 | 1,352 | 55 | 6,494 |
| Additions | 80 | 3,461 | 24 | 3,565 |
| Transfers | 1,352 | -1,352 | - | - |
| Cost of disposed assets | -20 | -8 | -3 | -31 |
| Effect of movements in foreign exchange | -67 | 145 | -1 | 77 |
| Accumulated cost at 31 December 2018 | 6,432 | 3,598 | 76 | 10,106 |
| Accumulated depreciation and impairment losses at 1 January 2018 | 851 | 8 | 17 | 876 |
| Depreciation for the year | 248 | - | 8 | 256 |
| Impairment losses | - | 17 | - | 17 |
| Accumulated depreciation and impairment losses disposed assets | -17 | -8 | -2 | -27 |
| Effect of movements in foreign exchange | -25 | -1 | 1 | -25 |
| Accumulated depreciation and impairment losses at 31 December 2018 | 1,057 | 17 | 23 | 1,097 |
| Carrying amount at 31 December 2018 | 5,374 | 3,581 | 53 | 9,008 |
| Estimated useful life (years) | 20-25 | N/A | 3-5 | |
| Accumulated cost at 1 January 2017 | 4,986 | 650 | 34 | 5,669 |
| Additions | -22 | 671 | 24 | 673 |
| Cost of disposed assets | - | - | -3 | -3 |
| Effect of movements in foreign exchange | 123 | 31 | 1 | 155 |
| Accumulated cost at 31 December 2017 | 5,087 | 1,352 | 55 | 6,494 |
| Accumulated depreciation and impairment losses at 1 January 2017 | 566 | 9 | 12 | 588 |
| Depreciation for the year | 240 | - | 6 | 246 |
| Impairment losses | 2 | - | - | 2 |
| Accumulated depreciation and impairment losses disposed assets | - | - | -2 | -2 |
| Effect of movements in foreign exchange | 42 | -1 | 1 | 42 |
| Accumulated depreciation and impairment losses at 31 December 2017 | 851 | 8 | 17 | 876 |
| Carrying amount at 31 December 2017 | 4,236 | 1,344 | 38 | 5,618 |
| Estimated useful life (years) | 20-30 | N/A | 3-5 |
The Group operates solar power plants in Europe, Middle East, Africa, South America and South-East Asia. During third quarter 2017 construction commenced on the Los Prados power plant (35 MW) in Honduras as well as the Quantum plants (197 MW) in Malaysia while construction of the four Apodi plants (162 MW) in Brazil commenced in the fourth quarter 2017. Construction of the Mocuba power plant (40 MW) in Mozambique began in the first quarter 2018 while construction of the Aswan plants (400 MW) in Egypt and the Upington plants (258 MW) in South Africa commenced in the second quarter 2018. During fourth quarter
2018 construction commenced on the RedSol power plant (40 MW) in Malaysia, the Rengy project (47 MW) in Ukraine and the Guanizuil project (117 MW) in Argentina.
The Los Prados power plant was grid connected and reached commercial operation 30 September 2018. On 28 November 2018, the Apodi power plant was grid connected and in commercial operation while the 65 MW Gurun power plant (part of the Quantum projects) reached commercial operation 21 December.
During 2018 the Group capitalised borrowing costs amounting to NOK 109 million (2017: NOK 15 million).
The carrying value of development projects that have not yet reached the construction phase was NOK 144 million at 31 December 2018 (31 December 2017: NOK 640 million). Scatec Solar's proportionate share of the carrying value of the development projects is approximately NOK 120 million (31 December 2017: NOK 391 million).
The power plant entities' assets, including solar power plants, are pledged as security for the non-recourse financing.
During 2018, the Group impaired equipment amounting to NOK 17 million (2017: NOK 2 million) related to discontinued development of some projects. In 2017 total impairments amounted to NOK 2 million, related to a lightning strike at two of the plants in South Africa.
All impairment losses on development projects are recognised in the Development & Construction segment whereas impairments related to power plants are recognised in the Power Production segment.
No impairment indicators related to the Group's remaining property, plant and equipment have been identified, which in all material respect consists of solar power plants in operation or under construction. The impairment risk related to these assets is considered to be limited due to the long-term power purchase agreements securing future revenues in line with the investment case for the project companies. The profitability of the project companies, compared to the investment case, are monitored on a monthly basis. Further, the carrying value of the property, plant and equipment in the consolidated financial statements is reduced with NOK 1,873 million of internal profit which provides an additional buffer compared to the project companies on a stand-alone basis.
The Group tests goodwill and other intangible assets with infinite useful life annually or more frequently if there are impairment indicators. As of 31 December 2018, and 2017, the Group had no other intangible assets with infinite useful life. Property, plant and equipment and other intangible assets with finite useful life are tested if there are indicators that assets may be impaired.
The following table shows the allocation of the total goodwill acquired in business combinations for impairment testing purposes, including to which segment the goodwill relates.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Operating segment: | ||
| Development and construction | 24 | 24 |
| Total at 31 December | 24 | 24 |
The goodwill is associated with the acquisition of Solarcompetence GmbH October 2007. The goodwill was determined to be related to know-how (employees), the record of accomplishment of the company acquired, as well as synergies. The purpose of the acquisition was to gain control of a competence centre that had documented results from delivering engineering, procurement and construction services related to large solar power projects.
Whereas project development and certain subcontracting require local knowledge and presence, a major part of the work related to the completion of solar power projects is of a generic nature and can be provided through a common methodology and platform independent of project and market. Consequently, the goodwill is allocated to and impairment tested on the global EPC cash generating unit, which is part of the Development & Construction operating segment.
The recoverable amount has been determined based on value in use calculations. The estimated cash flows correspond to the business plan for 2019, which is based on the Group's project backlog. Consequently, expected cash flows from 2020 onwards are not included in the analysis. This is purely a simplification and does not mean that the 2019 business plan not have cash flows from 2020 onwards. The business plan is approved by the Board of Directors. Cash revenues have been calculated based on estimated project volumes and an
average margin related to project execution. Cash expenses have been calculated based on budgeted cost of sales and operating expenses attributable to project execution activities. To the best of management's judgement, capital expenditure and changes in working capital are insignificant in relation to this calculation and are therefore excluded. The nominal free cash flows exceed the carrying amount by approximately 36 times and the asset is not impaired.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Tax payable | -40 | -13 |
| Change in deferred tax | -52 | 1 |
| Withholding tax | -5 | -13 |
| Correction of previous years' income taxes | -1 | 2 |
| Income tax expense | -97 | -23 |
| Reconciliation of Norwegian nominal tax rate to effective tax rate | ||
| Profit before income tax | 323 | 461 |
| Nominal tax rate (23% / 24%) | -74 | -111 |
| Tax effect of: | ||
| Tax rates different from nominal rate | -3 | 12 |
| Share of net income from associated companies | 8 | -2 |
| Permanent differences | -10 | 5 |
| Non-taxable gain on sale of project assets | - | 91 |
| Current tax on dividend received and withholding tax | -5 | -13 |
| Use and capitalisation of previously unrecognised losses carried forward | - | 1 |
| Valuation allowance loss carried forward | -11 | -2 |
| Effect of change of statutory tax rate | -3 | -3 |
| Correction of previous years taxes | -1 | 2 |
| Other items | 2 | -3 |
| Calculated tax expense | -97 | -23 |
| Effective tax rate | 30.1% | 5.0% |
For 2018 the Group had an income tax expense of 97 million, equivalent to an effective tax rate of 30%. For 2017 the effective tax rate was 5%, but adjusted for the non-taxable gain of 91 million related to the partial sale of the Apodi project in Brazil, the effective tax rate would have been approximately 25%. The effective income tax rate for the Group is influenced by profits in higher-tax countries and losses in lower-tax countries. The underlying tax rates in the companies in operation are in the range of 0% to 33%.
In some markets, Scatec Solar receives special tax incentives intended to promote investments in renewable energy. The effective tax rate will normally be higher in periods where construction activity is higher than power production activities as the tax rate in the construction companies normally is higher than in the power plant companies. The full tax expense on the internal profit is not eliminated in the consolidated financial statement and is hence increasing the effective consolidated tax rate.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Deferred tax assets | ||
| Tax losses carried forward | 537 | 704 |
| Property, plant and equipment | 282 | 447 |
| Financial instruments | 30 | 18 |
| Bad debt provision | 5 | 5 |
| Other items | 9 | -1 |
| Offsetting of tax balances 1) | -313 | -758 |
| Valuation allowance | -24 | -13 |
| Total deferred tax assets | 526 | 402 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Deferred tax liabilities | ||
| Property, plant and equipment | 555 | 923 |
| Financial instruments | 83 | 13 |
| Other items | 20 | 7 |
| Offsetting of tax balances 1) | -313 | -758 |
| Total deferred tax liabilities | 345 | 185 |
1) Deferred tax assets and liabilities are offset to the extent that the deferred taxes relate to the same fiscal authority and there is a legally enforceable right to offset current tax assets against current tax liabilities.
| NOK MILLION | 2018 | 2017 | |||
|---|---|---|---|---|---|
| COUNTRY | LOSS CARRIED FORWARD |
DEFERRED TAX ASSET |
LOSS CARRIED FORWARD |
DEFERRED TAX ASSET |
|
| South Africa | 1,628 | 450 | 2,255 | 621 | |
| Norway | 260 | 60 | 288 | 66 | |
| Czech | - | - | 3 | 1 | |
| France | 18 | - | 15 | - | |
| Italy | 14 | - | 14 | - | |
| Egypt | 11 | 3 | 11 | 2 | |
| Mexico | - | - | 2 | 1 | |
| Netherlands | 34 | - | 2 | - | |
| Total at 31 December | 1,966 | 513 | 2,591 | 691 |
In Norway, interest limitation rules came into force in 2014. The Group has at the end of 2018 capitalised approximately NOK 7 (7) million in deferred tax asset related to deferred interest expenses, which can be carried forward for 10 years. Tax losses in Egypt can be carried forward for 5 years while losses in Netherlands can be carried forward for 9 years. All other tax losses in the group can be carried forward indefinitely. The losses carried forward in South Africa and Egypt are recognised in full, based on expected future taxable profits that will more than offset accumulated losses and/or by using tax loss carry back mechanisms.
The losses carried forward in South Africa are mainly related to the fact that solar power plants are depreciated over three years for tax purposes, whereas the expected useful life for accounting purposes is 20 years. Similarly, the accelerated tax depreciations result in a deferred tax liability for property, plant and equipment at the same level as the taxable loss. Further, these project entities have entered into long-term Power Purchase Agreements and are expected to be profitable to the extent that all losses can be carried forward. Included in the net deferred tax asset is the tax effect of the eliminated internal profit related to the construction of
the solar power plants of NOK 443 million. This tax asset is expensed over the useful life of the solar power plants.
For further information on valuation allowance related to losses carried forward, refer to Note 2 - key sources of estimation uncertainty, judgements and assumptions.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Net deferred tax asset at 1 January | 217 | 200 |
| Recognised in the consolidated statement of profit or loss | -52 | 1 |
| Deferred tax on financial instruments recognised in other comprehensive income | 20 | 17 |
| Recognised in the consolidated statement of changes in equity | 4 | 5 |
| Offset against tax carry-back payment received | - | -8 |
| Translation differences | -8 | 3 |
| Net deferred tax asset at end of period | 181 | 217 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Accounts receivables | 199 | 151 |
| Provision for bad debt | - | - |
| Accrued income and other receivables | 80 | 87 |
| Total trade receivables | 279 | 239 |
Information on credit risk and foreign exchange risk regarding accounts receivables is further provided in Note 4 - Financial risk management. Accrued income represents contract assets related to energy production in the last month of the year, which is invoiced in January the following year.
Ageing of trade receivables at year-end was as follows:
| NOK MILLION | TOTAL | NOT DUE | OVERDUE |
|---|---|---|---|
| 2018 | 199 | 160 | 39 |
| 2017 | 151 | 123 | 28 |
The overdue receivables are mainly related to sale of electricity from the Agua Fria plant in Honduras. The collection risk is considered low even though payment regularly occurs after due date.
| OVERDUE | ||||
|---|---|---|---|---|
| NOK MILLION | LESS THAN 30 DAYS |
30 - 60 DAYS | 60 - 90 DAYS | MORE THAN 90 DAYS |
| 2018 | 9 | 10 | 9 | 11 |
| 2017 | 9 | 8 | 9 | 1 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Trade and other payables | 162 | 216 |
| Total trade and other payables | 162 | 216 |
The consolidated trade and other payables of NOK 162 million mainly consist of construction related supplier credits. Consequently, the balance is affected by the activity level in the Development & Construction segment. The decreased payables at 31 December 2018 compared to 31 December
2017 of NOK 55 million mainly reflects down payments of outstanding supplier credits related to the construction of the Quantum projects in Malaysia, partly offset by purchases of construction material to the projects in South Africa, Egypt and Mozambique.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Shareholder loan from non-controlling interests (ref note 25) | 564 | 128 |
| Other long-term provisions and accruals | 78 | 96 |
| Asset retirement obligations | 96 | 76 |
| Total other non-current liabilities | 738 | 299 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Current liabilities to related parties (ref note 27) | 8 | 6 |
| Current liabilities to non-controlling interests | 83 | 109 |
| Accrued expenses related to assets under development/construction | 764 | 66 |
| Public dues other than income taxes | 99 | 79 |
| Accrued interest expenses | 6 | 5 |
| Accrued payroll | 33 | 27 |
| Other accrued expenses | 238 | 64 |
| Total other current liabilities | 1,230 | 356 |
The increase in accrued expenses related to assets under development/construction is mainly related to the high construction activity during 2018, mainly in Egypt, Malaysia and South Africa.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Non-current assets from related parties (ref. note 27) | 4 | 6 |
| Loan to non-controlling interests | 61 | 79 |
| Other non-current receivables | 46 | 35 |
| Total other non-current assets | 112 | 120 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Prepayments related to assets under development/construction | 221 | 322 |
| Receivables from public authorities /prepaid taxes, VAT etc | 310 | 138 |
| Other receivables and prepaid expenses | 181 | 99 |
| Total other current assets | 711 | 559 |
Receivables related to assets under construction reflects working capital components on the construction contracts for the projects in Malaysia, South Africa, Egypt and Brazil.
Other operating expenses for the years ended 31 December 2018 and 2017 comprise:
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Facilities | 61 | 49 |
| Professional fees | 49 | 39 |
| Other office costs | 23 | 18 |
| Travel costs | 15 | 11 |
| Social development contributions | 14 | 19 |
| O&M external fees | 3 | 2 |
| Other costs | 8 | 5 |
| Total other operating expenses | 174 | 143 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Consultant fees | 27 | 12 |
| Legal fees | 8 | 10 |
| Audit services fees (including tax and other services provided by the auditors) | 7 | 9 |
| External accounting services | 7 | 8 |
| Total professional fees | 49 | 39 |
Consultant fees mainly relate to new market surveys, project development activities, recruitment of additional employees and temporary hires.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Audit services | 5 | 5 |
| Other attestation services | - | - |
| Tax services | 2 | 3 |
| Other services | - | 1 |
| Total remuneration | 7 | 9 |
VAT is not included in the numbers above.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Interest income | 50 | 51 |
| Other financial income | 147 | - |
| Total financial income | 197 | 51 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Interest expenses | -500 | -482 |
| Other financial expenses | -18 | -42 |
| Total financial expenses | -518 | -524 |
| Foreign exchange gains/(losses) | -15 | -60 |
| Net financial expenses | -306 | -532 |
During the second quarter of 2018, forward exchange contracts (FEC) were set up in order to eliminate currency exchange risk in the Upington projects in South Africa. In 2018 the gain following the mark-to-market revaluation of open USD and EUR FECs amounts to NOK 147 million. The FECs are carried at fair value and fluctuate with changes in the exchange rates throughout the contract period.
Refer to Note 6 – Non-recourse financing and Note 11 – Financial instruments: measurement and market risk sensitivities for further information on project financing and interest rate sensitivity. Refer to Note 5 – Bonds and Note 7 – Cash for further information on corporate financing.
The consolidated financial statements include the Group's share of profits/losses from joint ventures and associated companies, accounted for using the equity method.
| COMPANY | REGISTERED OFFICE | 2018 | 2017 |
|---|---|---|---|
| Megawatt Holding AS | Oslo, Norway | 50.0% | 50.0% |
| Sansca Limited | Hong Kong | 40.0% | 40.0% |
| Scatec Energy LLC | Denver, US | 50.0% | 50.0% |
| Kube Energy AS | Oslo, Norway | 25.0% | 25.0% |
| Scatec Solar Brazil BV | Amsterdam, Netherlands | 50.0% | 50.0% |
| Apodi I Energia SPE S.A | Jaboatão dos Guararapes, Brazil | 43.75% | 43.75% |
| Apodi II Energia SPE S.A | Jaboatão dos Guararapes, Brazil | 43.75% | 43.75% |
| Apodi III Energia SPE S.A | Jaboatão dos Guararapes, Brazil | 43.75% | 43.75% |
| Apodi IV Energia SPE S.A | Jaboatão dos Guararapes, Brazil | 43.75% | 43.75% |
| Scatec Solar Solutions Brazil BV | Amsterdam, Netherlands | 50.0% | 50.0% |
| Scatec Solar Brasil Servicos De Engenharia LTDA | Recife, Brazil | 50.0% | 50.0% |
| Scatec Equinor Solutions Argentina S.A | Buenos Aires, Argentina | 50.0% | - |
| Cordilleras Solar VIII S.A (Argentina) | Buenos Aires, Argentina | 50.0% | - |
Megawatt Holding AS and Sansca Limited had no activity in 2018, and the carrying amounts were zero for both companies at the beginning and end of the year. Scatec Energy developed wind projects in the US. The projects are sold, and the company's activities are limited to managing and following up on these sales agreements. Megawatt Holding AS has been dissolved in 2019.
On 29 September 2017 Scatec Solar signed an agreement to establish a 50/50 joint venture with Equinor to build, own and operate large scale solar power plants in Brazil. As the first step of the agreement Equinor secured a 40% equity position in Scatec Solar's existing 162 MW Apodi project. Equinor paid USD 25 million for the project rights and for participation in the joint venture. Equinor has in addition injected USD 35 million in the power plant companies to fund their share of the project. The joint venture will be responsible for construction, operation and maintenance as well as asset management of the plant. As of the effective date in 2017 Scatec Solar lost control (as defined by IFRS 10 for consolidation purposes) of the power plant companies and full consolidation ceased. Upon deconsolidation of the subsidiaries a net gain of NOK 176 million was recognized. As of the same date the investments were equity consolidated as Scatec Solar and Equinor are considered to be in joint control of the investees. The joint venture is recognized at fair value, resulting in a net gain of NOK 199 million. The fair value adjustment is allocated to the power purchase agreement (PPA). During 2018 an amortization charge of NOK 1 million was recognized following the CoD of the power plant in November 2018.
