EAM Solar ASA : P31 Acquisition legal status update

23 rd of September 2016

Following the fraudulent sale of 31 Solar PV power plants to EAM Solar ASA in July 2014 by Enovos Luxembourg SA and Avelar Energy Ltd through their jointly owned special purpose vehicle Aveleos SA of Luxembourg, the so-called "P31 Acquisition", EAM group has been forced to pursue EAM's legal and economic rights in several legal venues due to the unwillingness of the sellers to respect their contractual obligations in accordance with the Share Purchase Agreement entered into the 31 st of December 2013.

At current, EAM has 6 separate legal proceedings in progress or recently finalized, and in addition, between 2 and 4 further civil and criminal legal processes underway to be formally initiated. The following is an update on the status of these legal proceedings.

The financial reporting through annual and quarterly reports issued since July 2014 contains further details relevant for the interpretation of this stock exchange notice and can be found on the company web site ( www.eamsolar.no ).

1) Proceedings in the Criminal Court of Milan

Following the Criminal Court of Milan's decision to start tribunal proceedings in March 2016 in the case of criminal fraud against the State of Italy and EAM Solar ASA, the tribunal conducting the proceedings commenced on the 7 th of June 2016.

In the initial three hearings of the Tribunal, the formal decisions of March 2016 and appeals filed by the indicted and civilly liable companies to be excluded from the criminal proceedings have been reviewed by the Court. EAM has summoned Enovos Luxembourg SA and Avelar Energy Ltd as financially liable parties for the damages suffered by EAM. In the court ruling issued the 13 th of September 2016 the Court judged that Aveleos SA is merely an alter ego of the two companies and as such Enovos and Avelar are financially liable parties. The Courts ruling is public information and can be seen EAMs web site ( www.eamsolar.no/investors/p31-acquisition-legal-information/ ).

The next session in the criminal court of Milan is on the 2 nd of November 2016, and in total 8 trial sessions has been scheduled between November 2016 and March 2017.   

2) Administrative legal proceedings against GSE in the Administrative Court of Rome

Following the suspension of payments of the FIT contracts initiated by GSE in August 2014, and the permanent termination of the FIT contracts in Q4'2016, EAM appealed GSE's termination decision to the appropriate legal venue, the Administrative Court of Lazio in Rome. The appeal was based on the necessity to achieve a decision in the matter sanctioned by the appropriate Court.

EAM also summoned Aveleos and the financing banks to participate in the appeal of the termination decision. However, both Aveleos and the financing banks abstained from participating in court or to provide any factual information that would result in an annulment of GSE's termination decision, thereby waiving their rights of remedy on accordance with the rights and obligations in the Share Purchase Agreements.

On the 9 th of June the Administrative Court of Lazio issued their ruling that gave unreserved support and legal verification of the termination decision by GSE, thus making the termination a lawful fact.

The court concluded that the power plants does not have the right to the FIT contracts due to the fact that the have not been built in accordance with technical rules and regulations, and that the FIT contracts was obtained based on falsified documentation.

An important consequence of the ruling is that most of the PV modules on the power plants no longer have valid CE certification, consequently the power plants have lost the right to operate and be connected to the grid and any insurance is no longer valid. Based on this the power plants permanently closed operation on mid June 2015, and are now considered electronic scrap with a recycling obligation in accordance with the EU WEEE Directive.

3) Criminal complaint with civil action in Luxembourg against Enovos Group and managing directors in Enovos

In February 2016, based on the evidence at hand, EAM Solar ASA and associated companies and individuals filed two criminal complaints with civil damages actions to the Court of Luxembourg. One criminal complaint was filed against Aveleos SA, and one criminal complaint action against Enovos Luxembourg SA, Enovos International SA, Jean Lucius, Michel Schaus, Peter Hamacher and Martin Technau (all employees in the Enovos Group), and the Aveleos board directors, Igor Akhmerov and Marco Giorgi (employees of Avelar Energy Ltd).

EAM has been under obligatory investigation confidentiality in this matter until Tuesday the 20 th of September 2016 and has therefore not reported this fact earlier. The Prosecutors office in Luxembourg currently handles the criminal complaint.

The civil action contains damages claims in excess of EUR 215 million stemming from the contractual fraud against EAM solar ASA in conjunction with the P31 Acquisition.

