February 2017

NELJA ENERGIA AS CONSOLIDATION GROUP

Annual Environmental and Social Report

Overview of 2016

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Abbreviations

4E Nelja Energia AS (the parent company)

CEO Chief Executive Officer

CFO Chief Financial Officer

CHP combined heat and power (plant)

CTO Chief Technology Officer

EIA Environmental Impact Assessment

EU European Union

FE Freenergy

GHG Greenhousegas

Group The entities in 4E Group

KPI Key Performance Indicators

MoU Memorandum of Understanding

MW Megawatt

MWh/y Megawatt-hour per year

NGO Non-Governmental Organization

NPO Non-Profit Organization

OHSAS Occupational Health and Safety

O&M Operation and maintenance

tCO2 tons of carbon dioxide

SAC Special Area of Conservation

SEA Strategic Environmental Assessment

SPA Special Protection Area

VE Vardar Eurus

WP Wind Park

WT Wind Turbine

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Table of Contents

Short overview ......................................................................................................................................... 4

Financial/Economic highlights ......................................................................................................... 5

Environmental highlights ................................................................................................................. 5

Social highlights ............................................................................................................................... 5

Introduction .............................................................................................................................................. 6

Employees ....................................................................................................................................... 8

Corporate Environmental and Social values ................................................................................... 8

Overview of Nelja Energia portfolio ....................................................................................................... 10

Environmental and Social Legislation ................................................................................................... 12

Changes in legislation affecting environmental or social aspects ................................................. 12

Areas of non-compliance ............................................................................................................... 12

Overview of the Environmental Performance ........................................................................................ 12

Climate change impact .................................................................................................................. 12

Overview of the Environmental Studies ................................................................................................ 14

Environmental pre- and post-construction studies of the wind parks .................................................... 15

Wind parks in operation in Estonia ................................................................................................ 15

Wind parks in the construction or planning phase ......................................................................... 17

Biogas Projects .............................................................................................................................. 17

Biomass Projects ........................................................................................................................... 17

Natura 2000 and Important Bird Areas .......................................................................................... 18

Related management requirements or restrictions to wind farms ................................................. 18

Changes to relevant Natura 2000 and Important Bird Areas ........................................................ 18

Supporting local communities................................................................................................................ 19

Donations in Estonia ...................................................................................................................... 19

Donations in Lithuania ................................................................................................................... 20

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Short overview

The Group has increased its positive impact on the environment with increasing amount of energy projects that contribute to carbon reduction in time. The total reduced annual GHG emission by Group has almost doubled since 2011. In 2016 538 079 tCO2eq emission reduction while generating a total 615 GWh of wind energy. Covering the power need of 202 thousand households1[1] . In addition, in the last quarter in 2016 a CHP in Latvia was commissioned and a pellet plant entered the final stages of commissioning with test production ongoing.

Nelja Energia wind farms produced in 2016 8,1% more than in 2015. Estonian wind farms produced 291 GWh in 2016, 15,2% less than in 2015, due to a combination of technical availability and lower wind resource compared to 2015. In March 2016, the 20kV gas-insulated switchgear in the Paldiski wind farm 110/20 kV substation was damaged due to an internal short circuit, which led to production halt at the wind park (estimated production loss ca 15 GWh). The switchgear leaked less than 6 kg sulphur hexafluoride (SF6). There were no human or environmental damages. The root cause for the short circuit was a hidden defect in the installation of the switchgear, created during the construction by the responsible subcontractor. Code of conduct has been applied to prevent same incidents.

A new 60 MW onshore wind park started operation in second half of the year in Silute area, resulting high increase in Lithuanian production. Lithuanian wind farms produced 324 GWh in total, almost 43,9% more than in 2015. Significant increase in Lithuania is due to new wind park in Silute area, which started operation in second half of 2016.

All in all, it was an average year in terms wind resource, but lower availability of turbines had a negative impact on production.

During the whole year, no complaints were received on environmental nor health and safety issues. Two monitoring reports on the environmental matters for the operating wind parks were issued - a 2-year monitoring in Estonia and an interim report in Lithuania for Silute I wind park. None required mitigation measures.

1 Analysis based on data on households and their energy consumption in 2014/2015. Source: Eurostat

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Financial/Economic highlights

Environmental highlights

Social highlights

2

2 Cash based donations

0

50

100

150

200

250

300

Wind Biogas Biomass Onshoredevelopment

Installed capacity and onshore development

0

100

200

300

400

500

600

700

Estonia Lithuania

Offshore development (MW)

Generated energy

Wind Biogas Biomass

637 GWh in total

GHG emissions reduction

Wind Biogas

538 th tCO2

in total

Donations to local municipalities

EST LT

193 239

EUR in total

New WP

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Introduction

The Company’s main business area is the development, ownership and operation of wind assets in the Baltics. In addition to its core business focus, the Group also operates in three related business areas:

In a span of a decade 4E Group has become the largest privately held wind energy producer in the Baltics with interest in adjacent industries. By the end of 2016 the Group’s EBITDA was at €36 million. Although, 4E has entered a more mature phase, the firm retains an attractive pipeline of development projects. Furthermore, by 2017 Group will enlarge its business in biomass by commissioning the Broceni pellet factory and CHP.