In June 2018, Scatec Solar together with Equinor signed an agreement with the Portuguese company Martifer Renewables for the acquisition of the Guanizuil IIA project in Argentina. The project was awarded a PPA in the RenovAR auction process held by CAMMESA, the Argentinian Wholesale Power Market Administrator, in November 2017. The partners signed the 20-year PPA in November 2018, and construction started late December 2018. Total capital expenditure to realise the plant is estimated at USD 103 million and the plant will be owned 50% by Scatec Solar and 50% by Equinor. The project will be developed through the jointly owned company Scatec Equinor Solutions Argentina S.A. Scatec Solar and Equinor is deemed to be in joint control over the Argentina investment through the contractual arrangement of the project. The investment is presented as a joint venture and accounted for by using the equity method.
| NOK MILLION | BRAZIL | OTHER | TOTAL |
|---|---|---|---|
| Carrying amount of investments in JV and associated companies 31 December 2016 | - | - | - |
| Additions Share of profit/loss for the year |
420 3 |
2 -8 |
422 -7 |
| Effects of movement in foreign exchange | -10 | - | -10 |
| Reclassification (equity consolidated investments with a net negative carrying value is classified as external loans in the groups statement of financial position) |
- | 8 | 10 |
| Carrying amount of investments in JV and associated companies 31 December 2017 | 413 | 2 | 415 |
| Additions | 117 | 187 | 304 |
| Share of profit/loss for the year | 63 | - | 63 |
| Items charged to equity | -46 | 10 | -37 |
| Carrying amount of investments in JV and associated companies 31 December 2018 | 547 | 197 | 745 |
| 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|
| NOK MILLION | DEVELOPMENT AND CONSTRUCTION |
POWER PRODUCTION |
OPERATIONS AND MAINTENANCE |
TOTAL | DEVELOPMENT AND CONSTRUCTION |
POWER PRODUCTION |
TOTAL |
| Revenues | 555 | 37 | 3 | 594 | 57 | - | 56 |
| Operating expenses | -415 | -19 | -2 | -436 | -47 | - | -48 |
| Operating profit/(loss) | 140 | 18 | 1 | 158 | 9 | - | 9 |
| Net financial items | -2 | 10 | - | 8 | - | -1 | - |
| Profit before income tax | 138 | 28 | 1 | 167 | 9 | -1 | -8 |
| Income tax | -24 | -6 | - | -31 | -3 | - | -3 |
| Profit/(loss) after tax | 114 | 22 | - | 136 | 7 | -1 | 5 |
| Non-controlling interests | 1 | - | 1 | - | - | - | |
| Profit/loss (100 %) after non-controlling interests |
114 | 21 | - | 135 | 7 | -1 | 6 |
| Scatec Solar's Share | 57 | 10 | - | 67 | 3 | - | 3 |
| Less elimination of unrealized internal profit between joint venture companies |
-30 | -5 | |||||
| Plus profit from sale of services from consolidated to joint venture companies |
26 | 5 | |||||
| Net profit/loss (100 %) after non controlling interests |
63 | 3 |
| NOK MILLION | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Non-current assets | 1,787 | 205 |
| Current assets | 27 | 56 |
| Cash and cash equivalents | 191 | 283 |
| Total assets | 2,006 | 543 |
| Non-current liabilities | 1,385 | 37 |
| Current liabilities | 77 | 53 |
| Total liabilities | 1,462 | 90 |
| Total Equity | 544 | 453 |
| Non-controlling-interests | 40 | 43 |
| Total equity excluding NCI | 504 | 410 |
| Scatec Solar share of equity | 252 | 202 |
| Elimination of unrealized internal profit between JV companies | -35 | -5 |
| Fair value remeasurement at first time recognition of JV | 178 | 197 |
| Loan to JV | 152 | 21 |
| Net investment in JV | 547 | 415 |
Earnings per share is calculated as profit/(loss) attributable to the equity holders of the parent company divided by the average number of shares outstanding.
Diluted earnings per share is affected by the option program for equity-settled share-based payment transaction established in October 2016, refer to note 26 Employee benefits.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Profit/(loss) attributable to the equity holders of the company and for the purpose of diluted shares | 140 | 339 |
| Weighted average number of shares outstanding for the purpose of basic earnings per share | 108.8 | 101.1 |
| Earnings per share for income attributable to the equity holders of the company - basic (NOK) | 1.29 | 3.36 |
| Effect of potential dilutive shares: | ||
| Weighted average number of shares outstanding for the purpose of diluted earnings per share | 109.1 | 101.3 |
| Earnings per share for income attributable to the equity holders of the company - diluted (NOK) | 1.28 | 3.35 |
At year-end 2018 the total number of shareholders in Scatec Solar was 6,259. The total number of outstanding shares is 113,412,432 at par value NOK 0.025 per share as of December 31, 2018.
In the first quarter of 2018 the Group increased the share capital by 0.2 %, increasing the number of shares by 216,202 and raising NOK 6 million, as part of the Group's incentive program.
In June 2018, Scatec Solar successfully raised NOK 600 million through a private placement consisting of 10 million new shares at a price of NOK 60 per share. At 31 December 2018, the share capital amounted to NOK 2.8 million. All shares rank in parity with one another and carry one vote per share.
The tables below show the largest shareholders of Scatec Solar ASA and shares held by Management and Board of Directors at 31 December 2018.
| SHAREHOLDER | NUMBER OF SHARES | OWNERSHIP |
|---|---|---|
| SCATEC AS | 19,482,339 | 17.18 % |
| FERD AS | 13,411,182 | 11.83 % |
| EQUINOR ASA | 11,020,000 | 9.72 % |
| FOLKETRYGDFONDET | 7,550,904 | 6.66 % |
| UBS AG | 3,865,983 | 3.41 % |
| ARGENTOS AS | 2,755,760 | 2.43 % |
| VERDIPAPIRFONDET DNB NORGE (IV) | 2,199,263 | 1.94 % |
| SEB PRIME SOLUTIONS SISSENER CANOP | 2,100,000 | 1.85 % |
| HANDELSBANKEN HALLBAR ENERGI | 1,684,052 | 1.48 % |
| CACEIS Bank | 1,637,613 | 1.44 % |
| VERDIPAPIRFONDET PARETO INVESTMENT | 1,613,161 | 1.42 % |
| STOREBRAND NORGE I VERDIPAPIRFOND | 1,569,633 | 1.38 % |
| J.P. Morgan Bank Luxembourg S.A. | 1,289,620 | 1.14 % |
| HANDELSBANKENS NORDENFOND | 1,257,143 | 1.11 % |
| THE BANK OF NEW YORK MELLON SA/NV | 1,238,232 | 1.09 % |
| GOTHIC CORPORATION | 1,172,025 | 1.03 % |
| ARCTIC FUNDS PLC | 885,940 | 0.78 % |
| BNP Paribas Securities Services | 818,323 | 0.72 % |
| HANDELSBANK NORDISKA SMABOLAGSFOND | 706,271 | 0.62 % |
| KLP AKSJENORGE INDEKS | 702,233 | 0.62 % |
| Total 20 largest shareholders | 76,959,677 | 67.86 % |
| Total other shareholders | 36,452,755 | 32.14 % |
| Total shares outstanding | 113,412,432 | 100.0% |
| BOARD OF DIRECTORS | NUMBER OF SHARES | OWNERSHIP |
|---|---|---|
| John Andersen, Jr. 1) | - | 0.00% |
| Jan Skogseth | 22,000 | 0.02% |
| Gisele Marchand | - | 0.00% |
| Mari Thjømøe 2) | 27,338 | 0.02% |
| John Giverholt | 4,000 | 0,00% |
| Total at 31 December 2018 | 53,338 | 0.05% |
1) Related parties control 19,482,339 shares through Scatec AS.
2) Held through the controlled company Thjømøe Kranen AS.
| MANAGEMENT | NUMBER OF SHARES | OWNERSHIP | |
|---|---|---|---|
| Raymond Carlsen 1) | Chief Executive Officer | 2,778,386 | 2.45% |
| Mikkel Tørud | Chief Financial Officer | 283,940 | 0.25% |
| Terje Pilskog 2) | EVP Project Development & Project Finance | 497,727 | 0.44% |
| Roar Haugland 3) | EVP Sustainability Business & HSSE | 240,262 | 0.21% |
| Torstein Berntsen 4) | EVP Power Production | 682,609 | 0.60% |
| Snorre Valdimarsson | EVP General Counsel | 4,747 | 0.00% |
| Pål Helsing | EVP Solutions | 4,000 | 0.00% |
| Toril Haaland | EVP People & Organisation | - | 0.00 % |
| Total at 31 December 2018 | 4,491,671 | 3.96% |
1) Held through the controlled company Argentos AS, whereof 22,626 shares held by Raymond Carlsen directly.
2) Held through the controlled company Océmar AS.
3) Held through the controlled company Buzz Aldrin AS.
4) Held through the controlled company Belito AS, whereof 5,000 shares are held by Torstein Berntsen directly. In addition, 895 shares are held by Torstein Berntsen's spouse. These are not included in the total presented in the table above.
Refer to note 26 – Employee benefits for information on share options granted to the management.
In line with the dividend policy, the Board of Directors have resolved to propose to the ordinary General Meeting of Scatec Solar that a dividend of NOK 0.95 per share, totalling NOK 108 million, should be paid for 2018. Distribution of dividends is resolved by a majority vote of the Annual General Meeting of the shareholders of the Company, and on the basis of a proposal from the Board of Directors.
The Annual General Meeting has the power to reduce but cannot increase the dividend proposed by the Board of Directors. The share will be trading excluding dividend rights (ex-date) on the first business day following the Annual General Meeting to be held 30 April 2019.
For 2017, the Board of Directors proposed a dividend of NOK 0.78 per share, totalling NOK 81 million. The General Meeting resolved the Board's proposal of a dividend of NOK 0.78 per share and the share was traded excluding dividend rights (ex-date) on 24 April 2018. The dividend was paid on 14 May 2018.
Scatec Solar's value chain comprises all downstream activities such as project development, financing, construction, operations as well as having an asset management role trough ownership of the solar power plants. Normally Scatec Solar enter into partnerships for the shareholding of the power plant companies owning the power plants, leading to material non-controlling interest.
Consolidation of power plant companies are identified as a significant judgement for the consolidated financial statements, and as described in Note 2 - Key sources of estimation uncertainty, judgements and assumptions. During 2018 Scatec Solar established and consolidated the following entities which have non-controlling interests;
There are no material changes in the structure of the other companies with non-controlling interest.
| COUNTRY OF INCORPORATION | ||||
|---|---|---|---|---|
| NAME | AND OPERATION | 2018 | 2017 | |
| Egypt | ||||
| Under development/ | ||||
| Aswan Solar Power SAE | Egypt | construction | 49% | 49% |
| Daraw Solar Power SAE (Philadelphia) | Egypt | Under development/ construction |
49% | 49% |
| Kom Ombo Renewable Energy SAE (Kom Ombo) | Egypt | Under development/ construction |
49% | 49% |
| Red Sea Solar Power SAE (Red Sea) | Egypt | Under development/ construction |
49% | 49% |
| Upper Egypt Solar Power SAE (Sun Infinite) | Egypt | Under development/ construction |
49% | 49% |
| Under development/ | ||||
| Zafarana Solar Power SAE (Zafarana) | Egypt | construction Under development/ |
49% | 49% |
| Daraw BV | Netherlands | construction | 30% | 30% |
| Egypt Solar BV | Netherlands | Under development/ construction |
49% | 49% |
| Kom Ombo BV | Netherlands | Under development/ construction |
30% | 30% |
| Upper Egypt BV | Netherlands | Under development/ construction |
49% | 49% |
| Honduras Agua Fria | ||||
| Producción de Energía Solar y Demás Renovables, S.A. (Agua Fria) | Honduras | In operation | 60% | 60% |
| Honduras Los Prados | ||||
| Fotovoltaica Surena S.A | Honduras | In operation | 30% | 30% |
| Generaciones Energeticas S.A | Honduras | In operation | 30% | 30% |
| Energias Solares S.A | Honduras | In operation | 30% | 30% |
| Fotovoltaica Los Prados S.A | Honduras | Under development/ construction |
30% | 30% |
| Foto Sol S.A | Honduras | Under development/ construction |
30% | 30% |
| Jordan | ||||
| Scatec Solar AS/ Jordan PSC (Oryx) | Jordan | In operation | 10% | 10% |
| Anwar Al Ardh for Solar Energy Generation PSC (EJRE) | Jordan | In operation | 49.9% | 49.9% |
| Ardh Al Amal for Solar Energy Generation PSC (GLAE) | Jordan | In operation | 49.9% | 49.9% |
| Malaysia | ||||
| Quantum Solar Power Semenanjung | Malaysia | Under development/ construction |
- | 51% |
| Quantum Solar Power Kedah | Malaysia | In operation | - | 51% |
| Quantum Solar Power Melaka | Malaysia | Under development/ construction |
- | 51% |
| Quantum Solar Power Terengganu | Malaysia | Under development/ construction |
- | 51% |
| Mali (Non-material) | ||||
| Under development/ | ||||
| Segou Solaire SA | Mali | construction | 50% | 50% |
| Mexico (Non-material) | ||||
| Scatec Solar Intertec Mexico SAPI de CV | Mexico | Sold | - | 40% |
| Mozambique | ||||
| Central Solar de Mocuba (Mocuba) | Mozambique | Under development/ construction |
47.5% | 47.5% |
| Nigeria (Non-material) | ||||
| Scatec Solar Nigeria BV | Netherland | Under development/ construction |
30% | 30% |
| Rwanda | ||||
| Gigawatt Global Rwanda (ASYV) | Rwanda | In operation | 46% | 46% |
| NAME | AND OPERATION | COUNTRY OF INCORPORATION | ||
|---|---|---|---|---|
| South Africa Upington | ||||
| Scatec Solar South Africa BV | Netherland | Under development/ construction |
30% | 30% |
| Dyason's Klip 1 | South Africa | Under development/ construction |
54.5% | - |
| Dyason's Klip 2 | South Africa | Under development/ construction |
54.5% | - |
| Sirius Solar PV Project One (RF) (Pty) Ltd | South Africa | Under development/ construction |
54.5% | - |
| Scatec Solar Construction | South Africa | Under development/ construction |
49% | - |
| Scatec Solar Operations (Pty) Ltd | South Africa | Under development/ construction |
49% | - |
| South Africa Linde/Dreunberg | ||||
| Scatec Solar SA 164 (Pty) Ltd | South Africa | In operation | 19.3% | 29% |
| Simacel 155 (Pty) Ltd (Linde) | South Africa | In operation | 56.6% | 61% |
| Simacel 160 (Pty) Ltd (Dreunberg) | South Africa | In operation | 56.6% | 61% |
| South Africa Kalkbult | ||||
| Scatec Solar SA 165 (Pty) Ltd | South Africa | In operation | 23.4% | 35% |
| Scatec Solar SA 166 (Pty) Ltd (Kalkbult) | South Africa | In operation | 54% | 61% |
| South Africa other | ||||
| Scatec Solar SA 163 (Pty) Ltd | South Africa | In operation | 8% | 8% |
| Ukraine (Non-material) | ||||
| Rengy Solar BV | Netherland | Under development/ construction |
49% | - |
| Rengy Bioenergy LLC | Ukraine | Under development/ construction |
49% | - |
| USA (Non-material) | ||||
| Chateau St Jean | USA | Sold | - | 20% |
The non-controlling interests include the non-controlling interest's share of subsidiaries' carrying amounts. Non-controlling interests are calculated on the respective subsidiaries' stand-alone reporting, adjusted for intercompany transactions – i.e. unrealised profits and losses for the Group are not taken into account even if they are realised for the subsidiary on a standalone basis. Further, unrealised intercompany profits relating to depreciable assets (solar power plants) are viewed as being realised gradually over the remaining economic life of the asset. Consequently, the specification of non-controlling interest in the group financial statements will differ from the non-controlling interests calculated based on the respective subsidiaries' stand-alone reporting.
