ANNUAL REPORT - SN Power reporting/2016... · Prorata Income Statement ... SN POWER ANNUAL REPORT 2016 3 SN POWER YEAR 2016 ... Maris Canal Project in the Philippines which is located

ANNUAL REPORT2016

SN POWER

10

20

15

8

Financial Statements

Message from the CEO

Our Presence & Operations

Board of Directors’ Report

About SN Power

3

THIS IS SN POWER

About SN Power .................................3Key Figures ..........................................4Key Events ...........................................5Message from the CEO ....................8Presence and Operations ............. 10Corporate Governance ...................12Prorata Income Statement .......... 14Board of Directors’ Report ........... 15

FINANCIAL STATEMENTS

SN POWER GROUPAccounts 2016 ................................. 21Notes 2016 ....................................... 25

SN POWER ASAccounts 2016 .................................48Notes 2016 ....................................... 52

Auditor’s Report .............................. 59

SN POWER ANNUAL REPORT 2016 3

SN POWER

YEAR 2016

ABOUT

THIS IS SN POWER

About the Company

SN Power (SN Power AS) was re-established in June 2014, after a restructuring of the company founded in 2002 (Statkraft Norfund Power Invest AS). The ownership is split 50/50 between the two founding partners Statkraft and Norfund.SN Power is operating on commercial terms with the objective of investing in renewable energy production in developing markets globally. The overall business concept is to acquire, develop, construct, own and operate sustainable hydropower projects.

SN Power has diversified its portfolio across different regions and are currently operating hydropower plants in the Philippines, Laos, Zambia and Panama. In addition to the operating markets the company is looking at new greenfield in the regions where it operates.

The operational part of the business in Africa and Central America is currently operated through the subsidiary Agua Imara AS where Bergenshalvøens Kommunale Kraftselskap (BKK) is a significant co-owner.

Our Owners With Statkraft as one of its owners, SN Power has a strong industrial foundation, built on more than 120

years of experience in developing, owning and operating hydropower in Norway. Statkraft is a European leader within renewable energy, with approximately 66 TWh in annual power production. Through Statkraft, SN Power has access to significant experience and expertise.

Norfund is the Norwegian Investment Fund for Developing Countries, which invests risk capital in profitable private enterprises in Africa, Asia and Central America. Through Norfund, SN Power has access to significant experience and expertise in investing in developing markets.

Where we are heading SN Power, as a business, has clear core competencies, the network, the knowledge and the financial capacity to actively seek out exciting opportunities in high potential, yet often challenging, markets, alongside a proven ability to optimize return from existing assets.

Key to SN Power’s strategy is the company’s overall strategy to be a long-term industrial investor, capitalizing on Norwegian and international hydropower competence and expertise.

It is a part of SN Power’s mission to contribute to a sustainable development through its investment. All projects we enter into shall have a minimal adverse effect on society and the environment, and yield positive impact and benefits for both local communities and society through the increased generation of renewable energy. Read more on www.snpower.com

VISIONPowering development through renewable energy.

MISSIONTo become a leading hydropower company in emerging

markets, contributing to economic growth and sustainable development.

COMPETENCE: using knowledge and experience to achieve ambitious goals and be recognized as a leader.

RESPONSIBILITY:creating value while showing respect for employees, customers, the environment and society.

INNOVATION:thinking creatively, identifying opportunities and developing effective solutions.

CORE VALUES

ABOUT SN POWER

http://www.snpower.com


KEY FIGURES

YEAR 2016

SN POWER

KEY FIGURES

THIS IS SN POWER

1) Consolidated numbers, excluding income from associated companies/joint ventures. 2) Long-term and short term liabilities to financial institutions / Total equity 3) Equity / Assets

UNIT 2016 2015GROSS POWER PORTFOLIOSN Power share of installed capacity MW 450 450 Gross production, actual GWh 3,826 3,934 Net production (SN Power share) GWh 1,213 1,157

FINANCIALSGross operating revenue MUSD 33 28 Income from associated companies / JVs MUSD 48 57 EBITDA 1) MUSD 3 -5 Net Earnings after tax MUSD -37 34 Cash Flow from operational activities MUSD 93 46 Cash and cash equivalents MUSD 220 148 Equity MUSD 954 1,015 Equity investments from SN Power MUSD 1 6 Repaid capital on investments to SN Power MUSD - 57 New equity MUSD - - Interest bearing debt\equity ratio 2) % 15% 24%Equity ratio 3) % 80% 80%

HUMAN CAPITALEmployees Number 136 136 Sickness absence % 1.9 % 1.5 %Total recordable injury rate - Operations 1.6 2.4 Total recordable injury rate - Projects 3.3 6.1

ENVIRONMENT Environmental fines MUSD - -


KEY EVENTS

YEAR 2016

SN POWER

KEY EVENTS 2016

THIS IS SN POWER

JANUARY

PHASE II OF MIDDLE YEYWA FEASIBILITY STUDY

In 2014 SN Power signed an MOU with the Government of Myanmar for the development of a project east of Mandalay and is now working on the feasibility study to be completed during the third quarter of 2017. During this period SN Power will agree with the Government on the basic commercial terms, and do an Environmental and Social Impact Assessment.

SN Aboitiz Power started the construction of the Maris Canal Project in the Philippines which is located approximately 5.5 km downstream from the Magat dam, with the Maris reservoir situated between the two dams.

The Maris Canal Project will have an installed capacity of 8.5 MW and produce 45 GWh of energy per year.

The project includes the refurbishment of 12 irrigation control gates located on the intake to the Maris South Canal and is projected to be completed by February 2018.

CONSTRUCTION START OF MARIS CANAL


KEY EVENTS 2016

THIS IS SN POWER

SN Power has, through its partnership with Credicorp Group in Panama, developed and constructed the Bajo Frio hydropower project in the Chiriquí Viejo Basin near the border to Costa Rica. The project consists of a dam, two power station, and a canal, with a combined capacity of 58 MW. Construction started in 2011 and was finished in 2016 with all units performing to specifications. Generation started in 2015, and Bajo Frio received its commercial operations certificate in August 2016.

The power station is now contributing to replacing power generated by thermal HFO generators in Panama. Approximately 60% of the production is sold through long term PPA.

AUGUST

MARIS RAISING COMPLETED

COMMERCIAL OPERATIONS CERTIFICATE BAJO FRIO

SN Power signed a Share Purchase Agreement (SPA) with Sithe Global for the acquisition of their complete shareholding in Bujagali Energy Limited, with an expiry date on 31 December 2016. The acquisition did not reach financial close due to missing government approvals of the share transfer. The Government of Uganda has initiated a full re-financing of the project.

MARCH

BUJAGALI

capturing peaking hydro operation flows from the Magat plant and then utilizes the available storage in the Maris reservoir to regulate a constant outflow into two irrigation canals, Maris South Canal and Maris North Canal, located beside the Maris dam.

The Maris reservoir acts as a balancing pond by


KEY EVENTS 2016

THIS IS SN POWER

DECEMBER

THPC

SN Power signed a Head of Terms agreement with Industrial Promotion Services (IPS) and started a due diligence process to potentially enter the 147 MW Ruzizi III hydropower project located on the river bordering the Democratic Republic of the Congo (Congo) and Rwanda as IPS’ technical partner, and replace Sithe Global. As a result of a total evaluation of the project the Board of SNP decided not to pursue this opportunity. Norfund decided on this basis to continue the development of the project on a 100% basis, based on a full management service agreement with SN Power.

The expected start of construction is in 2019 and the estimated commercial operation date in 2024.

RUZIZI III

Fifty-two of the fifty-six villages (96%) included in THPC’s Social and Economic development (SED) program reached the consumption targets, set under the program. The reminder of the villages are expected to graduate THPC’s program by the end of 2017.

OCTOBER

SAFE OPERATIONS PROJECT LHPC

SN Power’s 51% owned subsidiary Lunsemfwa Hydro Power Company (LHPC) started the Safe Operations project, which will secure and stabilize energy supply from its two aging power stations, Lunsemfwa and Mulungushi, for the years to come. The project will be completed by the end of the first quarter of 2017.


TORGER LIEN

PRESIDENT & CEO

THIS IS SN POWER

MESSAGE FROM

MESSAGE FROM

THE CEO

For SN Power, 2016 was a year with good operational results, high activity on business and project development, improved HSE benchmarking figures and important restructuring activities in the organization.

Overall the year was relatively dry in all our four operating countries, but in the last part of the year precipitation picked up and we experienced good inflows and increasing reservoir levels well into 2017.

Spot prices in Panama and Philippines have remained relatively low, mainly due to increased overall generation capacity and low coal and gas prices. Our two construction projects, Maris Canal in the Philippines, and the Safety Upgrade project in Zambia, are developing according to plan.

Focus on growth on a sound commercial basis.The new management structure implemented during 2015, has resulted in a handful of promising project opportunities in Africa and South East Asia. These have been further developed during 2016. The development strategy has been adjusted to increase the commercial efforts in the early stages of the projects, delaying costly technical and environmental studies until solutions to the main commercial challenges have been found. The main hurdle and challenge for hydropower projects in developing markets is the power off-take solution. Power Purchase Agreements (PPAs), governmental guaranties, and license arrangements are prerequisites for viability of projects. With the high number of projects failing in the

development phase due to unacceptable commercial conditions, additional financing of early stage activity combined with reduced development costs are required to stay competitive. This work has started and we already see concrete results.

Making hydropower competitive in a fast-developing renewable energy marketNew renewable generation such as solar PV and wind, gain competitive ground year by year. Cost of generation is now in many markets at grid parity, and the steady yearly cost reduction per kilowatt installed capacity seems to continue. From an environmental perspective, this is very welcome, but for SN Power, concentrating on hydropower, it becomes more and more difficult to compete on a pure energy basis, as hydropower is delivering a different product. It is still the dominant renewable flexible


MESSAGE FROM

THE CEO

THIS IS SN POWER

SN Power is well positioned to continue to be a major player within the renewable power sector

in developing countries for years to come

“Torger Lien, CEO

generation source, and it has by far the best ability to deliver grid services required in modern grid structures. Even with a six to eight hours storage capacity, a run of river hydro plant delivers a totally different product than solar and wind which are 100% intermittent. By fully utilizing the features of hydro generation and making the most out of its comparative advantages, we are convinced that hydropower will continue to have a strong position in the renewable energy sector.

Fossil fuels still dominant in many markets.Even if new renewables are growing with an impressive rate, power generation based on fossil fuels will still be dominant in many of our markets and will therefore be central in price formation in these markets in the coming years. In Panama, existing fuel oil and new gas power plants based on LNG will be the price setters. As a result of lower future fuel price outlook, we have been forced to revise our market outlook for electricity prices, reducing expected future earnings. This is a fundamentally different situation from the one we expected four to five years ago. For new projects under development, robustness against lower energy cost, and certainty through firm PPA’s, will be given increased weight going forward.

Adapting to new market conditionsHydro power projects take more time to develop than most other power generating alternatives. On the other hand, they have a lifetime far exceeding these alternatives. To be competitive as a hydropower

Torger LienPresident & CEO

developer in today’s market the cost of development must be on par with short-time-to-market solar and wind projects. In SN Power, we have adapted the organization to the new situation and Agua Imara has been restructured to become a pure asset management company. Business- and project development is concentrated in SN Power. Local offices have been reduced or scaled down. Local knowledge through local employees is prioritized over expatriates from the head office in Oslo. Local partnerships and consortium structures reducing cost during development and construction are under implementation.

With these measures, I am convinced that hydropower remains a strong competitive alternative, and that it offers products that will be in demand also in the future electricity markets. SN Power is well positioned to continue to be a major player in developing flexible renewable generation projects in developing countries in Africa and South East Asia.


PRESENCE &

OPERATIONSYEAR 2016

SN POWER

THIS IS SN POWER

PRESENCE AND OPERATIONS

PHILIPPINES SN Power entered the Filipino market in 2006. The Joint Venture between SN Power and the Aboitiz Group owns three hydro power plants in the country, Ambuklao, Binga and Magat as well as the Maris Canal 8.5 MW project which is under construction and will be commissioned this year. The joint venture has a pipeline of other possible projects in the Philippines.

Ambuklao Ambuklao was commissioned by the National Power Corporation in 1956 and is one of the oldest hydropower plants in the Philippines. In 2008, SN Aboitiz Power (SNAP) bought the plant and it has since then gone through a major rehabilitation. The plant was recommissioned in 2011 with a new installed capacity of 105 MW from previously 75 MW.

Location: Benguet Province, Luzon Installed capacity: 105 MW Average output: 332 GWh

SN Power Ownership: 50% Other Owners: Aboitiz Power 50% Commercial operation: 1956 Power Purchase: The electricity generated is sold in the spot market or through bilateral contracts at Wholesale Electricity Spot Market (WESM) or in the reserve market as ancillary services.

Binga The Binga hydropower plant is also currently in operation and has gone through a major rehabilitation including replacement of most electrical and mechanical components. The project has been uprated from 100 MW to 140 MW

Location: Benguet Province, Luzon Installed capacity: 140 MW Average output: 430 GWh SN Power Ownership: 50% Other Owners: Aboitiz Power 50% Commercial operation: 1960 Power Purchase: The electricity generated is sold in the spot market or through bilateral contracts at WESM or in the reserve market as ancillary services.

Magat Magat is a multipurpose dam. As it is the source for almost 85,000 hectares of rice fields downstream, the main purpose of the dam is irrigation.

Location: Ifugao and Isabel Provinces, Luzon Installed capacity: 380 MW Average output: 929 GWh SN Power Ownership: 50% Other Owners: Aboitiz Power 50% Commercial operation: 1983 Power Purchase: The electricity generated is sold in the spot market or through bilateral contracts at Wholesale Electricity Spot Market (WESM) or in the reserve market as ancillary services.

Ambuklao spillway, Philippines

LAOSTheun Hinboun In September 2014 SNP acquired 20% of the shares in the Theun Hinboun Power Company (THPC) in Laos from Statkraft, who had been a partner in the project since the beginning in 1993. The project was developed in two stages, the second of which was commissioned in late 2012. THPC’s other shareholders are EdL Generation PLC from Laos with 60% and GMS Power Public Company Limited from Thailand with 20%. THPC was the first privately developed and financed hydropower project in Laos and has won several international awards for its development.

Theun Hinboun, Laos


THIS IS SN POWER

PRESENCE AND OPERATIONS

Location: Bolikhamxay and Khammouane provinces of Southeast Laos Installed capacity: 500 MW Average output: 3,292 GWh SN Power Ownership: 20% Other Owners: EdL Generation in Laos 60% and GMS Power in Thailand 20% Commercial operation: 210 MW in 1998 and 290 MW in 2012 Power Purchase: Long term contracts to Laos and Thailand

ZAMBIA In 2011, Agua Imara acquired a 51% shareholding in Lunsemfwa Hydropower Company Ltd (LHPC). LHPC currently owns two hydropower plants, Mulungushi and Lunsemfwa with a combined generation capacity of 56 MW.

Mulungushi The Mulungushi power station comprises a regulation reservoir, a canal and penstocks to a surface powerhouse. The power station has been developed in stages with the first unit installed in 1925.

Location: Near Kabwe in the Central Province Installed capacity: 32 MW Average output: 238 GWh Agua Imara ownership: 51% Other owners: Wanda Gorge Investments (WGI) Commercial operation: 1925

Lunsemfwa The Lunsemfwa power station comprises a reservoir, a canal and penstocks to a surface powerhouse. The power station was constructed in 1945 with two 6 MW units. The power plant was operated as a run-of-river scheme until 1958 when the Mita Hills dam was built. A third 6 MW unit was installed in 1961. With a fourth unit installed in 2012, Lunsemfwa hydropower project today has the capacity of 24 MW.

Location: Near Kabwe in the Central Province Installed capacity: 24 MW Average output: 190 GWh Agua Imara ownership: 51% Other owners: Wanda Gorge Investments (WGI) Commercial operation: 1945

Muchinga LHPC fully owns the Muchinga Power Company which has a license to develop a new hydropower plant with a potential capacity of 150 – 250 MW. A new Muchinga hydropower plant will harness the hydropower potential of the Lunsemfwa and Mkushi rivers and would be located downstream of the existing Lunsemfwa plant.