Additional information on Group

The 4E website (www.neljaenergia.ee) gives an overview of the company, information on offered services, news, overview of developed projects and operating plants, annual and periodical reports. In addition, it is possible to see production of the operating wind parks and the CHP plants in real time, including the general overview of the current and planned projects of 4E.

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Corporate Governance

Pursuant to the Commercial Code and the 4E’s Articles of Association, the right of decision and the administration in 4E is divided between the Shareholders represented by the Shareholders' Meeting, the Supervisory Board and Management Board. The main structure of the Group is given in Table 1.

4E Group is:

Headquartered in Tallinn, Estonia 77.2% owned by Norwegian company Vardar Eurus AS, 18.2% by local Estonian investors

and 4.6% by the management

Vardar Eurus AS is an investment vehicle, owned by Vardar AS (90%) and Nordic Environment Finance Corporation (NEFCO) (10%). Vardar AS is a Norwegian utility company owned by Buskerud Fylkeskommune (county) and Norwegian municipalities. NEFCO is an international finance institution established by Nordic countries.

The Supervisory Board is responsible for the administration of Nelja Energia AS and the appropriate organization of its operations. The Supervisory Board determines the principles for the Nelja Energia AS's strategy, organization, annual operating plans and budgets, financing and accounting. The Supervisory Board elects the members of the Management Board and determines their salaries and benefits.

The Supervisory board established the Audit Committee in August 2015. The Audit Committee was elected by the members of the Supervisory Board and has the same term of office as the supervisory board members. The Audit Committee is comprised of Solveig Nordström and Iren Bogen, all of whom satisfy the requirements with respect to independence and competence.

The Supervisory Board has at present seven members: Torleif Leifsen, as the new Chairman from April 2016, Iren Bogen, Ingvild Myhre, Egil Smevoll, Solveig Nordström, Tarmo Kõuhkna, and Sander Rebane. Tor Ottar Karlsen, the previous Chairman, resigned from the Supervisory Board.

The Management Board is an executive body charged with the day-to-day management of 4E, as well as with representing 4E in its relations with third parties, for example by entering into contracts on behalf of 4E. The Management Board must adhere to the lawful orders of the Supervisory Board.

The Management Board has at present three members: Martin Kruus, the CEO, Kalle Kiigske, the CFO, and Andrus Zavadskis, the CTO.

Members of the Management Board are elected by the Supervisory Board for periods of three years at a time. Every member of the Management Board has the right to represent 4E in any legal and business matter.

4E follows the Corporate Governance Recommendations of Oslo Stock Exchange.

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Table 1 Organizational chart of 4E Group.

Employees

4E Group team has increased almost double during 2016 due to commissioning a new development in Latvia, the Broceni CHP and pellet plant, consisting now of 65 motivated experts in different fields: 28 in Estonia, 8 in Lithuania and 27 in Latvia. The male to female gender ratio within the Group is 2/5, between the countries the highest difference is in Latvia – 4,8 males/female. The company is built up on staff in management, wind power, biogas and biomass, development, environmental issues, finance, energy trading and a local team of experts in Latvia and Lithuania.

Corporate Environmental and Social values

The Company strives to be resource- and environmentally conscious by facilitating the use of renewable energy. The company will remain in full compliance with the international environmental regulations and the specific environmental requirements of each country, where Group is involved. Sustainability in business is the key element/factor for 4E. Therefore, the company is in process to create a thorough system within the Group to maintain quality, safety and ensure social and environmental responsibility in daily operations. The system is being developed following the Quality Management System ISO 9001:2015. Additionally, for health, safety and environmental management separate standards are used - Environmental Management System ISO 14001:2005, Occupational Health and Safety Management System OHSAS 18001:2007.

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4E Group Quality Management System consists of internationally standardized principles and concepts to manage processes within and related to organization’s everyday work to achieve economic, environmental and social goals, such as:

Compliance with the applicable international and national law and regulations Sustainable environmental-friendly entrepreneurship with respect to environment and local

communities Contribution to mitigation of the climate change with positive social and environmental impact

In addition, the following environmental principles are considered:

Sustainability and being environmental conscious

When choosing the most suitable locations for the wind parks, besides the wind conditions and possible connections to the power grid, 4E selects locations, which have the least possible impact on inhabitants as well as on nature. In addition to greenfield projects, existing operating wind parks are a good example of reusing existing industrial land, like Pakri, Paldiski and Hanila WPs are partly situated in the former military areas.

Moreover, environmental aspects are considered on technical solutions/technology options. Best available technology (e.g less noise emitting turbines) principle with economically optimal solution is what Group aims when choosing the technology.