Accumulated balances of non-controlling interest and the allocation profit and loss are presented below, where they are presented by portfolio.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Egypt | -11 | 26 |
| Honduras Agua Fria | 87 | 86 |
| Honduras Los Prados | 190 | 12 |
| Jordan | 140 | 129 |
| Malaysia | - | -3 |
| Mozambique | 2 | 11 |
| Rwanda | 15 | 16 |
| South Africa Upington | 11 | - |
| South Africa Linde / Dreunberg | 158 | 207 |
| South Africa Kalkbult | 19 | 87 |
| South Africa other | -21 | -6 |
| Total non-controlling interest | 591 | 577 |
| NOK MILLION | 2018 | 2017 | |
|---|---|---|---|
| Egypt | -10 | -1 | |
| Honduras Agua Fria | -4 | -5 | |
| Honduras Los Prados | - | -4 | |
| Jordan | 3 | 13 | |
| Malaysia | - | -3 | |
| Mozambique | -5 | - | |
| Rwanda | -3 | 2 | |
| South Africa Upington | 9 | - | |
| South Africa Linde / Dreunberg | 48 | 50 | |
| South Africa Kalkbult | 47 | 48 | |
| South Africa other | 1 | 1 | |
| Total non-controlling interest | 86 | 99 |
| NOK MILLION | REVENUES | OPERATING EXPENSES |
OPERATING PROFIT |
NET FINANCIAL EXPENSES |
PROFIT BEFORE INCOME TAX |
PROFIT/ (LOSS) FOR THE PERIOD |
OTHER COMPRE HENSIVE INCOME |
TOTAL COMPRE HENSIVE INCOME |
PROFIT/ LOSS ATTRIBUTABLE TO NON CONTROLLING INTERESTS |
DIVIDENDS PAID TO NON CONTROLLING INTERESTS |
|---|---|---|---|---|---|---|---|---|---|---|
| Egypt | 1 | -2 | -1 | -24 | -25 | -25 | - | -25 | -10 | - |
| Honduras Agua Fria | 114 | -64 | 49 | -56 | -6 | -6 | - | -6 | -4 | - |
| Honduras Los Prados | 16 | -14 | 2 | - | 1 | 1 | - | 1 | - | - |
| Jordan | 133 | -75 | 58 | -48 | 10 | 9 | - | 9 | 3 | - |
| Malaysia | 7 | -7 | 0 | -27 | -27 | -27 | - | -27 | - | - |
| Mozambique | - | - | - | -10 | -10 | -10 | - | -10 | -5 | - |
| Rwanda | 18 | -12 | 6 | -14 | -8 | -7 | - | -7 | -3 | - |
| South Africa Upington | 298 | -296 | 3 | 22 | 24 | 17 | - | 17 | 9 | - |
| South Africa Linde / Dreunberg |
421 | -148 | 273 | -154 | 119 | 83 | 1 | 84 | 48 | 107 |
| South Africa Kalkbult | 332 | -105 | 227 | -107 | 120 | 86 | 6 | 92 | 47 | 99 |
| South Africa other | 55 | -37 | 18 | - | 18 | 11 | - | 11 | 1 | - |
| NOK MILLION | REVENUES | OPERATING EXPENSES |
OPERATING PROFIT |
NET FINANCIAL EXPENSES |
PROFIT BEFORE INCOME TAX |
PROFIT/ (LOSS) FOR THE PERIOD |
OTHER COMPRE HENSIVE INCOME |
TOTAL COMPRE HENSIVE INCOME |
PROFIT/ LOSS ATTRIBUTABLE TO NON CONTROLLING INTERESTS |
DIVIDENDS PAID TO NON CONTROLLING INTERESTS |
|---|---|---|---|---|---|---|---|---|---|---|
| Egypt | - | -2 | -2 | -1 | -3 | -3 | - | -3 | -1 | - |
| Honduras Agua Fria | 112 | -64 | 48 | -56 | -9 | -9 | - | -9 | -5 | - |
| Honduras Los Prados | - | - | - | -14 | -14 | -14 | - | -14 | -4 | - |
| Jordan | 143 | -62 | 81 | -49 | 32 | 30 | - | 30 | 12 | - |
| Malaysia | 34 | -35 | - | -5 | -5 | -5 | - | -5 | -3 | - |
| Mozambique | - | - | - | - | - | - | - | - | - | - |
| Rwanda | 31 | -12 | 19 | -15 | 5 | 4 | - | 4 | 2 | - |
| South Africa Upington | - | - | - | - | - | - | - | - | - | - |
| South Africa Linde / | ||||||||||
| Dreunberg | 422 | -148 | 274 | -176 | 97 | 69 | -26 | 43 | 50 | 98 |
| South Africa Kalkbult | 321 | -103 | 217 | -112 | 106 | 76 | -9 | 67 | 48 | 85 |
| South Africa other | 53 | -46 | 7 | 4 | 11 | 8 | - | 8 | 1 | 3 |
| ATTRIBUTABLE TO | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| NOK MILLION | PROPERTY, PLANT AND EQUIPMENT |
OTHER NON CURRENT ASSETS |
CASH AND CASH EQUIVALENT |
OTHER CURRENT ASSETS |
NON RECOURSE FINANCING |
OTHER NON CURRENT LIABILITES |
CURRENT LIABILITES |
TOTAL EQUITY |
NON CONTROLLING INTERESTS |
EQUITY HOLDERS OF THE PARENT |
| Egypt | 1,724 | 1,175 | 766 | 452 | -1,831 | -2,182 | -128 | -24 | -11 | -13 |
| Honduras Agua Fria | 794 | 1 | 111 | 77 | -513 | -323 | -2 | 146 | 87 | 58 |
| Honduras Los Prados | 732 | 9 | 1 | 15 | - | -46 | -79 | 632 | 190 | 442 |
| Jordan | 982 | 8 | 283 | 18 | -790 | -102 | -49 | 350 | 140 | 210 |
| Malaysia | 2,211 | 2,670 | 530 | 299 | -27 | -4,449 | -138 | 1,097 | - | 1,097 |
| Mozambique | 339 | 5 | 26 | 76 | -267 | -148 | -12 | 20 | 2 | 17 |
| Rwanda | 156 | 2 | 7 | 3 | -121 | -39 | -1 | 6 | 15 | -8 |
| South Africa Upington | 429 | 256 | 574 | 878 | -785 | -754 | -572 | 26 | 11 | 15 |
| South Africa Linde / Dreunberg |
1,540 | 101 | 174 | 101 | -1,384 | -202 | -24 | 307 | 158 | 149 |
| South Africa Kalkbult | 937 | 51 | 121 | 66 | -878 | -146 | -16 | 136 | 19 | 117 |
| South Africa other | 1 | 422 | 6 | 9 | - | -391 | -3 | 43 | -20 | 64 |
| ATTRIBUTABLE TO | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| NOK MILLION | PROPERTY, PLANT AND EQUIPMENT |
OTHER NON CURRENT ASSETS |
CASH AND CASH EQUIVALENT |
OTHER CURRENT ASSETS |
NON RECOURSE FINANCING |
OTHER NON CURRENT LIABILITES |
CURRENT LIABILITES |
TOTAL EQUITY |
NON CONTROLLING INTERESTS |
EQUITY HOLDERS OF THE PARENT |
| Egypt | 348 | 301 | 29 | 1 | - | -573 | -51 | 56 | 26 | 31 |
| Honduras Agua Fria | 808 | - | 115 | 55 | -532 | -301 | -2 | 144 | 86 | 58 |
| Honduras Los Prados | 289 | - | - | 190 | - | -438 | - | 41 | 12 | 29 |
| Jordan | 982 | 7 | 229 | 18 | -785 | -97 | -46 | 307 | 129 | 178 |
| Malaysia | 494 | 2 152 | 1 291 | 533 | -27 | -4 150 | -8 | 285 | -3 | 288 |
| Mozambique | - | 33 | 8 | 3 | - | - | -5 | 38 | 11 | 27 |
| Rwanda | 155 | - | 13 | 6 | -126 | -34 | -1 | 13 | 16 | -3 |
| South Africa Upington | - | - | - | - | - | - | - | - | - | - |
| South Africa Linde / Dreunberg |
1 816 | 172 | 220 | 110 | -1 636 | -297 | -82 | 302 | 207 | 99 |
| South Africa Kalkbult | 1 111 | 96 | 176 | 69 | -1 019 | -191 | -22 | 221 | 87 | 125 |
| South Africa other | - | 95 | 3 | 10 | - | -68 | -4 | 36 | -23 | 59 |
In relation to the structuring and financing of the power plant companies in the Group, financial instruments are issued by both the controlling and non-controlling interests. Such financing is granted both as formal equity and shareholder loans. The shareholder loans granted to Kalkbult, Linde, Dreunberg, ASYV, Oryx, EJRE and GLAE are recognised as equity as both of the following conditions are met:
The instrument includes no contractual obligation either:
Based on the above, all payments related to the shareholder loans are at the discretion of the power plant company. Accordingly, these shareholder loans are accounted for as equity.
At 31 December 2018, the following financing have been granted by co-investors to consolidated power plant companies.
| 2018 | SHAREHOLDER | |||
|---|---|---|---|---|
| NOK MILLION | TOTAL FINANCING | FORMAL EQUITY | LOAN RECOGNISED IN EQUITY |
FINANCIAL LIABILITY |
| Scatec Solar SA 166 (Pty) Ltd (Kalkbult) | 68 | 68 | - | - |
| Simacel 155 (Pty) Ltd (Linde) | 27 | 20 | 7 | - |
| Simacel 160 (Pty) Ltd (Dreunberg) | 47 | 40 | 7 | - |
| Gigawatt Global Rwanda (ASYV) | 15 | 5 | 10 | - |
| Scatec Solar AS/ Jordan PSC (Oryx) | 60 | - | 60 | - |
| Anwar Al Ardh for Solar Energy Generation PSC (EJRE) | 81 | 2 | 79 | - |
| Ardh Al Amal for Solar Energy Generation PSC (GLAE) | 38 | 1 | 37 | - |
| Producción de Energía Solar y Demás Renovables, S.A. (Agua Fria) | 232 | 97 | - | 135 |
| Los Prados | 196 | 194 | - | 2 |
| Scatec Solar Intertec Mexico SAPI de CV | 3 | 3 | - | - |
| Aswan Solar Power SAE (BB1) | 11 | 11 | - | - |
| Zafarana Solar Power SAE (ZAF1) | 39 | 10 | - | 29 |
| Red Sea Solar Power SAE (ZAF2) | 39 | 10 | - | 29 |
| Upper Egypt Solar Power (BB2) | 42 | 13 | - | 29 |
| Kom Ombo Renewable Energy SAE (BB3) | 40 | 10 | - | 30 |
| Daraw Solar Power SAE (BB4) | 45 | 17 | - | 28 |
| Scatec Solar Ukraine Opr Comp (EPC) | 6 | 6 | - | - |
| Kamianka / Chysta Energiya | 3 | 3 | - | - |
| Atlas Capital Energy | 3 | 3 | - | - |
| Greenteco SES | 13 | 3 | - | - |
| Rengy Bioenergy | 1 | 1 | - | 12 |
| Cordillera Solar VIII S.A. | 1 | 1 | - | - |
| Total project financing from non-controlling interests | 1,012 | 518 | 200 | 294 |
| 2017 | SHAREHOLDER | |||
|---|---|---|---|---|
| NOK MILLION | TOTAL FINANCING | FORMAL EQUITY | LOAN RECOGNISED IN EQUITY |
FINANCIAL LIABILITY |
| Scatec Solar SA 166 (Pty) Ltd (Kalkbult) | 81 | 75 | 6 | - |
| Simacel 155 (Pty) Ltd (Linde) | 33 | 23 | 10 | - |
| Simacel 160 (Pty) Ltd (Dreunberg) | 104 | 44 | 60 | - |
| Gigawatt Global Rwanda (ASYV) | 18 | 4 | 14 | - |
| Scatec Solar AS/ Jordan PSC (Oryx) | 56 | 0 | 56 | - |
| Anwar Al Ardh for Solar Energy Generation PSC (EJRE) | 75 | 1 | 75 | - |
| Ardh Al Amal for Solar Energy Generation PSC (GLAE) | 35 | 1 | 35 | - |
| Producción de Energía Solar y Demás Renovables, S.A. (Agua Fria) | 209 | 92 | - | 117 |
| Los Prados | 19 | 16 | - | 2 |
| Scatec Solar Intertec Mexico SAPI de CV | 3 | 3 | - | - |
| Aswan Solar Power SAE (BB1) | 9 | 5 | - | 3 |
| Zafarana Solar Power SAE (ZAF1) | 8 | 5 | - | 3 |
| Red Sea Solar Power SAE (ZAF2) | 8 | 5 | - | 3 |
| Upper Egypt Solar Power (BB2) | 9 | 6 | - | 3 |
| Kom Ombo Renewable Energy SAE (BB3) | 8 | 5 | - | 3 |
| Daraw Solar Power SAE (BB4) | 11 | 8 | - | 3 |
| Total project financing from non-controlling interests | 686 | 292 | 255 | 140 |
For the year ended 31 December 2018 NOK 14 million (NOK 20 million per 31 December 2017) of interest on financing provided by co-investors have been accrued, of which NOK 3 million is recognised directly in equity (NOK 9 million per 31 December 2017).
The equity and loan financing provided by the co-investors is repaid according to a pre-determined waterfall structure, meaning that the financing presented above will be settled after external non-recourse financing, and only when distributable cash as defined by the financing agreements is available. Normally this would occur twice a year. The tax equity liability will partly be settled with cash distributions based on a waterfall structure and partly from non-cash allocation of taxable results from the project company.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Salaries | 158 | 129 |
| Share-based payment | 8 | 5 |
| Payroll tax | 20 | 16 |
| Pension costs | 11 | 9 |
| Other personnel costs | 57 | 20 |
| Capitalised to PP&E (project assets) | -117 | -71 |
| Total personnel expenses | 137 | 107 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Salary and bonus | 21 | 14 |
| Pension | 1 | 1 |
| Total reportable benefits paid | 22 | 15 |
For further details refer to note 4 in the separate financial statements for the parent company. No severance package agreements have been established with management.
In line with the terms adopted by the annual general meeting of Scatec Solar ASA on May 4, 2016, the Board of Directors has established an option program for leading employees of the company. The option program follows the restricted share incentive program that was established prior to the Scatec Solar IPO in the fall of 2014 and that expired on October 3, 2016. The first award under the program was 757 thousand options, which vest 1/3 1 January 2018, 1/3 1 January 2019 and the final 1/3 1 January 2020. A total of 15 employees were awarded options of which three have subsequently left the company. The second award under the program was 490 thousand options, which vest 1/3 1 January 2019, 1/3 1 January 2020 and the final 1/3 1 January 2021. A total of 15 employees were awarded options of which one has subsequently left the company. The third award under the program, granted in January 2019, was 495 thousand options, which vest 1/3 1 January 2020, 1/3 1 January 2021 and the final 1/3 1 January 2022. A total of 24 employees were awarded options. The strike price is equivalent to the volume weighted average price of the shares the 10 preceding trading days of the grant, and the strike price for the three awards are NOK 28.08 NOK 47.65 and NOK 72.03 respectively. During 2018 216 thousand options were exercised, and at the end of the year the total number of outstanding options are 1,031 thousand.
The award of options meets the definition of an equity-settled share-based payment transaction (IFRS 2 app. A). To calculate the fair value of the options, the Black-Scholes-Merton option-pricing model is applied on each tranche. Share price (spot), exercise price, expected option lifetime, expected volatility, expected dividend and risk-free interest rate are the input parameters in the model. Expected volatility is calculated on the historical volatility based on the company's own
share prices. The fair value of the equity instruments is measured at grant date, which was 6 October 2016 for the first award, 1 January 2018 for the second grant and 1 January 2019 for the third award, respectively. At grant date the fair value of the first award (excluding social security tax) was estimated to NOK 7 million, the fair value of the second award (excluding social security tax) was estimated to NOK 6 million and the fair value of the third award (excluding social security tax) was NOK 8 million. The fair value of these awards is expensed as the options vests.
In September 2015 certain key employees were invited to participate in a one-time personal award program, whereby such key employees were granted 80 thousand synthetic Scatec Solar shares. In addition, the participants will earn a multiplier of between 1 and 2 times the awarded number of synthetic shares, making the total size of the program 160 thousand synthetic shares. The vesting of the shares is conditional upon the participants being employed with the company at year-end 2016/2018. Further, the second tranche of shares is linked to performance conditions that must be satisfied. The value of the synthetic shares will be paid to the participants 28 February 2017/2019 based on the share price on the last day of trading in 2016/2018. The program meets the definition of a cash settled share-based payment transaction and is accounted for in accordance with IFRS 2. The estimated total fair value of the plan at grant date was NOK 8 million and an accrual of NOK 3 million (3) has been recognised per 31 December 2018. The payment to the participants in 2018 amounted to NOK 0 million (2), whereas the remaining part will be paid out in 2019.
The Group has established pension schemes that are classified as defined contribution plans. Contributions to defined contribution schemes are recognised in the consolidated statement of profit and loss in the period in which the contribution amounts are earned by the employees.
| NUMBER OF FTES EMPLOYED DURING THE FINANCIAL YEAR | 2018 | 2017 |
|---|---|---|
| South Africa | 88 | 70 |
| Norway | 77 | 65 |
| Malaysia | 22 | 7 |
| Mozambique | 1 | 2 |
| Brazil1 | 17 | 5 |
| Honduras | 12 | 9 |
| Egypt | 11 | 7 |
| Ukraine | 2 | - |
| Czech | 4 | 4 |
| The Netherlands | 3 | 1 |
| France | 1 | 4 |
| Jordan | 2 | 2 |
| Rwanda | 2 | 2 |
| Germany | 1 | 1 |
| Argentina1 | 1 | - |
| Mali | 1 | - |
| Italy | - | 1 |
| Total | 245 | 180 |
1) Equity consolidated joint venture.
The Scatec Solar Group has during 2018 and 2017, had transactions with the following related parties:
| Related party | |
|---|---|
| --------------- | -- |
| Scatec Solar Brazil B.V. (associate) | Financing |
|---|---|
| Scatec Solar Solutions Brazil B.V (associate) | Financing |
| Scatec Solar Solutions Brazil SDE (associate) | Financing |
| Apodi I (associate) | Financing |
| Apodi II (associate) | Financing |
| Apodi III (associate) | Financing |
| Apodi IV (associate) | Financing |
| Scatec Energy LLC (associate) | Financing |
| Scatec Equinor Solutions Argentina S.A (associate) | Financing |
| Cordillera Solar VIII S.A (associate) | Financing |
| Key management employees | Loans and salaries |
All related party transactions have been carried out as part of the normal course of business and at arm's length. The most significant transactions in 2018 and 2017 are:
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Loan to associated companies | 308 | 22 |
| Loan to key management personnel | 4 | 6 |
| Total other non-current assets | 312 | 28 |
Refer to Note 18 – Other non-current and current assets for specification of total non-current and current assets.
The company had no other non-current liabilities to related parties according to definition described above.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Payable to associated companies | 1 | - |
| Accrued payroll to key management personnel | 8 | 6 |
| Total current liabilities to related parties | 9 | 6 |
Refer to Note 17 Other non-current and current liabilities for specification of total other non-current and other current liabilities.
Refer to Note 21 Investments in associated companies for specifications of investment in associated companies.
No sale of project assets has been effectuated during the financial year of 2018, hence no gain or loss from this activity has been recorded.
In the third quarter of 2017 Scatec Solar signed an agreement to establish a 50/50 joint venture with Equinor to build, own and operate large scale solar power plants in Brazil. As the first step of the agreement Equinor secured a 40% equity position in Scatec Solar's existing 162 MW Apodi project. Equinor paid USD 25 million for the project rights and for participation in the joint venture. Equinor has in addition injected USD 35 million in the power plant companies to fund their share of the project. The joint venture will be responsible for construction, operation and maintenance as well as asset management of the plant.
As of the effective date Scatec Solar lost control (as defined by IFRS 10 for consolidation purposes) of the power plant companies and full consolidation ceased. Upon deconsolidation of the subsidiaries a net gain of NOK 176 million was recognized. As of the same date the investments were equity consolidated as Scatec Solar and Equinor are considered to be in joint control of the investees. The joint venture is recognized at fair value, resulting in a net gain of NOK 199 million. The fair value adjustment is allocated to the power purchase agreement (PPA). No amortizations have been recorded as the PPA is not yet effective. In total net gain from sale of project assets during 2017 amounted to NOK 378 million.