Myitnge River, Myanmar

PANAMA SN Power has been present in Panama since 2010, and have an office in Panama City through its Subsidiary Agua Imara. Agua Imara owns 50.1% of Fountain Intertrade Corporation. The remaining share is owned by our local partner in Panama, the Credicorp Group. SN Power has two projects in the country – Bajo Frio and Burica. Bajo Frio started production in 2015, while Burica is still in the early construction planning phase.

Bajo Frio Bajo Frio is a run-of river hydropower scheme with two powerhouses and a dam. It’s located in the lower part of the Chiriquí Viejo River in the Chiriquí province in western Panama. Location: Chiriquí province in western Panama Installed capacity: 58 MW Agua Imara ownership: 50.1% Other owners: Credicorp Group 49.9% Generation started: 2015 Commercial operations Certificate: 2016

Burica Burica is located directly downstream of the Bajo Frio project in the Chiriquí Viejo Basin.

Location: Chiriquí province in western Panama Installed capacity: 63 MW Owner: Burica Hydropower SA Agua Imara Ownership: 50.1% Other owners: Credicorp Group 49.9%

Bajo Frio, Panama

Muchinga, Zambia

MYANMAR SN Power has been monitoring developments in Myanmar for several years, more extensively since 2011 as major reforms swept through the country. In 2014 SN Power signed a Memorandum of Understanding (MoU) with the Government of Myanmar. SN Power completed a pre-feasibility study and is now working on a feasibility study on a hydro power project located east of Mandalay.


CORPORATE GOVERNANCE

YEAR 2016

SN POWER

THIS IS SN POWER


SN Power complies with international corporate governance practices, and its principles are based on the Norwegian Code of Practice for Corporate Governance (NUES). Non-compliances are attributable to the fact that SN Power is not a publicly listed company as it is owned by Statkraft and Norfund, and restrictions contained in the Articles of Association. A statement concerning follow-up of the items in the Norwegian Code of Practice for Corporate Governance is given below.1. Corporate governance statement The basis for the board of SN Power’s corporate governance work is the Norwegian Code of Practice for Corporate Governance.

The code has been applied to the extent permitted by the company’s organisation and ownership. Non-compliances are attributable to the fact that SN Power is not a publicly listed company, that it is owned by Statkraft and Norfund, as well as restrictions contained in the Articles of Association. The non-compliances relate to non-discrimination of shareholders, tradability of shares, the annual general meeting, nomination committee, the corporate assembly, and take over.

SN Power’s policy for corporate governance establishes the relationship between the company’s owners, board of directors, and management.

2. Business SN Power’s Articles of Association state that: “The company’s objectives are, alone, in cooperation with or through ownership in other companies, to develop, construct, acquire, own and manage renewable energy plants in South East Asia, Sub-Sahara Africa and Central America, with focus on hydro power projects and other naturally related activities, including financial and physical power trading”.

SN Power AS is registered in Norway and its

management structure is based on Norwegian company law and the Limited Companies Act. In addition, the company’s Articles of Association, vision, values, code of conduct, corporate governance policies and ethical guidelines are guiding for the company’s business.

A summary of the vision, values, and code of conduct can be viewed at www.snpower.com

3. Share capital and dividend SN Power AS’ share capital is NOK 5,176,315,600 divided on 51,763,156 shares, with a nominal value of NOK 100 each. The legal share capital in NOK corresponds to booked share capital of USD 852,643,426 due to the fact that SN Power AS’ functional currency is USD.

It is the joint intention and purpose of the shareholders that SN Power shall be a going concern and shall be independently viable in all possible aspects. The shareholders shall exert their individual best efforts to make the company viable and profitable.

The company’s long term goal is to have an annual pay-out ratio of at least 40% of net profit.

See note 3 and 22 for more information about the management of the capital structure and note 19 for shares and shareholder information.

4. Equal treatment of shareholders and transactions with related parties 50% of the shares in SN Power AS are owned by the state-owned enterprise Statkraft AS and the remaining 50% by the Norwegian investment fund for developing countries, Norfund. The Shareholder Agreement defines the treatment of shareholders and transactions with related parties.

See note 24 and 8 for further information about related parties.

5. Freely negotiable N/A, shares are not traded in the open market.

6. General meeting The shareholders exercise supreme authority over SN Power AS through the annual general meeting. In accordance with the Articles of Association the annual general meeting shall be held annually before the end of June.

The company’s annual accounts and the auditor’s statement must be presented at the general meeting, and the following items must be discussed and resolved:

1. Approval of profit and loss accounts and balance sheet, including distribution of annual profit or coverage of loss.

2. Approval of group profit and loss accounts and group balance sheet.

3. Other matters that according to law or the articles



THIS IS SN POWER


of association fall within the scope of the general meeting.

7. Nomination committee N/A. There is no nomination committee.

8. The corporate assembly and board of directors, composition and independence Pursuant to the Norwegian Public Limited Liability Companies Act, SN Power AS does not have a corporate assembly as it has fewer than 200 employees.

SN Power’s board of directors shall have 2 - 8 members. The chairperson of the board and one board member or the general manager are jointly authorised to sign for the company. The company has per December 2016 6 directors. 3 directors, including the chairperson, are nominated by Statkraft and 3 are nominated by Norfund.

The board members are evaluated on the basis of their expertise and independence. The board shall furthermore be independent of the company’s executive employees. The current challenges facing the company are taken into consideration in establishing the composition of the board.

9. The work of the board of directors The board has established rules of procedure for the board of SN Power AS that lay down guidelines for the board’s work and decision-making procedures. The board’s tasks are described in general by Norwegian company law and the company’s Articles of Association. The rules of procedure also define the tasks and obligations of the chairperson and CEO in relation to the board.

Due to its size and that SN Power AS is not publicly listed, it does not have an audit committee nor a compensation committee. The board will undertake an annual evaluation of its own performance. The purpose of the evaluation is to improve board effectiveness. The chairperson will act on the results of the performance evaluation by recognizing the strengths and addressing the weaknesses of the board. The annual general meeting determines the remuneration of the board members.

See Report from the Board of Directors for more information about the work of the board of directors.

10. Risk management and internal control SN Power’s investments are made in emerging markets in South East Asia, Sub-Sahara Africa and Central America, and are to a great extent exposed to a high level of risk in terms of their future return. SN Power is continuously working to improve its methods for risk management to measure, mitigate, and manage this risk exposure.

Comprehensive risk analysis techniques covering financial, economic, social, environmental, and political factors have been established in the company’s project management system. The methods identify risk at an early phase in the valuation process and implement appropriate mitigation plans which are monitored through the projects.

As part of the Group’s internal control system, Statkraft’s corporate audit function assists the SN Power board and management in making an independent and impartial evaluation of the Group’s key risk management and control procedures. Statkraft Corporate Audit shall also contribute to on-going quality improvement in internal management and control systems. The annual corporate audit report and auditing plan for the coming year shall be submitted to the board.

Risk management and internal control has been further discussed in the Report from the Board of Directors and note 3.

11. Board remuneration The board’s remuneration is not related to the company’s results.

See note 8 for information about the board remuneration.

12. Remuneration to executive employees The salary and other remuneration of the CEO are decided by a convened meeting of the board. The remuneration of other executive management is decided by the CEO, based on a structure agreed by the board to enhance value creation by the company through shared goals.

The board reviews the CEO’s performance in meeting on an annual basis based on agreed goals and objectives.

See note 8 for information about the remuneration to executive employees.

13. Information and communication SN Power emphasises open and honest communications with all its stakeholders and places the greatest focus on the stakeholders who are directly affected by SN Power’s business. The information the company provides to its owners, lenders and the financial markets in general shall permit an evaluation of the company’s underlying values and risk exposure. To ensure predictability, the owners and the financial markets shall be treated equally, and information shall be communicated in a timely manner. SN Power’s financial reports shall be transparent, and provide the reader with a broad, relevant and reliable overview of its strategies, targets and results, as well as its consolidated financial performance.

14. Take-over of the company N/A. Shares not traded.

15. Auditor The annual general meeting appoints the auditor based on the board’s proposal and approves the auditor’s fees. The auditor serves until a new auditor is appointed. The external auditing contract is normally put out to tender at regular intervals.

The board has meetings with the external auditor to review the annual financial statements and otherwise as required. The board evaluates the external auditor’s independence and has established guidelines for the use of the external auditor for consultancy purposes. In accordance with the requirement to maintain the auditor’s independence, SN Power will only make limited use of the external auditor for tasks other than statutory financial audits.


PRORATA INCOME

STATEMENT01/01/2016-31/12/2016

SN POWER

THIS IS SN POWER

PPORATA INCOME STATEM

ENT

In order to have a better and more complete picture of SN Power’s financial status, prorated numbers adjusted for changes in fair value are used for internal reporting.

SN Power’s business model is to a large extent built on development of joint projects with local partners and in such projects the power to govern financial and operational matters will be shared between the shareholders. In the financial statements these investments are treated in accordance with the equity method, and presented as a single line item in the income statement and in the balance sheet. For internal reporting purposes, in order to have a better and more complete picture of the financial result, prorated numbers are used.

Figures in USD million Consolidated Non-controlling interests

Associated companies and

joint venturesAdjustments Prorata

2016 2016 2016 2016 2016Income statementOPERATING REVENUES AND EXPENSESSales revenues 33 -22 161 173 Energy purchase and other costs related to power sales -4 3 -22 -24 Salary and personnel costs -13 4 -4 -13 Depreciation, amortization and impairment -74 41 -17 -50 Other operating costs -13 4 -13 -22 Income from investments in associated companies and joint ventures 48 0 -0 -59 -11

Earnings before financial items and tax -22 29 104 -59 52

FINANCIAL INCOME AND EXPENSES

Financial income 6 -0 4 10 Financial expenses -17 9 -38 -47 Gain (loss) on derivatives - - 1 1 Net financial items -11 8 -33 - -36

Profit before tax -34 38 71 -59 16

This year's tax expense -3 -6 -12 -21

NET PROFIT FOR THE YEAR -37 32 59 -59 -5

Attributable to:Equity holders of the parent -5 Non-controlling interests -32 NET PROFIT FOR THE YEAR -37


BOARD OF DIRECTORS’

REPORTYEAR 2016

SN POWER

Asbjørn Grundt

Kjersti Rønningen

Simen Bræin Hilde Merete Nafstad

Øystein Øyehaug

Kjell Roland

THIS IS SN POWER

BOARD OF DIRECTORS’ REPORT

1. Introduction SN Power AS (SNP) is owned by Norfund (50%) and Statkraft (50%). SNP’s business strategy is to develop, build, acquire, own and operate sustainable hydropower projects in developing countries on commercial terms. The company’s mission is to become a leading hydropower company in developing countries, contributing to economic growth and sustainable development.

Statkraft Norfund Power Invest AS (SNPI), SN Power for short, was established in 2002. In 2013 Norfund and Statkraft decided to restructure the company. SNP was incorporated and in 2014 SNPI’s portfolio in Africa, South East Asia and Central America was transferred to SNP. SNPI’s remaining portfolio in South Asia and South America was integrated with Statkraft International Hydro’s assets in South East Europe. The transfer of assets and people from SNPI to SNP took place in June 2014.

The rationale for investing in developing countries is the attractiveness of these markets due to expected long-term economic growth, increased need for environmentally friendly energy, and the potential for hydropower development. 2. Important Events in 2016

• The Bajo Frio project in Panama started commercial operations.

• The Burica pre-construction works in Panama were almost completed, and put on hold.

• Started site activities on the safe operations project in Zambia (refurbishment and upgrading of existing units/equipment).

• Feasibility study for the Middle Yeywa project in Myanmar started, covering the commercial and basic technical aspects.

• Maris Raising project in the Philippines completed.

• Start of the construction of the Maris Canal project in the Philippines.

• Closing of SN Power’s office in Singapore.

• Signed MoU with Industrial Promotion Services (”IPS”) and started a due diligence process to potentially enter the 147 MW Ruzizi III hydropower project located on the river bordering the Democratic Republic of the Congo (”Congo”) and Rwanda, as IPS’



THIS IS SN POWER technical partner. The Project is continuing with

Norfund as owner

• Signed Share Purchase Agreement with Sithe Global for the acquisition of their complete shareholding in Bujagali Energy Limited in Uganda. However, the transaction did not close by the Agreement’s expiry date of 31 December.

3. The Financial Statements SN Power Group 2016 is the second full year of operation for SN Power Group and SN Power AS. The sales amounted to USD 33.0 million (28.4). As for 2015 the 2016 sales figures were characterized by dryer than normal conditions in Laos in the first half year due to el Niño, and due to drought in Zambia.

Operating expenses were USD -103.6 million (-39.5) including impairment for the year of USD -64.3 million (0). Income from investments in joint ventures was USD 48.1 million (56.8). Net financial items amounted to USD -11.3 million in 2016 (-7.0). The net result was USD -37.1 million in 2016 (33.8).

The SN Power Group’s cash and cash equivalents were at USD 219.6 million as of 31 December 2016 compared to 148.0 as of 31 December 2015. Net cash flow from operational activities was USD 92.8 million (46.1), while net cash flow to investment activities was USD 13.8 million (-15.4) and cash flow to financing activities was USD 7.8 million compared to -17.9 in 2015. Total assets amounted to USD 1,187.4 million at the end of the year 2016 (1,269.7). The equity as a percentage of total debt and equity was 80% as of 31 December 2016 which is no change from 2015.

SN Power AS The parent company, SN Power AS, had an operating loss of USD -8.8 million (-6.9). Net financial items amounted to USD -31.0 million (59.2), and net profit was USD -39.8 million in 2016 (52.3). Net profit includes a write-down of 53.4 MUSD of the shares in Agua Imara AS as a consequence of the impairment of the Bajo Frio project. The impairment was caused by a delayed completion, cost overrun and declining spot prices.

The company’s operational expenses for 2016 were USD -9.2 million (-7.8). The increase mainly comes from project related activities.

SN Power AS’ cash and cash equivalents were USD 119.4 million as per 31 December 2016 (106.0). Net cash flow from operational activities was USD 13.4 million (52.7), while investment in SN Power AS was USD 0.1 million (-35.9). There was no new paid in equity in 2016 (0). The Company has no interest bearing debt.

Total Assets at the end of 2016 were USD 872.8 million

(913.7). The equity as a percentage of total debt and equity was 99.6% as of 31 December 2016 (99.5%).

Allocation of this year’s net loss and continued operations SN Power AS’ Board of Directors has suggested that no dividend is distributed for 2016 and that this year’s net profit is allocated as follows:

The Board confirms that the company is in a situation of going concern.

It is the Board’s opinion that the annual accounts give a true and fair view of SN Power Group’s financial results in 2016 and the Group’s financial situation as of 31 December 2016. According to the Norwegian Accounting Act, the Board confirms that the Annual Accounts have been prepared based on the Group as a going concern.

International Financial Reporting Standards (IFRS) The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. SN Power Group’s presentation currency is USD. 4. Health and Safety

The health and safety of SNP’s employees and the employees of contractors and consultants is a key priority for SNP. Our goal is to meet international Health, Safety and Environmental (HSE) standards in all of our activities.

The Total Recordable Injury (TRI)-rate for Operation in 2016 was 1.6 (2.4), which is below the target. (TRI ≤ 3). This is a decrease from previous years.

The TRI-rate for Projects in 2016 was 3.3 (6.1) and below the target (TRI ≤ 5). This result could partly be contributed to low construction activity, but both Maris Canal Project in the Philippines and the Safe Operation Project in Zambia has performed well in 2016. In Zambia we had, however, an accident with permanent disability. One of our employees lost sight on one eye.

SNP experienced no fatalities in 2016.