Precautionary approach and consulting with interest groups

Environmental aspects for the energy-related projects have always been considered in accordance with the relevant legislation. Land-use planning and the impact assessment procedures with the public and interest group participation are practiced in the planning and development phase. When managing wind parks, during the operational phase of the park, monitoring of the environmental indicators is carried out as required by the EIA of the specific wind park.

Strategic environmental impact assessments together with land-use planning (most often detail planning) and building permits offer a good basis for interaction between the developer and different stakeholders (e.g. the public, various institutions etc). Moreover, the social sphere has always been considered in planning phase of the new projects.

Being socially responsible

4E Group supports activities, social groups, and events, which align with our mission statement and vision. Thus, our aim is to invest in the economic, environmental, cultural or social development of the local municipalities we operate in. In Lithuania and Estonia, we have committed to invest 0,32 EUR per MWh produced.

In addition, within the company social and environmental aspects are highly valued. Company staff plays crucial role in the successful work and development of the company. Social activities include various staff activities every summer, active participation in public discussions in the field of renewable energy, e.g. different articles, participation in working groups etc.

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Overview of Nelja Energia portfolio

All development projects in 4E Group portfolio are chosen considering efficient and effective production of renewable energy while maintaining:

Sustainability Environmental-friendliness Competitiveness on the Baltic energy market

The objectives are in the following categories:

Increase renewable energy share in Baltic energy market Effectiveness and sustainability in operating the Group and its entities Off-shore wind technology platforms’ know-how (development) in Baltics Reliability in the financial and environmental and social actions and reporting

The Company owns 100% in its entire onshore wind assets portfolio. Assets are held in separate subsidiaries usually associated with project financing arrangements. In addition to the onshore wind assets, the Company also owns 95% in OÜ Hiiumaa Offshore Tuulepark. 4E entity 4E Biofond (4E 70%) owns and operates two biogas assets in Estonia: Oisu Biogaas OÜ (40%) and Vinni Biogaas OÜ (46,5%). Biogas plants utilize biogas from organic waste, such as manure and dung, in a biogas engine to produce energy.

Currently 4E Group is responsible for managing 17 operating wind farms, 4 under development, one park going under compliance testing and 2 offshore wind farms being in planning phase (Table 2).

Table 2 Group portfolio of project under development, construction and in operational phase in Baltics.

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In addition, there are 2 biogas projects and the Group’s first biomass CHP and pellet plant in operation. The estimated annual production capacity of pellet plant is 140 th tons of pellets. The CHP is commissioned and pellet plant is in the final stage of commissioning. The following Table 3 and Table 4 indicate the status and installed capacity of each project. In the second half of 2016 one new wind park started operating: Silute I in Lithuania, which added to Lithuanian wind production 130 GWh, resulting in high increase in Lithuanian wind park production compared to 2015. The 60 MW Silute I wind park is located in an area of excellent wind conditions.

Table 3 Wind technology projects of the Group

Wind Park Country Start Turbine MWel

Operational

Virtsu I EST 2002 Enercon 1.2

Pakri EST 2004 Nordex 18.4

Esivere EST 2005 Enercon 8.0

Viru-Nigula EST 2007 WinWind 21.0

Virtsu II EST 2008 Enercon 6.9

Sudenai LT 2008 Enercon 14.0

Vanaküla EST 2010 WinWind 9.0

Virtsu III EST 2010 Enercon 6.9

Tooma I EST 2010 Enercon 16.0

Mockiai LT 2010 Enercon 12.0

Aseri EST 2012 WinWind 24.0

Silale LT 2012 Siemens 13.8

Ciuteliai LT 2012 Enercon 39.1

Paldiski EST 2012 GE 22.5

Ojaküla EST 2014 Enercon 6.9

Silute I LT 2016 GE 60.0

Development

Tooma II EST 2017 Enercon 7.1

Total 287.0

Table 4 CHP technology projects of the Group

CHP Country Start MWel MWth

Operational

Vinni (biogas) EST 2013 1.4 1.4

Oisu (biogas) EST 2013 1.2 1.2

Development

Broceni (biomass) LV 2017 3.98 15.9

Total 6.5 18.5

Commissioning phase and development

Pipeline includes two wind projects in Lithuania (Šilute II and Silale II with total 85.8 MW) and one

project in Latvia (Dundaga 41,3 MW). Silale II is expected to be commissioned in 2019, and Silute II

and Dundaga in 2020. Total development pipeline includes 214 MW of wind capacity, of which 7.1 MW is undergoing final commissioning procedures.

Tooma II, where grid compliance testing is ongoing, is an add-on to the already operational Tooma I 16 MW wind farm, located on the Western coast of Estonia. The location has fairly good wind conditions. Broceni almost 4 MW CHP production is ongoing but takeover acts have not been signed.

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In addition to the development pipeline, the Company has plans to develop offshore wind parks, notably a 700 MW in OÜ Hiiumaa Offshore Tuulepark in Estonia and 400 MW in Baltic Energy Group UAB in Lithuania. Hiiumaa Offshore EIA studies are finished and the public consultation process of the results and EIA report started in the Q1 2017.

