Encavis : Annual Report Encavis AG 2021

Annual Report 2021

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Group operating KPIs*

In TEUR

Revenue Operating EBITDA Operating EBIT Operating EBT Operating EAT Operating EPS (in EUR) Balance sheet total** Equity

Equity ratio Operating cash flow

2017

2018

2019

2020

2021

+/-compared to previous year

222,432

248,785

• 273,822 292,300

  332,703 14%

  166,768

  186,890

• 217,626 224,819

  256,398 14%

  100,387

  113,682

• 132,229 132,158

  149,050 13%

  46,739

  56,753

• 76,627 76,488

  87,345 14%

  39,962

  47,036

• 63,446 68,291

77,004 13%

0.29

0.31

0.43

0.43

0.48 12%

2,519,698

2,537,101

2,747,035

2,823,844

3,215,888 14%

698,594

687,057

722,713

751,561

1,066,388 42%

153,017

27.7%

174,282

27.1%

189,315

26.3%

212,947

26.6%

33.2% 251,941

- 18%

* The Group operating KPIs are based solely on the company's operating profitability and do not take any IFRS-related valuation effects into account.

** Some of the previous-year figures have been adjusted due to deferred tax assets and tax liabilities being recognised net for the first time in the 2020 financial year, thus making them not reconcilable with the annual report for the 2018 and 2019 financial years.

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Table of contents

Table of contents

• 3 FOREWORD FROM THE MANAGEMENT BOARD

• 6 FINANCIAL CALENDAR

• 7 REPORT OF THE SUPERVISORY BOARD

• 13 MANAGEMENT REPORT AND GROUP MANAGEMENT REPORT FOR THE 2021 FINANCIAL YEAR

• 68 CONSOLIDATED FINANCIAL STATEMENTS OF ENCAVIS AG

• 68 Consolidated statement of comprehensive income

• 69 Consolidated balance sheet

• 71 Consolidated cash flow statement

• 72 Consolidated statement of changes in equity

• 74 Notes to the consolidated financial statements of Encavis AG

• 166 INDEPENDENT AUDITOR'S REPORT

• 173 ASSURANCE OF THE LEGAL REPRESENTATIVES

• 174 GLOSSARY

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Foreword from the Management Board

Dear Shareholders,

Ladies and Gentlemen,

The past year and especially the beginning of 2022 have been dominated by the kind of crises we never thought possible just a couple of years ago. The pandemic is now in its second year and has impacted vast swathes of the economy all over the world. The recent escalation of tensions in Ukraine turned a regional conflict into a global crisis, demonstrating with great clarity that Europe's major reliance on Russian gas and oil is not sustainable. There's nothing we can do to end the war or ease the suffering of the millions of refugees, but we can play our part in the energy transition and help to reduce our dependency on fossil fuels. Our aim is to make renewable energies with storage technology so flexible and efficient that they can provide a permanent basic supply of energy without relying on subsidies - purely on the basis of private-sector contracts. We are committed and highly motivated to achieving this goal. Every day, something considered a bold idea a few years ago is getting closer and closer to becoming a reality.

Thanks to an IT environment that was upgraded at just the right time, comprehensive communication at all times and that luck we needed, there have still not been any restrictions or limitations at Encavis AG due to the pandemic. The nature of our approach and the sacrifices made by everyone involved have brought our company even closer together. For the most part, our Management Board and Supervisory Board meetings; meetings of executives; internal department workshops as well as external workshops; webinars; negotiations with banks, brokers, development partners, applicants, customers and institutional investors; roadshows with analysts and investors; our Capital Markets Day; and even our Annual General Meeting took place virtually, without any loss of substance, tempo or efficiency. We would like to thank everyone involved for their openness and flexibility and look forward to meeting you all again in person soon.

During the Covid-19 pandemic, we again managed to demonstrate to the capital market that our business model and our business operations are practically unaffected by the other uncertainties and disruption of the pandemic. Significant delays in approval processes for new wind and solar installations throughout 2021 led to corresponding hold-ups in connecting our strategic development partners' solar parks to the power grid. However, momentum started to pick up again in the fourth quarter. There was also a surge in the number of opportunities to purchase existing wind and solar parks outside of Germany at the end of 2021 and start of 2022, which we were able to seize. At the end of November 2021, we successfully placed our significantly oversubscribed hybrid convertible bond with an issue volume of EUR 250 million with institutional investors in a matter of hours at extremely favourable conditions and at an excellent price, thereby equipping ourselves with the tools we need for growth over the coming years.