The focus in 2016 has been on building competence within own organization, particularly focusing on the country offices. As part of this, SNP plans to adopt as much as possible from Statkraft’s Step Change program in 2017. 5. Projects and Operations 2016 The Philippines SNP and its partner Aboitiz Power, own on a 50/50-basis three hydropower plants in the Philippines with a total capacity of 625 MW. The financial performance in 2016 was affected by lower deliveries of ancillary services in Magat as well as lower spot prices. This has however to some extent been compensated by a good portfolio of longer fixed price contracts. The annual demand growth in the Luzon grid is estimated at 9.5%. Generation capacity, mainly coal, natural gas and some renewables, mainly solar, have increased and spot prices were 18% lower than



THIS IS SN POWER 2015.

All three plants Magat, Ambuklao and Binga provided ancillary services to the grid.

SN Aboitiz Power Magat refinanced and topped up its debt in USD and PHP with a PHP 19 billion fixed rate corporate note facility. Bank of the Philippine Islands is lead arranger and China Banking Corporation is the joint lead arranger.

The Maris Raising project was completed in March 2016. Construction has started on the 8.5 MW Maris Canal project and Commercial Operation Date is targeted early 2018.

The Alimit hydropower generation project is in its feasibility stage.

Laos SNP owns 20% of the shares in Theun Hinboun Power Company (THPC) in Laos. THPC has a capacity of 500 MW and the power is sold on long-term contracts to Thailand and Laos. THPC’s other shareholders are EDL Generation Plc from Laos with 60% and GMS Power International Pte. Ltd. from Singapore with 20%. The production and sales during 2016 were lower than in 2015 and significantly lower than that of 2014 because of a lack of water partly caused by the El Niño effect. This lack of water ended with the arrival of the rainy season in June 2016 when production went back to normal again.

Myanmar SNP has a Memorandum of Understanding with the Government of Myanmar for the development of a large scale Middle Yeywa hydropower project on the Myitnge river. During 2016 SNP has been working on a Feasibility study and an Environmental and Social Impact Assessment for the project, and the studies will be ready in 2017.

Zambia SNP’s subsidiary Agua Imara owns a 51% share in Lunsemfwa Hydro Power Company (LHPC) in Zambia. LHPC owns and operates two hydropower plants with a combined capacity of 56 MW. LHPC is the only private power generating company connected to the Southern African Power Pool (SAPP). The operations of LHPC were severely affected by drought for the third consecutive year in 2016. This has depleted both reservoirs, which will impact the production also in 2017. During the second half of the year, site activities on the safe operations project started. The project aims at refurbishing the existing units and equipment. The Lunsemfwa plant is completed and the Mulungushi plant is scheduled to be completed during the first quarter of 2017.

LHPC also owns Muchinga Power Company (MPC) in Zambia. MPC has a license to develop a hydropower plant with a potential capacity of 180-300 MW, downstream of the existing LHPC power plants. USD 6.9 million has been written down in 2016 related to MPC, due to suspension of the current scope of the project.

Panama SNP has through Agua Imara one subsidiary and one joint venture in Panama, Fountain Intertrade Corporation (FIC) and Hidro Burica SA (Burica). Agua Imara holds a 50.1% ownership share in both companies.

FIC has developed and constructed the 58 MW Bajo Frio run of river hydropower project, in the Chiriquí Viejo Basin near the border to Costa Rica. Bajo Frio started to generate energy in June 2015 and the regulator issued the Commercial Operations Certificate in August 2016. The first half of 2016 was affected by the El Niño phenomenon, which implied a lower than average hydrology and therefore lower production than in a normal year. Approximately 60% of the production is currently sold through a long term PPA which runs to the end of 2027.

USD 57.4 million was written down in 2016 related to Bajo Frio, due to higher cost and later start-up than expected as well as a revised future market outlook.

Burica is developing the 63 MW run of river hydropower plant immediately downstream of Bajo Frio. Due to the synergies with the Bajo Frio project, the construction of the Burica intake was completed in 2015. An international tender process for construction companies and equipment providers was put on hold early in 2016 due to uncertainty related to the approval of the 63 MW license. The approval was given in June 2016 and Burica is preparing for the new Power Purchase Agreement auction expected to take place in the third quarter of 2017.

Mozambique SNP’s and Agua Imara’s office in Mozambique has been closed down in 2016, due to lack of progress on development of new projects. However, SNP and Agua Imara will continue to monitor the potential for projects in the country.

Uganda On 3 March 2016 SNP signed a Share Purchase Agreement (SPA) with Sithe Global for the acquisition of their complete shareholding in Bujagali Energy Limited, with an expiry date on 31 December 2016.

The SPA was not extended at the end of the year due to missing government approvals of the share transfer. The Uganda Government initiated a full re-financing of the project.

Rwanda/Burundi/DRC SNP signed a Memorandum of Understanding with Industrial Promotion Services (IPS) and started a due diligence process to potentially enter the 147 MW Ruzizi III hydropower project located on the river bordering the Democratic Republic of the Congo (Congo) and Rwanda as IPS’ technical partner, and replace Sithe Global.

The Ruzizi III project represents an opportunity to enter a fairly matured project with a well-structured commercial framework. The expected start of construction is in 2019 and the estimated commercial operation date in 2024. The host countries and the region in general represents a risk profile that is fairly high. As a result of a total evaluation of the project the Board of SNP decided not to pursue this



THIS IS SN POWER opportunity. Norfund decided on this basis to continue

the development of the project on a 100% basis, based on a full management service agreement with SN Power.

Indonesia SNP is exploring opportunities for hydro power projects in Indonesia. A pre-feasibility study is being conducted for one project in the Lariang river in Sulawesi in partnership with Aboitiz Power and The Indonesian Industrial group Astra. 6. Employees and OrganizationMid-2016 SNP, due to strategic reasons, decided to downsize its non-operational office in Singapore with effect as of 1 January 2017.

SNP’s consolidated companies had 136 employees at the end of 2016 (136). Of these, 12 (16) worked at the company’s headquarters in Oslo together with 8 (7) employees in Agua Imara AS in addition to 6 (6) in the Philippines, 8 during the year and 0 at year end (8) in Singapore, 4 (4) in the Netherlands, 62 (55) in Zambia, 6 (0) in Bangkok and 30 (40) in Panama. Including joint ventures, the total number of employees at the end of 2016 was 660 (675). Of the additional employees in joint ventures, 201 (188) worked in the Philippines (SN Aboitiz Power (SNAP)/Manila Oslo Renewable Energy (MORE)), 2 (10) in Panama (Hidro Burica SA) and 321 (341) in Laos (Theun-Hinboun Power Company Ltd).

The Management team of the group continues to be divided into two units; one focusing on development and the other on operational matters. In this way, the SN Power Group has developed to be a leaner matrix based organization, working across different cultures.

In 2016, sick leave in SNP was 654 days, equivalent to 1.87% of the total number of working days. SN Power AS and Agua Imara AS had 38 (74) sick leave days, equivalent to 0.73% (1.40%) of the total number of working days.

At the end of the year, two of the six (33.3%) Board members in SN Power AS were females, with one female (10%) present in the top management. 25.38% of SN Power AS’s workforce is female.

To ensure that SNP does not discriminate on grounds of gender, religion, ethnic background, physical challenges or otherwise, appropriate procedures are in place concerning selection to jobs, promotions to higher positions, transfers and redundancies. Procedures entail transparent recruitment processes whereby job opportunities normally are advertised internally as a minimum, but in general also made available to the public through advertisements. Employment decisions are made in cooperation between at least two managers and the HR function to ensure compliance with statutory regulations and SNP’s internal guidelines.

7. Society and the Environment

SNP is committed to comply with international environmental and social standards set by the International Finance Corporation (IFC) and the UN Global Compact. The standards are integrated into the Company’s Group CSR and Environmental Policy and Procedures and into the Company’s project management tool.

SNP is keeping its strong focus on anti-corruption. The Company’s policy on reporting of concerns is focusing on a transparent, open line to report possible irregularities, and at the same time, protecting the integrity of the whistle-blower (reporter). In addition, SNP’s recording system ensures confidential reporting of any issue related to integrity and corruption. The same policy and system have been introduced to SNP’s joint ventures and subsidiaries. IFC has adopted SNP’s methodology for dealing with stakeholders in a systematic manner, and SNP and IFC mutually exchange knowledge and methodologies within this field.

A policy on security was implemented in 2016.

During 2016, there were no records of serious violations of SNP’s environmental standards for emission or other serious environmental risks, and no serious ethical or integrity cases were reported.

The Company’s operations do not result in pollution or spillage harmful to the external environment. 8. Market and Regulatory UpdateGlobal fuel prices have come down significantly the last year implying that the costs of conventional thermal generation are declining in most power markets. In combination with the global investment boom in wind and solar power this will inevitably reduce power prices also in SNP’s markets, including the Philippines and Panama. Against this backdrop of uncertain global fuel prices and spot prices in most emerging markets, SNP will primarily focus on investments backed by long-term power purchase agreements rather than merchant plants, with the exception of a few markets where spot prices alone may still justify plants with full spot exposure (i.e. notably the Philippines and Panama).

In the Philippines, the spot prices have come down significantly the last couple of years, and SN Aboitiz Power have reduced their spot exposure by developing a contract portfolio with favorable prices.

In Panama, a large contract for a liquefied natural gas fired combined cycle gas power plant has been awarded to American energy company AES, which will alter the power balance from 2019.

On the regulatory side, the guidelines from 2013 preventing hydropower plants with reservoirs to set the spot price are to be changed, which will be favorable to Bajo Frio, and bring the regulatory system in line with the other cost-based pools in Latin America.



THIS IS SN POWER

Oslo, 1 March 2017

9. Risk Management

SNP’s growth targets and the nature of its business make it important to monitor and understand the risk picture continuously at all levels. A global framework for risk management is implemented in all business areas and constantly improved. Important risk exposures for SNP are related to hydrology, market, political and regulatory environment, construction, health and safety, finance markets, and corruption. The company has in 2016 focused on monitoring and controlling risks and uncertainties by further developing procedures and tools to ensure quality in project development, investment decisions, project execution, and operations.

In some countries in which SNP operates, exposure to political and regulatory risk is considered to be high. All markets are particularly closely monitored in this regard and mitigation measures such as political risk insurance is evaluated and acquired if necessary.

The company manages the financial risks associated with foreign currencies, interest rates and liquidity primarily by using currency forward contracts and interest rate swap agreements.

Through the maximization of dividends, repayment of previously contributed capital, share issues and refinancing operations of the operative project companies, the capital structure is optimized to maximize the Group’s value and reinvestment capability.

The Group relies on project financing in which lenders are not entitled to recourse against the parent or sister companies. In some cases, capped parent company guarantees will still have to be issued in order to cover risks that cannot be allocated to lenders, typically construction related risks.

SNP has established a uniform and comprehensive set of HSE standards, which are monitored by its regional organizations and representatives in the Boards, the SNP management team, and through HSE audits. Serious injuries are subject to independent accident investigations. 10. Priorities for SN Power in 2017SNP has operating assets in the Philippines, Laos, Zambia and Panama. As the plant in Panama enters its first full year of regular operations and the plants in Zambia restart after the safe operations refurbishments, excellent operational performance will be a main priority. After dry years in many places we expect normal hydrology in 2017.

SNP’s work with the project pipeline in 2016 has focused on narrowing the scope to focus on a few projects where the likelihood that the projects will reach completion is deemed to be high. For 2017, the main priority will be to bring these preferred projects forward and limit the search for new projects to countries where we are already present or to where the particular hydropower project will have a competitive advantage compared to other power sources.


FINANCIAL STATEMENT


YEAR 2016

SN POWERFINANCIAL STATEMENTS



SN POWER GROUP

Income statement and consolidated statement of comprehensive income

SN POWER GROUP

Figures in USD 1,000 NOTE 2016 2015

Income statementOPERATING REVENUES AND EXPENSES

Sales revenues 7 33,026 28,351 Energy purchase and other costs related to power sales -4,018 -6,153 Salary and personnel costs 8 -12,765 -14,229 Depreciation, amortization and impairment 11, 12 -74,003 -6,435 Other operating costs 9 -12,809 -12,690 Income from investments in associated companies and joint ventures 2, 6 48,076 56,797

Earnings before financial items and tax -22,493 45,641


Financial income 10 6,052 6,604 Financial expenses 10 -17,382 -13,592 Net financial items -11,330 -6,988

Profit before tax -33,823 38,653

This year's tax expense 21 -3,325 -4,883

NET PROFIT FOR THE YEAR -37,148 33,770

Attributable to:Equity holders of the parent -5,328 34,895 Non-controlling interests -31,820 -1,125 NET PROFIT FOR THE YEAR -37,148 33,770

Consolidated statement of comprehensive incomeItems that may be reclassified subsequently to profit or lossNet gain (loss) on hedging instruments 14 2,085 593 Net gain (loss) on cash flow hedges in associated companies and joint ventures 6 833 3,214 Currency translation differences -26,949 -29,108 Total items that may be reclassified subsequently to profit or loss -24,031 -25,301

Items that will not be reclassified to profit or lossPensions 20 -76 641 Other adjustments -43 -149 Total items that will not be reclassified to profit or loss -119 492

Other comprehensive income for the year, net of tax -24,150 -24,809

Total comprehensive income for the year, net of tax -61,298 8,961

Attributable to:Equity holders of the parent -30,886 10,138 Non-controlling interests -30,412 -1,177 Total comprehensive income for the year, net of tax -61,298 8,961



SN POWER GROUP

Balance Sheet at December 31

SN POWER GROUP


ASSETS Deferred tax asset 21 - - Intangible assets 2, 11, 12 5,105 13,522 Property, plant and equipment 2, 11, 12 365,370 420,774 Investment in associated companies and joint ventures 2, 6 577,597 670,730 Financial assets 16 8,207 5,842 Total non-current assets 956,279 1,110,868 Spare parts 87 - Receivables 17 11,422 10,877 Bank deposits, cash and cash equivalents 18 219,563 147,971 Total current assets 231,072 158,848

TOTAL ASSETS 1,187,351 1,269,716

EQUITY AND LIABILITIESPaid-in capital 19 852,643 852,643 Other equity -5,525 25,360 Non-controlling interests 106,854 137,268 Total Equity 953,972 1,015,271 Pension commitments 20 1,348 1,068 Deferred tax 21 38,816 48,251 Non-current financial instruments (derivatives) 14 4,038 6,123 Interest-bearing long term debt 22 137,012 168,812 Total long-term liabilities 181,214 224,254 Current portion long term debt 22 8,433 8,207 Tax payable 21 786 1,375 Other current liabilities 23 42,946 20,609 Total current liabilities 52,165 30,191

TOTAL EQUITY AND LIABILITIES 1,187,351 1,269,716



SN POWER GROUP

Consolidated Statement of Changes in Equity at 31 December

SN POWER GROUP

Non-controlling interests

Total equity

Figures in USD 1,000 Share capital

Retained earnings

Translation reserve

Hedging reserve

At 1 January 2015 852 643 25 401 -8 581 -1 598 117 128 984 994

Transactions with shareholdersIssue of share capital in Subsidiaries - Minority Share 11,277 11,277 Increased minority due to purchase of subsidiary 10,040 10,040 Transactions with shareholders - - - - 21,317 21,317

Other comprehensive income for the year, net of taxNet gain/losses on hedging instruments 193 400 593 Net gain/losses on cash flow hedges in associated companies 3,214 3,214 Currency translation differences -29,108 - -29,108 Pensions 579 - 62 641 Other adjustments - 365 - - -514 -149 Other comprehensive income for the year, net of tax - 944 -29,108 3,407 -52 -24,809

Recognized through Profit and LossProfit for the year - 34,895 - - -1,125 33,770 Recognized through Profit and Loss 34,895 -1,125 33,770

Total comprehensive income for the year, net of tax 35,839 -29,108 3,407 -1,177 8,959

At 31 December 2015 852,643 61,239 -37,689 1,810 137,268 1,015,271

Other comprehensive income for the year, net of taxNet gain/losses on hedging instruments 678 1,407 2,085 Net gain/losses on cash flow hedges in associated companies 833 833 Currency translation differences -26,950 1 -26,949 Pensions -76 - - -76 Other adjustments - -43 - - - -43 Other comprehensive income for the year, net of tax -119 -26,950 1,511 1,408 -24,150