Environmental and Social Legislation Changes in legislation affecting environmental or social aspects

There have not been any areas of non-compliance with Environmental Laws or exceedances of the relevant permit levels for wind turbines managed by Group in 2016. No fines or penalties were received and there are no pending grievance cases for environmental, health and safety nor social matters. There are no other remarkable changes in any Baltic Countries in legislation related to social and environmental matters that might affect Group business.

Areas of non-compliance

No complaints related to any entities of the Group were received from the local residents.

Overview of the Environmental Performance Climate change impact

The main reason for increasing renewable energy technology installations in the world is to mitigate the negative impact resulting from using fossil fuels for energy production. Fossil fuel based power plants emit carbon dioxide and other GHG emissions that are believed to cause the negative climate change and global warming. The new agreement for 2030 in United Nations Conference on Climate Change held in Paris in December 2015 indicates additional need to significant increase in the share of the renewable energy in energy production.

The 4E Group increased capacity of installations has significant positive impact on carbon reduction in energy production. GHG emission reduction has almost doubled in time, resulting higher positive impact on climate change (Table 5 and Table 6). Wind-generated electricity is produced without emitting carbon dioxide. In addition, using biogas as energy source is adding value to carbon reduction in heat and electricity sector.

Table 5 Installed capacity, production and GHG emissions in the Group

The country based GHG emission baseline even show the increasing share of non-fossil energy sources in power production in Scandinavia and Baltics. The emission reduction factor for Estonian electricity production is showing the avoided GHG emissions on the basis of baseline emission coefficient. Until 2015, the baseline factor is 1,102 tCO2/MWh generally, except for those with special agreements on

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Emission Reduction Units (ERUs) sale, in this case factor is modelled using mechanism set out in Kyoto Protocol. From 2015 the factor is lower: 0,920 tCO2/MWh for all the power plants. The emission reduction factor for Lithuanian electricity production is based on Communication from the European Commission guidelines. Maximum regional GHG emission factors for Lithuania is remaining still 0,6 tCO2/MWh.

The emission reduction has been monitored at all operating wind farms and biogas plants managed by Group (results given in next chapter – Environmental Performance).

Table 6 GHG emission reduction per country.

4E Group Wind

Estonia Wind

Lithuania Biogas Total

2012 288 035 89 555 0 377 590

2013 324 032 117 882 41 377 483 292

2014 320 307 125 042 69 511 514 859

2015 316 229 135 061 71 659 522 949 2016 267 895 194 354 75 830 538 079

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Overview of the Environmental Studies

In 2016, two birds and bats monitoring reports were issued in operating WPs: a 2-year final study in Estonia for Paldiski and Pakri WP and an interim monitoring results in Silute I WP area in Lithuania.

Paldiski and Pakri wind park area field observations finished in spring 2016. No mitigation measures were required. Outcomes on study was reported and accepted by the local Environmental Board in autumn.

In autumn 2016 bird and bat monitoring started in Silute I WP area. The monitoring is required for the operational phase for 3 years. In addition, the scope of bird and bats monitoring for Silute I has been agreed with Lithuanian Environmental Protection Agency and State service for protection areas under the Ministry of Environment of Lithuania.

For the Hiiu offshore development a bird study was carried out and the report finished in the end of 2016. The EIA report will be released together with the public consultation on the 10th of February 2017. Public discussion is held on the 8th of March in Hiiumaa, and 9th of March in Tallinn.

The modern methodology for post-construction birds and bats study, which would include the radar technology based monitoring, has been recommended in Tooma II strategic environmental assessment. The discussions on the monitoring programme are ongoing.

Short overview of all indicators monitored for the environmental performance of Group are given in Annex 1 KPI table.

Majority of the wind parks of the Group in Estonia are situated close to Natura 2000 sites. For example, Pakri wind farm is situated just behind the border of Pakri SPA and SAC. Virtsu I, III, Esivere, Tooma I and II are all situated close to Väinameri SPA and SAC. There are also existing and planned wind farms which are not situated nearby the Natura sites - Viru-Nigula, Aseri and Ojaküla. Only one of the wind farms is located on the Natura site - Virtsu II wind farm. It has three wind turbines altogether, of which two are situated on Väinameri Natura SPA and SAC.

On the 20th of June 2016, the Hiiu county governor approved the marine spatial planning for the Group’s offshore wind farm with an expected capacity of 700 MW. However, a small local activist group disputed the county’s decision in the administrative court. The court ruled positive and the plan stayed in force. As assumed the small local activist group appealed the administrative court decision. Process is on-going.

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Environmental pre- and post-construction studies of the wind parks Wind parks in operation in Estonia

WP Operation start

Installed capacity

(MW)

GHG reduction (th t CO2eq)

EIA conducted/Natura area

Monitoring/results

Pre Post

Virtsu I 2002 102 2955 2002/nearby Väinamere SPA&SAC

Pakri 2005 18,4 42149 2002/bordered with Pakri SPA&SAC

Bird monitoring 2002; no significant outcomes.

