consolidated half -year financial report as of 30 … · consolidated half -year financial report...
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CONSOLIDATED HALF-YEAR FINANCIAL REPORT AS OF 30 JUNE 2016 OF THE TERNIENERGIA GROUP
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CORPORATE INFORMATION
TerniEnergia S.p.A.
Registered office in Strada dello Stabilimento 1, 05035 Narni (TR)
Authorised, issued and paid-up share capital: Euro 57,007,230
Terni Register of Companies No. 01339010553
Branches and Offices
Narni – Strada dello Stabilimento 1
Milan – Corso Magenta, 85
Lecce – Via Costadura, 3
Athens – 52, Akadimias Street
Cape Town - Boulevard Office Park, 2nd floor, Block D, Searle. District of Woodstock
Warsaw - Sw. Krolewska 16, 00-103
Bucharest - Str. Popa Petre 5
Board of Directors
Chairman and CEO
Stefano Neri
Directors
Massimiliano Salvi
Fabrizio Venturi
Monica Federici
Laura Bizarri
Paolo Ottone Migliavacca
Mario Marco Molteni
Domenico De Marinis
Laura Rossi
Board of Statutory Auditors
Ernesto Santaniello (Chairman)
Marco Chieruzzi (*)
Simonetta Magni
(*) replaces Vittorio Pellegrini as from 7 June 2016
Independent auditors
PriceWaterhouseCoopers S.p.A.
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Contents
1. REPORT ON OPERATIONS ............................................................................................................................... 5
1.1 THE GROUP’S BUSINESS AND MISSION ......................................................................................... 5
1.2 THE GROUP’S STRUCTURE ............................................................................................................ 6
1.3 MAIN EVENTS DURING THE FINANCIAL PERIOD ENDED 30 JUNE 2016 .......................................... 7
1.4 PERFORMANCE OF OPERATIONS ................................................................................................ 13
1.5 GROUP ECONOMIC RESULTS ...................................................................................................... 15
1.6 OVERVIEW OF STATEMENT OF FINANCIAL POSITION .................................................................. 17
1.7 STATEMENT OF RECONCILIATION OF THE PARENT COMPANY’S OPERATING RESULT AND
SHAREHOLDERS’ EQUITY WITH THE CONSOLIDATED RESULTS AS AT 30 JUNE 2016 ............................... 21
1.8 INVESTMENTS ............................................................................................................................ 22
1.9 HUMAN RESOURCES .................................................................................................................. 22
1.10 RISK FACTORS RELATED TO THE REFERENCE SECTOR .................................................................. 23
1.11 RELATIONS WITH RELATED PARTIES ........................................................................................... 24
1.12 INFORMATION REQUIRED BY ART. 123 BIS OF THE T.U.F. (CONSOLIDATED FINANCIAL ACT) ........ 24
1.13 OTHER INFORMATION................................................................................................................ 26
1.14 SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD CLOSED AS AT 30 JUNE 2016 ................... 29
1.15 BUSINESS OUTLOOK ................................................................................................................... 29
2 FINANCIAL STATEMENTS ....................................................................................................................... 31
2.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................ 31
2.2 CONSOLIDATED INCOME STATEMENT ........................................................................................ 31
2.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ....................................................... 33
2.4 STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY ...................................... 34
2.5 CONSOLIDATED CASH FLOW STATEMENT ................................................................................... 35
3 EXPLANATORY NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT 30 JUNE 2016 . 36
3.1 GENERAL INFORMATION ............................................................................................................ 36
3.2 SEGMENT REPORTING ................................................................................................................ 36
3.3 FORM, CONTENT AND APPLIED ACCOUNTING PRINCIPLES .......................................................... 38
3.4 COMMENTS ON THE MAIN STATEMENT OF FINANCIAL POSITION ITEMS .................................... 43
3.4.1 INTANGIBLE FIXED ASSETS.......................................................................................................... 43
3.4.2 TANGIBLE FIXED ASSETS ............................................................................................................. 45
3.4.3 EQUITY INVESTMENTS ............................................................................................................... 47
3.4.4 DEFERRED TAX ASSET .............................................................. Errore. Il segnalibro non è definito.
3.4.5 NON CURRENT FINANCIAL RECEIVABLES .................................................................................... 52
3.4.6 INVENTORIES ............................................................................................................................. 53
3.4.7 TRADE RECEIVABLES .................................................................................................................. 53
3.4.8 OTHER CURRENT ASSETS ............................................................................................................ 54
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3.4.9 FINANCIAL RECEIVABLES ............................................................................................................ 55
3.4.10 CASH AND CASH EQUIVALENTS ............................................................................................. 56
3.5 COMMENTS ON THE MAIN LIABILITY AND EQUITY ITEMS ........................................................... 57
3.5.1 SHAREHOLDERS’ EQUITY ............................................................................................................ 57
3.5.2 PROVISIONS FOR EMPLOYEE BENEFITS ....................................................................................... 57
3.5.3 PROVISIONS FOR DEFERRED TAXES ............................................................................................ 58
3.5.4 NON CURRENT FINANCIAL PAYABLES ......................................................................................... 58
3.5.5 OTHER NON CURRENT LIABILITIES .............................................................................................. 59
3.5.6 DERIVATIVES .............................................................................................................................. 60
3.5.7 TRADE PAYABLES ....................................................................................................................... 60
3.5.8 FINANCIAL PAYABLES AND OTHER LIABILITIES ............................................................................ 61
3.5.9 INCOME TAX PAYABLES .............................................................................................................. 62
3.5.10 OTHER CURRENT LIABILITIES ................................................................................................. 63
3.5.11 COMMITMENTS AND GUARANTEES ISSUED AND POTENTIAL LIABILITIES ............................... 63
3.6 COMMENTS ON THE MAIN INCOME STATEMENT ITEMS............................................................. 70
3.6.1 REVENUES.................................................................................................................................. 70
3.6.2 CHANGE IN INVENTORIES OF SEMI-FINISHED AND FINISHED PRODUCTS ..................................... 71
3.6.3 COST OF RAW MATERIALS, CONSUMABLES AND GOODS ............................................................ 72
3.6.4 COSTS FOR SERVICES .................................................................................................................. 72
3.6.5 PERSONNEL COSTS ..................................................................................................................... 73
3.6.6 OTHER OPERATING COSTS.......................................................................................................... 73
3.6.7 AMORTISATION, DEPRECIATION, ALLOCATIONS AND WRITE-DOWNS ......................................... 74
3.6.8 FINANCIAL INCOME AND EXPENSES ........................................................................................... 74
3.6.9 PROFIT SHARE FROM JOINT VENTURES ...................................................................................... 75
3.6.10 TAXES ................................................................................................................................... 76
3.7 RELATIONS WITH RELATED PARTIES ........................................................................................... 77
3.8 ATYPICAL AND/OR UNUSUAL TRANSACTIONS............................................................................. 83
3.9 OTHER INFORMATION................................................................................................................ 83
Agreement for the without recourse factoring of receivables for around Euro 1.2 million ................... 84
4 CERTIFICATION OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE TERNIENERGIA GROUP AS
AT 30 JUNE 2016 PURSUANT TO ARTICLE 154 BIS OF LEGISLATIVE DECREE 58/98 AND ART. 81 TER OF CONSOB
REGULATION NO. 11971/99, AND SUBSEQUENT AMENDMENTS AND SUPPLEMENTS ....................................... 89
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1. REPORT ON OPERATIONS
1.1 THE GROUP’S BUSINESS AND MISSION
TerniEnergia aims to establish itself as the first independent Italian “smart energy company” operating in
the sectors of renewable energies, energy efficiency, and waste and Energy management through its
individual business model.