Recognized through Profit and LossProfit for the year -5,328 - - -31,820 -37,148 Recognized through Profit and Loss -5,328 -31,820 -37,148

Total comprehensive income for the year, net of tax -5,447 -26,950 1,511 -30,412 -61,298

At 31 December 2016 852,643 55,792 -64,639 3,322 106,854 953,972

Other equityPaid-in capital

Attributable to equity holders of the parent



SN POWER GROUP

Cash flow statementSN POWER GROUP


OPERATIONAL ACTIVITIESProfit before tax -33,823 38,653 Tax paid -13,649 -8,052 Depreciation, amortization and impairment 11, 12 74,003 6,435 Loss (gain) on disposal of fixed assets 7 -101 - Difference between this year's pension expense and pension premium 356 785 Income from investments in associated companies and joint ventures 6 -48,076 -56,797 Dividends from associated companies and joint ventures 6 113,787 61,395 Effect of exchange rate changes (agio/disagio) 2,180 187 Change in spare parts -87 - Change in receivables and other current liabilities -1,813 3,479 Net cash flow from operational activities 92,776 46,085

INVESTMENT ACTIVITIESInvestment in tangible and intangible fixed assets 11, 12 -10,188 -32,731 Proceeds from sale of fixed assets 135 - Investment in associated companies and joint ventures 6 -1,405 50,769 Change in non-current financial assets -2,365 -2,652 Net cash flow to investment activities -13,823 15,386

CASH FLOW FROM FINANCING ACTIVITIESNew long-term debt 22 431 13,379 Paid installments long-term debt 22 -8,207 -6,789 New paid-in equity from non-controlling interests EQ - 11,277 Net cash flow from financing activities -7,776 17,867

Effect of exchange rate changes on cash and cash equivalents 415 -512

Net change in cash and cash equivalents 71,592 78,826 Cash and cash equivalents at 1 January 147,971 69,145 Cash and cash equivalents at 31 December 219,563 147,971


SN POWER GROUP

Notes to the financial statments

SN POWER GROUP

NOTES TO THE FINANCIAL STATEMENTS

Note 1Summary of significant accounting principlesGeneral information SN Power AS, including subsidiaries (SN Power Group), is an international renewable energy company with projects and operations in South-East Asia, Sub-Sahara Africa and Central America. The company invests on commercial terms and is committed to social and environmental sustainability throughout the business. The company’s headquarter is in Oslo.

The consolidated financial statements of the SN Power Group for the year 2016 were authorized for issue in accordance with a resolution of the Board of Directors on 1 March 2017.

The following text describes the most important accounting principles used in the consolidated financial statements. These principles have been applied consistently to all reporting, unless otherwise stated.

Basic principles The consolidated financial statements for the Group have been prepared in accordance with the International Financial Reporting Standard (IFRS) as adopted by the EU.

The following new and revised or amended Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements, but may affect the accounting for future transactions or arrangements.

At the time of presentation of the financial statements, the following standards and interpretations are issued by IASB, but not entered into force for the financial year 2016. Management assumes that these standards and interpretations will be applied in the Group financial statements from the financial year 2017 or later, and have not assessed the potential effect of these new standards.

Standards and Interpretations that are clearly not relevant for the Group’s financial statements have not been included in the below schedule. The impact of the standard listed below on the Group financial statements are expected to be minimal.

Standard/

InterpretationTitle Date of issue

Applicable to accounting periods commencing on or after

Amendments to IAS 1 Disclosure initiative Dec 2014 1 January 2016Amendments to IFRS 10, IFRS 12 and IAS 28

Investment entities: Applying the Consolidation Exemption

Dec 2014 1 January 2016

Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations

May 2014 1 January 2016

Amendments to IAS 16 and IAS 38

Acceptable methods of depreciation and amortisation

May 2014 1 January 2016

Amendments to IAS 27 Allow the use of the Equity Method in Separate Financial Statements

August 2014 1 January 2016

Improvements to IFRSs (Various Standards and Interpretations)

Improvements to IFRSs 2012-2014 Cycle

September 2014

1 January 2016

FIGURES IN USD 1,000


SN POWER GROUP

SN POWER GROUP


Standard/

InterpretationTitle Date of issue

Applicable to accounting periods commencing on or after

Improvements to IFRSs (Various Standards and Interpretations)

Annual Improvements 2014–2016 Cycle

December 2016 1 January 2017

IFRS 9 Financial Instruments July 2014 1 January 2018IFRS 15 Revenue from Contracts with

CustomersMay 2014 1 January 2018

IAS 12 Amendments regarding the recognition of deferred tax assets for Unrealized losses

January 2016 1 January 2017

IAS 7 Disclosure initiative January 2016 1 January 2017

When entering into new investments in subsidiaries, associated companies or joint ventures, the Group will measure the cost of the business combination according to IFRS 3. Management must use judgment in defining and allocating fair values of assets, liabilities and direct costs attributable to the combination.

Contracts related to purchase and sale of energy Contracts related to purchase and sale of energy that meets the definition of financial instruments, are valued at fair value through profit and loss. The calculation of fair value on such contracts imply in most cases use of a wide range of estimates, of which the determination of future price curves in the market are the most significant.

Impairments SN Power Group has significant investments in fixed assets, associated companies and joint ventures. These assets are tested for possible impairment where indications of loss of value are present. Such indicators might be changes in market prices on energy or capital, shift in production capacity or other economic and legal circumstances. Calculating the recoverable amount requires a series of estimates concerning future cash flows, of which price curves and discount rate are the most significant.

Development costs Development costs are recognized in the balance sheet when it is probable that these will result in future economic benefits. Establishing such probability involves extensive use of judgment based on previous results and experience.

Price forecast for power A key assumption used by management in making business decisions is management’s price forecasts for power and the related market developments. In addition, these assumptions are critical input for management related to financial statement processes such as:

• Allocation of fair value in business combinations

• Valuation of contracts related to purchase and sale of energy

Functional and presentation currency The consolidated financial statements are presented in US dollars (USD), which is the functional currency of the parent company is US dollars (USD). All amounts are rounded to the nearest thousand, unless otherwise stated.

Significant accounting judgments, estimates and assumptions The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in estimates will be recognized in the period they occur only if applicable in that period. If changes also concern future periods, the effect is distributed over both current and future periods. However, uncertainty about these assumptions and estimates could result in outcomes requiring a material adjustment to the carrying amount of the asset or liability affected in the future. The areas in the financial statements of SN Power Group that are most affected by significant accounting judgments, estimates and assumptions are:

Useful life of tangible and intangible fixed assets Depreciation is based on management estimates of the useful lives of the assets and their residual values. Estimates may change due to changes in scrap value, technological development, environmental and other conditions. Management reviews the future useful lives of each component and the residual value annually, taking into account the above mentioned factors.

Provisions and contingent liabilities IAS 37 defines when to recognize a provision in the financial statements. Management must make estimates and use judgment in determining the expected probability of an outflow of resources and a reliable estimate of the amount.

Purchase price allocation related to new investments in subsidiaries, associated companies, and joint ventures


SN POWER GROUP

SN POWER GROUP

The process is headed and run by a team of experts across the organization. The main results are benchmarked to external references and major deviations are explained. The process aims to ensure consistency, and arrive at a balanced view of both the markets and the future power prices.

Capital management The primary objective of the Group’s capital management is to optimize the use of equity to maximize shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust debt exposure, dividend payments to shareholders, return capital to shareholders or issue new shares. The Group’s policy is to use project financing in all investments and in the long run to keep the gearing ratio in operating companies above 50 %. The gearing ratio is defined as interest bearing debt divided by Total equity and liabilities:

• Impairment testing of property, plant and equipment, intangible assets and equity accounted investments

SN Power performs an update of its price forecasts and the related expected market developments in the geographical areas where SN Power operates, annually. The update provides basis for both strategic decisions as well as the management’s expectation for future prices and revenue streams associated with the assets. The annual update is the output of a continuous process of monitoring, interpreting and analyzing global as well as local trends, market fluctuations and drivers that ultimately could affect future markets and revenues. A fundamental approach is applied to analyse the markets. Such analysis includes among others;

• Cost levels of competing technologies and fuels

• Future energy balances

• Political regulations

• Technological developments to reduce emissions of climate gases

Basis for consolidation The consolidated financial statements comprise the financial statements of the parent company SN Power AS and its controlling interests in other companies as of 31 December 2016.

Subsidiaries Subsidiaries are all entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date control ceases.

Business combinations The purchase method of accounting is used to account for the acquisition of subsidiaries. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. The amount of the consideration which exceeds fair value of net identifiable assets is recorded as goodwill, and tested annually for impairment. Non-controlling interest Non-controlling interest is the share of profit and equity that is not held by the majority owners. Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Investments in associated companies and joint ventures Shares in companies where the Group exercises a significant, but not controlling influence, and shares in companies with joint control are accounted for under the equity method. Significant influence normally means

that the Group owns between 20 % and 50 % of the voting capital. The Group’s share of the companies’ net result adjusted for amortization of excess value is shown on a separate line in the consolidated income statement. The investments are shown in the consolidated balance sheet as non-current assets, recognized at the value which equals the historical cost price including directly assigned transaction costs adjusted for the accumulated share of results adjusted for depreciation and amortization of excess values during the period of ownership, dividend received and possible exchange rate adjustment. Any conversion differences are recorded directly against equity. The consolidated financial statement includes the Group’s share of profit or loss from the date on which significant influence is attained and until such influence ceases. If the Group’s share of losses of an associate or a joint venture equals or exceeds the interest in the associate or joint venture, the Group discontinues recognizing its share of further losses. The interest in an associate or a joint venture is the carrying amount of the investment under the equity method together with any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture. Such items may include long-term shareholder loans that are subordinated and unsecured.

Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses resulting from intra-group transactions, are eliminated. Unrealized gains arising from transactions with associated companies and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

2016 2015

Total Interest-bearing debt 175,448 177,019

Total equity and liabilities 1,187,351 1,269,716 Gearing ratio 14.8% 13.9%



SN POWER GROUP

SN POWER GROUP

Financial instruments Generally Financial instruments are initially allocated to one of the categories of financial instruments as described in IAS 39. The different categories relevant to the SN Power Group and the management that follow the instruments recognized in the respective categories are described below.

Valuation principles for different categories of financial instruments 1) Instruments at fair value through profit or loss Derivatives and financial instruments held for sale have to be measured at fair value in the balance sheet with corresponding change in fair value through profit and loss statement. For derivatives that are hedging instruments in a hedge accounting relationship, the change in value of the effective part of the hedge, following from a change in the value of the hedged risk, is not taken to profit or loss. In a fair value hedge such effects are carried against the value of the hedging object. For hedging of cash flow and hedging of net investments in foreign operations such effects are taken directly to equity. Derivatives consist of both independent derivatives and embedded derivatives that are separated from the host contract and recognized at fair value as if the derivative was an independent contract.

2) Loans and receivables Loans and receivables are initially recognized at fair value including transaction costs. In subsequent periods, loans and receivables are measured at amortized cost using the effective interest method, so that the effective interest rate becomes equal over the term of the instrument.

3) Financial liabilities Financial liabilities are initially recognized at fair value including transaction costs. In subsequent periods, financial liabilities are measured at amortized cost using the effective interest method so that the effective interest rate becomes equal over the term of the instrument.

Principles for designation of financial instruments to different categories of instruments Below is a description of the guidelines applied by the SN Power Group for designation of financial instruments to different categories of financial instruments in cases where an instrument can qualify for recognition under more than one category.

Instruments at fair value through profit or loss Derivatives must always be assessed under the category “fair value through profit or loss”. Financial contracts regarding purchase or sale of energy and CO2-quotas always have to be considered as derivative financial instruments. Physical contracts regarding purchase and sale of energy and CO2-quotas entered into as authorized by trading, or settled financially are considered as if they were financial instruments and have to be measured at fair value. Physical contracts regarding purchase and sale of energy and CO2-quotas entered into according to authorization related to own requirements or provision for own production, are normally not covered by IAS 39 as long as the contracts do not contain written options in terms of volume flexibility.

Financial instruments included in hedge accounting Identification of financial instruments designated as a hedge instrument or a hedge object in a hedge account is based on the intention of the acquisition of the financial

Foreign operations Each entity in the Group determines its own functional currency based on local operations, and items included in the financial statement of each entity are measured using that functional currency. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s presentation currency (USD) at the exchange rate at the reporting date. The income and expenses of foreign operations are translated to USD at the average rate for the reporting year. Foreign exchange differences are recognized in other comprehensive income and accumulated in the translation reserve, except to the extent to the extent that the translation difference is allocated to non-controlling interest.

Revenue recognition Revenue comprises the fair value for the sale of goods and services, net of value-added tax, rebates and discounts. Intra-group sales are eliminated in the group accounts. Revenue is recorded as and when earned.

(a) Power sales Revenues from power sales and transmission are recognized as income when delivered.

(b) Rendering of services Income from rendering of services is recognized in the accounting period in which the services are rendered.

(c) Dividend income Dividend income is recognized when the right to receive payment is established, normally when approved by the General Meeting.

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Government grants Grants from the government are recognized gross in the income statement and in the balance sheet. Government grants related to costs are deferred and recognized in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants related to projects recognized in the balance sheet are presented as deferred income and recognized as income along with depreciation of the corresponding asset.

Emission rights SN Power Group will in some cases receive emission rights through production of environmentally friendly energy and sell them to a third party. Such rights are considered grants which are recognized when there is reasonable assurance that the Group will comply with the conditions attached to it. This is generally achieved once energy is produced. Emission rights are intangible assets. They are recognized at cost if separately acquired.

Emission rights received free of charge from the government are recognized at cost (nil) as allowed by IAS 20.23.



SN POWER GROUP

SN POWER GROUP

Current/non-current An asset/liability is classified as current when it is expected to be realized or settled, is intended for sale or consumption within the Group’s normal operating cycle, is held primarily for the purpose of being traded, or is expected to be realized or settled within twelve months after the balance sheet date.

The presentation of financial instruments in current and non-current items respectively, is made according to general guidelines for such classification. For long-term debt, the first year installment is classified as a short-term item.

Intangible assets Road and land rights Expenses for intangible assets, comprising road and land rights, are recognized at historic cost to the extent that the criteria for capitalization are satisfied.

Development costs Development costs are capitalized only if future economic benefits from the development of an intangible asset are probable, according to IAS 38. Development costs will often be capitalized when a construction project is more likely to happen than not. This may occur before the formal investment decision has been made.

Property, plant and equipment Items of property, plant and equipment are measured at cost, including expenses completing the asset for use, less accumulated depreciation and any accumulated impairments. Borrowing costs for significant investments are capitalized. Expenses accrued after the asset has been taken into use, such as maintenance costs, are taken to profit or loss, while other expenses expected to generate economic benefits are recognized in the balance sheet.

Water rights are not depreciated if no right of reversion exists and the value is deemed to be perpetual. Time limited rights are depreciated over the license period. Water rights acquired in a separate transaction are measured initially at cost. Water rights acquired in a business combination is measured at fair value based on the estimated excess earnings of the acquired power plant. The excess earnings are the difference between the after-tax operating cash flow and the required cost of invested capital on all other assets used in order to generate those cash flows. These contributory assets include property, plant and equipment, other identifiable intangible assets and net working capital for the power plant. The allowance made for the cost of such capital is based on the value of such assets and a required rate of return reflecting the risks of the particular assets.

Depreciation is made on a straight line basis over the useful life of the asset. Useful life is assessed on an individual basis and there might be variations within the group based on given local conditions or license period. The normal useful lives for different groups of assets are presented in the table below:

instrument. If financial instruments are acquired with the intention to obtain an economic hedge effect, a closer consideration of the possibilities to document a hedge account will be made.