The organic growth of our portfolio of wind and solar parks forms the basis for the implementation of >> Fast Forward 2025, our growth strategy. To achieve our growth targets, we have secured - together with our strategic development partners - a project pipeline of wind and solar installations with a total generation capacity of more than 3.5 gigawatts (GW). In the future, we will also realise both opportunities to purchase installations that benefit from guaranteed feed-in tariffs as well as to acquire parks for which the sale of the electricity produced is secured via long-term contracts with industrial customers (known as power purchase agreements, or PPAs). These parks open up the world of direct sales of green electricity to companies, which is a global market experiencing extremely dynamic growth. For this purpose, we combined our expertise into a separate PPA Origination department last year. With our two large-scale projects in Spain - La Cabrera with a generation capacity of 200 megawatt-peak (MWp) and the even larger Talayuela solar park (300 MWp) - we will be able to generate stable returns while avoiding around 3.4 million tonnes of harmful CO2 emissions over the ten-year PPA term, without needing to rely on government subsidies. By generating power from renewable energy, we are already making a crucial contribution to supplying environmentally friendly and sustainable energy. Energy generated by the Group solely through the use of photovoltaics and wind power in 2021 avoided more than 1.3 million tonnes of harmful CO2 emissions. To learn more about our sustainability strategy, as well as the latest measures and ongoing achievements in our Group-wide ESG efforts and ambitions, please refer to our Encavis AG sustainability report, which is published in an environmentally friendly online-only format available on our website:https://www.encavis.com/en/sustainability/.

Our subsidiary Encavis Asset Management AG in Neubiberg near Munich continues to perform well. The target group, consisting of institutional investors such as insurance companies, building societies and cooperative banks, once again

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Foreword from the Management Board

entrusted us with a substantial volume of funds in the reporting period. The special bank fund Encavis Infrastructure Fund IV (EIF IV) was set up in collaboration with BayernInvest Luxembourg S.A. at the end of 2021 with the aim of providing a portfolio that is highly diversified in terms of technology (onshore wind and solar) and European locations and focuses on the stability and yield strength of renewable energies. It has a target fund volume of EUR 500 million.

The positive development of the Encavis Group, which continued in the 2021 financial year, is founded on the ongoing expansion of the portfolio and the high degree of availability of our installations. Despite average or below-average meteorological conditions in many parts of Europe, we were able to achieve and even exceed our forecast goals. Steady rises in the price of electricity over the past year had a positive impact on our business. With the vast majority of our electricity prices secured in long-term agreements, we were only able to benefit from this trend with a small share of our energy generation activities, but the effect is still noticeable. Our revenue came to EUR 332.7 million, a year-on-year increase of 14% to EUR 292.3 million. Operating earnings before interest, tax, depreciation and amortisation (operating EBITDA) rose by 14% to approximately EUR 256.4 million (previous year: EUR 224.8 million), resulting in a stable EBITDA margin of around 77%. Operating earnings before interest and tax (operating EBIT) climbed by 13% to EUR 149.1 million from EUR 132.2 million in the previous year, generating a stable operating EBIT margin of around 45%. Operating cash flow was the main beneficiary of this upturn, increasing significantly by around EUR 39.0 million to EUR251.9 million (increase of 18%). At EUR0.48, operating earnings per share, which is a key performance indicator for the management of the Group, exceeded the forecast value of EUR 0.46 and was up by a substantial 12 % compared to the figure of EUR 0.43 reported in the previous year. The guidance which we had confirmed multiple times throughout 2021 was therefore clearly exceeded for all KPIs.

It goes practically without saying that we would like to offer you, our shareholders, an opportunity to benefit from the successful growth of Encavis AG. That is why we plan to recommend to the Annual General Meeting the distribution of a dividend of EUR 0.30 per voting share for the 2021 financial year, in accordance with our long-term dividend strategy, which remains valid until the end of the current financial year. As in years past, the distribution will once again be offered as an optional dividend, enabling shareholders to choose between receiving it in the form of shares in the company or in the form of cash.

In light of the Encavis Group's business strategy, which is geared towards qualitative growth, we again expect significant growth in the 2022 financial year. The acquisitions we completed in 2021 will provide a significant boost to both revenue and earnings moving forward, as will further transactions already agreed for the 2022 financial year and continued rises in electricity prices, which we will be able to take advantage of through variable-rate electricity generation and new PPAs. We anticipate revenue growth of EUR 380 million in the 2022 financial year (increase of 14 %). Operating EBITDA is expected to increase to more than EUR 285 million (increase of 11 %). At Group level, we are set to achieve growth in operating EBIT to more than EUR 166 million (increase of 11%), bringing operating earnings per share up to EUR 0.51 (increase of 6 %). We expect to generate operating cash flow upwards of EUR 260 million, which is on even higher than the extremely strong operating cash flow generated in 2021. These expectations for the 2022 financial year are based on the composition of our portfolio of wind and solar parks at the beginning of March 2022, as well as the expectations with regard to standard weather conditions.

We would be very pleased if you, dear Encavis AG shareholders, would continue to place your trust in us and accompany us on our path towards future growth. Stay healthy during these difficult times, and stay tuned to see how we seize the opportunities offered by these times - with dedication and good judgement - to create a successful future.