2014-2016 together with Paldiski WP.

Esivere 2005 8 14655 2002/>1km Väinamere SPA&SAC)

- Together with Tooma II (2017/2018)

Virtsu II 2008 6,9 12716 2004/yes (2 WT-s on Väinamere SPA&SAC)

- Migratory bird observations in 2009 - 2010 (together with Virtsu III) for migration period.

Viru-Nigula

2008 24 34127 2004/no - -

Virstu III 2010 6,9 13648 2007/nearby Väinamere SPA&SAC

- Migratory bird observations were carried out in 2010 (together with Virtsu II) for spring and autumn migration period, observations were repeated in 2011 and 2012. Bat activity monitoring of 2012-2014 results were reported in spring 2015. There is some bat activity at nacelle height. Northern bat is most frequently found species in the bat monitoring activity. No significant findings on impacts nor mitigation measures are required.

Vanaküla 2010 9 13209 2004/no (>2km) - -

Tooma I 2010 16 30652 2002/ nearby Väinamere SPA&SAC

- Together with Tooma II (2017/2018)

Aseri 2011 24 44413 2006/no (>2km Nõva-Osmussaare SAC&SPA)

- In 2012 noise measurements conducted. Results:11 neighbouring households might have problems with noise levels. Compensatory measures settled with all during 2012-2013. Bat activity monitoring Aug 2014-Febr 2015. Final report was published 2015:no significant negative impact was found. No mitigation measures required. Most found bat species are local, highest intensity of bat activity is in autumn migration period.

Paldiski 2012 22,5 36903 2005/2006/nearby Pakri SAC

- 2-year bird and bat activity monitoring iwind farm area, including Pakri WP March 2014-Feb 2016. Final report 2016: no significant findings that would affect WP. Most found species local (Northern bat and genus Myotis). Very low collision risk for local and migratory species as only few pass the WP areas. Collison risk for birds is estimated low. Environmental Authority has reviewed the report and no mitigation measures were necessary.

Ojaküla 2012 6,9 14032 2009/no -

Tooma II 2017 7,1 8436 2013/ no - Grid compliance tests are ongoing with 1 test remaining. Integrated 2-year monitoring of cumulative impact on birds and bats includes Esivere and Tooma I & II area. 1st time a radar technology method is required. Monitoring programme is being discussed with relevant survey experts. Estimated start earliest in autumn 2017.

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Wind parks in operation in Lithuania Sudenai 2008 14 15810 2006/nearby

Sudenai meadow SPA

-

Mockiai 2010 12 20075 nearby Svenceles swamp SAC

According to the Lithuania Law the EIA screening conducted: full EIA procedure is not required.

-

Silale 2011 14 22595 -/no According to the Lithuania Law the EIA screening conducted: full EIA procedure is not applicable.

-

Ciutelai 2012 39,1 57658 2008/no (>1km Nemuno delta regional park)

Bird monitoring 2011 in spring and autumn period as it is intense bird migration area.

2012-2015 3-year bird and bat monitoring study: activity is related to the intensive passerine bird migration route on the southern and south-eastern part of WP. The collision rates for the bird and bats at the windfarm relatively low comparing with values from similar studies in Europe and over the World. The highest rate of bat findings during autumn migration period. No significant negative impact was found during all the study period.

Silute I

2016 39,6 78216 2010/no (>3km Nemuno delta regional park)

Bird and bat study: no breeding nor roosting bat habitat. Hence, bats are not endangered during the construction phase. Regular species found in the area: Nathusius' Pipistrelle, Northern bat, Serotine bat. No negative impact to the well-being of these birds recorded during construction. Study concluded: transect breeding bird study is not required in the future. A site-specific environment and social management plan with necessary mititgation measures for pre-construction, construction and operation phase developed as EIA required.

In autumn 2016 bird and bat monitoring started. The monitoring required for 3 years. So far no environmental issues were recorded during the reporting period. Scope of bird and bats monitoring has been agreed with Lithuanian Environmental Protection Agency and State service for protection areas under the Ministry of Environment of Lithuania. The traffic has the potential to contribute to complaints due to noise/ dust nuisance on a local basis. Mitigation measures were used to decrease noise during construction: using designated managed traffic routes only; restricting delivery hours; speed limit of 30 km/h set on non-paved roads; covering top of the trucks when carrying the excavated materials; water spraying on roads. Noise measurements performed at the site boundaries. All closest dwellings during commissioning stage and results were found to be within an acceptable range.

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Wind parks in the construction or planning phase

WP Operation start EIA

conducted/Natura area

Monitoring/results

Pre

Silale II In development Not required

Society health impact assessment of the planned park was performed for Silale II project as a part of ongoing spatial planning process. The conclusions do not indicate negative impact on health of the community. A preliminary environmental assessment was carried out, which concluded no need for further EIA. Hence, no EIA planned for the future.