Presentation of derivatives in profit and loss and in the balance sheet Derivatives not related to hedging are presented on separate lines in the balance sheet under assets and liabilities, respectively. Derivatives with positive and negative fair value, respectively, are presented gross in the balance sheet as long as no legal rights to set off different contracts exist, and such rights to offset actually will be applied in the current cash settlement following the contracts. In the latter case, the particular contract will be presented net in the balance sheet. In the income statement, changes in fair value of derivatives not classified as hedge accounting are classified as financial items. Value changes in energy derivatives are presented under revenue, while value changes in financial derivatives are presented under financial items.

Income tax Income tax expenses comprises of current and deferred tax. It is recognized in the profit and loss except to the extent that it related to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax Current tax comprises the expected tax payable or receivables on the taxable income of loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of tax payable or receivables is the best estimate of the tax amount expected to be paid to or received from the tax authorities in each country. The tax rates and laws used to compute the amount are those that are enacted or substantially enacted by the reporting date. Current tax also include any tax arising from dividends.

Deferred tax Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the date of the reporting date. Deferred tax assets and deferred tax liabilities are offset within the same legal tax subject and jurisdiction.



SN POWER GROUP

SN POWER GROUP

Land EternalWater rights License periodPlants and machinery

Rock-fill dams, concrete dams 75Tunnel systems 75Rock rooms/chambers 75Mechanical machine installations 40Remaining technical machine parts 15Generator 40Transformer 40Switchgear (high-voltage) 35Control gear 15Electro technical auxiliary gear 15System control centre 15Telecommunication circuit 10Administration building 50Power plant - Building structure 75Other buildings related to operation 50Buildings: Technical installations 30Buildings: Tele- and automatics 10-20

Fixtures and fittings, vehicles, other equipmentOffice- and computer equipment 3Furniture and fixtures 5Means of transport 10

Each part of a fixed asset that is significant to the total cost of the item will be depreciated separately. Residual value is taken into account when calculating the annual depreciation. Land is not subject to depreciation. Periodic maintenance is capitalized with depreciation over the time period until the next maintenance is expected to be carried out. Estimated useful life, depreciation method and remaining value are reviewed annually.

When assets are sold or disposed of, the capitalized value is derecognized and any loss or gain is taken to profit or loss. If new components are capitalized, the components that were replaced are removed and any remaining recognized value is recorded as a loss.

Leases A lease is classified as a financial lease if it transfers substantially all the risks and rewards incidental to ownership. With financial lease agreements, the asset is recognized in the balance sheet and depreciated.

A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Payments made under operating leases are charged to the income statement on a straight-line basis over the leasing period.

Impairment of non-financial assets The carrying amount of property, plants and equipment and intangible assets are reviewed on a quarterly basis to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Intangible assets with indefinite useful life and goodwill are not amortized, but tested for impairment at each reporting period. For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash flow generating units.


The recoverable amount of an asset or cash generating unit is the greater of its fair value less costs of sell. Value in use is based on the estimated future cash flow, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash flow generating unit.

An impairment loss is recognized if the carrying amount of an asset or cash flow generating unit exceeds its recoverable amount. Impairment losses are recognized in profit and loss. They are allocated first to reduce the carrying amounts of goodwill allocated to the cash flow generating unit, and then to reduce the carrying amount of the other assets in the cash flow generating unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciations or amortization, if no impairment loss had been recognized. Such reversal is recognized in profit or loss.

Investments in associated companies and joint ventures are tested for impairment when there are indicators of possible loss in value. An impairment loss is recognized if the recoverable amount, estimated as the higher of the fair value less cost to sell or value in use, is below the carrying amount.

Trade and other receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognized in the income statement.

Cash and cash equivalents Cash and cash equivalents include bank deposits, other short-term liquid investments and bank overdrafts. Cash and cash equivalents are recognized at current values. Restricted deposits are included in cash and cash equivalents.

Equity Proposed dividend is classified as equity. Dividends are reclassified to short term liabilities when approved by the General Assembly.

Provisions, contingent assets and liabilities Provisions are recognized when the Group has a present obligation (legal or self-imposed) as a result of a past event, it is probable that the obligation has to be settled and that a reliable estimate of the obligation can be made.

Provisions are recognized with best estimate of the expenses required to settle the existing obligation at the balance sheet date. If significant, the time value of money is taken into account when calculating the size of the provision.

Contingent assets and liabilities are not recorded in the financial statements.


SN POWER GROUP

SN POWER GROUP

Pensions Defined benefit plans A defined benefit plan is a pension plan that defines an amount of pension that an employee will receive upon retirement, normally set as a share of the employee’s salary.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The present value of the defined benefit obligation at the balance sheet date is determined by discounting the estimated future cash outflow using a risk free interest rate. The obligation is calculated annually by an independent actuary using the linear accrual method.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in comprehensive income.

Changes in the defined benefit obligations due to changes in pension plans are taken directly through income statement over the vesting period.


Net pension assets for over-funded plans are recognized at fair value and classified as long term assets. Net pension obligations for under-funded plans and non-funded plans covered by operations are classified as long term provisions.

Net pension costs for the period are included in salary and personnel costs and consist of the sum of pension earned in the period, interest costs on the estimated obligation and estimated return on the pension’s fund.

Defined contribution plans A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity without further obligations after the contribution has been made. Expenses related to defined contribution plans are classified as salary and personnel costs.

Cash Flow Statement The cash flow statement is prepared using the indirect method. This means presenting, on the basis of profit before tax, cash flow from operating, investing and financing activities.

Dividend paid to shareholders and non- controlling interest is presented under financing activities.


SN POWER GROUP

SN POWER GROUP

Note 2Business CombinationsBusiness combinations 2016 SN Power Group was not involved in business combinations in 2016.

Business combinations 2015 In 2015 SN Power Group was not involved in business combinations. The purchase price allocation related to the acquisition of Agua Imara AS in 2014 has been adjusted as follows; water rights / concession agreement have increased by 20 MUSD (Water rights MUSD 15.4 and Power Purchase Agreements MUSD 4.6), non-controlling interests have increased by 10 MUSD and deferred taxes have increased by 10 MUSD.

Note 3Market risk, credit risk and liquidity riskSN Power’s strategic goals and ambitions as well as the geographical and cultural diversity in the countries of operation, makes it important to continuously evaluate risk factors at all levels. SN Power’s core business is in regions that are, or have been politically and financially unstable. The company has a risk management framework in place, including policy and risk appetite, structure, methodology, skills, knowledge, culture and tools/system support. This framework is applied to projects in all life cycles; to new developments, projects under construction and acquisitions as well as for operating entities.

Market risk Market risk is defined as risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market prices. SN Power is mainly exposed to market risk on financial instruments related to currency, interest rate and energy prices.

Currency risk SN Power Group’s presentation currency is US dollars (USD), and the functional currency of each subsidiary is determined from an evaluation of the primary economic environment of each company. The functional currency of each country is:

• USD: Panama, Norway, Zambia, Laos and Singapore

• ZMW: Zambia Holding

• PHP: Philippines

SN Power Group is exposed to currency risk from transactions mainly from investments in and dividends from subsidiaries, associated companies and joint ventures. Companies with USD as functional currency are in many cases exposed to currency risk from local currency since a portion of the operating costs will typically be denominated in local currency. Currency risk related to the balance sheet will materialize when group companies with different functional currencies are converted to USD, like the Philippines.

SN Power Group makes use of currency swaps and forward contracts to hedge all or part of the currency exposure related to new investments and other significant cash flows in foreign currency. Dividends are not hedged due to the short time from declaration to payment relative to the time horizon of the investment. The management and monitoring of foreign exchange exposure is regulated by the Group Treasury Policy owned by the Treasury Department, and the entity with foreign currency risk is responsible for compliance.

The following table shows the sensitivity of financial instruments to a reasonable possible change in material currencies for the Group (consolidated companies), with all other variables held constant:

Currency risk Currency

Increase/decrease in

currency rate

Effect on profit before

tax (TUSD)

2016 NOK +10% + 708NOK -10% - 708

2015 NOK +10% - 1,123NOK -10% + 1,123

Significant currency changes in associated companies will also have consequences on the income statement through application of the equity method for such investments.



SN POWER GROUP

SN POWER GROUP

Interest rate risk SN Power Group is exposed to interest rate risk through external debt financing in subsidiaries, associated companies and joint ventures. In addition there is an indirect interest rate exposure through inputs in valuations. Interest rate exposure related to the subsidiaries, associated companies and joint venture’s debt financing is secured through interest rate swaps for a significant portion of the loans. SN Power’s ambition for the Group’s interest risk is to minimize interest costs, reduce fluctuations, and limit changes in the value of the Group’s net debt. The Group`s total debt exposed to floating interest rates, exclusive associates and joint ventures, amounts to MUSD 73.

The following table shows the sensitivity of financial instruments to a reasonable possible change in interest rate for the Group (consolidated companies), with all other variables held constant:

Interest rate risk exposure

Increase/decrease

in interest rate

Effect on profit before

tax (TUSD)

2016 +1% + 1,464-1% + 585

2015 +1% + 765-1% + 572

Credit risk Credit risk is defined as the risk of a party to a financial instrument inflicting a financial loss on SN Power Group by not fulfilling its obligation. Maximum credit risk exposure is:

2016 2015Short and long-term receivables on associated companies/JV's 8,399 6,083 Other long term receivables 75 68 Cash and cash equivalents 219,563 147,971 Short term receivables 11,163 10,568 Total 239,200 164,690

Credit risk related to account receivables and other receivables in SN Power is limited by the fact that customers and counterparts are in different markets and in many cases are governmental institutions. On the other hand, customers are few and large and we operate in emerging markets where counter-party risk might be assessed to be higher. Handling of potential credit risk on receivables is primarily made through credit checks, establishment of bank guarantees and parent company guarantees in addition to ongoing monitoring of counterparts.

To mitigate credit risk related to cash and cash equivalents, SN Power has a finance policy that regulates the maximum exposure per counterpart.

Ageing of account receivables is presented below, provision for losses on receivables are made.


Current receivables

Less than 90 days

More than 90 days Impaired

Total receivables

Accounts receivables 4,192 2,924 103 -209 7,010Other receivables 4,420 4,420


SN POWER GROUP

SN POWER GROUP

Liquidity risk Liquidity risk is defined as the risk that SN Power will encounter difficulties in meeting obligations associated with financial liabilities. SN Power had MUSD 92.8 in positive cash flow from operations due to received dividends in 2016.

SN Power AS’ financing is based on equity. Both construction projects and operational activities are financed on the basis of non-recourse project financing. SN Power is extending limited and capped guarantees primarily during project construction phase.

The following table sets out the installment profile by maturity of the Group’s financial commitments. Under the current circumstances the financial commitments are expected to be covered by the cash flow from operations:

2017 2018 2019 2020 2021 After 2021 Total

Instalments related to fixed interest rate loans*External loans in subsidiaries 4,612 5,443 6,048 7,106 6,728 71,939 101,876

Instalments related to floating interest rate loansExternal loans in subsidiaries 3,822 33,030 3,179 3,443 3,349 26,318 73,141

Interest paymentsCalculated interest payments 10,618 8,805 8,205 7,548 6,940 25,676 67,792 Total liabilities 19,051 47,279 17,432 18,098 17,017 123,933 242,809

Credit risk exposureRestricted cash 188 188 Bank deposits, cash and cash equivalents 219,375 219,375 Receivables 11,430 11,430 Financial assets 8,207 8,207 Total assets 239,200 - - - - - 239,200

Net 220,149 -47,279 -17,432 -18,098 -17,017 -123,933 -3,609

* Including the parts of the floating interest rate loans that are swapped to fixed interest

Note 4Events after the balance sheet dateNo significant events have occured after the balance sheet date.



Note 5Subsidiaries

The following subsidiaries are included in the consolidated financial statements:

Company

Date of establ./acquisition Voting share Owner share

SN Power AS 5 December 2013

Agua Imara AS 6 June 2014 61.0 % 64.9%

SN Power Invest Netherlands BV

6 June 2014 100.0% 100.0%

Nordic Hydropower AB 24 September 2014 100.0% 100.0%

SN Power Philippines Inc. 6 June 2014 100.0% 100.0%

SN Power Invest Asia Pte Ltd. 6 June 2014 100.0% 100.0%

Agua Imara ACA Pte. Ltd. 6 June 2014 100.0% 100.0%

SN Power ACA (Zambia) Ltd 19 August 2015 100.0% 100.0%

SN Power Panama SA 19 February 2015 100.0% 100.0%

Nordic Power (Asia) Ltd. 1 December 2015 100.0% 100.0%

Fountain Intertrade Corporation 6 June 2014 50.1% 50.1%

Lunsemfwa Hydro Power Company Ltd 6 June 2014 51.0% 51.0%

Muchinga Power Company Ltd 6 June 2014 100.0% 100.0%

SN Power White Nile Ltd 18 May 2016 100.0% 100.0%

SN Power Uganda Ltd 18 May 2016 100.0% 100.0%

SN Power Bujagali Ltd 27 May 2016 100.0% 100.0%

SN Power AS

SN Power Invest Netherlands BVSN Power Invest Netherlands BV

Lunsemfwa Hydro Power Company Ltd

Kabwe, Zambia

Amsterdam, Netherlands

Manila, Philippines

Singapore

Agua Imara AS

Agua Imara ACA Pte. Ltd.


Kampala, Uganda SN Power Uganda Ltd/SN Power White Nile Ltd

SN Power Invest Netherlands BV

Kampala, Uganda SN Power AS

Kampala, Uganda SN Power AS

Business office

Oslo, Norway

Oslo, Norway



Panama City, Panama

Kabwe, Zambia

Lusaka, Zambia

Panama City, Panama

Bangkok, Thailand



Parent company

SN Power AS

SN Power AS

SN POWER GROUP SN POWER GROUP



Note 6Associated companies and joint venturesThe following associated companies and joint ventures are included in the consolidated financial statements:


Company

Date of establ./acquisition Voting share Owner share

Manila-Oslo Renewable Enterprise Inc. 2)

6 June 2014 16.7% 16.7%

SN Aboitiz Power - Magat Inc 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Benguet Inc 6 June 2014 40.0% 40.0%

SN Aboitiz Power - RES Inc 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Generation Inc 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Hydro Inc 1) 6 June 2014 40.0% 40.0%

Neptune Hydro Inc 1) 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Ifugao Inc 1) 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Cordillera Inc 1) 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Projects Inc 1) 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Renewables Inc 1) 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Greenfield Inc 1) 6 June 2014 40.0% 40.0%

SN Aboitiz Power - Energy Inc 1) 6 June 2014 40.0% 40.0%

Burica Hydropower SA 6 June 2014 50.0 % 50.1%

Theun-Hinboun Power Company Ltd 24 September 2014 20.0 % 20.0 %

Manila, Philippines

Manila, Philippines

Manila, Philippines

Manila, Philippines

SN Power Philippines Inc.






Parent company

Manila, Philippines

Manila, Philippines

Manila, Philippines

Manila, Philippines

Businessoffice

Manila, Philippines

Manila, Philippines

Manila, Philippines






Manila, Philippines



Nordic Hydropower AB

Manila, Philippines

Panama City, Panama

Vientiane, Laos


1) Companies without or with insignificant activity. 2) Manila-Oslo Renewable Enterprise has a 60% owner share in SN Aboitiz Power - Magat Inc, SN Aboitiz Power - Benguet Inc, SN Aboitiz Power - RES Inc, SN Aboitiz Power - Generation Inc, SN Aboitiz Power - Hydro Inc, Neptune Hydro Inc, SN Aboitiz Power - Ifugao Inc, SN Aboitiz Power - Cordillera Inc, SN Aboitiz Power - Projects Inc , SN Aboitiz Power - Renewables Inc, SN Aboitiz Power - Greenfield Inc and SN Aboitiz Power - Energy Inc.

Book value associated companies and joint ventures

* The difference between amount in this table and the table with financial information from associated companies and joint ventures is related to Group effects which are not included in the table below. Group effects consist of excess values and amortization of these.