The following subsidiaries are included in the consolidated financial statements. Consolidated economic interests correspond to the voting interests if not otherwise stated. For companies on level 2 in the table below (i.e. subsidiaries of the ultimate Parent's subsidiaries), the economic interests stated is the mathematically indirect consolidated economic interests.
| CONSOLIDATED | CONSOLIDATED | ||
|---|---|---|---|
| COMPANY | REGISTERED OFFICE | ECONOMIC INTERESTS 2018 1) |
ECONOMIC INTERESTS 2017 1) |
| Scatec Solar Solutions GmbH | Regensburg, Germany | 100.00 % | 100.00 % |
| Scatec Solar S.r.l. | Rome, Italy | 100.00 % | 100.00 % |
| BFL.F S.r.l. | Rome, Italy | 100.00 % | 100.00 % |
| Scatec Solar s.r.o. | Prague, Czech Republic | 100.00 % | 100.00 % |
| Signo Solar PP01 s.r.o. | Prague, Czech Republic | 100.00 % | 100.00 % |
| Signo Solar PP02 s.r.o. | Prague, Czech Republic | 100.00 % | 100.00 % |
| Signo Solar PP03 s.r.o. | Prague, Czech Republic | 100.00 % | 100.00 % |
| Signo Solar PP04 s.r.o. | Prague, Czech Republic | 100.00 % | 100.00 % |
| Signo Solar PV1 s.r.o. | Prague, Czech Republic | 100.00 % | 100.00 % |
| Scatec Solar India Ltd. | New Delhi, India | 100.00 % | 100.00 % |
| Scatec Solar North America inc. 3) | California, USA | - | 100.00 % |
| St. Jean 3) | California, USA | - | 80.00 % |
| Tourves PV SAS | St Raphael, France | 100.00 % | 100.00 % |
| Scatec Solar SAS France | Paris, France | 100.00 % | 100.00 % |
| Scatec Solar Jordan (EPC) | Amman, Jordan | 100.00 % | 100.00 % |
| Scatec Solar AS/ Jordan PSC | Amman, Jordan | 90.00 % | 90.00 % |
| Anwar Al Ardh For Solar Energy Generation PSC | Amman, Jordan | 50.10 % | 50.10 % |
| Ardh Al Amal For Solar Energy Generation PSC | Amman, Jordan | 50.10 % | 50.10 % |
| Scatec Solar Africa (Pty) Ltd | Cape Town, South Africa | 100.00 % | 100.00 % |
| Scatec Solar Management Services (Pty) Ltd | Sandton, South Africa | 100.00 % | 100.00 % |
| Scatec Solar SA 163 (Pty) Ltd. | Cape Town, South Africa | 92.00 % | 92.00 % |
| Scatec Solar SA (pty) Ltd. | Sandton, South Africa | 100.00 % | 100.00 % |
| Scatec Solar SA 165 (Pty) Ltd. | Sandton, South Africa | 76.60 % | 65.00 % |
| Scatec Solar SA 166 (Pty) Ltd. | Sandton, South Africa | 46.00 % | 39.00 % |
| Scatec Solar SA 164 (Pty) Ltd. | Sandton, South Africa | 80.70 % | 71.00 % |
| Simacel 155 (Pty) Ltd. | Sandton, South Africa | 44.40 % | 39.00 % |
| Simacel 160 (Pty) Ltd. | Sandton, South Africa | 44.40 % | 39.00 % |
| Scatec Solar Rwanda Ltd | Rwanda | 100.00 % | 100.00 % |
| Gigawatt Global Rwanda Ltd | Rwanda | 54.03 % | 54.03 % |
| Scatec Solar Honduras SA | Honduras | 100.00 % | 100.00 % |
| Produccion de Energia Solar Demas Renovables S.A,. | Honduras | 40.00 % | 40.00 % |
| Fotovoltaica Surena S.A. | Honduras | 70.00 % | 70.00 % |
| Generaciones Energeticas S.A. | Honduras | 70.00 % | 70.00 % |
| Fotovoltaica Los Prados S.A. | Honduras | 70.00 % | 70.00 % |
| Foto Sol S.A. | Honduras | 70.00 % | 70.00 % |
| Energias Solares S.A. | Honduras | 70.00 % | 70.00 % |
| Scatec Solar Mali SAS | Bamako, Mali | 100.00 % | 100.00 % |
| Segou Solaire S.A. | Bamako, Mali | 50.00 % | 50.00 % |
| Scatec Solar DMCC | United Arab Emirates | 100.00 % | 100.00 % |
| Central Solar de Mocuba S.A. | Mozambique | 52.50 % | 52.50 % |
| Scatec Solar Mozambique Limitada | Mozambique | 100.00 % | 100.00 % |
| COMPANY | REGISTERED OFFICE | CONSOLIDATED ECONOMIC INTERESTS 2018 1) |
CONSOLIDATED ECONOMIC INTERESTS 2017 1) |
|---|---|---|---|
| Scatec Solar Mexico SAPI de CV 3) | Mexico | - | 100.00 % |
| Scatec Solar Intertec Mexico SAPI de CV 3) | Mexico | - | 60.00 % |
| Saferay Solar SAPI de CV 3) | Mexico | - | 60.00 % |
| SIM Solar1 SAPI de CV 3) | Mexico | - | 60.00 % |
| SIM Solar2 SAPI de CV 3) | Mexico | - | 60.00 % |
| Scatec Sukhur B.V. Offshore Holdco | The Netherlands | 100.00 % | 100.00 % |
| Scatec Solar Netherlands B.V. | The Netherlands | 100.00 % | 100.00 % |
| Scatec Solar Nigeria B.V. | The Netherlands | 100.00 % | 100.00 % |
| Nova Scotia Power Development Limited | Abuja, Nigeria | 100.00 % | 100.00 % |
| Scatec Solar Solutions Egypt LLC | Egypt | 100.00 % | 100.00 % |
| Egypt Solar B.V. | The Netherlands | 51.00 % | 51.00 % |
| Upper Egypt 2 B.V. | The Netherlands | 51.00 % | 51.00 % |
| Upper Egypt Solar Power | Egypt | 51.00 % | 51.00 % |
| Kom Ombo 2 B.V. | The Netherlands | 51.00 % | 51.00 % |
| Kom Ombo Renewable Energy SAE | Egypt | 51.00 % | 51.00 % |
| Daraw B.V. | The Netherlands | 51.00 % | 51.00 % |
| Philadelphia Power SAE | Egypt | 51.00 % | 51.00 % |
| Zafarana 2 B.V. | The Netherlands | 51.00 % | 51.00 % |
| Zafarana Power SAE | Egypt | 51.00 % | 51.00 % |
| Red Sea Solar Power 2 B.V. | The Netherlands | 51.00 % | 51.00 % |
| Red Sea Solar Power SAE. | Egypt | 51.00 % | 51.00 % |
| Aswan Solar Power SAE | Egypt | 51.00 % | 51.00 % |
| Scatec Solar Mali B.V. | The Netherlands | 100.00 % | 100.00 % |
| Scatec Solar Malaysia B.V. | The Netherlands | 100.00 % | 100.00 % |
| Scatec Solar Solutions Malaysia Sdn Bhd | Kuala Lumpur, Malaysia | 100.00 % | 100.00 % |
| Quantum Solar Park Semenanjung Sdn Bhd 4) | Kuala Lumpur, Malaysia | 100.00 % | 65.00 % |
| Quantum Solar Park (Kedah) Sdn Bhd 5) | Kuala Lumpur, Malaysia | 100.00 % | 65.00 % |
| Quantum Solar Park (Melaka) Sdn Bhd 5) | Kuala Lumpur, Malaysia | 100.00 % | 65.00 % |
| Quantum Solar Park (Terengganu) Sdn Bhd 5) | Kuala Lumpur, Malaysia | 100.00 % | 65.00 % |
| Red Sol 2) | Kuala Lumpur, Malaysia | 100.00 % | - |
| Scatec Solar South Africa B.V. | The Netherlands | 70.00 % | 70.00 % |
| Dyason's Klip 1 (Pty) Ltd | South Africa | 45.50 % | 42.00 % |
| Dyason's Klip 2 (Pty) Ltd | South Africa | 45.50 % | 42.00 % |
| Sirius Solar PV Project One (RF) (Pty) Ltd | South Africa | 45.50 % | 42.00 % |
| Scatec Solar Construction R4 1) | South Africa | 51.00 % | - |
| Scatec Solar Operations R4 1) | South Africa | 51.00 % | - |
| Scatec Energy LLC 4) | California, USA | 50.00 % | 50.00 % |
| Scatec Solar Brazil II B.V. 4) | The Netherlands | 50.00 % | 50.00 % |
| Apodi I Energia SPE S.A. 4) | Brazil | 43.75 % | 43.75 % |
| Apodi II Energia SPE S.A. 4) | Brazil | 43.75 % | 43.75 % |
| Apodi III Energia SPE S.A. 4) | Brazil | 43.75 % | 43.75 % |
| Apodi IV Energia SPE S.A. 4) | Brazil | 43.75 % | 43.75 % |
| Scatec Solar Brazil II Solutions B.V. 4) | The Netherlands | 50.00 % | 50.00 % |
| Scatec Solar Brazil Servicos de Engenharia Ltda 4) | Brazil | 50.00 % | 50.00 % |
| Scatec Solar Argentina B.V. 4) | The Netherlands | 50.00 % | 50.00 % |
| Scatec Equinor Solutions Argentina S.A. 4) | Argentina | 50.00 % | 50.00 % |
| Cordillera Solar VIII S.A. 4) | Argentina | 50.00 % | 50.00 % |
| COMPANY | REGISTERED OFFICE | CONSOLIDATED ECONOMIC INTERESTS 2018 1) |
CONSOLIDATED ECONOMIC INTERESTS 2017 1) |
|---|---|---|---|
| Scatec Solar Ukraine B.V. 2) | Ukraine | 100.00 % | - |
| Scatec Solar Ukraine Opr Comp (EPC) 2) | Ukraine | 100.00 % | - |
| Chysta Energhiaa 2011 LLC 2) | Ukraine | 100.00 % | - |
| Atlas Capital Energy 2) | Ukraine | 100.00 % | - |
| Greenteco SES 2) | Ukraine | 100.00 % | - |
| Progressovka 2) | Ukraine | 100.00 % | - |
| Boguslav 2) | Ukraine | 100.00 % | - |
| Rengy Solar B.V. 2) | The Netherlands | 51.00 % | - |
| Rengy Bioenergy 2) | Ukraine | 51.00 % | - |
| Scatec Solar Vietnam B.V. 2) | The Netherlands | 100.00 % | - |
| Scatec Solar Bangladesh B.V. 2) | The Netherlands | 100.00 % | - |
1) For projects under development the economic interest may be subject to change
2) Companies established/consolidated in 2018
3) Companies sold or liquidated in 2018
4) Joint venture companies refer to note 21 Investments in JVs and associated companies
5) The consolidated economic interest in the Malaysian project companies represents Scatec Solar's share of the contributed equity and retained earnings in the project companies as of the reporting date. Scatec Solar's average economic interest through the PPA tenor is estimated to be 68% based on the Group's right to economic return obtained through shareholdings and other contractual arrangements. The average economic interest may be subject to change. Refer to note 2 for further description of the project's investment structure.
For information on associated companies and joint venture companies, refer to Note 21 Investments in JVs and associated companies.
No events occurred after the balance sheet date with significant impact on the financial statements for 2018.
The Scatec Solar Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). In compliance with the Norwegian Accounting Act, additional disclosure requirements are included in the notes to the financial statements of Scatec Solar ASA.
The consolidated financial statements have been prepared on a historical cost basis, with the exception of financial instruments at fair value through profit or loss, financial instruments that are recognised at fair value, and loans, receivables and other financial liabilities recognised at amortised cost.
From first quarter 2018 the segment financials are reported on a proportionate basis in line with how the management team assesses the segments' performance. With proportionate financials Scatec Solar reports its share of revenues, expenses, profits and cash flows from its subsidiaries without eliminations based on the Group's economic interest in the subsidiaries. The consolidated revenues and profits are mainly generated in the Power Production segment. Activities in Operation Maintenance and Development & Construction segment mainly reflect deliveries to other companies controlled by Scatec Solar (with from 39 % to 100 % ownership), for which revenues and profits are eliminated in the consolidated financial statements. The Group uses proportionate financials to improve transparency on underlying value creation across Scatec Solar's business activity.
The consolidated financial statements are presented in Norwegian kroner (NOK) and all values are rounded to the nearest million (NOK 1 000 000) except when otherwise indicated. Because of these rounding adjustments, the figures in some columns may not add up to the total of that column.
The statement of cash flows is prepared under the indirect method.
The consolidated financial statements comprise the financial statements of the Parent and its subsidiaries as of 31 December 2018. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
The non-controlling interests include the non-controlling interest's share of subsidiaries' carrying amounts. Non-controlling interests are calculated on the respective subsidiaries' stand-alone reporting, adjusted for intercompany transactions – i.e. unrealised profits and losses for the Group are not taken into account even if they are realised for the subsidiary on a stand-alone basis. Further, unrealised intercompany profits relating to depreciable assets (solar power plants) are viewed as being realised gradually over the remaining economic life of the asset.
When acquiring a non-controlling interest, the difference between the cost of the non-controlling interest and the non-controlling interest's share of the assets and liabilities is reflected in the consolidated statement of financial position at the date of acquisition of the non-controlling interest as an equity transaction.
The Group's consolidated financial statements are presented in NOK, which is also the parent Company's functional currency. For each entity the Group determines the functional currency, and items included in the financial statements of each entity are measured using that functional currency. The functional currency of the subsidiaries is the same as their local currency, except for the subsidiaries in Rwanda, Honduras, Mozambique, Egypt, the Netherlands, Argentina and Jordan which use USD and Ukraine which uses EUR as functional currency. The Group uses the direct method of consolidation.
Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the exchange rate at the reporting date.
On consolidation, the assets and liabilities of foreign entities with functional currencies other than NOK are translated into NOK at the rate of exchange prevailing at the reporting date and their income statements are translated at average monthly exchange rates. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
See Note 24 - Non-controlling interests for information on the non-controlling interests share of profit/loss and equity prior to intercompany eliminations.
The IFRIC Interpretation 22 Foreign Currency Transaction and Advance Consideration clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transactions for each payment or receipt of advance consideration.
Entities can choose to apply the interpretation retrospectively for each period presented, prospectively to items in scope that are initially recognized on or after the beginning of the reporting period in which the interpretation is first applied, or prospectively from the beginning of a prior reporting period presented as comparative information.
These interpretations have not resulted in any significant impact on the financial statements of The Group.
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:
All other assets are classified as non-current. A liability is current when:
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarized in the following notes:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on 1 January 2018 and later. The Group has adopted IFRS 9 from 1 January 2018. The implementation of IFRS 9 has not resulted in any significant impacts on the financial statements of Scatec Solar.
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.
For purposes of subsequent measurement, financial assets are classified in four categories:
The Group measures financial assets at amortised cost if both of the following conditions are met:
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group's financial assets at amortised cost includes trade receivables and cash and cash equivalents.
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the statement of profit or loss.
A financial asset is primarily derecognized and removed from the Group's consolidated statement of financial position when:
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. IFRS 9 has changed the Group's principle for measuring impairment losses on financial assets by replacing the incurred loss approach after IAS 39 with a forward-looking expected credit loss (ECL) approach. Under the ECL-approach an allowance for expected credit losses should be recognized for all debt instruments not held at fair value through profit or loss and contract assets.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, payables or, as derivatives designated as hedging instruments in an effective hedge. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group's financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
Scatec Solar uses non-recourse financing for constructing and/or acquiring assets, exclusively using as guarantee the assets and cash flows of the project entities carrying out the activities financed. Compared to corporate financing, non-recourse financing has certain key advantages, including a clearly defined and limited risk profile. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interestbearing loans and borrowings. For more information refer to Note 6 – Non-recourse financing.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Entities within the Group have issued certain instruments as part of the project financing structures to minority shareholders (shareholder loans). These shareholder loans are considered equity instruments only if both of the following conditions are met:
The instrument includes no contractual obligation either:
Based on the above, all payments related to such shareholder loans are of the discretion of the company. Accordingly, these shareholder loans are accounted for as equity. See note 2 and 25 for further information.
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks. Such derivative financial instruments are initially recognised at fair value on the date of which a derivative contract is entered and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. See Note 9 for more details.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss.
The Group only applies hedge accounting for cash flow hedges that meet the criteria in IFRS 9. At the inception of each hedge relationship, the Group designates and documents the hedge accounting relationship, the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument's effectiveness in offsetting the exposure to change in expected cash flows from the hedged item's hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in the expected cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income, while the ineffective portion is recognised in profit or loss. Amounts recognised in other comprehensive income are reclassified to profit or loss when the hedged transaction affects the income statement, such as when hedged financial income or financial expense is recognised. If a hedge of a forecasted transaction subsequently results in the recognition of a non-financial asset or liability, the gain or loss on the hedge instrument that was recognised in other comprehensive income is reclassified to the income statement in the same period or periods during which the asset acquired or liability assumed affects the statement of profit or loss. If the forecast transaction is no longer expected to occur, amounts previously recognised in other comprehensive income are reclassified to the statement of
profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in other comprehensive income remain in other comprehensive income until the forecast transaction occurs.
IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers and provides a model for the recognition and measurement of sales of some non-financial assets (e.g., disposals of property, plant and equipment). IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures. Scatec Solar has made a detailed assessment of the impact of the new revenue recognition standard. The analysis was done for revenues generated in all operating segments.
The Group has adopted the IFRS 15 from 1 January 2018 using the full retrospective method. The effect of the transition to IFRS 15 on the current period has not been specified as the impact on the Group's financials is immaterial. The analysis of IFRS 15 potential impact on revenue recognition related to sale of electricity has shown that revenues should be recognized based on volumes delivered at the contractually agreed and invoiced price. The transaction price will be adjusted for the agreed inflation adjustment (and other relevant price adjustments) each year, when it occurs. This is in line with both the previous revenue recognition under IAS 18 and IFRS 15. IFRS 15 will therefore not impact revenue recognition related to the sale of power. Further, the Group's contracts for sale of electricity does not contain significant deferred or advanced payment terms. The segment revenues as presented in note 3, Operating segments will, in line with the above, remain unchanged. Please refer to note 3 for further details.
With regards to variable consideration related to intra-group EPC and OM agreements, under the previous IAS 11/18, revenue was recognized when it was probable that the economic benefits associated with the transaction would flow to the entity. Under the new standard the entity may include some or all of it in the transaction price – but only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue will not occur.
Where Scatec Solar develops projects or acquire project rights and sell these assets to other entities in the Scatec Solar Group or external parties; revenues from transfer of development rights are recognised upon the transfer of title.
Where Scatec Solar is responsible for the total scope of a Turn Key installation of a solar power plant through a contract covering Engineering, Procurement and Construction; Revenues from construction services are based on fixed price contracts and are accounted for using the percentage of completion method. The stage of completion of a contract is determined by actual cost incurred over total estimated costs to complete.
Scatec Solar periodically revise contract profit estimates and immediately recognises any losses on contracts. Incurred costs include all direct materials, costs for solar modules, labour, subcontractor costs, and other direct costs related to contract performance. Scatec Solar recognises direct material costs as incurred costs when the direct materials have been installed. When contracts specify that title to direct materials transfer to the customer before installation has been performed, revenue and associated costs are deferred and recognised once those materials are installed and have met any other revenue recognition requirements. Scatec Solar considers direct materials to be installed when they are permanently attached or fitted to the solar power systems as required by engineering designs.
Some construction contracts include product warranties. The expected warranty amounts are recognised as an expense at the time of sale and are adjusted for subsequent changes in estimates or actual outcomes.
The group has currently no ongoing external construction contracts.
Where Scatec Solar delivers services to ensure optimised operations of solar power producing assets through a complete and comprehensive range of services for technical and operational management. Revenues are based on service agreements with a periodic base fee as well as a potential performance bonus. These revenues are recognised as the service is provided. The potential performance revenues are considered as variable consideration under IFRS 15 and are recognised when it is highly probable that the recognition will not be reversed in future periods. The group has currently no significant external operation and maintenance service contracts.
The Group's power producing assets derives its revenue from the production and sale of solar generated electricity based on long-term Power Purchase Agreements or Feed-in-Tariffs. Revenue is recognised upon delivery of electricity produced to the local operator of the electricity grid. Delivery is deemed complete when all the risks and rewards associated with ownership have been transferred to the buyer as contractually agreed, compensation has been contractually established and collection of the resulting receivable is probable. Revenues from the sale of electricity are recognised at the time the electricity is supplied on the basis of periodic meter readings. For all sales contracts the Group had per the end of year, indexation of tariffs is recognised when they come into force.
The Group applies the above policies also for intercompany transactions between segments.
Income tax expense comprises current tax and change in deferred tax.
Current income tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Uncertain tax positions and potential tax exposures are analysed individually and, the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and virtually certain amount for assets to be received (disputed tax positions for which payment has already been made), are recognised within current tax or deferred tax as appropriate. Interest income and interest expenses relating to tax issues are estimated and recorded in the period in which they are earned or incurred and, are presented in net financial expenses in the statement of profit or loss.
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, subject to the initial recognition exemption. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the
consolidated statement of financial position date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In order for a deferred tax asset to be recognised based on future taxable profits, convincing evidence is required.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Current and deferred tax are recognised as expense or income in the consolidated statement of profit or loss, except where they relate to items recognised in other comprehensive income or directly to equity, in which case the tax is also recognised as other comprehensive income or directly to equity.
For information on significant judgements related to tax, refer to Note 2 – Key sources of estimation uncertainty, judgements and assumptions.
Each solar project that the Group develops is unique and does not give rise to an intangible asset, which can be utilised across projects. Consequently, there are no internally generated intangible assets in the Group's statement of financial position.