4) Breach of standstill agreement proceedings against Aveleos SA in the Court of Luxembourg

In October 2014, EAM entered into a so-called standstill agreement with Aveleos SA that also encompassed Enovos, Avelar and its employees. The purpose of the standstill agreement was to give the sellers time to resolve the payment suspension measures of GSE and to document the necessary facts confirming the validity of the FIT contracts and the technical feasibility of the power plants within a limited time frame of 6 months. In exchange for this the sellers pledged to finance the running costs of the criminally affected power plants with a minimum of EUR 5 million in liquidity until the above matters was resolved.

In exchange for this pledge and the promises given by the sellers, EAM lifted the injunction achieved on the bank accounts of Aveleos SA in Luxembourg in September 2014 in order to avoid the immediate bankruptcy Aveleos SA in October 2014 as threatened by the Enovos and Avelar directors.

Aveleos and its Directors breached the standstill agreement already in November 2014, as confirmed in the ruling by the Civil Court of Milan (Enterprise Matters Specialized Section) in September 2015 and by the Criminal Court of Milan in the ruling the 13 th of September 2016.

In the Autumn 2015 Aveleos summoned EAM again in Luxembourg court in order to misuse the standstill agreement to achieve exclusion from the criminal proceedings in Milan in order for Enovos and Avelar to escape legal proceedings. On the 20 th of September 2016 Aveleos asked the court of Luxembourg for a postponement of these proceeding, which was granted until January 2017.

5) Financial restructuring and voluntary liquidation plan for the criminally indicted SPVs in the Bankruptcy Court of Milan

Following the FIT termination decision by GSE, the criminal affected SPVs filed for a financial restructuring procedure ("Concordato Preventivo") with creditor protection. This was granted by the bankruptcy Court of Milan until the 8 th of July, and then further extended to the 6 th of September 2016.

EAM has been forced to act as a custodian for the SPVs affected by the criminal proceedings since July 2014. EAM has performed this task in order to protect the values of the SPVs and minimize any financial damage arising from the criminal proceedings and its legal and operational consequences.

Following legal and technical clarifications achieved during July and August 2016, the Sole Managing Director and the shareholder of the SPVs, in an understanding with the Bankruptcy Court of Milan, determined that a financial restructuring would be unachievable under the laws governing such procedures, mainly due to the fact that the SPVs are criminally indicted, but also due to technical administrative reasons. Therefore the companies filed for a voluntary liquidation and bankruptcy procedure with the Bankruptcy Court of Milan on the 22 nd of September 2016.

As the custodian, EAM will ask the Bankruptcy court of Milan to review the bankruptcy in light of the Italian civil code article 1227 concerning gross negligence of creditors.

6) Initiation of Arbitration proceedings in the Chamber of Arbitration in Milan

On the 12 th of September 2016, EAM Solar ASA and EAM Solar Italy holding Srl filed a summons to the Chamber of Arbitration of Milan against Aveleos SA. The objective of the filing is to have the entire Share Purchase Agreement and associated agreements annulled based on fundamental breach of contract. The annulment is merited by the various court rulings obtained in Rome and Milan that substantiate the validity of EAM's legal and financial claims.

In addition to the reversal of all transactions, EAM is also seeking damages for the economic losses imposed on EAM through the fraudulent sale of the P31 companies.

Aveleos SA has 30 days to respond to the arbitration summons.

7) Future legal proceedings to be initiated in Italy and Switzerland

Based on the legal rulings achieved, and clarification and validation of facts evidencing the fraud, EAM is in the process of initiating further criminal and civil legal proceedings.

 

Future legal actions will be formally initiated going forward in Italy and Switzerland against companies and individuals with a documented responsibility for participating in the fraud against EAM. The timing of legal actions is based on the finalization of various forensic investigations and third party validation of the forensic investigation results.

For information, please contact:

Viktor E Jakobsen, CEO, phone +47 9161 1009, viktor@eam.no

About EAM Solar: EAM Solar is a utility company that acquires and operates solar power plants. The Company currently owns solar PV power plants in Italy. The plants are operating under long-term sales contracts.
 
 
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.



This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: EAM Solar ASA via GlobeNewswire

HUG#2044243