CompanyBook

value 2015Additions/ disposals

Share of profit/loss* Dividends

Foreign currency

translation difference

Gain/Loss on Cash

Flow hedges Associates

Book value 2016

SN Aboitiz Power - Magat Inc 288,665 - 22,666 -85,592 -17,018 -405 208,318 Manila-Oslo Renewable Enterprise Inc. 95,275 101 19 - -5,322 - 90,072 SN Aboitiz Power - Benguet Inc 112,883 - 24,682 -28,195 -7,301 1,237 103,306 SN Aboitiz Power - Generation Inc 192 - -472 - 8 - -272 SN Aboitiz Power - RES Inc 216 403 438 - -30 - 1,027 Burica Hydropower SA 16,003 902 -240 - - - 16,664 Theun-Hinboun Power Company Ltd 157,498 - 983 - - - 158,481 Total 670,730 1,405 48,076 -113,787 -29,662 832 577,597



SN Power and Aboitiz Equity Ventures have joint control of the Philippine companies with a 50% shareholding each. SN Power’s prorata share of reported net profit (before group effects) from The Philippines operations amounted to MUSD 53. The Philippine entities have PHP (peso) as functional currency and there has been a significant weakening against USD in 2016, resulting in a negative translation difference of MUSD 30.

Agua Imara and the Panamanian partner Credicorp established in February 2012 a new company, Hidro Burica SA. Its purpose is to develop the 63 MW Burica hydropower plant. Agua Imara AS has, through its subsidiary Agua Imara ACA Pte. Ltd, injected another MUSD 0.9 in 2016. The Burica hydropower plant has been in an early construction phase. Due to licensing issues in Panama, it was decided to put the project temporarily on hold early in 2016. SN Power and Credicorp continued to work on the regulatory requirements related to the project during 2016, but have put the investment decision on hold pending PPA auction in Panama which is planned for Q3 of 2017.

Theun-Hinboun Power Company Ltd. (THPC) is a 500 MW hydropower plant based in Laos. THPC was acquired from Statkraft SF through the purchase of 100% of the shares in Nordic Hydropower AB with effect from 24 September 2014. Nordic Hydropower AB owns 20% of the shares in THPC. The net profit and dividends were lower than expected in 2016 due to low hydrology the first half of 2016.

*Assets and liabilities are converted to USD using the closing balance rate per 31 December 2016. Revenue and Net Profit are converted using average rate for 2016. The financial information does not include group adjustments.


Specification of Additions/disposalsCapital repaid

Groupeffects

Adjustments InvestmentAdditions/ disposals

SN Aboitiz Power - Magat Inc - - - Manila-Oslo Renewable Enterprise Inc. - - 101 101 SN Aboitiz Power - Benguet Inc - - - - SN Aboitiz Power - Generation Inc - - - SN Aboitiz Power - RES Inc - 403 403 Burica Hydropower SA - 902 902 Theun-Hinboun Power Company Ltd - - Specification of Additions/disposals - - 1,405 1,405

Financial information from associated companies and joint ventures (100%)*Company Assets Liabilities Revenue Net profitSN Aboitiz Power - Magat Inc 572,084 399,600 132,225 51,144 Manila-Oslo Renewable Enterprise Inc. 155,879 1,937 3,580 112 SN Aboitiz Power Benguet Inc 614,956 399,607 132,198 55,059 SN Aboitiz Power - Generation Inc 13,827 14,709 - -944 SN Aboitiz Power - RES Inc 6,137 3,867 12,751 876 Burica Hydropower SA 34,018 990 - -480 Theun-Hinboun Power Company Ltd 687,957 475,173 109,568 30,297


Note 7Sales revenues and costs of goods sold

Note 8Employee benefit expenses, management remuneration and audit fee


By business area 2016 2015

Power sales 32,740 27,527 Services 185 767 Gain on disposal of assets 101 57 Total 33,026 28,351

By geographical market 2016 2015

Europe 396 1,440 Central America 24,477 17,187 Asia 35 - Africa 8,118 9,724 Total 33,026 28,351

Costs of goods sold 2016 2015

Purchase of electric power 1,945 5,298 Transmission costs 1,977 855 Other accrued costs 96 - Total 4,018 6,153

Salary and personnel costs 2016 2015

Salary expenses 10,486 11,627 Social security costs 1,108 1,144 Pension costs (note 20) 502 1,002 Other personnel costs 669 456 Total salary and personnel costs 12,765 14,229

The average number of man-years 2016 2015

SN Power Group consolidated companies 136 136 SN Power Group associated companies and joint ventures (100%) 524 539 Total 660 675

Expensed management remuneration 2016 NOK 2016 USD 2015 NOK 2015 USD

Chief Executive OfficerSalary 2,583 307 2,648 328 Paid pension premium 403 48 534 66 Other 313 37 218 27 Total Chief Executive Officer 3,299 393 3,400 422

Executive Management TeamSalary 12,691 1,511 12,467 1,546 Paid pension premium 873 104 1,353 168 Other 5,402 643 3,011 373 Total Executive Management Team 18,966 2,258 16,832 2,087

Total remuneration CEO and Executive Management Team 22,265 2,650 20,231 2,509




SN Power and its subsidiary Agua Imara have a shared management team and the remuneration expenses are split equally between the two companies. The table above reflects the total remuneration expenses allocated to both companies.

The SN Power Management Team consists of nine people in addition to the CEO.

The CEO and one member of the Management Team has a supplementary pension scheme with a right to a pension of 66% of the salary from 12 up to 20 times the Norwegian Public Pension Base Rate (“G”) from the age of 65 years. The plan requires 30 years vesting period and is funded by the company. The Management Team has no right to severance pay related to end of employment, with the exception of the CEO who is entitled to severance pay of up to 12 months.

The CEO and the Management Team are covered by the same bonus plan as all employees in SN Power AS. The plan is limited up to 20% of salary, and the remuneration is based on yearly goal achievements.

Remuneration to the Board of Directors in SN Power AS in 2016 is NOK 256 thousand (USD 31 thousand). In 2015 is NOK 210 thousand (USD 24 thousand).

Audit fee, SN Power Group 2016 2015

Statutory audit 106 128 Other assurance services 78 12 Tax services 107 60 Non-audit services 144 182 Total fees to auditors 434 383

Deloitte is the auditor for SN Power Group. Total fees related to consolidated companies not audited by Deloitte amounts to TUSD 253 (TUSD 171 in 2015), whereof TUSD 101 (TUSD 59 in 2015) for statutory audit, 37 TUSD for other assurance services ( 2 TUSD in 2015), TUSD 48 (TUSD 51 in 2015) for tax services and 67 TUSD (59 TUSD in 2015) for non-audit services provided.

Note 9Other operating costs

Note 10Financial income and expenses

2016 2015

Leasing of premises, office equipment and company cars 1) 862 830 External services 6,485 5,598 Travel expenses 1,078 1,554 Insurance expenses 797 536 Fees, licenses, etc. 479 391 Loss on disposal of assets, accounts receivable and contracts 2 7 Repairs and maintenace 669 613 Office expenses 544 527 Other costs 1,893 2,634 Total other operating costs 12,809 12,690 1) Leasing of premises, office equipment and company cars are expected to be at the same level for the years to come

Financial income IAS 39 category 2016 2015Interest income bank Amortized cost 713 220 Realized currency gain Fair value through profit or loss 254 1,755 Unrealised currency gain Fair value through profit or loss 4,978 4,562 Other financial income Amortized cost 107 67 Financial income 6,052 6,604

Financial expenses 2016 2015Interest expenses loans Amortized cost -11,477 -5,416 Realized currency loss Fair value through profit or loss -2,873 -3,168 Unrealised currency loss Fair value through profit or loss -2,770 -4,899 Other financial expenses Amortized cost -262 -109 Financial expenses -17,382 -13,592

Net financial items -11,330 -6,988



Note 11Property, plant and equipment


Land Water rightsPlants and machinery

Fixtures and fittings,

vehicles, other

equipment TotalBook value 1 January 2015 6,883 114,324 257,050 1,166 379,423 Additions 1 - 26,663 875 27,539 Additions through business combinations, ref. Note 2 - 15,477 - 140 15,617 Accumulated dep'n through business combinations, ref. Note 2 - - - -69 -69 Capitalized borrowing costs - - 4,774 - 4,774 Disposals at book value - - 41 -5 36 Depreciation for the year - -425 -5,152 -539 -6,116 Exchange differences for the year - - - -27 -27 Book value 31 December 2015 6,884 129,376 282,973 1,541 420,774

Acquisition cost 31 December 2015 6,884 129,801 298,348 3,537 438,570 Accumulated depreciation - -425 -14,972 -1,962 -17,359 Accumulated impairment losses - - - - - Accumulated exchange differences - - - -34 -34 Book value 31 December 2015 6,884 129,376 282,973 1,541 420,774

Book value 1 January 2016 6,884 129,376 282,973 1,541 420,774 Additions 20 - 9,687 457 10,164 Disposals at book value - - - -34 -34 Depreciation for the year - -777 -7,903 -589 -9,269 Impairment for the year 1) - -38,769 -17,524 - -56,293 Exchange differences for the year - - - 28 28 Book value 31 December 2016 6,904 89,830 267,233 1,403 365,370

Acquisition cost 31 December 2016 6,904 129,801 307,631 3,753 448,089 Reclassification - - - - - Accumulated depreciation - -1,202 -22,874 -2,344 -26,420 Accumulated exchange differences - - - -6 -6 Book value 31 December 2016 6,904 89,830 267,233 1,403 365,370

1) See below for more details on impairment.

Impairment losses recognized in the year Refer to note 1 for accounting principles related to impairment and the separate section within note 1 related to judgements and estimates, especially regarding information about SN Power’s process related to updating their market view and long term price forecasts.

In 2016, property plant and equipment are impaired by total of USD 56 million compared to MUSD 0 in 2015 and Intangible assets og USD 8 million compared to USD 0 million in 2015.

Indicators that might give rise to impairment are analyzed by local management in the subsidiaries and joint ventures and reviewed and discussed by the group management team. When indicators are identified through this review process, calculations are made to determine the recoverable value of the asset and impairment is recognized if the recoverable amount is lower than that carrying amount. Assets where the following situations exists are given special attention by SN Power Group Management;

• Declining market outlook and uncertain regulatory environment

• Uncertainties or delays in project executions

Estimated revenues are based on SN Power’s price forecast for power, as described in note 1. SN Power uses prices as agreed in power purchase agreements when applicable. The production volume used in the discounted cash flow analyses is the expected production volume for any given site, taking into account all expected technical and hydrological. The volume estimate is a combination of information from external sources and SN Power’s internal estimates.

Calculated value in use is based on a nominal discount after tax rate. However, the tax effects are considered in the calculated cash flows which means that the recoverable amounts calculated for impairment purposes are equal to the theoretical before tax model in accordance with IAS36. The discount rate represents SN Powers expectation of earnings after tax on the investments in this type of asset in the relevant market.




Bajo Frio investment in Panama Bajo Frio is a 58 MW run of river hydropower plan in the Chiriquí Viejo Basin near the border to Costa Rica which started to generate energy in June 2015. The combination of delayed completion of the project, cost overrun and declining spot prices have had a negative impact on the future cash flows from the Bajo Frio asset. The impairment calculations show a gross impairment of USD 57 million (MUSD 4 million of intangible assets and USD 53 million of tangible assets). The calculation of recoverable amount is based on a discount rate of 8,1% (after tax).

A change in the future power price of 10 % will impact impairment by approximately USD 26 million. Change of discount rate of 0.5 percentage points (before tax) will impact impairment by approximately USD 14 million.

Muchinga investment in Zambia Please refer to section under Note 12 for more details on the Muchinga investment impairment. A total of USD 7 million (USD 4 million of intangible assets and USD 3 million of tangible assets) has been recognized as impairment in 2016 related to the Muchinga investment.

Note 12Intangible assets

Note 13Contractual commitments

GoodwillRoad and

land rights

Projectdevelop

ment

Power Purchase Contracts Total

Book value 1 January 2015 5,105 - 3,999 - 9,104 Additions - - 418 - 418 Additions through business combinations - - - 4,643 4,643 Disposals at book value - - -324 - -324 Impairment losses - - - -319 -319 Book value 31 December 2015 5,105 - 4,093 4,324 13,522

Acquisition cost 31 December 2015 8,329 - 8,991 4,643 21,963 Accumulated amortization - - - -319 -319 Accumulated impairment losses -3,224 - -4,898 - -8,122 Book value 31 December 2015 5,105 - 4,093 4,324 13,522

Book value 1 January 2016 5,105 - 4,093 4,324 13,522 Additions - - 24 - 24 Amortization for the year - - - -416 -416 Impairment losses 1) - - -4,117 -3,908 -8,025 Book value 31 December 2016 5,105 - - - 5,105

Acquisition cost 31 December 2016 8,329 - 9,015 4,643 21,987 Accumulated amortization - - - -735 -735 Accumulated impairment losses -3,224 - -9,015 -3,908 -16,147 Book value 31 December 2016 5,105 - - - 5,105

1) See paragraph on impairment in Note 11 for details related to the impairment of the Bajo Frio asset.

Project development Project development costs are capitalized only if future economic benefits from the development of an intangible asset is probable. Development costs will be capitalized as part of the construction cost of the plant and depreciation will start when the asset is put into operation. Muchinga Power Company (MPC) in Zambia has a license to develop a hydropower plant with a potential capacity of 180-300 MW, downstream of the existing LHPC power plants. Capitalized project development costs in the Muchinga project was completely written down in 2016 with USD 4 million. The project has already been written down with USD 5 million in 2014 due to expected change in design for the planned new power plant. The main reason for the impairment of the Muchinga development project is uncertainties related to water rights.

Off balance sheet guarantees and obligations 31 December 2016 2015Parent company guarantees 20,100 20,100 Legal recourse guarantees 18,400 29,659 Sureties 20,250 20,250 Total 58,750 70,009




Note 14Derivatives

2016 2015Derivatives - non current liabilitiesInterest rate derivatives 4,038 6,123 Total non-current derivatives 4,038 6,123

Net Interest rate derivatives -4,038 -6,123 Total net derivatives -4,038 -6,123

Fair value of derivatives The estimated fair value of financial instruments has been determined using relevant market information and valuation methods. The fair value of interest rate swaps and currency swaps is determined by discounting expected future cash flows to present values using observed market interest rates and exchange rates, while the valuation of forward exchange contracts is based on the observed exchange rates, of which forward exchange rates are derived. Estimated present values are tested for reasonableness against calculations made by the counter-parties in the contracts (market-to-market).

Market interest rate curve is assumed for discounting derivatives. Market interest rate curve calculated based on the published swap rates from major financial institutions and credit spreads are added to the market yield curve in cases where credit risk is relevant. Fair value measurements can be classified by using a fair value hierarchy that reflects the significance of the inputs used in the preparation of the measurements. The fair value hierarchy has the following levels:

Level 1: Non-adjusted quoted prices in active markets for identical assets or liabilities. Level 2: Other than the quoted prices included in Level 1 that are observable for the asset or liability either directly as prices, or indirectly derived from prices. Level 3: Data for the asset or liability is not based on observable market data.

Fair value hierarchy and fair value changes in financial derivatives is presented below, while for the remaining financial instruments are discussed in the text above. Further analysis of market risk is discussed in note 3.

Interest derivatives TOTAL

Level 2

Derivatives 1 January 2016 -6,123 -6,123 Derivatives 31 December 2016 -4,038 -4,038 Change in fair value for derivatives 2,085 2,085

Changes in fair value recognized in other equity 2,085 2,085 Change in fair value for derivatives 2,085 2,085

Changes in fair value recognized in other equity 2,085 2,085 Recognized in other equity 2,085 2,085

Hedge accounting SN Power have entered into interest rate swaps in Fountain Intertrade Corporation. All contracts qualify for hedge accounting of future cash flows, and changes in fair value are recorded against equity until the payment is settled. Other hedging instruments that does not meet hedge accounting requirements are recorded at fair value over profit and loss statement. Per 31 December a total of MUSD 4 of the groups hedging instruments qualify for hedge accounting.