The Industrial Plan as of February 2015, “Fast on the smart energy road”, was updated and approved by
the previous TerniEnergia Board of Directors on 29 October 2015. In particular, the plan is based on the
following business assumptions:
- backlog of work orders in the photovoltaic sector, both acquired and those in the process of being acquired
abroad;
- development of significant commercial cross-selling opportunities in the sectors of energy efficiency
(strong growth) and in gas & power management;
- strong diversification of the TerniEnergia business within anti-cyclical sectors and completion of core
activities of the Group along the entire value chain of energy, ranging from the design of plants to advanced
post-sales services;
- search for potential corporate and business partnerships in the environmental sector, including the
possibility of spinning off the waste management sector in a “newco”, which may represent a “national
leader” industrial platform open to the investment of new investors focused on the green & circular
economy sector.
The overall number of photovoltaic plants constructed by TerniEnergia since the start of operations is equal
to 274, with cumulative capacity of around 366.6 MWp (including 13.2 MWp held 100% by the company
and 30 MWp in joint venture, allocated to power generation activities). In addition, biomass plants for a
total of 1.5 MWe and 2 MWt are connected to the grid.
The overall production of energy in full ownership and joint venture plants for Power generation activities
was equal to around 30.85 million kWh.
Within the environmental sector, plants for the treatment and recovery of unused tires in Nera Montoro
and Borgo Val di Taro, as well as for biodigestion and GreenAsm composting are operational, as are the
Nera Montoro groundwater purification plants.
TerniEnergia Gas&Power managed around 14,200,000 of standard cubic metres of gas, equivalent to
150,250 MWh.
During the period, it launched lighting energy efficiency work on an industrial scale for a leading cement
manufacturing group. The Group undertook initiatives for 5,150 lighting points, with expected savings of
more than 9,760 million KWh of 0.55 million kWh and 1,842 TEP.
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1.2 THE GROUP’S STRUCTURE
TERNIENERGIA S.P.A.
100%
NEWCOENERGY S.R.L.
REBIS POWER S.R.L.
CAPITAL SOLAR S.R.L.
INVESTIMENTI INFRASTRUTTURE S.R.L.
CAPITAL ENERGY S.R.L.
SOC AGR FOTOSOLARA BONNANARO S.R.L.
ENERGIA NUOVA S.R.L.
SOC AGR FOTOSOLARA ORISTANO S.R.L.
MEET SOLAR S.R.L.
INFOCACIUCCI S.R.L.
RINNOVA S.R.L. 50% ENERGIA ALTERNATIVA S.R.L.
ENERGIA BASILICATA S.R.L.
SOLTER S.R.L.
ENERGIA LUCANA S.R.L.
GIRASOLE S.R.L.
VERDE ENERGIA S.R.L.
GUGLIONESI S.R.L.
FESTINA S.R.L.
GREEN ASM S.R.L.
SOCIETA' AGRICOLA PADRIA SRL
SOC AGR FOTOSOLARA CHEREMULE S.R.L.
SOC AGR FOTOSOLARA ITTIREDDU S.R.L.
80% TEVASA L.t.d.
TECI S.R.L. TERNIENERGIA PROJECT L.t.d.
MEET GREEN ITALIA S.R.L. 70%
IGREEN PATROL S.R.L.
LYTENERGY S.R.L.
TERNIENERGIA POLSKA Sp.z.o.o. 49%
TERNIENERGIA SOLAR SOUTH AFRICA L.t.d.
TERNIENERGIA MIDDLE EAST POWER
TERNIENERGIA S.p.A. HELLAS M.E.P.E.
TERNIENERGIAROMANIA S.R.L.
T.E.R.N.I. SOLARENERGY S.R.L. 5% SOL TARENTI S.R.L.
ALCHIMIA ENERGY 3 S.R.L.
TERNIENERGIA GAS&POWER S.P.A.
GREENLED INDUSTRY S.P.A.