Dundaga In development Not required

Hiiumaa Offshore

In development

The EIA public consultation period

is ongoing in Q1 2017

Biogas Projects

Currently, there are two biogas plants being operated by 4E – the Vinni and the Oisu CHP plant.

Oisu biogas plant

The Oisu biogas CHP plant (1,2 MWel) was completed in 2013. In 2016 Oisu plant produced over 4 mio m3 biogas (52,4% methane) from what in total 2,3 GWh heat and 8,5 GWh electricity was produced (2015 8,2 GWh and 2 GWh, respectively). The main source of raw material was manure from nearby farms. Additionally, silage was used. Total carbon reduction over 36 th CO2eq (2015 slightly over 35 th CO2eq).

Vinni biogas plant

Vinni biogas CHP plant (1,4 MWel) was completed in 2013. In 2016 Vinni plant produced over 4 mio m3 biogas (58,8% methane) from what 8,3 GWh electricity and 3,3 GWh heat in total was produced (2015 7,9 GWh and 2,3 GWh, respectively). The main source of raw material was manure and leftovers from food production. Additionally, silage, waste from ethanol production, potato leftovers, wheat drying leftovers, milk whey and molasses was used to increase the biogas productionTotal carbon reduction almost 40 th CO2eq (2015 over 36 th CO2eq).

Biomass Projects

Broceni Pellet and CHP plant

During 2016 the Broceni CHP (ca 4 MWel) and pellet factory test production commenced (takeover acts have not been signed). It is estimated to start full operation in 2017. Wood pellets, as a form of upgraded biomass characterised by its high-energy density and low process energy requirements, are an environmentally friendly fuel allowing for carbon-neutral heating with the highest energy efficiency. The wood pellets produced during the testing period have been of good quality. Pellet plant was audited successfully for the quality of pellets (ENPlus) and its production and supply chain (Forest Stewardship Council (FSC) and Sustainable Biomass Partnership (SBP) certification). SBP vision coincides with the Group values - an economically, environmentally and socially sustainable supply chain that contributes to a low carbon economy. SBP has developed a certification system to provide assurance that woody biomass is sourced from legal and sustainable sources.

The Group Estimates that the plant will be fully in operation in the first half of 2017.

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Natura 2000 and Important Bird Areas

EU Directive3 on the conservation of natural habitats and of wild fauna and flora aims to promote the maintenance of biodiversity, taking account of economic, social, cultural and regional requirements. It forms the base of Europe's nature conservation policy with the Birds Directive and establishes the EU wide Natura 2000 ecological network of protected areas, safeguarded against potentially damaging developments. Natura 2000 network aims to preserve, maintain and, where necessary, restore the favourable conservation of the animal, bird and plant species and their natural habitat.

Natura 2000 network consists of Special Protection Areas (SPAs) established for protection of the bird species listed in Annex I of the Birds Directive and, of Special Areas of Conservation (SACs) established for the protection of Annex I habitat types and Annex II species of the Habitats Directive.

In July 2000, a special programme called “Estonian NATURA 2000” has been adopted by the government. This programme outlines main actions for years 2000-2007. The programme includes the following most relevant actions: gathering and evaluating data; preparing a preliminary list of SPAs (Important Bird Areas - IBA) and SACs; additional inventory on species and habitats; hearings and negotiations of stakeholders; final preparation of the list of Natura 2000 sites. It is worth to mention that SPA site selection was based on previously identified IBAs, which still exist but are not legally binding.

Related management requirements or restrictions to wind farms

There is no a priori prohibition of new activities or developments within Natura 2000 sites. However, certain restrictions apply to business activities within Natura 2000 sites if they are deemed to undermine or destroy the environmental value of the site. To ensure that negative impact of any planned project (e.g. wind farms) is precluded, it is necessary to conduct a Natura assessment in accordance with the relevant guidelines - Assessment of plans and projects significantly affecting Natura 2000 sites. Methodological guidance on the provisions of Article 6(3) and (4) of the Habitats Directive 92/43/EEC. European Commission.

Protection of Natura 2000 areas in Estonia is organized in accordance to the Nature Conservation Act by establishing a protected area, a limited-conservation area, a species protected site or a protected natural monument. Maintaining favourable conservation status of the relevant species or their habitat is achieved by established protection requirements within Nature Conservation Act or other relevant regulation. Protection requirements must be considered when planning a wind farms and followed when development actions are taken. Also, in Lithuania the Natura areas are protected with national relevant regulations.

Changes to relevant Natura 2000 and Important Bird Areas

Natura 2000 process in Estonia is still not complete and continues with data collection for the designation of new sites and modifying boundaries of the existing sites. For instance, due to lack of data about marine species and habitats and their migration routes, only a few offshore sites are defined. Nevertheless, Estonia is in process to define more offshore areas with marine spatial planning.