Note 15Fair value of financial instruments

Note 16Financial assets

Note 17Receivables

Note 18Bank deposits, cash and cash equivalents

Fair value of financial instruments The estimated fair value of financial instruments has been determined using the relevant market information and valuation methods. There are no identified financial instruments where the carrying value differs significantly from fair value. The carrying value of cash and cash equivalents is the best estimate of fair value. Loans are valued at amortized cost.

Book Fair Financial assets valued at amortized cost value valueLoans to associated companies and joint ventures 8,132 8,132 Other long term receivables 75 75 Accounts receivable 7,219 7,219 Prepayments to suppliers 988 988 Other current receivables 3,215 3,215 Cash and cash equivalents (note 18) 219,563 219,563 Total financial assets at amoritized cost 239,192 239,192

Financial liabilities valued at amortized costInterest-bearing long term debt 137,012 137,012 Current portion long term debt 8,433 8,433 Other current liabilities 40,685 40,685 Accounts payable 2,261 2,261 Tax 786 786 Total financial liabilities valued at amortized cost 189,177 189,177

2016 2015

Loan to associated companies and joint ventures 8,132 5,774 Other long term receivables 75 68 Total other financial assets 8,207 5,842

2016 2015

Accounts receivable 7,219 5,915 Provisions for loss on receivables -209 -188 Prepayments to suppliers 988 1,823 Earned but not invoiced operating income 1,841 1,816 Accrued dividend from associated companies and joint ventures 267 309 Other current receivables 1,186 936 Settlement account VAT 106 228 Prepaid rent 24 38 Total receivables 11,422 10,877

2016 2015

Bank deposits, cash and cash equivalents 219,375 147,900 Bank deposits - tax restricted 188 71 Total bank deposits, cash and cash equivalents 31 December 219,563 147,971




Note 19Share capital, shareholder information and dividend

Note 20Pensions and other long-term employee benefits

Share capital

Paid in capital

Paid-in equity 1 January 2016 852,643 852,643 Paid-in equity 31 December 2016 852,643 852,643

Shareholders in SN Power AS as of 31 December 2016 Number of shares

Owner and voting share

Statkraft Asset Holding AS 25,881,578 50%Norfund 25,881,578 50%Total 51,763,156 100%

Share capital NOK

2,588,157,800 2,588,157,800 5,176,315,600

No dividends are paid out for 2016.

SN Power AS and Agua Imara AS have pension schemes that cover a total of 23 staff members, and that comply with Norwegian regulations on mandatory pension. The pension plans conferred the right to defined future benefits, that were mainly dependent on the vesting period, the level of pay at retirement and the size of state pension benefits. These obligations have partially been covered by a closed plan for 1 employee in the Norwegian Public Service Pension Fund (SPK) and through a group pension scheme with Nordea Liv.

The defined benefit plan with Nordea Liv was terminated as of 31 December 2015 and replaced by a defined contribution plan starting from 1 January 2016. Total expenses related to the defined contribution plan in 2016 is TUSD 226.

In addition, four people including the CEO in SN Power and Agua Imara have a supplementary plan. This plan confers a right to a pension of 66% of the salary up to 20G (see note 9) from the age of 65 years. The plan requires 30 years vesting period and is funded by the company. Assumptions The following assumptions were used in calculating the current year’s pension costs and liabilities:

2016 2015Discount rate 2.1 % 2.5 %Expected rate of return, SPK 2.3 % 2.5 %Regulation of salary 2.25% 2.50%Regulation of pension, Nordea 0.0 % 0.0 %Regulation of pension, SPK 1.25% 1.50%Regulation of base rate 2.0 % 2.3 %Turnover 3.5 % 3.5 %

Pensions costs SPK Funded Unfunded 2016 2015Net present value of the current year's pension earnings - - 234 234 861 Interest rate and administrative costs 13 - 19 33 107 Gross pension costs 13 - 254 267 968 Return on pension plan assets -10 - - -10 -101 Administration costs - - - - 13 Accrued social security cost 0 - 19 19 122 Net pension costs 3 - 272 276 1,002

- - - Pension liabilities 0 0 0 2016 2015Pension liabilities 519 - 1,194 1,713 1,363 Pension plan assets 518 - - 518 416 Calculated pension liabilities 0 - 1,194 1,195 947 Social security cost 0 - 153 154 122 Net pension liabilities 0 - 1,348 1,348 1,068

- - - Movement in actuarial gains/losses recognized directly in equity - - - 2016 2015

22 228 227 478 -193 Currency effects 0 5 5 10 30 Recognised in the period 134 - -220 -86 641

- -233 - -233 -

156 0 13 169 478

Actuarial gains/losses from terminated scheme reclassified to other equity from OCIAccumulated amount recognised directly in equity before tax 31 December

Accumulated amount recognised directly in equity before tax 1 January




Note 21TaxTax expense 2016 2015

Taxes payable 13,060 5,100 Change in deferred tax -9,735 -217 Tax expense 3,325 4,883

Tax expense is related to foreign subsidiaries.

Tax expense 2016 2015

Profit before tax -33,821 38,653 Expected tax expense at a nominal rate of 27% -8,455 10,436 Effect on taxes of:Differences in foreign tax rates 103 799 Income from associated companies -12,019 -15,335 Tax loss carried forward 8,640 7,603 Withhold tax on received dividend from assoicated companies 12,120 3,856 Changes in temporary differences not recognized in profit & loss or balance sheet -241 -156 Other permanent differences, net 3,155 -2,781 This year's tax expense 3,325 4,883 Tax rate -9.8 % 12.6 %

Specification of the tax effects of temporary differences 1 January.

2016

Recognized in profit and

loss Recognized

in equity

Company acquisitions/

salesTranslation differences

31 December.

2016Property, plant and equipment -48,251 9,735 - - -300 -38,816 Total net deferred tax liability/(asset) -48,251 9,735 - - -300 -38,816

Deferred tax -48,251 -38,816 Total deferred tax in balance sheet -48,251 -38,816

2016 2015Property, plant and equipment 7 3 Pension liabilities 1,242 984 Tax losses carried forward/compensation 23,658 8,754

24,907 9,741

Temporary differences including tax loss carried forward for which no deferred tax asset is recognized in the balance sheet

Temporary differences including tax loss carried forward for which no deferred tax asset is recognized in the balance sheet

Deferred tax asset (DTA) not recognized in the balance sheet is related to tax losses carried forward and temporary differences in SN Power AS and Agua Imara AS. DTA is recognized on the basis of an expectation of a future taxable profit. The nature of SN Power AS and Agua Imara AS operations imply that future profits will not primarily be taxable. The benefits of deferred tax accordingly cannot be justified in the foreseeable future and have not been recognized in the companies’s balance sheets.




Note 22Long-term debt

Note 23Specification of other current liabilities

Average interest rate 2016 2015Regular loans in subsidiaries 4.6% 145,445 177,019 Total debt 145,445 177,019 First years installment long term debt -8,433 -8,207 Interest-bearing long term debt 137,012 168,812

Pledged as security and restricted funds The SN Power Group uses non-recourse debt in the project companies to fund investments and capital expenditures for construction and acquisition of power plants. This debt is secured by the shares in the project company, the physical assets, the contracts, and the cash flows of the related project company. The risk is limited to the respective project company and is without recourse to the parent companies.

The terms and conditions of the non-recourse debt within the SN Power Group, include certain financial and non-financial covenants. These covenants are limited to the activities in the project companies and vary among the companies. The covenants may include, but are not limited to maintenance of certain reserves, minimum levels of working capital, limitations on incurring additional debt and share retention.

Book value of pledged assets/shares in the group amounts to MUSD 180 and the underlying commitment amounts to MUSD 145.

2016 2015

Payables to shareholders 30,003 - Public taxes payable 544 553 Accounts payable 2,261 13,369 Accrued salary and vacation expense 1,251 1,447 Accrued costs and deferred revenue 483 488 Current interest-bearing debt 2,840 - Accrued interest 2,687 1,966 Other current liabilities 1,377 2,786 Total other current liabilities 42,946 20,609




Note 24Transactions with related partiesAll subsidiaries, associated companies and joint ventures listed in Note 5 and Note 6 are related parties of SN Power. Balances and transactions between consolidated companies are eliminated in the consolidated accounts and are not shown in the note. SN Power’s Management Team and board are also related parties of SN Power. SN Power is indirectly owned by the Norwegian government. There are no identified significant transactions and balances with the Norwegian government or companies controlled by the Norwegian government, other than the ones listed in this note 24, note 9 and Note 2. All transactions with related parties have been carried out as part of the ordinary operations and at arm’s length prices. There are no identified significant transactions and balances with related parties other than the ones listed in this note 24 and in note 8.

The profit & loss sheet includes the following amounts resulting from transactions with related parties

Transaction typeRelated party 2016 2015

Sales revenue Statkraft Group - 84 Sales revenue Norfund 362 - Sales revenue Burica Hydropower SA 185 744 Sales revenue Theun-Hinboun Power Company Ltd. - 23 Sales revenue Total 547 851

Other operating costs Statkraft Group 885 425 Other operating costs Total 885 425

The balance sheet includes the following amounts resulting from transactions with related parties 2016 2015

Receivables Norfund 362 - Receivables SN Aboitiz Power - Magat Inc 55 23 Receivables Manilla - Oslo Renewable Enterprise, Inc 677 670 Receivables SN Aboitiz Power - Benguet Inc 21 - Receivables SN Aboitiz Power - RES Inc 55 46 Receivables SN Aboitiz Power - Generation Inc 114 5,055 Receivables Hidro Burica S.A. - 255 Receivables Theun-Hinboun Power Company Ltd. 7,469 10 Receivables Total 8,753 6,059

Other current liabilities Statkraft Group - 52 Other current liabilities Hidro Burica S.A. 53 8 Other current liabilities Total 53 60

SN Power has assumed a guarantee obligation on behalf of Norfund related to specific revenue items in the Bajo Frio project. SN Power is entitled to recourse on commercial terms. The guarantee is be effective from commercial completion date of the Bajo Frio plant.




SN POWER AS

Income statement


OPERATING REVENUES AND EXPENSES

Sales revenues 2 372 855 Salary and personnel costs 3 -2,375 -3,392 Depreciation and amortization 6 -83 -50 Other operating costs 4 -6,711 -4,315

Operating loss -8,797 -6,902


Financial income 5 24,178 61,491 Financial expenses 5 -55,214 -2,243 Net financial items -31,036 59,248

Profit before tax -39,833 52,346

Tax expense 8 - -

NET PROFIT FOR THE YEAR -39,833 52,346

Statement of comprehensive income

Items that will not be reclassified to profit or lossPensions 7 -76 463 Total items that will not be reclassified to profit or loss -76 463

Other comprehensive income for the year, net of tax -39,909 52,809

Total comprehensive income for the year, net of tax -39,909 52,809

SN POWER AS



SN POWER AS

Balance Sheet at 31 December

SN POWER AS


ASSETSTangible assets 6 297 274 Investment in subsidiaries 9 748,948 802,303 Total fixed assets 749,245 802,577 Receivables 12 4,177 5,117 Cash and cash equivalents 10 119,368 106,026 Total current assets 123,545 111,143

TOTAL ASSETS 872,790 913,720

EQUITY AND LIABILITIESPaid-in equity 11 852,643 852,643 Other equity 11 16,871 56,780 Total equity 869,514 909,423 Pension commitments 7 1,242 985 Total long-term liabilities 1,242 985 Current liabilities 13 2,034 3,312 Total current liabilities 2,034 3,312

TOTAL EQUITY AND LIABILITIES 872,790 913,720

Oslo, 1 March 2017



SN POWER AS

Statement of Changes in Equity at 31 December

SN POWER AS

Figures in USD 1,000 NOTE Share capital Other equity Total equity

At 1 January 2015 852,643 3,971 856,614

Other comprehensive income for the year, net of taxPensions 463 463 Other comprehensive income for the year, net of tax 463 463

Recognized through Profit and LossProfit for the year - 52,346 52,346 Recognized through Profit and Loss - 52,346 52,346

Total comprehensive income for the year, net of tax - 52,809 52,809

At 31 December 2015 852,643 56,780 909,423

Other comprehensive income for the year, net of taxPensions - -76 -76 Other comprehensive income for the year, net of tax - -76 -76

Recognized through Profit and LossProfit for the year - -39,833 -39,833 Recognized through Profit and Loss - -39,833 -39,833

Total comprehensive income for the year, net of tax - -39,909 -39,909

At 31 December 2016 852,643 16,871 869,514



SN POWER AS

Cash flow statementSN POWER AS


OPERATIONAL ACTIVITIESProfit/loss before tax -39,833 52,346 Depreciations 6 83 50 Difference between this year's pension expense and pension premium 231 515 Impairment of financial assets 53,355 Currency effect on investments and share capital -49 118 Change in intra-group accounts 12, 13 134 -278 Change in other current assets and liabilities 12, 13 -472 -13 Net cash flow from operational activities 13,449 52,738

INVESTMENT ACTIVITIES

Investment in tangible and intangible fixed assets 6 -106 -188 Investments in subsidiaries 9 - 36,049 Net cash flow to investment activities -106 35,861

FINANCING ACTIVITIES

New paid-in equity 11 - - Net cash flow from financing activities - -

Net change in cash and cash equivalents 13,343 88,599 Cash and cash equivalents at 1 January 106,026 17,427 Cash and cash equivalents at 31 December 10 119,368 106,026


SN POWER AS

Notes to the financial statements

SN POWER AS

Summary of significant accounting policies The financial statements have been presented in accordance with simplified application of international accounting standards according to the Norwegian Accounting Act § 3-9. The financial statements consist of the income statement and statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes to the financial statements.

The financial statements give a true and fair view of the financial position, the financial performance and the cash flows for the year.

Classification Assets and liabilities related to the normal operating cycle are classified as current assets and current liabilities. Receivables and liabilities not related to the normal operating cycle are classified as current if they are of a short-term nature, normally due within one year. Shares and other investments not intended for continued use or ownership are classified as current assets. Other assets are classified as fixed assets and other liabilities as long term liabilities. Revenue recognition Sales of services are recognized as income when rendered. Other operating revenues are recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

Foreign currency Functional currency for the company is USD. Foreign currency monetary items are translated at the closing rate at the date of the balance sheet. Foreign currency gains and losses are reported in the income statement under the line items financial income or financial expenses.

Investments Investments in subsidiaries are accounted for using the cost method. The investments are initially measured at the acquisition price of the shares. When it is assumed that the fair value of investments is lower than its carrying amount, the asset is written down to the recoverable amount. Previously recognized impairment loss is reversed only if there have been changes in the estimates used to determine the recoverable amount. Dividends from subsidiaries are recognized when earned, which is usually when the dividend is approved by the board of directors in the subsidiaries.

If an appropriation exceeds the proportion of retained profit after acquisition, the excess amount represents a repayment of invested capital, and the appropriation is deducted from the value of the investment in the balance sheet.

Tangible fixed assets and intangible assets Tangible fixed assets and intangible assets are measured at cost less accumulated depreciation and write-downs. Tangible fixed assets and intangible assets with limited useful lives are depreciated over the expected useful life of the assets. Tangible fixed assets and intangible assets are written down if the carrying amount exceeds the recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and the value in use. Write-downs are reversed if the basis for the write-down is no longer present.

Research costs are expensed as incurred. Development costs related to project development are capitalized only if future economic benefits from the development of an intangible asset is probable. Development costs will often be capitalized when a construction project is more probable than not. This may occur before the formal investment decision has been made.

Leasing Leasing agreements are classified as financial or operational based on the actual terms and conditions of the agreement. Agreements transferring substantially all the financial rights and obligations related to the leased object to the company are classified as financial. Other lease agreements are classified as operational and the annual leasing fee is charged to profit and loss as a leasing expense. Trade receivables Trade receivables are measured at the recoverable amount. Provisions are made for bad debts.

Income taxes The tax expense is calculated from the profit (loss) before tax and comprises the current taxes and the change in deferred taxes. According to an interpretation from the Ministry of Finance, the taxable income is calculated in NOK as functional currency as opposed to USD in the financial statements. Deferred tax assets and liabilities are calculated in accordance with the liability method without discounting and provided for all differences between the carrying amount in the balance sheet and the tax base of assets and liabilities, and for tax losses carried forward. Deferred tax assets are recognized on the balance sheet only when it is probable that the benefit can be utilized through future taxable profits.