Goodwill is tested for impairment annually as of 31 December and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (CGU) (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
The Group's investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. In a situation where a joint venture is established by rendering joint control to another party in a business, that before the transaction was fully consolidated, will the consolidated assets and liabilities be derecognized at book value at the time of the transaction and replaced by a single-line- asset in the Consolidated statement of financial position, measured at fair value. The difference between the carrying amount of the net consolidated assets and the fair value of the joint venture is fully recognized in the consolidated statement of profit and loss when the derecognized assets constitute a business under the definition in IFRS 3.
The carrying amount of the investment is adjusted to recognise changes in the Group's share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects the Group's share of the results of operations of the associate or joint venture in addition to amortisation of any fair value adjustment at the time of investment.
When the Group's share of a loss exceeds the Group's investment in an associate or joint venture, the amount carried in the Group's statement of financial position is reduced to zero and further losses are not recognised unless the Group has an obligation to cover any such loss.
Any change in OCI of those investees is presented as part of the Group's OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.
The aggregate of the Group's share of profit or loss of an
associate and a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.
With application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture should be impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as 'Share of profit of an associate and a joint venture' in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
Expenses relating to research activities (project opportunities) are recognised in the statement of profit or loss as they incur. Expenses relating to development activities (project pipeline and backlog) are capitalised to the extent that the project is technically and commercially viable and the Group has sufficient resources to complete the development work.
Expenses that are capitalised include the costs of materials, direct wage costs and other directly attributable expenses. Capitalised development costs are presented as part of Property, plant and equipment to the extent that the Group has the intention to complete the development and construction as well as operating the solar power plant. In the case where the Group's intention is to sell the solar power plant, capitalised development costs are presented as inventory.
Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of a decommissioning obligation, if any, and, for qualifying assets, borrowing costs incurred in the construction period. Each component
of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately on a straight-line basis over the estimated useful life of the component. Maintenance expenses are recognised in the statement of profit or loss as incurred. Replacement of damaged components is accounted for as an impairment of the replaced components with capitalization of the replacement cost as a new item of PPE.
The estimated useful lives of property, plant and equipment are reviewed on an annual basis and changes in useful lives are accounted for prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period the item is de-recognised.
General and specific borrowing costs directly attributable to the acquisition or construction of solar power plant are capitalised within property plant and equipment. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use are undertaken and continue to be capitalised until the date in which development of the relevant asset is complete. All other borrowing costs are recognised in the profit or loss in the period in which they incur.
Depreciation of a solar power plant commences when the plant is ready for management's intended use, normally at the date of grid connection and commissioning. The residual value of the plant is taken into consideration when calculating the annual depreciation.
At each reporting date, the Group evaluates if there are indicators that property, plant and equipment may be impaired. If indicators exist, the recoverable amount of assets or cash generating units is estimated and compared with the carrying amount. The recoverable amount is the higher of the fair value less cost to sell and value in use.
For impairment of property, plant and equipment, the Company assesses assets or groups of assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Individual assets are grouped to a level that provides separately identifiable and largely independent cash flows. In assessing whether a write-down of the carrying amount of a potentially impaired asset is required, the asset's carrying amount is compared to the recoverable amount which is the higher of fair value less costs to sell and value in use. Frequently the recoverable amount of an asset proves to be the Group's estimated value in use, which is determined using a discounted cash flow model. The estimated future cash flows are based on budgets and forecasts and are adjusted for risks specific to the asset and discounted using a post-tax discount rate. Country risk is adjusted for in the discount rate. The use of post-tax discount rates in determining value in use does not result in a materially different determination of the need for, or the amount of, impairment that would be required if pre-tax discount rates had been used.
Impairments are reversed to the extent that conditions for impairment are no longer present.
Provision for asset retirement costs are recognized when the Group has an obligation to dismantle and remove a solar power plant and to restore the site on which it is located. The asset retirement cost is capitalized as part of the carrying value of the solar power plant and depreciated over the useful life of the plants. Expenditures related to asset retirement obligations are expected to be paid in the period between 2033 and 2041. The expected timing is based on the duration of the existing PPAs but could be extended dependent on the development of the power markets post the current PPA regime.
Scatec Solar's future asset retirement obligation depends on several uncertain factors such as the possible existence of a power market for the plants after the end of the PPA, future recycling arrangements for solar panels and/or their second-hand value, future value of steel and copper as well as future development of interest and currency exchange rates. As a result, the initial recognition of the liability and the capitalised cost associated with the removal obligations, and the subsequent adjustments, involve the application of significant judgement. The calculation of the ARO is done on a plant by plant basis, taking into consideration relevant project specifics.
Determining whether an arrangement contains a lease At inception of an arrangement, Scatec Solar assesses whether the arrangement is or contains a lease.
The Group distinguishes between lease contracts and capacity contracts. Lease contracts provide the right to use a specific asset for a period of time. Capacity contracts confer
the right to and the obligation to pay for availability of certain capacity volumes. Such capacity contracts that do not involve specified single assets that do not involve substantially all the capacity of an undivided interest in a specific asset or capacity contracts that have a contractually fixed price are not considered by the Group to qualify as leases. In doing this assessment the Group applies the conditions set forth by IFRIC 4. The Group's portfolio of PPAs comprise agreements with no indexation, partial indexation, full indexation and stepped pricing. With regards to the interpretation of the requirement "contractually fixed price per unit" Scatec Solar considers the contract price fixed also when the price is subject to inflation adjustment. Except for the power plants in Jordan and Malaysia, all the existing PPAs in operation are considered capacity contracts. The Jordanian and Malaysian PPAs have a pricing mechanism which requires power produced above a certain cap to be made available at significant discounts. As such the price is not absolutely fixed and the PPAs are accounted for as operational leases. This does not have an impact on the presentation of the operations in the statements of financial position or profit or loss.
Leases for which the Group assumes substantially all the risks and rewards of ownership are reflected as finance leases within property, plant and equipment and financial liabilities, respectively. All other leases are classified as operating leases and the costs are charged to the statement of profit or loss on a straight-line basis over the lease term, unless another basis is more representative of the benefits of the lease to the Group.
Finance lease assets and liabilities are reflected at an amount equal to the lower of fair value and the present value of the minimum lease payments at inception of the lease. The finance lease assets are subsequently reduced by accumulated depreciation and impairment losses, if any. The assets are depreciated over the shorter of the estimated useful life of the asset or the lease term on a straight-line basis.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Leases for which most of the risk and return associated with the ownership of the asset have not been transferred to the Group are classified as operating leases. During the contract period, lease payments are classified as operating costs and are recognised in the statement of comprehensive income in a straight–line.
Scatec Solar has not entered into arrangements in which the Group is a lessor.
The Company recognises a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorised, and the distribution is no longer at the discretion of the Company. As per the corporate laws in Norway, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
Cash includes cash in hand and at bank. Cash equivalents are short-term liquid investments that can be immediately converted into a known amount of cash and have a maximum term to maturity of three months.
Restricted cash is cash reserved for a specific purpose and therefore not available for immediate and general use by the Group.
Wages, salaries, bonuses, pension and social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Company. The Group has pension plans for employees that are classified as defined contribution plans. Contributions to defined contribution schemes are recognised in the consolidated statement of profit or loss in the period in which the contribution amounts are earned by the employees. Certain key employees were in 2014 invited to a retention and share incentive programme. The programme is entirely settled in shares. In 2015, a cash settled sharebased programme was introduced to certain key employees. In 2016, the company introduced an equity settled option program for leading employees. The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognized in personnel expenses, together with a corresponding increase in equity over the vesting period. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the company's best estimate of the number of equity instruments that will ultimately vest. Service and non-market performance conditions are not considered when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the company's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, is considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
A liability is recognized for the fair value of cash-settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognized in personnel expenses. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability.
Further information on both programmes is provided in note 26.
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Grants are recognised systematically during the grant period. Grants are deducted from the cost which the grant is meant to cover. Grants are recognised either as cost reduction or as a deduction of the asset's carrying amount. Grants received for projects being capitalised are recognised systematically over the asset's useful life.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, 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, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance expenses in the consolidated statement of profit or loss.
A provision for a guarantee is recognised when the underlying products or services are sold. The provision is based on historical information on guarantees and a weighting of possible outcomes according to the likelihood of their occurrence.
Provision for asset retirement costs are recognized when the Group has a legal or constructive obligation to dismantle and remove a solar power plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. The provisions are estimated per plant based on specific characteristics of each plant also in addition to applicable macroeconomic conditions. When a liability for asset retirement costs is recognized, a corresponding amount is recorded to increase the related property, plant and equipment. This is subsequently depreciated as part of the cost of the plant. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding property, plant and equipment.
Contingent liabilities arising from past events and for which it is not probable that an outflow of resources will be required to settle the obligation, if any, are not recognised but disclosed with indication of uncertainties relating to amounts and timing involved. Disclosures are not given if the possibility of an outflow in settlement is remote.
Contingent assets arising from past events that will only be confirmed by future uncertain events and are not wholly within the Group's control, are not recognised, but are disclosed when an inflow of economic benefits is probable.
New information on the company's financial position at the end of the reporting period that becomes known after the reporting period is recorded in the annual accounts. Events after the reporting period that do not affect the company's financial position at the end of the reporting period, but which will affect the company's financial position in the future, are disclosed if significant.
The Group applied for the first-time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2018. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
These amendments were effective for annual periods beginning on or after 1 January 2018. These amendments have not resulted in any significant impact on the financial statements of The Group. Please refer to note 26 for details.
Standards and interpretations that are issued up to the date of issuance of the consolidated financial statements, but not yet effective are disclosed below. The Group's intention is to adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued. The adoption of these standards and interpretations are not expected to have material effect on the consolidated financial statements.
In January 2016 the IASB issued IFRS 16 Leases. The standard is effective from 1 January 2019.
At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17.
The Group has made an analysis based on the contracts in place in 2018. The new standard is expected to mainly impact the Group's recognition of long-term land lease agreements for the solar power plants and office leases. The accounting effect for land leases varies across the solar plants due to differences in contract terms impacting whether there is a lease or not. The analysis indicates that the total effects on the financial statements for 2018 would have been limited. EBITDA would have increased by NOK 17 million (1.8 %), operating profit (EBIT) would have increased by NOK 2 million (0.3 %), while the total balance sheet would have increased by NOK 191 million (1.3%).
The amendments to IAS 12 are effective from 1 January 2019 and are not expected to have any impact on the Group.
Parent company financial statements
| Statement of income | 112 | |
|---|---|---|
| Statement of financial position | 113 | |
| Statement of financial position | 114 | |
| Statement of cash flow | 115 | |
| Notes to the parent company financial statements | 116 | |
| Note 1 | General information | 116 |
| Note 2 | Accounting principles | 116 |
| Note 3 | Revenues | 119 |
| Note 4 | Personnel expenses, number of employees and auditor's fee | 120 |
| Note 5 | Property, plant and equipment | 124 |
| Note 6 | Other operating expenses | 124 |
| Note 7 | Financial income and expenses | 125 |
| Note 8 | Tax | 125 |
| Note 9 | Investments in subsidaries and associated companies | 127 |
| Note 10 | Inventory | 129 |
| Note 11 | Cash and cash equivalents | 129 |
| Note 12 | Equity and shareholder information | 130 |
| Note 13 | Guarantees, contractual obligations, contingent liabilities | 131 |
| Note 14 | Transactions with related parties | 134 |
| Note 15 | Provision for bad debt | 135 |
| Note 16 | Bonds | 135 |
| Note 17 | Other current liabilities | 136 |
| Note 18 | Subsequent events | 136 |
1 JANUARY – 31 DECEMBER
| NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|
| Revenues | 3 | 1,661 | 488 |
| Total revenues | 1,661 | 488 | |
| Costs of sales | 2, 10 | -1,446 | -430 |
| Personnel expenses | 4 | -90 | -61 |
| Other operating expenses | 6, 14, 15 | -62 | -77 |
| Depreciation, amortisation and impairment | 5 | -3 | -1 |
| Operating profit/(loss) | 60 | -82 | |
| Interest and other financial income | 7, 14 | 148 | 206 |
| Interest and other financial expenses | 7, 14 | -102 | -77 |
| Foreign exchange gain/(loss) | 44 | -71 | |
| Profit before tax | 149 | -24 | |
| Income tax (expense)/benefit | 8 | -28 | 26 |
| Profit/(loss) for the period | 122 | 2 | |
| Allocation of profit/(loss) for the period | |||
| Dividend | 12 | 108 | 80 |
| Transfer to/(from) other equity | 12 | 14 | -79 |
| Total allocation of profit/(loss) for the period | 122 | 1 |
1 JANUARY – 31 DECEMBER
| NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|
| Non-current assets | |||
| Deferred tax assets | 8 | 56 | 77 |
| Property plant and equipment | 5 | 26 | 11 |
| Investments in subsidiaries | 9 | 1,836 | 811 |
| Loan to group companies | 14 | 1,630 | 715 |
| Other non-current receivables | 29 | 14 | |
| Total non-current assets | 3,578 | 1,628 | |
| Current assets | |||
| Inventory | 10 | 364 | 277 |
| Trade and other receivables | 15 | 15 | 2 |
| Trade and other receivables group companies | 3,15 | 641 | 852 |
| Other current assets | 18 | 14 | |
| Cash and cash equivalents | 11 | 425 | 332 |
| Total current assets | 1,465 | 1,477 | |
| TOTAL ASSETS | 5,043 | 3,105 |
AS OF 31 DECEMBER
| NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|
| Paid in capital | |||
| Share capital | 12 | 3 | 3 |
| Share premium | 12 | 1,794 | 1,195 |
| Total paid in capital | 1,797 | 1,197 | |
| Other equity | |||
| Other equity | 12 | -161 | -174 |
| Total other equity | -161 | -174 | |
| Total equity | 1,636 | 1,022 | |
| Non-current liabilities | |||
| Bonds | 16 | 743 | 741 |
| Liabilities to group companies | 14 | 1,041 | 674 |
| Other non-current liabilities | 40 | 42 | |
| Total other non-current liabilities | 1,823 | 1,456 | |
| Current liabilities | |||
| Trade and other payables | 103 | 66 | |
| Trade payables group companies | 83 | 80 | |
| Income tax payable | 8 | 5 | 1 |
| Public duties payable | 16 | 15 | |
| Dividend | 12 | 108 | 80 |
| Other current liabilities | 17 | 1,269 | 384 |
| Total current liabilities | 1,584 | 626 | |
| Total Liabilities | 3,407 | 2,083 | |
| TOTAL EQUITY AND LIABILITIES | 5,043 | 3,105 |
The Board of Directors of Scatec Solar ASA
John Andersen Jr. (Chairman) John Giverholt Mari Thjømøe
Jan Skogseth Gisele Marchand Raymond Carlsen (CEO)
1 JANUARY – 31 DECEMBER
| NOK MILLION | NOTE | 2018 | 2017 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit before taxes | 149 | -24 | |
| Depreciation, amortisation and impairment | 5 | 3 | 1 |
| Interest and other financial income | 7 | -148 | -206 |
| Interest and other financial expenses | 7 | 102 | 78 |
| Foreign exchange gain/(loss) | -44 | 192 | |
| (Increase)/decrease in inventories | 10 | -87 | - |
| (Increase)/decrease in trade receivables | 15 | 198 | -392 |
| Increase/(decrease) in trade payables | 40 | 9 | |
| Taxes paid | 8 | - | - |
| Other items | 1,169 | 123 | |
| Net cash flow from operating activities | 1,382 | -219 | |
| Cash flows from investing activities | |||
| Investments in property, plant and equipment | 5 | -17 | -7 |
| Proceeds from sale of fixed assets | - | 1 | |
| Net loans to subsidiaries | 14 | -1,326 | -365 |
| Interests received | 91 | 37 | |
| Investments in subsidiaries and associated companies | 9 | -614 | -33 |
| Dividends from and capital decrease in subsidiaries | 9 | 130 | 169 |
| Net cash flow from investing activities | -1,736 | -199 | |
| Cash flows from financing activities | |||
| Proceeds from share capital increase | 12 | 596 | 373 |
| Dividends paid to equity holders | 12 | -81 | -73 |
| Interest paid | -68 | -55 | |
| Proceeds from bond issue | 16 | - | 750 |
| Repayment of bond | 16 | - | -523 |
| Net cash flow from financing activities | 447 | 472 | |
| Net increase/(decrease) in cash and cash equivalents | |||
| Net increase/(decrease) in cash and other equivalents | 93 | 54 | |
| Cash and cash equivalents at end of period | 332 | 278 | |
| Cash and cash equivalents at end of period | 425 | 332 |
Scatec Solar ASA is incorporated and domiciled in Norway. The address of its registered office is Karenslyst Allé 49, NO-0279 OSLO, Norway. Scatec Solar was established on 2 February 2007.
Scatec Solar ASA ("the Company"), its subsidiaries and investments in associated companies and joint ventures ("the Group" or "Scatec Solar") is a leading independent solar power producer. The Company is pursuing an integrated business model across the complete lifecycle of utility-scale
solar photovoltaic (PV) power plants including project development, financing, construction, ownership, and operation and maintenance.
The Company is listed on the Oslo Stock Exchange.
The consolidated financial statements for the full year 2018 were authorised for issue in accordance with a resolution by the Board of Directors on 14 March 2019.
The financial statements of Scatec Solar ASA are prepared in accordance with the Norwegian Accounting Act of 1998 and Norwegian Generally Accepted Accounting Principles (NGAAP).
These financial statements have been prepared on a historical cost basis.
In preparing the financial statements, assumptions and estimates that have had effect on the amounts and presentation of assets and liabilities, income and expenses and contingent liabilities must be made. Actual results could differ from these assumptions and estimates.
The functional currency and presentation currency of the Company is Norwegian kroner (NOK). Transactions in foreign currency are translated at the rate applicable on the transaction date. Monetary items in a foreign currency are translated into NOK using the exchange rate applicable on the balance sheet date. Non-monetary items that are measured at their historical cost expressed in a foreign currency are translated into NOK using the exchange rate
applicable on the transaction date. Non-monetary items that are measured at their fair value expressed in a foreign currency are translated using the exchange rate applicable on the balance sheet date.
Scatec Solar ASA develops project rights that are the basis for construction of solar PV plants. Revenues are partly derived from the sale of these project rights. These transactions are primarily made with project companies which are under the control of the Group. Revenues are recognized upon the transfer of title. The accumulated cost of project rights is expensed upon the transfer of title or when a project is abandoned and impaired. Cost of sales consists of capitalised payroll expenses, travel expenses and external expenses that are directly attributable to developing the project rights, such as legal fees, expenses incurred for obtaining permits etc.
Revenues from construction services are based on fixed price contracts and are accounted for using the percentage of completion method. The stage of completion of a contract is determined by actual cost incurred over total estimated costs to complete. These transactions are primarily made with project companies which are under the control of the Group.
Scatec Solar periodically revise contract profit estimates and immediately recognises any losses on contracts. Incurred costs include all direct materials, costs for solar modules, labour, subcontractor costs, and other direct costs related to contract performance. Scatec Solar recognises direct material costs as incurred costs when the direct materials have been installed. When contracts specify that title to direct materials transfer to the customer before installation has been performed, revenue and associated costs are deferred and recognized once those materials are installed and have met any other revenue recognition requirements. Scatec Solar considers direct materials to be installed when they are permanently attached or fitted to the solar power systems as required by engineering designs.