In December 2015, the Environmental Board announced about plans on amendment of two Acts on Nature Reserve and Landscape Protection by modifying the requirements and range of two nature conservation areas that affect Group’s wind parks. Both regulations are defining limitations to closeby areas of Pakri and Virtsu, excluding Group wind turbines. Hence, currently no limitations that would affect the operating parks are planned. Both Acts are in inter-ministerial coordination. Estimated to enter into force in the end 2017.

3 The Habitats Directive(92/43/EEC), adopted in 1992 by the Council http://ec.europa.eu/environment/nature/legislation/habitatsdirective/index_en.htm

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Supporting local communities

4Energia supports activities and values in places, where wind energy is produced, following environmental friendly aspect of the energy production.

The Ciuteliai, Silale, Silute and Mockiai wind parks in Lithuania also have support schemes for the neighbouring local governments such as Silute, Silale, and Kretinga. The donations from wind parks In Lithuania are used for environmental and social projects, like arranging local cultural events, organizing cultural education programs and educational sightseeing tours. In Estonia, several NPOs have been created with the aim to partly distribute the revenue from the wind energy production in order to promote economic, environmental, cultural and social development of the communities located near our wind parks.

The aim is to share a profit from the wind energy production and to invest it in the local economic, environmental, cultural or social development in these parishes. In addition, municipalities in Estonia and Lithuania receive other donations to support community-related social activities related to family and children. "Vilkyčių" community center - fixed annual fee according to support agreement and a financial support for Juknaiciu local school: summer camp for children.

Five non-profit organizations have been established in Estonia – Viru-Nigula valla toetusgrupp MTÜ (16.06.2010), Hanila valla toetusgrupp MTÜ (26.10.2010), Noarootsi Tuuleenergia MTÜ (20.04.2011), Aseri Tuul MTÜ (18.12.2012) and Paldiski Linna Toetusgrupp (26.11.2015).

In Lithuania and Estonia, the wind farms have support schemes in place with the local municipalities, paying per produced wind energy 0.32 eur/MWh.

During 2016 total cash based donations to the NPOs and NGOs were 193 239 euros (2015 144 284), from which was donated 98 662 (2015: 75 872) euros in Estonia and 94 577 (2015: 68 412) euros in Lithuania.

Donations in Estonia

Hanila Valla Toetusgrupp MTÜ received in total 25 173 euros donations that were used to support several following projects:

Local sports events, such as traditional horseback riding competition and other educational events organised by local communities, like exhibition and educational material on the orchids (all species under protection), publication of the book about Virtsu history.

Activities for the local people, like participation on the folk dance events. Investments in the education, like laptops for the Virtsu school, sports equipment fothe school sports stadium and

partial restoration of historical buildings, such as roof for the Virtsu manor, Virtsu fortress main gate conservation and benches for the Hanila church.

Viru-Nigula Toetusgrupp MTÜ received in total 16 768 euros donations that were used to support several following projects:

Local traditional motorsports event Punnvõrr. Activities for the local people, such as sports trainings, licences and insurance for the local motocross team. Investments for the external sports equipment and local community centre.

Aseri Tuul MTÜ received in total 15 450 euros donations that were used to support several following projects:

Activities for the local youth. such as supporting young table tennis player sports trainings. Investments for the education, like 20 laptops for the local school. Supporting local community centres in Rannu, Kalvi and Kõrtsialuse village.

Noarootsi Tuuleenergia MTÜ received in total 4 449 euros donations that were used to support several following projects:

Local events, such as first aid training, summer camp for the children etc.

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Activities for the local people, like various handicraft trainings for the children and adults, participation in folk dance event etc.

Investments, such as restoration of the roof of the historical building and the floor of the Lyckholm museum, pump for the fire fighters etc.

Scholarships for the local youth to obtain higher education in various fields.

Paldiski Linna Toetusgrupp MTÜ received in total 36 823 euros donations that were used to support several following projects:

Local events for cultural education, like poem nights, publishing book on local literature etc. Activities for the local people, such as sports trainings etc. Investments, such as the sports equipment for the local sports club, partly restoration of internal of the local

church and a roof for the local football arena. Scholarships for the local youth to obtain (higher) education in various fields.

Donations in Lithuania

Ciuteliai community received in total 30 751 euros that was used to support following projects:

Local events, such as celebration "Žuvienės" championship Road repair works in Lankupių, Grumblių, Bundalų villages Activities for the local people, like celebration "Marių šventė", "summer of classical music concert. Investment in equipment for local Children and youth playground, installing a recreational area and Vilkyčių park

infrastructure.

Mockiai municipality received in total 10 707 euros that was used for following:

Financial support to the local municipality for the social projects.

Silale I supported local community with 12 051 euros for the following:

Activities for local people, such as celebration "Žvejo šventė" Investments in street lighting installation and project in Stungaičiai village.