VAL DI TARO TYRE SRL
TERNIENERGIA MOCAMBIQUE LIMITADA
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1.3 MAIN EVENTS DURING THE FINANCIAL PERIOD ENDED 30 JUNE 2016
Establishment of the subsidiary TerniEnergia Middle East Power LLC in Abu Dhabi
In January 2016, as part of the global growth strategy, TerniEnergia S.p.A. established the company
TerniEnergia Middle East Power LLC in Abu Dhabi, governed under UAE law, with a 51% investment by
Khalid Al Hamed Group LLC and 49% by TerniEnergia. The subsidiary will operate in Middle Eastern
countries and within the Gulf Cooperation Council (GCC), with share capital of 50 thousand dirham.
In particular, TerniEnergia and Al Hamed Group signed a shareholders’ agreement governing the company’s
operations, which was the subject of a strategic agreement previously signed by the parties and announced
to the market on 29 April 2014. The Board of Directors of TerniEnergia Middle East Power LLC will have a
Board of Directors consisting of two members, Chairman and CEO of Khalid Al Hamed Group LLC, Sheik
Khalid Bin Ahmed Al Hamed, and Chairman and CEO of TerniEnergia S.p.A., Stefano Neri. The profits from
the company’s operations will be divided as follows: 75% to TerniEnergia S.p.A. and 25% to Khalid Al Hamed
Group LLC.
The agreement envisages that Khalid Al Hamed Group LLC will primarily be involved in the management of
relations with the local government authorities as well as the facilitation of authorisation processes, the
acquisition of operational requirements and support during negotiations with financial partners and with
banking institutions supporting business operations, while TerniEnergia will be responsible for managing
the operational and industrial component. By means of this managerial model, the parties aim to unite and
enhance the value of the know-how and technological competencies of TerniEnergia in the energy and
environmental sectors, with the financial endowment and business development skills of the Al Hamed
Group, thereby ensuring rapid growth for TerniEnergia Middle East Power LLC.
“TerniEnergia Hub” presented, the new operating formula for the Group’s Energy Saving business line
On 11 February 2016, TerniEnergia presented the “HUB” project, a new operating method to open up the
industrial energy efficiency market through “third party financing” in Italy.
The objective of “TerniEnergia Hub” is to form a strategic alliance between all players in the value chain to
meet the needs of capital markets. The formula that the Group uses in the renewables and Energy
management sectors can also bring advantages to the industrial energy efficiency sector, as was explained
in a presentation to a select audience of partners and suppliers during a workshop held in the conference
room of the Hotel Principe di Savoia in Milan. In the three-year plan “Fast on the smart energy road”,
TerniEnergia paid particular attention to developing the Energy saving business line, by defining a new
business model.
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Among the applicable methods, TerniEnergia added:
1) Financial leasing:
The action was completed and accepted by the end user. The Hub assesses the intervention and assumes
ownership, absorbing the business risk, and finances it through financial leasing. TerniEnergia is responsible
for performance guarantees, assuming the role of ESco, compensates the partner for the investment made
for technology costs and for the O&M assets. The partner recovers the invested equity, making it available
for new interventions, while TerniEnergia Hub is compensated through the savings generated and
guarantees the expected return to the investor. At the conclusion of the contract, TerniEnergia redeems
the plant and transfers ownership to the end user.
2) Securitisation of receivables
This action was also completed and accepted by the end user. The Hub assesses the intervention and uses
a special purpose vehicle to purchase the energy efficiency plant, compensating the partner for the
investment made in technology costs and the O&M asset. The SPV transfers the plant and discounted
receivable to the investor. The securitisation can also be applied to portfolios of similar transactions, if there
is not one single high-value project.
3) Financing from the contract signing
This intervention is only in the planning stage and the end user has signed the contract for installation and
management. TerniEnergia Hub will acquire the contract and activate the procedures to finance the project
through the FTT formula. The possibility of issuing guarantees, the track record and the TerniEnergia
governance system will release the necessary capital for the investment. Once the contact is acquired,
depending on the type, entity, business plan and quality of the intervention, TerniEnergia will decided
whether to activate the leasing option or the securitisation of receivables option.
Establishment of the subsidiary TerniEnergia Moçambique Limitada in Mozambique
TerniEnergia SpA finalised the establishment of TerniEnergia Moçambique Limitada, wholly-owned, in
Maputo (Mozambique) in March 2016. The Mozambique subsidiary will operate with the utmost efficiency
for the performance of the consistent programme of activities which the Group envisages to develop in
African countries, considered strategic in terms of trend for the growth of the businesses linked to
renewable energy and smart energy. In detail, operations are underway preliminary for participation in
projects in the energy sector, by means of the construction of industrial-size photovoltaic plants.
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Connection to the network of the giant photovoltaic plant in Paleisheuwel
The first of the two giant sites active in South Africa was connected on 26 April to the national transmission
network of the distributor Eskom. This Paleisheuwel site, whose overall installed power capacity came to
82.5 MWp, was connected in advance with respect to the timeline envisaged by the EPC contracts. The site
covers an area of 240 hectares and employs more than 500 workers in the various functions for the
installation of a good 611,000 photovoltaic panels with a power capacity ranging between 125Wp and
140Wp. 101,850 frames were mounted in total, 7 million Kg of metalwork used and 3,000 km of electrical
cables laid. During the work, TerniEnergia collaborated with 6 subcontractors and operated in compliance
with the policies for furthering the participation of coloured people in economic life. As at the date of this
consolidated half year report, accessory work remains to be completed for the purpose of final delivery of
the plant to the customer.
Approval of the 2015 financial statements and renewal of the corporate bodies
On 26 April, the Ordinary Shareholders' Meeting of TerniEnergia SpA approved the draft financial
statements and acknowledged the presentation of the consolidated financial statements at 31 December
2015, resolving the distribution of a dividend of Euro 0.025 per share (gross of tax), to be withdrawn from
the net profit (loss) of the individual financial statements and corresponding to a pay-out ratio of 43% of
the net profit (loss) of the consolidated financial statements with dividend coupon No. 7 registered on 23
May 2015 and dividend payment on 25 May 2016.