Pension cost Pension liabilities related to defined benefit plans are measured at the net present value of future pension benefits earned at the balance sheet date and calculated on the basis of assumptions for, among others, the discount rate, expected future wage growth and pension adjustments. Plan assets are measured at fair value. Net pension liabilities related to under-funded plans are recorded as provisions, while the net assets of over-funded plans are recorded as financial fixed assets. Net pension expense, which is gross pension expense less the expected return on plan assets adjusted for past service cost and the effects of changes in estimates, are included in salary

Note 1Summary of significant accounting principles


FIGURES IN USD 1,000


SN POWER AS

SN POWER AS

and personnel costs. Changes in pension liabilities due to amendments in pension plans are included in net pension expense over the vesting period or immediately if the benefits are immediately vested. Changes in pension liabilities and plan assets, due to changes in and deviations from the calculation assumptions are recorded in equity.

In the case of pension plans that are defined as contribution plans for accounting purposes, the premiums are charged to pension expenses for the period. Cash flow statement The cash flow statement is prepared using the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.

Note 2Sales revenues

Note 3Employee benefit expenses, management remuneration and audit fee

By business area 2016 2015Services 372 855 Total 372 855

SN Power AS and its subsidiary Agua Imara AS have a shared management team and the remuneration expenses are split equally between the two companies. The table above reflects the expenses that are allocated to SN Power AS.

The SN Power Management Team consists of nine people in addition to the CEO.

The CEO and one member of the Management Team has a supplementary pension scheme with a right to a pension of 66% of the salary from 12 up to 20 times the Norwegian Public Pension Base Rate (“G”) from the age of 65 years. The plan requires 30 years vesting period and is funded by the company. The Management Team has no right to severance pay related to end of employment, with the exception of the CEO who is entitled to severance pay of up to 12 months.

The CEO and the Management Team are covered by the same bonus plan as all employees in SN Power AS. The plan is limited up to 20% of salary, and the remuneration is based on yearly goal achievements.

Remuneration to the Board of Directors in SN Power AS in 2016 is NOK 257 thousand (USD 31 thousand). In 2015 it was NOK 150 thousand (USD 17 thousand).

NOTES TO THE FINANCIAL STATEMENTS Salary and personnel costs 2016 2015

Salary expenses -1,466 -2,115 Social security costs -438 -613 Pension costs -314 -580 Other personnel costs -157 -84 Total salary and personnel costs -2,375 -3,392

The average number of man-years 2016 2015SN Power AS 12 15

Expensed management remuneration 2016 NOK 2016 USD 2015 NOK 2015 USD

Chief Executive OfficerSalary 1,292 154 1,324 164 Paid pension premium 201 24 267 33 Other 157 19 109 14 Total Chief Executive Officer 1,650 196 1,700 211

Executive Management TeamSalary 6,346 755 6,234 773 Paid pension premium 436 52 677 84 Other 2,701 322 1,506 187 Total Executive Management Team 9,483 1,129 8,416 1,044

Total remuneration CEO and Executive Management Team 11,133 1,325 10,116 1,254


SN POWER AS

SN POWER AS

Note 4Other operating costs

Note 5Financial items

Note 6Fixed assets

1) Leasing of premises, office equipment and company cars are expected to be at the same level for the years to come. 2) Technical services from Statkraft International Hydro (Project and Construction team) and other external service providers related to project development and external tax services, legal services, accounting services and other administrative services.

Functional currency SN Power AS’s functional currency and reporting currency is USD.


Auditor 2016 2015Statutory audit 74 84 Other assurance services 75 3 Tax services 0 48 Non-audit services 57 - Total fees to auditors 207 136

Other operating costs 2016 2015Leasing of premises, office equipment and company cars 1) -183 -242 External services related to project development and other outside services 2) -5,563 -2,457 Travel expenses -322 -518 Insurance expenses -37 -38 Office expenses -67 -93 Other costs -539 -967 Total other operating costs -6,711 -4,315

Financial income IAS 39 category 2016 2015Interest income bank Amortized cost 545 79 Realised currency gain Fair value through profit and loss 145 1,063 Unrealised currency gain Fair value through profit and loss 484 669 Dividend from subsidiaries Amortized cost 23,004 59,680 Financial income 24,178 61,491

Financial expenses 2016 2015Interest expenses loans Amortized cost -3 - Realised currency loss Fair value through profit and loss -232 -860 Unrealised currency loss Fair value through profit and loss -1,496 -1,305 Impairment of financial assets Amortized cost -53,355 - Other financial expenses Amortized cost -128 -78 Financial expenses -55,214 -2,243

Net financial items -31,036 59,248

Tangible assets

Furnitures, office

fixtures and office

equipment

Total

Acquisition cost 1 January 2016 354 274 Additions 106 106 Acquisition cost 31 December 2016 460 460 Accumulated depreciation at 31 December 2016 -163 -163 Book value 31 December 2016 297 297 Depreciation for the year -83 -83

Estimated economic life 3-10 yrsDepreciation method linear


SN POWER AS

SN POWER AS

Note 7PensionsSN Power AS has pension schemes that cover a total of 14 staff members, and comply with Norwegian regulations on mandatory pension. The pension plans conferred the right to defined future benefits, that were mainly dependent on the vesting period, the level of pay at retirement and the size of state pension benefits. These obligations are partially covered by a closed plan for 1 employee in the Norwegian Public Service Pension Fund (SPK) and through a group pension scheme with Nordea Liv.

The defined benefit plan with Nordea Liv was terminated as of 31 December 2015 and replaced by a defined contribution plan starting from 1 January 2016. Total expenses related to the defined contribution plan in 2016 is USD 159 thousand.

In addition, four people including the CEO have a supplementary plan. This plan confers a right to a pension of 66% of the salary up to 20G (see note 9) from the age of 65 years. The plan requires 30 years vesting period and is funded by the company.

Assumptions The following assumptions were used in calculating the current year’s pension costs and liabilities:

2016 2015Discount rate 2.1 % 2.5 %Expected rate of return, SPK 2.3 % 2.5 %Regulation of salary 2.25% 2.50%Regulation of pension, Nordea 0.0 % 0.0 %Regulation of pension, SPK 1.25% 1.50%Regulation of base rate 2.0 % 2.3 %Turnover 3.5 % 3.5 %

* Total Pension cost for the year is 314 TUSD. 159 TUSD of this is cost related to the defined contribution plan.


Pensions costs SPK Funded Unfunded 2016 2015Net present value of the current year's pension earnings - - 113 113 487 Interest rate and administrative costs 13 - 19 33 82 Gross pension costs 13 - 133 146 569 Return on pension plan assets -10 - - -10 -78 Administration costs - - - - 10 Accrued social security cost 0 - 19 19 78 Net pension costs* 3 - 151 155 580

Pension liabilities 2016 2015Pension liabilities 519 - 1,088 1,607 1,279 Pension plan assets 518 - - 518 416 Calculated pension liabilities 0 - 1,088 1,089 863 Past service cost - - - - - Social security cost 0 - 153 154 122 Net pension liabilities 0 - 1,242 1,242 985

- - - - - Movement in actuarial gains/losses recognized directly in equity - - - 0 0Accumulated amount recognised directly in equity before tax 01.01 22 214 227 463 - Currency effects - 5 5 10 - Recognised in the period 134 - -220 -86 463

Actuarial gains/losses from terminated scheme reclassified to other equity from OCI - -218 - -218 - Accumulated amount recognised directly in equity before tax 31.12 156 - 13 169 463


SN POWER AS

SN POWER AS

Note 8Tax

Deferred tax benefit is recorded on the basis of an expectation of a future taxable profit. The nature of SN Power AS operations imply that future profits will not primarily be taxable. The benefits of deferred tax accordingly cannot be justified in the foreseeable future and have not been recognized in the companies’s balance sheets. Tax loss carried forward at 31 December 2016 amounts to NOK 99,553 thousand.

Note 9SubsidiariesThe following subsidiaries are included in the consolidated financial statements:

SN Power AS has received total dividends of USD 23 million from its subsidiaries in 2016. Impairment of financial assets Bajo Frio is a 58 MW run of river hydropower project in Panama. Bajo Frio started to generate energy in June 2015 and the regulator issued the Commercial Operations Certificate in August 2016. Higher cost and later start-up than expected as well as a revised future market outlook led to an impairment of the project in 2016. Agua Imara AS owns 50.1% of the Bajo Frio project.



Taxes payable - - Adjustments relating to previous years - - Change in deferred tax - - Tax expense - -


Profit (loss) before tax -39,833 52,346 Expected tax expense at a nominal rate of 25 % (27%) -9,958 14,133 Effect on taxes of:Permanent profit and loss differences between USD accounts and tax -596 601 Permanent differences 2 14 Other permanent differences related to investments (the exemption method, in accordance with Norwegian taxation act § 2-38) 7,673 -14,708

Tax loss carried forward 2,820 -231 Changes in temporary differences 60 192 This year's tax expense - - Tax rate 0% 0%

Temporary differences or unused tax losses for which no deferred tax asset/liability is recognised in the balance sheet 2016 2015

Property, plant and equipment 7 -4 Pension liabilities 1,242 984 Tax losses carried forward/compensation 11,549 640 Temporary differences or unused tax losses for which no deferred tax asset/liability is recognised in the balance sheet 12,798 1,620

Tax rate 25% 27%Deferred tax asset 31 December - -

Company Date of establ. Businessoffice

Country of registration

Main operations

Parent company

Voting share

Ownership share

SN Power Invest Netherlands BV 6 June 2014 Amsterdam Netherlands Investment SN Power AS 100.0 % 100.0 %Agua Imara AS 13 January 2009 Oslo Norway Investment SN Power AS 61.0 % 64.9 %

Nordic Hydropower AB 24 September 2014 Stockholm Sweden Investment SN Power AS 100.0 % 100.0 %

CompanyPaid-in

capital NOKPaid-in

capital USD Book valueSN Power Invest Netherlands BV N/A 518,473 518,473 Agua Imara AS 1,136,589 185,914 64,348 Nordic Hydropower AB N/A 17 166,127 Total 704,404 748,948

Shares in subsidiaries are recorded in accordance with the cost method in the balance sheet of SN Power AS.


SN POWER AS

SN POWER AS

Note 10Guarantees, cash and cash equivalents

Note 11Share capital, shareholder information and foreign exchange rate contracts

Note 12Receivables

Note 13Other current liabilities

Guarantees:

SN Power AS has on behalf of associates and subsidiaries issued guarantees for a total amount of USD 59 million as of 31 December 2016.

Cash and cash equivalents:


The carrying amount of the investment in Agua Imara AS has been tested for impairment in accordance with IAS 39, resulting in a write-down of USD 53.4 million.

2016 2015Specification of cash and cash equivalents:Cash and bank deposits 119,255 105,911 Restricted bank deposits - witholding tax employees 113 115 Total cash and cash equivalents 119,368 106,026

Share Capital

Paid in capital

Paid-in equity 1 January 2016 852,643 852,643 Paid-in equity 31 December 2016 852,643 852,643

Shareholders 31 December 2016 Share capital NOK

Number of shares

Owner and voting share

Statkraft Asset Holding AS 2,588,157,800 25,881,578 50%Norfund 2,588,157,800 25,881,578 50%Total 5,176,315,600 51,763,156 100%

Nominal value per share is NOK 10. All issued shares have equal voting rights and are equally entitled to dividend. No dividend is paid out for 2016.

2016 2015

Account receivable 453 50Prepayments to suppliers 255 1 170Intra-group receivables 2 905 3 880Current receivables from associated companies 138 0Other current receivables 426 4Settlement account VAT - 13 Total receivables 4,177 5,117

2016 2015

Public taxes payable 238 271Accounts payable 309 680Intra-group payables 978 1 819Accrued salary and vacation expense 283 352Other current liabilities 226 190 Total other current liabilities 2,034 3,312


SN POWER AS

SN POWER AS

Note 14Transactions with related partiesAll subsidiaries, associated companies and joint ventures are related parties of SN Power AS, refer note 26 of SN Power Group financial statements. SN Power’s Executive Management Team and board are also related parties of SN Power. SN Power is indirectly owned by the Norwegian government. There are no identified significant transactions and balances with the Norwegian government or companies controlled by the Norwegian government, other than the ones listed in this note and note 3.

All transactions with related parties have been carried out as part of the ordinary operations and at arm’s length prices. There are no identified significant transactions with related parties other than the ones listed in this note 14 and note 3. The profit & loss sheet includes the following amounts resulting from transactions with related parties

SN Power has assumed a guarantee obligation on behalf of Norfund related to specific revenue items in the Bajo Frio project. SN Power is entitled to recourse on commercial terms. The guarantee is be effective from commercial completion date of the Bajo Frio plant.


Transaction type Related party 2016 2015

Sales revenue Statkraft Group 0 84Sales revenue Fountain Intertrade Corporation 1 4Sales revenue Hidro Burica SA 0 161Sales revenue SN Power Panama 8 0Sales revenue Lunsemfwa Hydro Power Company Ltd. 6 23Sales revenue Nordic Hydropower AB 0 25Sales revenue Agua Imara AS 0 167Sales revenue SN Power Invest Netherlands BV 0 24Sales revenue Theun-Hinboun Power Company Ltd. 0 23Sales revenue Norfund 362 0Sales revenue Total 377 511

Other operating costs Statkraft Group 704 278Other operating costs Agua Imara AS 58 0Other operating costs SN Power Invest Asia Pte. Ltd. 1 805 1 515Other operating costs Nordic Power (Asia) Ltd. 739 53Other operating costs Total 3 306 1 846

The balance sheet includes the following amounts resulting from transactions with related parties 2016 2016

Receivables Agua Imara AS 319 1 140Receivables Hidro Burica SA 11 0Receivables SN Power Invest Netherlands BV 1 310Receivables SN Power White Nile Ltd 21 0Receivables SN Power Uganda Ltd 44 0Receivables SN Power Bujagali Ltd 54 0Receivables Nordic Hydropower AB 2 405 2 375Receivables Manila-Oslo Renewable Entreprise Inc. 0 2Receivables SN Aboitiz Power-Magat Inc. 55 0Receivables SN Aboitiz Power-Benguet Inc. 55 0Receivables SN Aboitiz Power-Generation Inc. 9 0Receivables Statkraft Group 0 0Receivables Norfund 362 0Receivables Lunsemfwa Hydro Power Company Ltd. 60 0Receivables Fountain Intertrade Corporation 1 55Receivables Theun-Hinboun Power Company Ltd. 0 10Receivables Total 3 397 3 892

Other current liabilities Hidro Burica SA 0 8Other current liabilities Agua Imara AS 98 0Other current liabilities Nordic Power (Asia) Ltd. 5 53Other current liabilities SN Power Invest Netherlands BV 211 251Other current liabilities Statkraft Group 22 52Other current liabilities SN Power Invest Asia Pte. Ltd. 664 1 515Other current liabilities Total 1 000 1 879


AUDITOR’S REPORT



AUDITOR’S REPORT



AUDITOR’S REPORT


The NetherlandsEntities:SN Power Invest Netherlands B.V.Agua Imara ACA Pte LtdNordic Hydropower ABAddress:ITO TorenGustav Mahlerplein 1001082 MA Amsterdam The Netherlands

SN POWER

Head OfficeOslo, Norway

Visiting address:Lilleakerveien 6, 0283 Oslo, Norway

Postal address:P.O.Box 200 Lilleaker0216 Oslo, Norway

Phone:+31 (0) 203 690 050www.snpower.com

Phone:+47 66 71 70 00www.snpower.com

ANNUAL REPORT

YEAR 2016

SN POWER

DESIGN; SN Power PHOTO; iStock.com/ddggg (cover, page 2 and 3), duncan1890 (page 2 and 10), BlackJack3D (page 2 and 20), studiocasper (page 14), peepo (page 62),SN Power: (page 2,5,6-8,10-11 and 15)



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