Some construction contracts include product warranties. The expected warranty amounts are recognized as an expense at the time of sale and are adjusted for subsequent changes in estimates or actual outcomes.
Further, Scatec Solar ASA derives revenues from the allocation of headquarter costs to its subsidiaries. Revenues from the sale of intercompany services are recognized when the services are delivered.
Wages, salaries, bonuses, pension and social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Company. The Company has pension plans for employees that are classified as defined contribution plans. Contributions to defined contribution schemes are recognized in the statement of profit or loss in the period in which the contribution amounts are earned by the employees. Certain key employees were in 2014 invited to a retention and share incentive programme. The programme is entirely settled in shares. In 2015, a cash settled sharebased programme was introduced to certain key employees. In 2016, the company introduced an equity settled option program for leading employees. The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognized in personnel expenses, together with a corresponding increase in equity over the vesting period. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the company's best estimate of the number of equity instruments that will ultimately vest. Service and nonmarket performance conditions are not considered when
determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the company's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
A liability is recognized for the fair value of cash-settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognized in personnel expenses. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability.
For further information refer to note 4 – Employee benefits.
Interest income and expenses are recognized in the income statement as they are accrued, based on the effective interest method.
Income tax expense in the statement of income for the year comprises current tax and changes in deferred tax. Income tax expense is recognized in the statement of income.
Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Uncertain tax positions and potential tax exposures are analysed individually and the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and virtually certain amounts for assets to be received (disputed tax positions for which payment has already been made) in each case are recognized within current tax or deferred tax as appropriate. Interest income and interest expenses relating to tax issues are estimated and recorded in the period in which they are earned or incurred and are presented in net finance expenses in the statement of income.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the
financial statements and their respective tax bases, subject to the initial recognition exemption. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In order for a deferred tax asset to be recognized based on future taxable profits, convincing evidence is required.
Current assets and liabilities consist of receivables and payables due within one year as well as project rights. Other balance sheet items are classified as non-current assets and liabilities.
Intangible assets and property, plant and equipment are stated at cost, less accumulated amortisation/depreciation and accumulated impairment losses. Intangible assets and property, plant and equipment acquired separately are carried initially at cost.
Intangible assets and property, plant and equipment are amortised/depreciated on a straight-line basis over their expected useful life, from the date the assets are taken into use. The expected useful life of the assets is reviewed on an annual basis and changes in useful life are accounted for prospectively.
Each component of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately on a straight-line basis over the estimated useful life of the component.
An item of intangible assets and property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is recognized in the statement of income in the period the item is derecognized.
Subsidiaries and investment in associated companies Subsidiaries are all entities controlled by Scatec Solar ASA. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee.
Subsidiaries and investment in associated companies are accounted for using the cost method and are recognized at cost less impairment. The cost price is increased when funds are added through capital increases. Dividends to be received are recognized either as income or a reduction of the investment in the subsidiary, at the date the dividend is declared by the general meeting of the subsidiary. To the extent that the dividend relates to distribution of results from the period Scatec Solar ASA has owned the subsidiary, it is recognized as income. Dividends which are repayment of invested capital are recognized as a reduction of the investment in the subsidiary.
Scatec Solar ASA assesses at each balance sheet date whether a financial asset or a group of financial assets should be impaired. For financial assets carried at amortised cost, if there is objective evidence that an impairment loss on loans and receivables has been incurred, the carrying amount of the assets are reduced. Interest-bearing borrowings are initially recognized at cost. After initial recognition, such financial liabilities are measured at amortised costs using the effective interest method. Transaction costs are taken into account when calculating amortised cost. Trade payables are carried at cost.
Inventories are measured at the lower of cost and net realisable value and comprise costs of solar PV project assets that are intended for sale. Project assets consist primarily of costs relating to solar power projects in various stages of development that are capitalised prior to the sale of the solar power project to a third party for further project development or prior to the signing of a project construction contract. These costs include costs for land and costs for developing a solar power plant. Development costs can include legal, consulting, permitting, and other similar costs such as interconnection or transmission upgrade costs as well as directly attributable payroll expenses.
Scatec Solar reviews project assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers a project commercially viable if it is anticipated to be realised for a profit once it is either fully developed or fully constructed. Scatec Solar considers a partially developed project commercially viable if the anticipated selling price is higher than the carrying value of the related project assets.
A number of factors are assessed to determine if the project will be profitable, the most notable of which is whether there are any changes in environmental, ecological, permitting, or regulatory conditions that impact the project. Such changes could cause the cost of the project to increase or the selling price of the project to decrease. The accumulated cost of a project is expensed as cost of sales either when it is sold or when a project is impaired.
Cash includes cash in hand and at bank. Cash equivalents are short-term liquid investments that can be immediately converted into a known amount of cash and have a maximum term to maturity of three months. In the statement of cash flows, the overdraft facility is presented gross as part of changes in current liabilities.
Distribution of dividends is resolved by a majority vote at the Annual General Meeting of the shareholders of Scatec Solar ASA, based on a proposal from the Board of Directors.
Dividends are recognized as a liability at the reporting date of the financial year that the proposal of dividend relates to. Additional proposed dividends based on the previous fiscal year approved financial statements (i.e. between 1 January and the date that the current year financial statements will be approved) are recognized as a liability at the balance sheet date.
New information on the Company's financial position on the end of the reporting period which becomes known after the reporting period, is recorded in the annual accounts. Events after the reporting period that do not affect the Company's financial position on the end of the reporting period, but which will affect the Company's financial position in the future, are disclosed if significant.
The cash flow statement is prepared using the indirect method.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Services | 1,661 | 488 |
| Sum | 1,661 | 488 |
Services comprise EPC services, sale of project rights and management services – all rendered to Group companies and associates.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Egypt | 971 | 71 |
| Honduras | 391 | 222 |
| Mozambique | 155 | - |
| Malaysia | 62 | 73 |
| South- Africa | 35 | 76 |
| Brazil | 25 | 14 |
| Ukraine | 13 | - |
| Argentina | 8 | - |
| Dubai | - | 30 |
| France | - | 1 |
| Sum | 1,661 | 488 |
Refer to note 14 - Transactions with related parties for further information.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Salaries | 90 | 80 |
| Share-based payment | 7 | 4 |
| Payroll tax | 18 | 14 |
| Pension costs | 7 | 6 |
| Other benefits and personnel costs | 4 | 4 |
| Capitalised to PPE (project assets) | -37 | -46 |
| Total personnel expenses | 90 | 61 |
The average number of FTEs that has been employed in the company through 2018 was 77 (2017: 62).
| 2018 | NUMBER OF OPTIONS |
EXERCISE OF SHARE |
OUT STANDING SHARE |
OTHER | PENSION | LOANS OUT |
|||
|---|---|---|---|---|---|---|---|---|---|
| NOK THOUSAND | TITLE | SALARY 1) | BONUS | AWARDED 2) | OPTIONS | OPTIONS | BENEFITS 3) | COST | STANDING |
| Raymond Carlsen | Chief Executive Officer | 3,211 | 1,200 | 76 | -39 | 154 | 28 | 147 | - |
| Mikkel Tørud | Chief Financial Officer | 2,258 | 770 | 56 | -26 | 119 | 11 | 145 | 1,153 |
| Snorre Valdimarsson EVP General Counsel | 1,763 | 601 | 44 | -22 | 88 | 17 | 146 | 1,212 | |
| Terje Pilskog | EVP Project Development & Project Finance | 1,965 | 670 | 49 | -26 | 101 | 11 | 146 | 1,212 |
| Roar Haugland | EVP Sustainable Business & HSSE | 1,754 | 515 | 44 | -22 | 88 | 11 | 151 | - |
| Torstein Berntsen | EVP Power Production | 1,864 | 636 | 46 | -25 | 95 | 11 | 149 | 1,126 |
| Pål Helsing | EVP Solutions | 1,885 | 827 | - | - | - | 6 | 146 | - |
| Toril Haaland (from 1/6-2018) |
EVP People & Organisation | 801 | - | - | - | - | 69 | - |
| 2017 NOK THOUSAND |
TITLE | SALARY 1) | BONUS | NUMBER OF OPTIONS AWARDED 2) |
EXERCISE OF SHARE OPTIONS |
OUT STANDING SHARE OPTIONS |
OTHER BENEFITS 3) |
PENSION COST |
LOANS OUT STANDING |
|---|---|---|---|---|---|---|---|---|---|
| Raymond Carlsen | Chief Executive Officer | 3,121 | - | - | 116 | 18 | 146 | - | |
| Mikkel Tørud | Chief Financial Officer | 2,205 | - | - | 90 | 12 | 142 | 1,535 | |
| Snorre Valdimarsson EVP General Counsel | 1,686 | - | - | 67 | 13 | 143 | 1,504 | ||
| Terje Pilskog | EVP Project Development & Project Finance | 1,920 | - | - | 78 | 12 | 143 | 1,446 | |
| Roar Haugland | EVP Sustainable Business & HSSE | 1,686 | - | - | 67 | 12 | 148 | - | |
| Torstein Berntsen | EVP Power Production | 1,821 | - | - | 74 | 15 | 146 | 1,445 | |
| Pål Helsing | EVP Solutions | 1,850 | - | 12 | 144 | - |
1) Including paid out holiday allowance.
2) See below for further information.
3) Other benefits include benefits such as insurance, free phone, and car allowance.
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| NOK THOUSAND | BOARD REMUNER ATION |
AUDIT COMMITTEE |
REMUNER ATION COMMITTEE |
NOMINATION COMMITTEE |
BOARD REMUNER ATION |
AUDIT COMMITTEE |
REMUNER ATION |
NOMINATION COMMITTEE |
| Alf Bjørseth (until 23 April 2018) | - | - | - | - | 250 | - | - | - |
| Mari Thjømøe | 275 | 55 | - | - | 250 | 50 | - | - |
| John Andersen Jr. | 440 | 55 | 30 | - | 400 | 50 | 25 | - |
| Jan Skogseth | 275 | - | 30 | - | 250 | 50 | 25 | - |
| Gisele Marchand (from 14 December 2017) |
275 | - | - | - | 146 | - | - | - |
| John Giverholt (from 23 April 2018) |
275 | - | - | - | - | - | - | - |
| Karin Bing Orgland (from 24 April 2017 until 5 October 2017) |
- | - | - | - | 104 | - | - | - |
| Inge Hansen | - | - | - | 50 | - | - | - | 45 |
| Alf Inge Gjerde | - | - | - | 35 | - | - | - | 30 |
1) Annual fees paid in 2018 and 2019 respectively.
The Company has a defined contribution plan in line with the requirement of the law. NOK 7 million is expensed related to the defined contribution plan in 2018 (2017 NOK 6 million).
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Audit fees | 2 | 2 |
| Tax services | 2 | 2 |
| Other services | - | 1 |
| Total | 4 | 5 |
VAT is not included in the numbers above.
In accordance with the Norwegian Public Limited Liability Companies Act section 6-16 a) the Board of Directors intends to present the following statement regarding remuneration of the Executive Management Team to the Annual General Meeting.
This declaration is prepared by the Board of Directors in Scatec Solar ASA ("Scatec Solar") in accordance with the Norwegian Public Limited Liability Companies Act (the "Companies Act") section 6-16a, for consideration at the Annual General Meeting on 30 April 2019.
Principles in this declaration regarding allocation of shares, subscription rights, options and any other form of remuneration stemming from shares or the development of the share price in the Company or in other group companies are binding for the Board of Directors when approved by the General Meeting. Such guidelines are described in section 3.1.2. Other guidelines are precatory for the Board of Directors. If the Board of Directors in an agreement deviates from these guidelines, the reasons for this shall be stated in the minutes of the Board of Directors' meeting.
The principles set out for determination of salaries and other remuneration applies for the Chief Executive Officer, the Chief Financial Officer, and the Executive Vice Presidents of Scatec Solar (together "Executive Management"), as of today eight individuals, for the financial year 2019 and until new principles are resolved by the General Meeting in accordance with the Companies Act.
Executive Management remuneration in Scatec Solar shall be determined based on the following main principles:
Executive Management remuneration shall, as a general guideline, be suitable to attract and retain skilled leaders. The salaries for the Executive Management should be comparable with levels in similar businesses.
Executive Management remuneration should be structured to motivate the Executive Management to strive to realise the Company's strategic goals. The main element of Executive Management remuneration should be the base salary, although additional variable incentives should be available to motivate the Executive Management's efforts on behalf of the company.
Scatec Solar has sought to structure a plan combining base salary, short term incentive and share based long term incentive to ensure (i) to motivate the Executive Management to strive to realise the Company's strategic goals including financial results, (ii) be suitable to attract and retain skilled leaders taking into account the international market the company participates in, and (iii) that the plan is approximately the average for management salaries for comparable Executive Management in similar businesses, and in the respective local market.
As part of the incentive and retention plan in effect from 2016, the Executive Management is part of a bonus arrangement based on key performance indicators both on the Company's overall and financial performance as well as the individual's performance. The bonus shall not exceed fifty percent (50%) of the annual base salary.
The Company implemented in 2016 a share option plan (the "Former Option Plan") whereby the Executive Management and certain of the Company's key employees, may over a three-year period be allocated options corresponding to up to 4,600,000 shares of the Company, equivalent to approximately five percent (5%) of the total outstanding shares. The last tranche of the Former Option Plan was awarded in January 2019, and in aggregate options corresponding to 1,658,315 shares of the Company, equivalent to approximately one and a half percent (1.5%) of total outstanding shares have been awarded since 2016. The strike price of each yearly award is based on the volume weighted average share price for the period immediately
prior to the award. The number of options awarded to each employee is calculated so that the value of the options is expected to correspond to fifty percent (50%) of the employee's base salary based on a pre-defined share price increase over the tenor of the option program.
It is intended that the Board of Directors may use its authorisation to increase the share capital of the Company and/or buy own shares to settle options being exercised under the Option Plan.
From 2020 the Board intends to continue the share option plan following the same principles as previously. Over a three year period, options may be allocated corresponding to up to 2,500,000 shares of the Company, equivalent to approximately 2.2 percent of the total outstanding shares. Annually approximately 1/3 of the options are awarded, with corresponding vesting periods of 12, 24 or 36 months.The strike price of each yearly award is based on the volume weighted average share price for the period immediately prior to the award. The number of options awarded to each employee is calculated so that the value of the options corresponds to fifty percent (50%) of the employee's base salary where the share price increases by 7.5% annually.
The Company has established a pension scheme in accordance with the Norwegian Occupation Pension Act. The pension scheme is based on a defined contribution for all Norwegian employees. The pension scheme covers salary from 1G (NOK 96,883) to 12G (NOK 1,162,596) and is therefore in accordance with Norwegian legislation.
The Company may, but currently has not, sign early retirement agreements for Executive Management.
The Company may compensate the Executive Management and the manager's family, as defined as close associates pursuant to the Norwegian Securities Trading Act section 2-5 no. 1 and 2, for health and life insurance plans in line with standard conditions for executive positions, in addition to mandatory occupational injury insurance required under Norwegian Law.
Agreements may be signed regarding severance pay for the Company's Chief Executive Officer ("CEO") and other members of the Executive Management in order to attend to the Company's needs, at all times, to ensure that the selection of managers is in commensuration with the Company's needs. Pursuant to the Norwegian Working Environment Act, such agreements will not have a binding effect on executives other than the CEO.
Severance schemes shall be sought set up so that they are acceptable internally and externally. In addition to salary and other benefits during the term of notice, such schemes are not to give entitlement to severance pay for more than 12 months.
Executive Management may be offered the benefits in kind that are common for comparable positions, e.g. free telephone service, home PC, free broadband service, newspapers.
Other companies in the Scatec Solar group are to follow the main principles for the determining of management salaries and remuneration as set out in this declaration. Scatec Solar aims at coordinating management remuneration policy and the schemes used for variable benefits throughout the group.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Accumulated cost at 01.01 | 14 | 7 |
| Additions | 17 | 7 |
| Disposed assets at cost | - | -1 |
| Accumulated cost at 31 December | 32 | 14 |
| Accumulated depreciation at 01.01 | 3 | 1 |
| Depreciations for the year | 3 | 1 |
| Accumulated depreciation disposed assets | - | - |
| Accumulated depreciation at 31 December | 6 | 3 |
| Carrying amount at 31 December | 26 | 11 |
| Estimated useful life (years) | 3-10 | 3-5 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Facilities | 8 | 6 |
| Professional fees | 24 | 27 |
| IT and communications | 16 | 13 |
| Travel costs | 6 | 4 |
| Other costs | 8 | 4 |
| Provisions for loss on receivables (ref note15) | - | 20 |
| Total other operating expenses | 62 | 77 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Interest income from group companies | 80 | 33 |
| Other interest income | 5 | 5 |
| Dividend from group companies | 63 | 169 |
| Total interest and other financial income | 148 | 206 |
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Interest expenses from group companies | -10 | -8 |
| Other interest expenses | -63 | -41 |
| Other financial expenses | -29 | -28 |
| Total interest and other financial expenses | -102 | -77 |
The increased interest expenses in 2018 is driven by added corporate funding facilities. Refer to Note 11 – Cash and cash equivalents and 16 - Bonds for further information on company financing.
During fourth quarter 2017 Scatec Solar refinanced the NOK 500 million senior unsecured green bond with maturity in November 2018. The refinancing included certain one-off expenses, including early redemption price above par, early consent fee and solicitation agent fee. The one-off expenses are included in other financial expenses with NOK 27 million.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Income tax expense: | ||
| Current taxes (including CFC) | - | - |
| Withholding tax on received dividends | 6 | 13 |
| Change in deferred tax | 22 | -39 |
| Total tax expense/(income) | 28 | -26 |
| Tax basis: | ||
| Profit before taxes | 149 | -25 |
| Net non-deductible income and expenses 1) | -57 | -160 |
| Changes in temporary differences | -41 | 17 |
| Utilisation of tax losses carried forward | -48 | - |
| Tax base | - | -168 |
| Current taxes according to statutory tax rate (23%/24%) | - | - |
1) Net non-deductible income and expenses for 2018 and 2017 are mainly related to non-taxable dividends partly offset by non-deductible share based payment expenses. The items also include tax-deduction on transaction costs from capital increase recognized in equity.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Expected income tax expense according to statutory tax rate (23%/24%) | 34 | -6 |
| Non-deductible expenses | -13 | -36 |
| Withholding tax on received dividends/CFC | 5 | 13 |
| Effect of changed statutory tax rate (23% to 22% and 24% to 23%) | 3 | 3 |
| Income tax expense/(income) | 28 | -26 |
| Effective tax rate (%) | 19.8 % | 106.2 % |
| NOK MILLION | 2018 | 2017 | CHANGE |
|---|---|---|---|
| Tax loss carried forward | -265 | -304 | 39 |
| Receivables | -23 | -23 | - |
| Inventory | -13 | - | -13 |
| Work in progress | 50 | - | 50 |
| Total temporary differences | -251 | -327 | 76 |
| Recognised tax liability/(asset) | -56 | -77 | 21 |
NOK 29 million of the tax losses carried forward expire in 2024. The remaining tax loss can be carried forward indefinitely.
The table below sets forth Scatec Solar ASA's ownership interest in subsidiaries as well as investments owned by Scatec Solar's subsidiaries. Ownership interest corresponds to voting interest if not otherwise stated.