The shareholders’ meeting also approved the Company and Group policy with regard to remuneration and
incentives, which envisages: (a) the total annual taxable emolument of the Board of Directors as Euro 490
thousand plus legal contributions and charges, as well as the reimbursement of the costs incurred as a
result of the appointment; (b) a maximum annual variable component equal to 15% of the emolument due
to the individual executive director in the event of exceeding an amount equal to at least 15% of the EBITDA
forecast by the business plan approved, deferring the payment of 50% of the variable component accrued
solely as of the natural expiry of the mandate; (c) to establish the total gross annual emolument for the
Board of Statutory Auditors as Euro 70 thousand plus the reimbursement of the expenses incurred as a
result of the appointment.
In conclusion, the Shareholders’ Meeting appointed the members of the Board of Directors who will remain
in office for the years 2016, 2017 and 2018, until the date of the meeting called to approve the financial
statements as of 31 December 2018, whose number of members has been established as 9. The directors,
proposed in the list presented by the majority shareholder Italeaf SpA, and voted for unanimously, are
Stefano Neri, who undertakes the office of Chairman, Monica Federici, Fabrizio Venturi, Massimiliano Salvi,
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Laura Bizzarri, Mario Marco Molteni, Paolo Ottone Migliavacca, Domenico De Marinis and Laura Rossi.
Mario Marco Molteni, Paolo Migliavacca, Domenico De Marinis and Laura Rossi have declared that they are
in possession of the independence requisites envisaged by current provisions, including the Consolidated
Financial Act and the Corporate Governance Code.
Three members of the Board of Statutory Auditors and two alternate auditors were also appointed, who
will remain in office for the years 2016, 2017 and 2018, i.e. Ernesto Santaniello, who undertakes the office
of Chairman of the Board of Statutory Auditors, Vittorio Pellegrini, elected as standing auditor, Simonetta
Magni elected as standing auditor, Marco Chieruzzi and Caterina Brescia elected as alternative auditors. On
7 June, Marco Chieruzzi replaced Vittorio Pellegrini, who handed in his resignation for personal reasons,
from the office of standing auditor.
Merger by incorporation of the wholly-owned company TerniEnergia Gas&Power in TerniEnergia SpA
On 2 May, TerniEnergia SpA communicated the filing care of its head offices, in the “Investor relations”
section of the company website, as well as care of the authorised storage mechanism 1Info, at the address
www.1info.it, of the Project for the merger via incorporation of the wholly-owned company TerniEnergia
Gas & Power SpA in TerniEnergia SpA, together with the balance sheets of TerniEnergia Gas & Power SpA
and TerniEnergia SpA as of 31 December 2015, drawn up in accordance with Article 2501 quater of the
Italian Civil Code.
Acquisition of a contract for the construction in Egypt of a photovoltaic plant and a lighting energy
efficiency contract
On 19 May 2016, TerniEnergia disclosed that it has been awarded a contract for a value of around US$ 19.2
million relating to the construction in Egypt of an industrial size photovoltaic plant with total power of 47
MWp on behalf of a leading Italian utility company.
The plant will be installed in Benban around 900 km from Cairo and cover an area of roughly 150 hectares.
The contract envisaged EPC activities (engineering, procurement and construction) without the supply of
photovoltaic modules and inverters. More than 250 workers will be employed at the site when fully up and
running. The project envisaged the use of 3Sun panels (manufactured in Italy at the Catania plants),
mounted on traditional steel structures.
Furthermore, TerniEnergia has entered into a lighting energy efficiency agreement, featuring the FTT
formula (financing via third parties) of a shared saving type, for a value of around Euro 0.6 million on behalf
of a leading Italian cement manufacturer. The project, with regard to which TerniEnergia will also see to
the “turnkey” EPC aspect, will be carried out on a plant in Lombardy and will envisage the replacement of
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4,497 traditional lighting points with 2,853 new latest generation LED lighting points produced using the
Group’s own technology, with an expected savings of around 1GWh/year.
Agreement entered into for the construction of two important water treatment plants care of the Nera
Montoro production site
On 27 May 2016, TerniEnergia revealed that it had entered into an agreement for the construction of two
important water treatment plants care of the Nera Montoro (TR) production site, for an equivalent value
of around Euro 6 million with Saceccav, a Bona Dea S.r.l. Group company, active in the sector involved in
construction and management of industrial plants for the treatment of waste water.
The work, launched in June 2016, will allow TerniEnergia to complete the scheduled investments on the
biological and chemical/physical plants that are already operational in Umbria, so as to comply with the
provisions for the restoration project of the groundwater of Nera Montoro and for the construction of a
new treatment plant intended for the special liquid waste treatment business (e.g. agricultural, industrial,
organic and inorganic chemical, etc.).
The agreement will make it possible to achieve new high quality plant engineering equipment within the green
industry hub of Nera Montoro (TR). In detail, the first plant is functional for environmental redevelopment via the
implementation of a hydraulic barrier, the creation of new plant engineering sections and the modernisation of the
existing parts; the treatment potential of the groundwater, polluted over the years by previous uses of the site, will
be equal to 50,000 litres an hour. Thanks to the experience and expertise of Saceccav, the enhancement of the
treatment activities will be guaranteed, preventing the pollutants from reaching the river Nera, returning water with
a more or less drinkable quality, as envisaged in the Operational Restoration Plan and requested by the Bodies
involved.
The second plant treats liquid waste originating from production activities whose treatment requires
solutions with a high technologic content, permitting TerniEnergia to intercept flows of materials currently
destined for plants positioned outside Umbria and at the same time meet the industrial demand of Central
Italy. The plant, which represents the state of the art of the treatment and purification technologies, with
have an intake capacity of 58,000 tons/year of waste with different matrixes and will therefore have the
twofold objective of upholding the requests of the Authorities and establishing a resource for TerniEnergia’s
activities in the circular economy sector and for the development of the area.
The measures have been approved by means of Executive Resolution of the Province of Terni No.
11458/2015 “Integrated Environmental Authorisation (IEA)” relating to the “Operational plan for
restoration of the groundwater of the industrial site of Nera Montoro (TR) – adjustment to provisions and
implementation of current plants with the introduction of new sections for liquid waste treatment with
third parties”.