Sudenai municipality received in total 8 444 euros which was used to:

Activities for local people, such as Laukžemės village community celebration "Sušilkime Kalėdine viltimi", traditional "Žolinių" celebration, Įpilties village community celebration.

Investment support for the street lightning project and installation in Darbėnai village.

Silute I WP started operating in the second half of 2016, from this production it donated 30 976 euros to the local municipality for the social projects.

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Annex 1 Environmental Key Performance Indicators (KPI)

Theme Environmental KPI-s

Indicator Measure Description Actual performance Results of previous year

Airborne emissions

Reduced GHG emissions from “green” energy

production

Total annual emission reduction

in tonnes CO2eq

Measures amount of airborne emissions that

are reduced due to energy production by power

plants instead of fossil fuels

Total: 538 079:

Wind: 462 249

Biogas: 75 830

Total: 522 949:

Wind: 451 290

Biogas: 71 659

Noise

Sound level at distance from

WT

/

Complaints from the local residents

The proportion of times that the

measured noise level comply with the acceptable noise range in decibels (dB)

/

No of measurements

done/No of complaints and no

of people filing complaints

Measures the number of times when the turbine noise is exceeding the limits set in regulation

/

Shows the social acceptance (disturbance

felt by the local community habitants) of the wind turbines in the

nearby communities

The proportion of times that noise levels comply with the norms: 100% time / as there is not any actually confirmed violation of norms, performance 100%.

No expected nor reported complaints received.

Silute I: WP traffic has the potential to contribute to

complaints on noise by locals. Mitigation measures were used to decrease noise, such as using of designated managed traffic routes only; restricting delivery hours; speed limit of 30 km/h was set on non-paved roads; covering top of the trucks when carrying the excavated materials; water spraying roads.

Noise measurements were performed at the site boundaries and all closest dwellings during commissioning stage and results were found to be within an acceptable range

The proportion of times that noise levels comply with the norms: 100% time / as there is not any actually confirmed violation of norms, performance 100%.

No expected nor reported complaints received.

According to the 2012 noise measurement results neighbouring households might have problems with noise levels at night in Aseri wind park area. Compensatory measures have been settled with all the households in 2014.

Birds and bats,

including protected species

Activities implemented

that EIA reports speficy

/ No of collisions

No of carried out monitoring studies

/ No of

collisions/collision risk level

how many bird and bat observations have been

carried out /

how many collisions have been identified

Monitoring studies required/carried out: 2 / 2

No mitigation measures required in Paldiski. Silute monitoring continues (total 3-year). No of collisions: Paldiski:16 birds (14 passerines,2 gulls) and 2 bats

(northern bat). Collision risk of birds is similar to average of the EU WP. Silute: 10 birds (4 goldcrests, 3 robins, great tit,

wood pigeon and lesser) and 6 bats (3 nathusius's pipistrelle, common pipistrelle, northern bat, common noctule.

Monitoring required/carried out: 3 / 3

1. Paldiski: a 2-year bird and bat

monitoring studies carried out in Paldiski until April 2016, reports finalised end of 2016. 2. Ciuteliai: birds and bats monitored, no

mitigation measures are required for the future. 3. Silute: a pre-study of the bats and

summer birds conducted in 2015. WP is currently in construction phase; hence no carcass search was needed. Report and post-construction bird and bat monitoring

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Theme Environmental KPI-s

Indicator Measure Description Actual performance Results of previous year

programme will be issued in 2016. Monitoring starts 2016. No of collisions: 11 birds and 2 bats

(Ciuteliai)

Visual impact

Light intensity and motion

notice by the light sensors

No of complaints received

This indicator shows the social impact of wind turbines on humans

Complaints received/solved: 0 / 0

Shadow detection system (with light sensors to stop the turbines in case of shadow flickering) is installed in Virtsu I and Virtsu II. Mitigation measure by stopping wind turbines in Virtsu I was turned on for 55 (1 WT) hours and in Virtsu II in total 205 hours (3 WT) during 2015.

The shadow detection system is not required in other wind parks of the Group.

Complaints received/solved: 0 / 0

Shadow detection system (with light sensors to stop the turbines in case of shadow flickering) is installed in Virtsu I and Virtsu II. Mitigation measure by stopping wind turbines:Virtsu I turned on for 65 h; Virtsu II:23 h

The shadow detection system is not required in other wind parks of the Group.

Accidents on site

No of accidents on site

No of accidents on site

This indicator shows any kind of accidents on site (damage of the turbines,

flying ice from the turbines, oil pollution from

the service, etc)

1

In March 2016 in Paldiski WP substation was short-circuit in mid-voltage switchgear after breakdown of own consumption transformer. From switchgear leaked out less than 6 kg sulphur hexafluoride (SF6). There were no human or environment damages. The root cause of mid-voltage switchgear failure was during installation was not followed instructions of manufacture. Code of conduct has been applied to prevent same incidents.

1

A fire case in Viru-Nigula one turbine: the damaged turbine was decommissioned, no environmental damage reported by national Environmental Board.