Ownership interest in daughter-daughter companies are shown by direct ownership interest of daughter-company.
| NOK MILLION | ||||
|---|---|---|---|---|
| COMPANY | REGISTERED OFFICE | OWNERSHIP INTEREST |
CARRYING VALUE 2018 |
CARRYING VALUE 2017 |
| Scatec Solar Solutions GmbH | Regensburg, Germany | 100% | 44 | 43 |
| Scatec Solar SA163 (Pty) Ltd | Cape Town, South Africa | 92% | 16 | 16 |
| Scatec Solar Italy S.R.L | Rome, Italy | 100% | - | - |
| BFL F S.R.L | Rome, Italy | 100% | - | - |
| Scatec Solar S.R.O | Prague, Czech | 100% | 62 | 113 |
| Signo Solar PP01 S.R.O | Prague, Czech | 100% | - | - |
| Signo Solar PP02 S.R.O | Prague, Czech | 100% | - | - |
| Signo Solar PP03 S.R.O | Prague, Czech | 100% | - | - |
| Signo Solar PP04 S.R.O | Prague, Czech | 100% | - | - |
| SPV 1 Solar S.R.O | Prague, Czech | 100% | 7 | 16 |
| Scatec Solar India Pvt. Ltd. | New Delhi, India | 100% | - | - |
| Scatec Solar North America Inc. | California, USA | 100% | - | 85 |
| Utah Red Hills Renewable Park, LLC | California, USA | - | - | - |
| Altamaha Renewable Energy Park, LLC | California, USA | - | - | - |
| Live Oak Solar Farm, LLC | California, USA | - | - | - |
| Three Peaks Power, LLC | California, USA | - | - | - |
| Scatec California Solar No 1, LLC | California, USA | 100% | - | - |
| Scatec California Partners, LP | California, USA | 100% | - | - |
| Scatec Solar Hawaii LLC | Hawaii, USA | 100% | - | - |
| Chateau St Jean Solar LLC | California, USA | 80% | - | - |
| Tourves SPV SAS | St Raphael, France | 100% | - | - |
| Scatec Solar SAS | Paris, France | 100% | - | - |
| Scatec Solar Jordan EPC | Amman, Jordan | 100% | - | - |
| Scatec Solar AS/Jordan PSC | Amman, Jordan | 90% | 53 | 52 |
| Anwar Al Ardh For Solar Energy Generation PSC | Amman, Jordan | 50.1% | 72 | 72 |
| Ardh Al Amal For Solar Energy Generation PSC | Amman, Jordan | 50.1% | 33 | 33 |
| Scatec Luxemburg Holding SA | Luxemburg | - | - | - |
| Scatec Solar Asia Pacific Pte Ltd | Singapore | - | - | - |
| Scatec Solar SA (Pty) Ltd | Sandton, South Africa | 70% | 3 | 3 |
| Scatec Solar SA 165 (Pty) Ltd | Sandton, South Africa | 65% | 96 | 79 |
| Scatec Solar SA 166 (Pty) Ltd | Sandton, South Africa | 39% | - | - |
| Scatec Solar SA 164 (Pty) Ltd | Sandton, South Africa | 71% | 123 | 153 |
| Simacel 155 (Pty) Ltd | Sandton, South Africa | 39% | - | - |
| Simacel 160 (Pty) Ltd | Sandton, South Africa | 39% | - | - |
| Scatec Solar Management Services (Pty) Ltd | Sandton, South Africa | 100% | - | - |
| Scatec Solar Corporation | Tokyo, Japan | - | - | - |
| Scatec Solar Rwanda Ltd | Rwanda | 100% | - | - |
| Gigawatt Global Rwanda Ltd | Rwanda | 54% | 21 | 20 |
| Scatec Solar Honduras SA | Honduras | 100% | 19 | - |
| Produccion de Energia Solar Demas Renovables SA | Honduras | 40% | 59 | 59 |
| Fotovoltaica Surena S.A | Honduras | 70% | 150 | 11 |
| Generaciones Energeticas S.A | Honduras | 70% | 145 | 11 |
| NOK MILLION | ||||
|---|---|---|---|---|
| COMPANY | REGISTERED OFFICE | OWNERSHIP INTEREST |
CARRYING VALUE 2018 |
CARRYING VALUE 2017 |
| Fotovoltaica Los Prados S.A | Honduras | 70% | 63 | 9 |
| Foto Sol S.A | Honduras | 70% | 4 | 4 |
| Energias Solares S.A | Honduras | 70% | 87 | 6 |
| Scatec Solar Africa (Pty) Ltd | South Africa | 100% | - | - |
| Scatec Solar DMCC | United Arab Emirates | 100% | - | - |
| Central Solar de Mocuba SA | Mozambique | 52.5% | - | - |
| Scatec Solar Mozambique Limitada | Mozambique | 100% | 8 | 8 |
| Scatec Solar Mexico SAPI de CV | Mexico | 100% | - | - |
| Scatec Solar Intertec Mexico SAPI de CV | Mexico | 60% | - | - |
| Saferay Solar SAPI de CV | Mexico | 60% | - | - |
| SIM Solar 1 SAPI de CV | Mexico | 60% | - | - |
| SIM Solar SAPI de CV | Mexico | 60% | - | - |
| Scatec Solar Netherlands B.V | The Netherlands | 100% | 767 | 14 |
| Scatec Solar Nigeria B.V | The Netherlands | 100% | - | - |
| Scatec Sukhur B.V Offshore Holdco | The Netherlands | 100% | - | - |
| Scatec Solar Solutions Egypt LLC | Egypt | 100% | - | - |
| Egypt Solar B.V | The Netherlands | 70% | - | - |
| Upper Egypt 2 B.V | The Netherlands | 70% | - | - |
| Upper Egypt Solar Power | Egypt | 51% | - | - |
| Kom Ombo 2 B.V | The Netherlands | 70% | - | - |
| Kom Ombo Renewable Energy SAE | Egypt | 51% | - | - |
| Daraw B.V | The Netherlands | 70% | - | - |
| Philadelphia Power SAE | Egypt | 49% | - | - |
| Zafarana 2 B.V | The Netherlands | 100% | - | - |
| Zafarana Solar Power SAE | Egypt | 49% | - | - |
| Red Sea Solar Power 2 B.V | The Netherlands | 100% | - | - |
| Red Sea Solar Power SAE | Egypt | 51% | - | - |
| Aswan Solar Power SAE | Egypt | 100% | 2 | 2 |
| Scatec Solar Mali S.A. | Mali | 100% | - | - |
| Segou Solaire S.A | Mali | 50% | - | - |
| 1,834 | 809 |
| NOK MILLION | ||||
|---|---|---|---|---|
| ASSOCIATES AND JOINT VENTURES | OFFICE | OWNERSHIP | CARRYING VALUE 2018 |
CARRYING VALUE 2017 |
| Megawatt Holding AS | Oslo, Norway | 50% | - | - |
| SanSca Limited | Hong Kong | 25% | - | - |
| Scatec Energy | California, USA | 50% | - | - |
| Kube Energy AS | Oslo, Norway | 25% | 2 | 2 |
| Total | 2 | 2 |
The carrying value of projects under development are presented as inventories and are stated at the lower of cost and net realisable value. The project assets are related to solar power plants under development and construction.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Americas | 111 | 214 |
| West Africa | 4 | 41 |
| Middle East | 110 | 14 |
| Asia | 44 | 4 |
| East Africa | 78 | 2 |
| South Africa | - | 1 |
| Europe | 17 | - |
| Carrying value inventory at 31.12 | 364 | 277 |
The impairments done during 2018 were NOK 12 million (2017: NOK 0 million). The impairments are presented in cost of sales.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Restricted cash | 18 | 27 |
| Free cash | 407 | 305 |
| Total cash and cash equivalents | 425 | 332 |
On 7 July 2017 Scatec Solar entered into a new guarantee facility, a new USD 30 million overdraft facility and an intercreditor agreement. The facilities replaced all other corporate guarantees and overdraft facilities existing at the date of the new agreements. Financial covenants were changed during 2017 and equal the financial covenants in the new NOK 750 million bond agreement.
In first quarter 2018 Scatec Solar entered into a USD 60 million revolving credit facility with Nordea Bank as agent and Nordea Bank and ABN Amro as equal Lenders. The facility can be drawn in USD, NOK, EUR or an optional currency agreed with the banks. Revolving credit facility interest is the interbank offer rate for the drawn period plus a margin of 3.25%. Scatec Solar has not drawn on the revolving credit facility per 31 December 2018.
In second quarter 2018 Scatec Solar entered into a USD 5 million overdraft facility with Nordea Bank. The overdraft interest is the 7-day interbank offer rate plus a margin of 2.5%. Scatec Solar has not drawn on the overdraft facility per 31 December 2018.
In fourth quarter 2017 Scatec Solar issued a NOK 750 million senior unsecured green bond with maturity in November 2021. The bond carries an interest of 3-month NIBOR + 4.75%, to be settled on a quarterly basis. The bond was listed on the Oslo Stock Exchange 6 April 2018 with ticker SSO02 G.
Per 31 December 2018, Scatec Solar was in compliance with all financial covenants for the above facilities. The book equity of the recourse group, as defined in the facility agreements, was NOK 3,095 million per quarter end.
During 2018 interest amounting to NOK 61 million (41) was expensed for the bond, overdraft- and revolving credit facility.
Refer to note 16 for further information on the bonds.
| NOK MILLION | ISSUED CAPITAL | SHARE PREMIUM | OTHER EQUITY | TOTAL EQUITY |
|---|---|---|---|---|
| Equity as of 31.12.2017 | 3 | 1,195 | -174 | 1,022 |
| Profit/(loss) for the period | - | - | 122 | 122 |
| Share-based payment | - | 5 | - | 5 |
| Share capital increase | - | 595 | - | 595 |
| Accrued dividend | - | - | -108 | -108 |
| Equity as of 31.12.2018 | 3 | 1,794 | -161 | 1,636 |
On 5 February 2018, as part of the Group's incentive program, a share capital increase raised NOK 5 million through an exercise of employee share options consisting of 216,202 new shares at a price of NOK 28.86 per share.
During second quarter 2018 Scatec Solar successfully raised NOK 590 million through a private placement consisting of 10 million new shares at a price of NOK 60 per share. At 31 December 2018, the share capital amounted to NOK 2,835 thousand. All shares rank in parity with one another and carry one vote per share.
For 2018 the Board of Directors has proposed a dividend of NOK 0.95 per share, totalling NOK 108 million. The share will be traded excluding dividend rights (ex-date) on the day following the Annual General Meeting to be held 30 April 2019.
On 23 April 2018, the Annual General Meeting of Scatec Solar ASA resolved to pay a dividend of NOK 0.78 per share, totalling NOK 81 million. The dividend was paid to the shareholders on 14 May 2018.
The tables below show the largest shareholders of Scatec Solar ASA and shares held by Management and Board of Directors at 31 December 2018.
| SHAREHOLDER | NUMBER OF SHARES | OWNERSHIP |
|---|---|---|
| SCATEC AS | 19,482,339 | 17.18 % |
| FERD AS | 13,411,182 | 11.83 % |
| EQUINOR ASA | 11,020,000 | 9.72 % |
| FOLKETRYGDFONDET | 7,550,904 | 6.66 % |
| UBS AG | 3,865,983 | 3.41 % |
| ARGENTOS AS | 2,755,760 | 2.43 % |
| VERDIPAPIRFONDET DNB NORGE (IV) | 2,199,263 | 1.94 % |
| SEB PRIME SOLUTIONS SISSENER CANOP | 2,100,000 | 1.85 % |
| HANDELSBANKEN HALLBAR ENERGI | 1,684,052 | 1.48 % |
| CACEIS Bank | 1,637,613 | 1.44 % |
| VERDIPAPIRFONDET PARETO INVESTMENT | 1,613,161 | 1.42 % |
| STOREBRAND NORGE I VERDIPAPIRFOND | 1,569,633 | 1.38 % |
| J.P. Morgan Bank Luxembourg S.A. | 1,289,620 | 1.14 % |
| HANDELSBANKENS NORDENFOND | 1,257,143 | 1.11 % |
| The Bank of New York Mellon | 1,238,232 | 1.09 % |
| GOTHIC CORPORATION | 1,172,025 | 1.03 % |
| ARCTIC FUNDS PLC | 885,940 | 0.78 % |
| BNP Paribas Securities Services | 818,323 | 0.72 % |
| HANDELSBANK NORDISKA SMABOLAGSFOND | 706,271 | 0.62 % |
| KLP AKSJENORGE INDEKS | 702,233 | 0.62 % |
| Total 20 largest shareholders | 76,959,677 | 67.86 % |
| Total other shareholders | 36,452,755 | 32.14 % |
| Total shares outstanding | 113,412,432 | 100.00 % |
| BOARD OF DIRECTORS | NUMBER OF SHARES | OWNERSHIP |
|---|---|---|
| John Andersen, Jr. 1) | - | 0.00% |
| Jan Skogseth | 22,000 | 0.02% |
| Gisele Marchand | - | 0.00% |
| Mari Thjømøe 2) | 27,338 | 0.02% |
| John Giverholt | 4,000 | 0,00% |
| Total at 31 December 2018 | 53,338 | 0,05% |
1) Related parties control 19,482,339 shares through Scatec AS.
2) Held through the controlled company Thjømøe Kranen AS.
| MANAGEMENT | NUMBER OF SHARES | OWNERSHIP | |
|---|---|---|---|
| Raymond Carlsen 1) | Chief Executive Officer | 2,778,386 | 2,45% |
| Mikkel Tørud | Chief Financial Officer | 283,940 | 0.25% |
| Terje Pilskog 2) | EVP Project Development & Project Finance | 497,727 | 0.44% |
| Roar Haugland 3) | EVP Sustainable Business & HSSE | 240,262 | 0.21% |
| Torstein Berntsen 4) | EVP Power Production & Asset Management | 682,609 | 0.60% |
| Snorre Valdimarsson | EVP General Counsel | 4,747 | 0.00% |
| Pål Helsing | EVP Solutions | 4,000 | 0,00% |
| Toril Haaland | EVP People & Organisation | - | 0,00% |
| Total at 31 December 2018 | 4,492,566 | 3,96% |
1) Held through the controlled company Argentos AS, where of 22,626 shares held by Raymond Carlsen directly
2) Held through the controlled company Océmar AS.
3) Held through the controlled company Buzz Aldrin AS.
4) Held through the controlled company Belito AS, where of 5,000 shares held by Torstein Berntsen directly. In addition, 895 shares are held by Torstein Berntsen's spouse. These are not included in the total presented in the table above.
Refer to note 4 – Employee benefits for information on share options granted to the management.
Scatec Solar is often required to provide advance payment, performance and warranty guarantees in connection with construction activities, as well as bid bonds in connection with tender processes. These guarantees are issued under the guarantee facility established by Scatec Solar ASA. Outstanding advance payment, performance and warranty guarantees are mainly issued in relation to construction contracts entered into with project companies where Scatec Solar has a controlling interest. Advance payment guarantees typically represent 15-25% of construction contract value and performance guarantees typically represents 10-15% of the construction contract value. After the power plant is completed and grid connected the performance guarantee is replaced by a warranty guarantee of typically 5-10% of the contract value and is in force for the duration of the warranty period typically two years from grid connection. While the total nominal exposure from such guarantees may become significant as the level of construction activities increases in new markets, the exposure is limited in relation to the expected project margins and the contracts relate to construction activities where Scatec Solar has a solid track record. A bid bond is a guarantee issued to the provider in a tender process. Scatec Solar ASA is also providing equity guarantees to project lenders, if project debt is disbursed to project companies before equity.
When required, Scatec Solar ASA is providing a parent guarantee on behalf of subsidiaries for their fulfilment of contractual obligations.
The guarantee volumes specified below include both guarantees issued from recourse group to project companies (subsidiaries) and guarantees issued to third parties.
The guarantees have the following duration (closing balance of total guarantee exposure):
| NOK MILLION | 2019 | 2020 | 2021 | >2021 |
|---|---|---|---|---|
| Advance payment guarantees | 208 | - | - | - |
| Performance guarantees | 497 | 105 | 146 | 54 |
| Warranty guarantees | - | - | 22 | - |
| Bid Bonds | 37 | - | - | 10 |
| Other guarantees | 452 | 169 | 5 | - |
| Total | 1 193 | 274 | 173 | 64 |
The advance payment guarantees, performance guarantees and warranty guarantees are guarantees granted by fully owned subsidiaries in the group to partly owned subsidiaries. Any exercise of these would therefore only affect the allocation of profits or loss and equity between the majority and non-controlling interests in the group. Bid bonds and other guarantees are granted by consolidated subsidiaries to third parties.
The guarantees issued from Scatec Solar ASA are issued by Nordea bank under the guarantee facility with Nordea Bank as agent, and Nordea Bank, ABN Amro and Swedbank as guarantee instrument lenders. The advance payment guarantees, performance guarantees and warranty guarantees in Malaysia, Egypt, Brazil, Jordan and South Africa are counter guaranteed by The Norwegian Export Credit Guarantee Agency (GIEK). Financial covenants are equal to the financial covenants in the green bond issued in November 2017. Per 31 December 2018, Scatec Solar was in compliance with all covenants.
Refer to Note 16 – Bonds, for further information and definitions.
Scatec Solar has contractual obligations primarily through office lease. Further, the group commitments in contracts with suppliers of equipment and sub-EPC services related to the plants under construction in Ukraine, Malaysia, South Africa and Egypt.
| NOK THOUSAND | 2019 | 2020 | 2021 | >2021 |
|---|---|---|---|---|
| Leases (office rental) | 7 | 7 | 7 | 7 |
| Total purchase modules, inverters etc | 1,466 | - | - | - |
| Total purchase services | 15 | - | - | - |
| Total contractual obligations | 1488 | 7 | 7 | 7 |
The Agua Fria power plant in Honduras was completed and commenced operations in July 2015, where Scatec Solar was the contractor. Prior to start of construction, the design of the plant was altered which reduced Capacity from 49.9 MW to approximately 44.15 MW without reducing the actual production and revenue stream of the plant. The commissioning of the plant was delayed as compared to the original schedule where the majority of the delay being deemed caused by events owner should bear the risk for, however, a dispute arose where the owner claimed both delay liquidated damages and capacity damages given the previous reduction in capacity. Scatec Solar's view was that neither delay damages nor capacity damages where due. As an amicable solution the parties agreed that the claims would be forfeited against an extension of the facility to reach a capacity of 47 MW at an installation cost of USD 6 million combined.
Per December 2018 the construction of the extension has not yet been initiated due to interruptions out of the control of Scatec Solar. The owner has claimed that final completion certificate, and hence the final payment, will not be paid until the extension is built. Scatec's position is that it is the owner that has not initiated the extension and as such there is no requirement of having finalized the extension prior to achieving final completion. Consequently, no settlement provision has been made in the group financial statements as at 31 December 2018. There has been extensive dialogue and communication on this topic during 2018 and 2019, and the parties are now in the final phase of negotiations on a solution to the dispute.
| Related parties | Transactions |
|---|---|
| Key management personnel | Loan and payroll |
Subsidiaries and associates Management, development and EPC services and financing
All related party transactions have been carried out as part of the normal course of business and at arm's length. The most significant transactions in 2018 and 2017 are:
Scatec Solar ASA sold EPC services amounting to NOK 1,595 million in total during 2018 (2017: NOK 247 million). Scatec Solar ASA has been EPC contractor for the construction of power plants in Honduras, Mozambique, Egypt, and South Africa. During 2018 total revenues on these contracts amounted to NOK 1,514 million (2017: NOK 164 million). In 2018 the company continued to deliver construction services to subsidiaries in Malaysia, Brazil, Egypt, Mozambique, and Argentina contracted as a sub-contractor. The revenues for 2018 amounted to NOK 82 million (2017: NOK 82 million).