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Connection to the network of the giant photovoltaic plant in Tom Burke
On 8 June 2016, TerniEnergia revealed that also the second of the two giant sites active in South Africa on
behalf of a leading Italian utility company was connected, by means of a new stretch of high voltage line,
to the national transmission network of the distributor Eskom. In detail, TerniEnergia Projects PTY Ltd, the
South African subsidiary of TerniEnergia S.p.A., connected the Tom Burke plant to the network (for an
overall installed power capacity of 66 MWp), in advance with respect to the timeline envisaged by the final
EPC (engineering, procurement and construction) and O&M (operation and maintenance) contracts which
have a four-year duration and are renewable, in observance of the estimated economic results.
The Tom Burke site, which covers an area of 200 hectares in the Limpopo region close to the border with
Botswana, employed more than 350 workers in the various functions for the installation of around 500,000
photovoltaic panels with a power capacity ranging between 125Wp and 140Wp. 82,700 metalwork frames
were mounted in total and 2,550 km of electrical cables laid. During the work, TerniEnergia operated in
compliance with the policies for furthering the participation of coloured people in economic life.
Acquisition of a contract for the construction in Zambia of a photovoltaic plant
On 15 June 2016, within the sphere of the process for the insourcing of the photovoltaic EPC business
(engineering, procurement and construction), TerniEnergia disclosed that it has been awarded a contract
for a value of around US$ 8 million relating to the construction in Zambia of an industrial size photovoltaic
plant with total power of 34 MWp on behalf of a leading Italian utility company.
By means of this new industrial agreement, TerniEnergia strengthened its leadership role in the
construction of large plants for the production of energy from solar sources in Africa.
The Zambia plant will be installed in Lusaka in the province of the same name and cover an area of around
50 hectares. The contract envisages EPC activities without the supply of photovoltaic modules and inverters.
Around 150 workers will be employed at the site when fully up and running, for the installation of roughly
106,260 poly modules with 320 Wp of power. The use of 2,550 kg of steel metalwork frames is envisaged
along with the laying of 960 km of electrical cables.
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1.4 PERFORMANCE OF OPERATIONS
Below are summarised the main economic and financial highlights of the TerniEnergia Group as at 30 June
2016 compared with the corresponding figures for the previous year.
The financial results of the Group are summarised below:
Six months ended 30 June
2016
Six months ended 30 June
2015
Change Change
(in Euro) %
Income Statement Net revenues from sales and services 50,535,713 151,270,656 (100,734,942) (66.59)% EBITDA 9,503,452 10,735,543 (1,232,092) (11.48)% EBIT 5,948,923 7,865,932 (1,917,009) (24.37)% Result for the period 1,107,682 1,484,340 (376,658) (25.38)% Ebitda Margin 18.8% 7.1% 11.7% n.a.
30 June 31 December Change Change
(in Euro) 2016 2015 %
Financial data Fixed assets 124,484,721 125,960,176 (1,475,455) (1.17)% Net working capital, excluding provisions and other liabilities 9,550,490 17,202,726 (7,652,236) (44.48)% Net financial position 79,361,677 87,371,548 (8,009,871) (9.17)% Shareholders’ equity 54,673,534 55,791,353 (1,117,819) (2.00)%
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Performance indicators
Performance indicators 30 June 30 June
2016 2015
PROFITABILITY RATIOS
ROE 2.1% 10.1% ROI 4.3% 5.8% ROS 11.8% 4.6%
FINANCIAL RATIOS Fixed asset coverage 1.61 1.51 Short-term NFP / Shareholders’ equity (0.02) 0.20 NFP / Shareholders’ equity 1.45 1.44 NFP / Net invested capital 0.59 0.59 Shareholders’ equity / Net invested capital 0.41 0.41 NFP / EBITDA 8.35 5.36
NET WORKING CAPITAL ROTATION Net working capital / Revenues 28.80% 12.60%
(a) ROE: Normalised net earnings for the period/Total Shareholder’s Equity net of the net profit for the period; (b) ROI: Normalised EBIT/ average of the Net invested capital at the beginning of the reference period and the Net invested capital at the end of the reference period; (c) ROS: Normalised operating result/Normalised revenues net of sales and services; (d) Fixed asset coverage: Total tangible and intangible fixed assets/Shareholder’s Equity
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1.5 GROUP ECONOMIC RESULTS
Six months ended 30 June
2016
Six months ended 30 June
2015 Change
Change
(in Euro) %
Net revenues from sales and services 50,535,713 151,270,656 (100,734,942) (66.59)% Cost of production (38,857,759) (137,032,633) 98,174,873 (71.64)% Added value 11,677,954 14,238,023 (2,560,069) (17.98)% Personnel costs (2,174,503) (3,502,480) 1,327,977 (37.92)% EBITDA 9,503,452 10,735,543 (1,232,092) (11.48)% Amortisation, depreciation, allocations and write-downs (3,554,529) (2,869,611) (684,918) 23.87% Operating result 5,948,923 7,865,932 (1,917,009) (24.37)% Financial income and expenses (3,603,971) (5,211,808) 1,607,836 (30.85)% Profit share from joint ventures 619,659 49,532 570,127 n.a. Pre-tax result 2,964,611 2,703,657 260,954 9.65% Income taxes (1,856,929) (1,219,317) (637,612) 52.29%
Net result 1,107,682 1,484,340 (376,658) (25.38)%
The period in question in particular highlights the progress of the EPC activities care of two giant plants in
South Africa, linked to the network and by now close to completion. The comparison with the first half of
2015 highlights the repercussions of the contract for divestment in Free Energia, fully illustrated in the 2015
statutory and consolidated financial statements to which reference is made and which, despite not
determining essential changes in the business model, has led, for the moment, to a significant downsizing
in trading activities with a consequent reduction in revenues.