During 2018 the company sold development projects rights amounting to NOK 47 million. The sale of rights related to the financial close and transfer of rights for the Kamianka projects in Ukraine amounting to NOK 10 million, the Redsol project in Malaysia amounting to NOK 19 million and projects in South Africa amounting NOK 5 million. During 2017 the company sold development projects rights amounting to NOK 225 million. The sale of rights related to the financial close and transfer of rights for the Los Prados projects to the power project companies in Honduras amounting to NOK 56 million as well as the Egypt projects portfolio of NOK 70 million. The company also sold the capitalised project asset values of the development projects where the role as main developer / project owner was transferred from Norway to South Africa for projects defined as subsahara projects amounting to NOK 67 million in total as well as the development project in Mozambique where the role as main developer was transferred from Norway to the Scatec Solar DMCC company in Dubai resulting in an income of NOK 30 million.
Scatec Solar has during 2018 charged NOK 17 million for corporate services provided to its subsidiaries (2017: NOK 13 million).
In the course of the ordinary business, inter-company financing is provided from Scatec Solar to its subsidiaries. Long-term financing is interest bearing and priced at arm's length. Refer to note 7 for specification of interest income/expenses from/to subsidiaries and note 9.
Scatec Solar acquired certain consultancy services, such as accounting and project development services, from Scatec AS. For the year ended 31 December 2018 the company incurred fair share of travel agency service cost of NOK 181 thousand. In 2017 the company was charged consultancy service cost of NOK 105 thousand. Travel agency service and consultancy services are presented as other operating expenses in the statement of income. As per 31 December 2018 the trade payables to Scatec AS was NOK 0 thousand (2017: NOK 9 thousand). In connection with the Scatec Solar ASA equity issue in June 2018, Scatec AS entered a share lending agreement with the joint book-runners and Scatec Solar ASA.
Refer to note 4 for information regarding transactions with key management personnel.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Bad debt realised | - | 6 |
| Provision for bad debt | - | 14 |
| Total expenses | - | 20 |
| Bad debt reserve 31 December | 23 | 23 |
In 2017 Scatec Solar completed a NOK 750 million senior unsecured green bond issue with maturity in November 2021. The bonds carry an interest of 3 months NIBOR + 4.75%, to be settled on a quarterly basis. The bond is listed on the Oslo Stock Exchange.
During the term of the bonds, Scatec Solar shall comply with the following financial covenants at all times:
Per 31 December 2018, Scatec Solar was in compliance with all bond covenants. The book equity of the recourse group, as defined in the loan agreement, was NOK 3,094 million per year end, and the debt to capitalization ratio was 19% per year end.
During 2018, an interest amounting to NOK 44 million was expensed (2017: 41 million).
The loan is carried at amortised cost with the total fees of NOK 9 million being amortised over the 4-year period until maturity.
Refer to the loan agreement available on www.scatecsolar.com/investor/debt for further information and definitions.
Refer to Note 11 – Cash and cash equivalents, for description of other sources of corporate funding.
| NOK MILLION | 2018 | 2017 |
|---|---|---|
| Deferred income EPC projects | 1,083 | 246 |
| Liabilities to co-developers | 84 | 84 |
| Accrued interest expenses | 5 | 5 |
| Vacation allowances, bonus accruals etc. | 35 | 26 |
| Other | 62 | 23 |
| Total current liabilities | 1,269 | 384 |
No events occurred after the balance sheet date with significant impact on the financial statements for 2018.
| Backlog | |
|---|---|
| Project backlog | Project backlog is defined as projects with a secure off-take agreement assessed to have more than 90% likelihood of reaching financial close and subsequent realisation. |
| Pipeline | |
| Project pipeline | The pipeline projects are in different stages of development and maturity, but they are all typically in markets with an established government framework for renewables and for which project finance is available (from commercial bank or a multilateral development bank). The project sites have typically been secured and Scatec solar is in a position to participate in bilateral negotiations for a long-term power sales agreement with an off-taker, feed-in-tariff schemes, or tender processes. |
| Lost time injury (LTI) | |
| Lost time injury (LTI) | An occurrence that results in a fatality, permanent disability or time lost from work of one day/shift or more. |
| Definition of project milestones | |
| Financial close (FC): | The date on which all conditions precedent for drawdown of debt funding has been achieved and equity funding has been subscribed for, including execution of all project agreements. Notice to proceed for commencement of construction of the solar power plant will normally be given directly thereafter. Projects in Scatec Solar defined as "backlog" are classified as "under construction" upon achievement of financial close. |
| Start of Production (SOP): | The first date on which the solar power plant generates revenues through sale of power under the off-take agreement. Production volumes and/or the price of the power may be lower than when commercial operation date (COD) is reached. This milestone is regulated by the off-take agreement with the power off-taker. This milestone may be reached prior to COD if the construction of a power plant is completed earlier than anticipated in the off-take agreement. |
| Commercial Operation Date (COD): A scheduled date when certain formal key milestones have been reached, typically including grid compliance, approval of metering systems and technical approval of plant by independent engineers. Production volumes have reached normalised levels sold at the agreed off-taker agreement price. This milestone is regulated by the off-taker agreement with the power off-taker. |
|
| Take Over Date (TOD): | The date on which the EPC contractor hands over the power plant to the power plant company. COD must have been reached, in addition to delivery of training and all technical documentation before TOD takes place. The responsibility for Operations & Maintenance (O&M) of the plant is handed over from the EPC contractor to the O&M contractor at the TOD. This milestone will normally occur shortly after the COD date. |
| Definitions of project finance terms | |
| Debt Service Cover Ratio (DSCR): | The amount of cash flow available to meet annual interest and principal payments on debt. |
| Loan Life Cover Ratio (LLCR): | A ratio used to estimate the ability of a borrowing company to repay an outstanding loan. It is calculated by dividing the net present value (NPV) of the money available for debt repayment by the amount of senior debt owed by the company. |
| Project Life Cover Ratio (PLCR): | A ratio of the net present value (NPV) of the cash flow over the remaining full life of the project to the outstanding debt balance in the period. |
| Other Definitions | |
| Cash in power plant companies in operation: |
Is defined as restricted cash in proceed accounts, debt service reserve accounts, disbursements accounts, maintenance and insurance reserve accounts and similar. These cash and cash equivalents are only available to the Group through distribution as determined by shareholder and non-recourse financing agreements. |
| Cash in power plant companies under development/construction: |
Comprise shareholder financing and draw down on term loan facilities by power plant companies to settle outstanding external EPC invoices. |
| Full-Time Equivalent Employee (FTE): |
An employee which have a contract with the company with no end date. |
| Net gain project sale: | Is defined as sales revenue less costs from sale of project assets. |
We confirm to the best of our knowledge, that the consolidated financial statements for 2018 has been prepared in accordance with IFRS as adopted by EU, and that the information gives a true and fair view of the Group's assets, liabilities, financial position and result for the period. We also confirm that presented information provides a fair overview of important events that have occurred during the period and their impact on the financial statements, key risk and uncertainty factors that Scatec Solar is facing during the next accounting period.
Oslo, 14 March 2019
The Board of Directors of Scatec Solar ASA
John Andersen Jr. (Chairman) John Giverholt Mari Thjømøe
Jan Skogseth Gisele Marchand Raymond Carlsen (CEO)
Scatec Solar discloses alternative performance measures (APM's) in addition to those normally required by IFRS. This is based on the Group's experience that APM's are frequently used by analysts, investors and other parties for supplemental information.
The purpose of APM's is to provide an enhanced insight into the operations, financing and future prospect of the Group. Management also uses these measures internally to drive performance in terms of long-term target setting. APM's are adjusted IFRS measures that are defined, calculated and used in a consistent and transparent manner over the years and across the Group where relevant.
Financial APM's should not be considered as a substitute for measures of performance in accordance with the IFRS. Disclosures of APM's are subject to established internal control procedures.
Book equity: is the total book equity of the recourse group less investments in subsidiaries within the recourse group at the end of any relevant period and in accordance with IFRS. In case a subsidiary is not wholly owned, the book equity of that subsidiary is adjusted to reflect the issuer's pro rate ownership of the book equity in that subsidiary.
Book equity ratio: is defined as total equity divided by total assets.
Cash flow to equity: is a measure that seeks to estimate value creation in terms of the Group's ability to generate funds for equity investments in new solar power plant projects and/or for shareholder dividends over time. The measure is defined as EBITDA less normalized loan and interest repayments, less normalized income tax payments. The definition excludes changes in net working capital, investing activities and fair value adjustment of first-time recognition of joint venture investments. See table below for a detailed specification of cash flow to equity.
EBIT: is defined as earnings before interest and tax and corresponds to operating profit in the consolidated statement of profit or loss.
EBIT margin: is defined as EBIT divided by total revenues and other income.
EBITDA: is defined as operating profit adjusted for depreciation, amortisation and impairments.
EBITDA margin: is defined as EBITDA divided by total revenues and other income.
Gross profit: is defined as total sales revenue including net gain/loss from sale of project assets and net gain/loss from associates minus the cost of goods sold (COGS) divided by total sales revenue, expressed as a percentage. The gross margin represents the percentage of total sales revenue that the Group retains after incurring the direct costs associated with producing the goods and services.
Net interest expense: is defined as interest income less interest expenses, excluding shareholder loan interest expenses and accretion expenses on asset retirement obligations.
Normalised loan repayments: are calculated as the annual repayment divided by four quarters for each calendar year. However, loan repayments are normally made bi-annually. Loan repayments will vary from year to year as the payment plan is based on a sculpted annuity.
Normalised income tax payment: calculated as operating profit (EBIT) less normalised net interest expense multiplied with the nominal tax rate of the jurisdiction where the profit is taxed.
Scatec Solar's economic interest: Scatec Solar's share of the total estimated economic return from its subsidiaries. For projects in development and construction the economic interest is subject to change from the development of the financial model.
SSO Proportionate Financials: From first quarter 2018 the segment financials have been reported on a proportionate basis in line with how the management team assesses the segment performance. With proportionate financials Scatec Solar reports its share of revenues, expenses, profits and cash flows from its subsidiaries without eliminations, based on Scatec Solar's economic interest in the subsidiaries. The Group uses proportionate financials to improve transparency on underlying value creation across Scatec Solar's business activities. The consolidated revenues and profits, on the other hand, are mainly generated in the Power Production segment. Activities in Operation & Maintenance and Development & Construction segment mainly reflect deliveries to other companies controlled by Scatec Solar (with from 43.4% to 100% ownership), for which revenues and profits are eliminated in the Consolidated Financial Statements.
A reconciliation between SSO Proportionate Financials and the consolidated financials for the Group is included in note 3 Operating segments.
Break-down of proportionate cash flow to equity
| NOK MILLION | POWER PRODUCTION |
OPERATION & MAINTENANCE |
DEVELOPMENT & CONSTRUCTION |
CORPORATE | TOTAL |
|---|---|---|---|---|---|
| EBITDA | 492 | 33 | 488 | -53 | 961 |
| Net interest expenses | -162 | - | 3 | -58 | -217 |
| Normalized loan repayments | -136 | - | - | - | -136 |
| Normalized income tax payments | -38 | -8 | -108 | 26 | -127 |
| Cash flow to Equity | 157 | 26 | 383 | -85 | 481 |
| NOK MILLION | POWER PRODUCTION |
OPERATION & MAINTENANCE |
DEVELOPMENT & CONSTRUCTION |
CORPORATE | TOTAL |
|---|---|---|---|---|---|
| EBITDA | 454 | 28 | 361 | -50 | 792 |
| Adjustments 1) | - | - | -201 | - | -201 |
| EBITDA adjusted | 454 | 28 | 160 | -50 | 592 |
| Net interest expenses | -171 | 1 | 3 | -37 | -203 |
| Normalized loan repayments | -113 | - | - | - | -113 |
| Normalized income tax payments | -28 | -7 | 4 | 21 | -10 |
| Cash flow to Equity | 142 | 22 | 167 | -65 | 265 |
1) Adjustments include changes in net working capital, investing activities and fair value adjustment of first-time recognition of joint venture investments.
Debt to Capitalisation Ratio: is defined as the Gross Debt of the Recourse Group divided by the Capitalization of the Recourse Group.
Cash Flow Interest Coverage Ratio: is defined as, for any Relevant Period, the Issuers aggregate Cash Flow to Equity from Power Production, O&M and Corporate (as reported in the Issuers quarterly statements and for Corporate adjusted by adding back any Net Interest Costs already deducted) divided by the Net Interest Costs of the Recourse Group.
Recourse Group: is defined as all entities in the Group, excluding the Solar Park Companies (each a Recourse Group Company).
Key topics and concerns that have been raised through stakeholder engagement, including:
| STAKEHOLDER GROUP | ENGAGEMENT (102-43) | KEY CONCERNS (102-44 I) | RESPONSE (102-44 II) |
|---|---|---|---|
| National governments and customers |
Close dialogue with national governments is a natural part of our operations and our projects often involve regular dialogue. This dialogue is usually conducted by our project development team or community liaisons. |
The main concern of governments in host countries, that will often also be our customers, is local impacts and value creation, which usually includes the economic value of the projects, increased access to energy, the potential for direct and indirect job creation. |
Refer to chapter 3 in the sustainability report |
| Local government and communities |
A social impact assessment is conducted as part of the planning of all projects and based on this a plan for stakeholder engagement is developed. Scatec Solar emphasizes continuous dialogue with local and regional communities in order to manage and meet expectations. A dedicated community liaison officer (CLO) is appointed to all our locations. |
The main concern of local governments and communities is also local impacts and value creation, specifically job creation, local content and education/training. |
Refer to chapter 3 in the sustainability report |
| Co-investors and partners |
A detailed dialogue with regards to expectations is the starting point for all partnerships, and detailed in our agreements. Depending on the partnership we keep close dialogue with our partners. |
Co-investors and partners are concerned that we are a trustworthy business partner that applies international best practice standards such as the IFC Performance Standards and the Equator Principles in order to manage environmental and social impacts. Investors with a specific impact investment focus are also concerned with the local value creation, and promotion of green energy. Some of our partners are also concerned with our ability to promote Norwegian exports. |
Refer to chapter 2 and 3 in the sustainability report |
| Financing partners | Financing partners are mainly engaged prior to providing capital, and often have very specific requirements with regards to how environmental, social and governance factors are assessed and managed. |
Financing partners also focus on our business conduct and efforts to ensure that we are a trustworthy business partner. Local financiers and financiers with an impact focus are also concerned with our local impact and value creation in terms of for example access to energy and job creation. |
Refer to chapter 2 and 3 in the sustainability report |
| Shareholders | Existing and potential shareholders are engaged on a regular basis and often express their concerns and expectations directly with top management. |
Shareholders are concerned with the ability to create value in the short and longer term and governance aspects such as anti-corruption and being a trustworthy business partner. |
Refer to chapter 2 in the sustainability report |
| Employees | Our employees make up our company and who we are. |
Many of our employees are proud of our social and environmental impact through promoting renewable energy and our ability to demonstrate local value creation. Employees are also concerned with own working conditions, health and safety, and opportunities to develop competencies and career path. |
Refer to chapter 1, 2 and 3 in the sustainability report |
| Contractors | Contractors concerns are heard as part of project they are involved with and our contractors are considered as if they were our own employees when on our sites. |
Contractors that work on our projects are concerned with their working conditions, fair wages, health and safety and opportunities to develop competencies. |
Refer to chapter 2 in the sustainability report |
| STAKEHOLDER GROUP | ENGAGEMENT (102-43) | KEY CONCERNS (102-44 I) | RESPONSE (102-44 II) |
|---|---|---|---|
| Norwegian government and regulators |
The Norwegian government is engaged through the various institutions that are interested in our efforts in Norway and in other countries. |
The Norwegian government regulates our efforts and is also interested in supporting the positive impacts of our efforts in Norway and abroad. |
Refer to chapter 1 and 3 in the sustainability report |
| Suppliers | Supplier visits are undertaken each year to monitor and establish a platform for good dialogue and feedback. |
Our suppliers are concerned with fair pricing, working conditions, and health and safety. |
Refer to chapter 2 in the sustainability report |
| NGO's | NGO's that represent local communities are engaged through each phase of the project. Environmental NGOs in Norway are engaged through collaboration with regards to promoting renewable energy. |
NGOs in the local communities are concerned with our ability to create local value. Norwegian environmental NGOs support us in our efforts to promote renewable energy. |
Refer to chapter 1 and 3 in the sustainability report |
The material sustainability topics for our company were defined based on an assessment of key stakeholder expectations, the significance of social, economic and environmental impacts and the relevance to our strategy. The mapping of stakeholders' expectations was based on results of the ongoing stakeholder dialogue that is part of daily business on the ground when planning and executing projects, as well as at the corporate level with stakeholders such as investors,
regulators and financiers. This information was collected and structured through interviews with key internal stakeholders. The significance of social, economic and environmental impacts was based on an assessment of impacts through the value chain in the countries where we operate.
Our sustainability framework illustrating the most material topics for our company:
of the Group as at 31 December 2018 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.
We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in Norway, and we have fulfilled our ethical responsibilities as required by law and regulations. We have also complied with our other ethical obligations in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2018. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements.
2
The group has entered into partnerships for shareholding of project companies owning solar power plants. Scatec Solar seeks to obtain operational and financial control of the project companies also when Scatec Solar's owns less than 50 % of the shares. Based on the criteria in IFRS 10 regarding control, other factors than ownership can be decisive as to whether Scatec Solar has control. Management's assessment of control is based on shareholder agreements and other contractual arrangements. Assessments are performed for new project companies, and an annual reassessment is performed for material project companies.
The assessments are complex and involve significant use of management judgment, and due to the significant impact on classification and presentation of the project companies in the consolidated financial statements, the control assessments are considered a key audit matter.
We have evaluated management's assessment of control for new project companies and the annual reassessment for material project companies. For new project companies in 2018 we read the shareholder agreements and other key contractual agreements such as development, financing, Engineering, Procurement and Construction and Operation & Maintenance agreements. We have compared the terms and conditions in these agreements with the requirements in IFRS 10.
We evaluated the information provided in disclosure and that the description in note 2 is consistent with the assessments performed by management.
Other information consists of the information included in the Company's annual report other than the financial statements and our auditor's report thereon. The Board of Directors and Chief Executive Officer (management) are responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the financial statements of the parent company and International Financial Reporting Standards as adopted by the EU for the financial statements of the Group, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and 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.
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 level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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 these financial statements.
Independent auditor's report - Scatec Solar ASA
A member firm of Ernst & Young Global Limited
146
4
Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that management has fulfilled its duty to ensure that the Company's accounting information is properly recorded and documented as required by law and bookkeeping standards and practices accepted in Norway.
Oslo, 27 March 2019 ERNST & YOUNG AS
Thomas Embretsen State Authorised Public Accountant (Norway)
Independent auditor's report - Scatec Solar ASA
A member firm of Ernst & Young Global Limited
www.scatecsolar.com
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