As at 30 June 2016, the Group recognised consolidated revenues from sales and services for Euro 50,536
thousand, a decrease of Euro 100,735 thousand compared to the first half of 2015 (Euro 151,271 thousand),
due mainly to the exit from the scope of consolidation of the company Free Energia on 30 November 2015.
Sei mesi
chiusi al 30 Giugno
2016
Sei mesi chiusi al 30
Giugno 2015 Variazioni Variazioni
% (in Euro)
Ricavi Clean Technologies 4.572.924 4.967.532 (394.608) -7,94%
Ricavi Technical services 41.178.787 19.350.758 21.828.029 112,80%
Ricavi Energy Saving 884.954 1.255.757 (370.803) -29,53%
Ricavi Energy Management 3.899.049 125.696.609 (121.797.560) -96,90%
Totale 50.535.714 151.270.656 (100.734.942) -66,59%
16
The revenues from the Technical Service activities came to Euro 41,179 thousand, of which Euro 34,773
thousand relating to the EPC activities carried out at the two South African sites of Paleisheuwel and Tom
Burke and the remaining balance relating to the power generation and maintenance activities; the item
also includes the recognition of tax-related income for Euro 2,021 thousand deriving from the application
of the so-called “Tremonti Ambientale”, in relation to which, for greater details, reference is made to the
matters indicated in the explanatory notes to the section commenting on the Revenues. The increase with
respect to the first half of the previous year, when the revenues amounted to Euro 19,351, is mainly
attributable to the stage of completion of the sites.
The Cleantech revenues amounted to about Euro 4,573 thousand, down with respect to the first half of
2015 (Euro 4,967 thousand). This change is essentially due to the combined effect of the presence, in the
first half of 2016, of revenues deriving from the PFU plant at Borgo Val di Taro, which entered service at the
end of 2015, and the exit from the scope of consolidation as of 30 November 2015 of the company Feed
SpA (controlled by Free Energia), which in the first half of 2015 had contributed to the revenues of the
Group by means of its vegetable oil trading activities.
The revenues of the Energy Saving business amounted to Euro 885 thousand, down with respect to the first
half of 2015, when they came to Euro 1,255 thousand, further to the postponement in the second half of
2016 of the realisation of numerous energy efficiency projects in relation to which advanced negotiations
are underway at present.
The Energy Management revenues amounted to Euro 3,899 thousand, down considerably with respect to
the first half of 2015 (Euro 125,697 thousand) due to the effect illustrated above of the exit of Free Energia
from the scope of consolidation.
Direct production costs, which are primarily variable in nature, totalled Euro 38,858 thousand, disclosing a
decrease of Euro 98,175 thousand compared to the first half of 2015 (Euro 137,033 thousand), essentially
reflecting the drop in revenues due to the cessation of the energy trading activities of Free Energia. With
respect to the first half of 2015, the EBITDA fell from Euro 10,736 to Euro 9,503 thousand, therefore
disclosing a decrease less than proportionate with respect to the drop in revenues, as confirmed by the
EBITDA margin trend which passed from around 7% to around 19%.
“Amortisation, depreciation, allocations and write-downs” in the reclassified income statement reported
an increase from Euro 2,870 thousand to Euro 3,555 thousand with respect to the first half of 2015 due, on
the one hand, to the write-downs of securities (Veneto Banca) reported in the first half of 2016 and, on the
other hand, the lower depreciation attributable to the fewer photovoltaic plants fully owned by the Group.
Financial operations, a negative balance of around Euro 3,604 thousand, disclosed a considerable increase
with respect to the first half of 2015, when the balance was negative for Euro 5,212 thousand, essentially
as a result of the minor average borrowing and the exit from the scope of consolidation, as from 30
November 2015, of the Free Energia Group.
17
The JV portion of result, increasing Euro 570 thousand compared with 30 June 2015, was mainly affected
by the recognition of the positive effects of the Tremonti Ambientale on the company Guglionesi (pro rata
Euro 285 thousand).
The item taxation shows an increase of Euro 638 thousand with respect to 30 June 2015, with a tax rate
which increased mainly due to the different incidence of the tax adjustments as well as further to the
adjustment of the estimates of the taxes for the same period in the previous year.
The net result for the period as at 30 June 2016 has a positive balance of Euro 1,108 thousand, with a
decrease in absolute terms of Euro 377 thousand compared to the figure in the same period last year (Euro
1,484 thousand), on account of the dynamics described above.
1.6 OVERVIEW OF STATEMENT OF FINANCIAL POSITION
Following is the summarised equity and income information.
30 June 31 December Change Change (in Euro) 2016 2015 %
Intangible fixed assets 5,309,242 4,460,745 848,497 19.02% Tangible fixed assets 81,280,641 82,616,544 (1,335,903) (1.62)% Financial fixed assets and other fixed assets 37,894,838 38,882,887 (988,049) (2.54)% Fixed assets 124,484,721 125,960,176 (1,475,455) (1.17)%
Inventories 13,893,554 23,329,978 (9,436,424) (40.45)% Trade receivables 31,843,192 52,361,935 (20,518,743) (39.19)% Other assets 20,320,750 24,104,536 (3,783,786) (15.70)% Trade payables (44,066,235) (63,543,245) 19,477,010 (30.65)% Other liabilities (6,029,224) (13,106,938) 7,077,714 (54.00)% Net working capital 15,962,037 23,146,266 (7,184,229) (31.04)%
Provisions and other non-trade liabilities (6,411,547) (5,943,540) (468,007) 7.87%
Net invested capital 134,035,211 143,162,902 (9,127,691) (6.38)%
Shareholders’ equity 54,673,534 55,791,353 (1,117,819) (2.00)%
Current net financial position (170,495) 8,099,515 (8,270,010) (102.11)% Non-current net financial position 79,532,172 79,272,033 260,139 0.33% Total net financial position 79,361,677 87,371,548 (8,009,871) (9.17)%
Total sources 134,035,211 143,162,901 (9,127,690) (6.38)%
18
Net invested capital
Net invested capital as at 30 June 2016 amounted to Euro 134,035 thousand consisting of Euro 124,485
thousand from fixed assets, Euro 15,962 thousand from net working capital and Euro 6,412 thousand from
provisions and other non-trade liabilities.
With respect to the financial statements for the period ended 31 December 2015, the net invested capital
reported a decrease of Euro 9,128 thousand attributable for Euro 1,475 thousand to the decrease in the
fixed assets, the significant decrease in the net working capital for Euro 7,184 thousand, attributable in
particular to (i) the collections of receivables received at the end of the first half of 2016 by TerniEnergia
Project relating to the milestones achieved at the sites in South Africa, (ii) the reduction in the value of
inventories for South Africa, comprising as of 31 December 2015 of panels which have been installed during
the first half of 2016 and (iii) the reduction in trade payables further to the payment of the first tranche of
the debt for the panels relating to the Tom Burke and Paleisheuwel plants. The remaining change in Net
invested capital is attributable to the increase of Euro 468 thousand in the item Provisions and other non-
trade liabilities.
19
Net financial position
30 June 31 December (in Euro) 2016 2015
Cash (30,109) (20,354) Available bank current accounts (22,287,218) (11,873,035) Liquidity (22,317,328) (11,893,389)
Bonds 684,726 1,544,521 Current bank payables (current account overdrafts) 4,363,217 3,683,254 Current bank payables (advances) 8,529,217 7,867,675 Current portion of leasing payables 2,294,250 1,882,573 Short-term financing 9,575,578 9,207,073 Financial payables/(receivables) (3,300,155) (4,192,193) Current financial debt 22,146,833 19,992,904
Net current financial debt (170,495) 8,099,515
Bonds 24,489,145 24,419,853 Non-current financing 31,326,929 33,243,168 Financial payables due to leasing companies 23,716,098 21,609,012
Net non-current financial debt 79,532,172 79,272,033
Total net financial position 79,361,677 87,371,548
The significant reduction in the Net Financial Position, already highlighted during 2015, with respect to
previous periods, is proof of the attention paid by management to maintain the financial equilibrium of the
Group. Furthermore, the change with respect to 31 December 2015 was affected by the collections relating
to the invoicing of the milestones linked to the stage of completion of the activities care of the South African
sites, with benefits in particular reflected in the current Net Financial Position. In this connection, it is
highlighted that a significant part of this liquidity, around Euro 11 million, was used at the beginning of July
2016 to pay the second tranche of the debt for the purchase of the panels relating to the suppliers in South
Africa.
Net financial debt at 30 June 2016 amounted to Euro 79,362 thousand, divided into a short-term portion
which presented a negative imbalance of Euro 170 thousand and a long-term portion of Euro 79,532
thousand. The long-term portion is primarily attributable to leases entered into with major financial
institutions to cover the financial requirements necessary for the development of photovoltaic plants that
are fully available to the company and for the investments in the biodigestion plant and the used tire
treatment plants in Nera Montoro and, as from the second quarter of 2016, of Borgo Taro. Non-current
financial debt also includes the quota due beyond 12 months of the corporate financing granted to the
20
parent company TerniEnergia at the end of 2013, and mainly composed of an unsecured loan totalling Euro
10 million with a duration of 60 months and reimbursement in 20 quarterly instalments, as well as an
unsecured loan of Euro 5 million with a duration of 60 months and lump sum reimbursement at the
expiration date, both issued by Veneto Banca. Finally, the non-current financial debt also includes the bond
with a nominal value of Euro 25 million and a duration of 5 years, annual coupon of 6.875%, as well as
reimbursement in a lump sum at the expiration date (month of February 2019). The current quota includes
the accrual of the interest accrued in the first half of 2016, equal to around Euro 800 thousand, and relative
to the coupon to be paid in the month of February 2017.
It should be noted that current financial payables comprise part of the payments incurred for investments
already made or still under construction and for which – as of 30 June 2016 – a specific contract for financing
over the medium - long term had not yet been stipulated. In particular, they refer to the second treatment
plant of a pyrogasification plant and a composting plant under construction in Apulia.
The short-term financial position presents a negative imbalance of Euro 170 thousand and is basically made
up of short-term debt to banks for overdrafts totalling Euro 4,363 thousand or advances on invoices and/or
contracts for Euro 8,529 thousand, short-term financing from banks for Euro 9,576 thousand, short-term
portion of lease payables for Euro 2,294 thousand, cash for Euro 22,317 thousand, and the short-term
portion of financial receivables and securities for Euro 3,300 thousand.
Shareholders' equity
As at 30 June 2016, shareholders' equity, including income for the period, amounted to Euro 54,674
thousand, a decrease with respect to 31 December 2015 of Euro 1,118 thousand. This change is mainly due
to the combined effect of the distribution of the dividend in May, the change in the cash flow hedge reserve
and the positive result for the period.
21
1.7 STATEMENT OF RECONCILIATION OF THE PARENT COMPANY’S OPERATING RESULT AND SHAREHOLDERS’
EQUITY WITH THE CONSOLIDATED RESULTS AS AT 30 JUNE 2016
Following is the statement of reconciliation of the consolidated operating result and shareholders' equity
with the Parent Company's operating result and shareholders' equity, pursuant to Consob communication
no. 6064293 of 27 July 2006.
Amounts in Euro thousands
Jun-16
(in Euro/000) SE IS
Parent Company shareholders' equity and operating results 54,491 (1,119)
Capital and reserves of the consolidated companies 5,159
Consolidated companies' operating result for the period 1,695 1,695
Derecognition of the value of consolidated equity investments (8,339)
Net capital gains attributable to assets as at the investee acquisition date 1,771 (9)
JV recognition effect 503 503
Other adjustments to the consolidated income statement for the period 38 38
Deferred tax effects 51
Other effects (285)
JV Cash flow hedge reserve - derivatives (410)
Group shareholders' equity and operating results 54,673 1,108
22
1.8 INVESTMENTS
In the period ended on 30 June 2016, investments totalled Euro 3,366 thousand, mainly for plants under
construction by the Parent Company TerniEnergia SpA.
(in Euro) Direct investments
Increases from
purchases
Total investments
as of 30/06/2016
31-Dec-15 Change %
Software 535,795 535,795 310,810 224,985 72.4% Other intangible assets 426,106 426,106 1,075,603 (649,497) (60.4%) Plant and machinery 133,943 133,943 2,541,712 (2,407,769) (94.7%) Industrial equipment 79 79 45,599 (45,520) (99.8%)
Other assets 17,910 (17,910) (100.0%)
Fixed assets in progress 927,139 927,139 3,255,318 (2,328,179) (71.5%)
Total 2,023,062 2,023,062 7,246,952 (5,223,890) (72.08%)
For further details regarding investments made during the half year, please see the explanatory notes (note
3.4.1 and 3.4.2).
1.9 HUMAN RESOURCES
As at 30 June 2016, the Group had 138 employees classified as follows:
30-Jun-16 31-Dec-15 Actual Average Actual Average Executives 4 3.83 4 3.67 Middle managers 13 12.67 12 8.92
Office workers 40 37.5 43 40.67
Manual workers 81 76.33 72 64.08
Total 138 130.33 131 117.34
The Parent Company applied Italian Legislative Decree No. 81/08, appointing a security manager and
entrusting a qualified and experienced outsourcer with the analysis of risks and the related evaluation
report.
Procedures have been implemented in compliance with currently effective legislation and, in this regard,
medical examinations as well as training and refresher courses on safety at work and within the working
environment are regularly carried out for all the employees of the Company.
23
1.10 RISK FACTORS RELATED TO THE REFERENCE SECTOR
In order to comply with the provisions pursuant to Italian Legislative Decree no. 58 of 24 February 1998 and
specifically under article 154-ter as to the description of the main risks and uncertainties, below are
reported the risks and/or uncertainties and the related actions taken by the Company to neutralise their
effects on the economic-financial position and performance.
Activities pertaining to the construction and operation of plants for the production of energy from
renewable sources, similarly to new environmental activities, are extremely regulated; TerniEnergia
analyses in detail the regulations of reference in order to be constantly updated and to adopt, if possible,
optimal applicable solutions. During the implementation of its operations, TerniEnergia therefore is subject
to risks deriving respectively from external factors pertaining to the regulatory and macroeconomic context
of reference, including the legislative, financial and credit sectors where the Group operates or which result
from strategic choices adopted during operations and which expose the Group itself to specific risks as well
as internal risks deriving from ordinary operational management.
The Group is therefore significantly influenced by trends in scenario variables that are not controlled by
TerniEnergia itself, including the issue and/or revocation of administrative authorisations, developments in
the regulatory framework, the energy produced by photovoltaic, biomass and biogas plants, assumptions
made in relation to the price of sold electrical and thermal energy. In order to contain these risks,
TerniEnergia has diversified both the types of investment as well as the locations of the operational plants
in order to diversify risks across different enterprises. In addition, the sector is characterised by a high level
of competition as well as rapid and significant technological innovation with consequences in terms of
financial requirements.
Participation in policies for the support and strengthening of the sector reported a significant decrease that
culminated in the issue of Italian Legislative Decree No. 91 of 24 June 2014, the so-called “Spalmaincentivi
Decree”, containing “urgent provisions for the agricultural sector as well as for environmental protection,
energy efficiency of school and university buildings, the launching and growth of companies, the
containment of costs affecting electrical prices and the immediate fulfilment of obligations pursuant to
European regulations”.
Despite the introduction of legislative provisions for decreasing incentives relative to the production of
electrical energy (as of 2015) – and which involve an inevitable decrease in cash flows from investments –
the management of the Parent Company believes it can confirm the existence of a satisfactory level of
profitability from the completed investments.
24
For the purposes of diversifying and mitigating risk relative to the regulatory framework of reference,
TerniEnergia has for some time implemented an internationalisation strategy by conducting its activities
for the design and construction of major industrial plans for the production of electrical energy from
renewable sources in countries with regulations that are favourable to the development of such
investments.
The construction of plants from renewable energy sources is primarily financed through project financing,
leasing and/or financing sources of both public and private origin. There remains the risk, even in light of
the market situation and the regulatory norms, of collection of any financing which is necessary or sufficient
for the realisation of projects or whether favourable conditions are attained. In addition, these financing
contracts could provide for certain limitations, including in terms of timing, and relative to the construction
and operational start-up of the plants or may require the issuing of guarantees.
During its current phase of developing business, the Group must constantly monitor these risk factors in
order to evaluate, in advance, any potentially negative factors and initiate any opportune actions to
mitigate them.
With regard to risks pertaining to legal disputes that are underway, refer to note 3.5.11 of the Explanatory
Notes.
1.11 RELATIONS WITH RELATED PARTIES
With reference to relations with related parties, reference is made to the Explanatory Notes to the Financial
Statements (Note 3.7).
1.12 INFORMATION REQUIRED BY ART. 123 BIS OF THE T.U.F. (CONSOLIDATED FINANCIAL ACT)
Structure of share capital
Categories of shares composing the share capital of the Parent Company:
N° OF SHARES % OF LISTED SHARE CAPITAL RIGHTS AND OBLIGATIONS
Ordinary shares 44,089,550 100 The shares are registered and give the right to vote at ordinary and extraordinary shareholders’ meeting as well as the right to participate in profits
25
The amount of the capital subscribed and paid up on 30 June 2016 was equal to Euro 57,007,230.00, divided
into 44,089,550 ordinary shares, without par value. It should be noted that 3,767,095 shares, representing
unlisted (as at the reporting date) own shares deriving from the share capital increase of 13 October 2014
are marked by ISIN Code IT0005059230 and differ with respect to those of the TerniEnergia shares that are
currently in circulation.
The Group has not issued other financial instruments that give the right to underwrite newly issued shares.
Restrictions on the transfer of securities
At the date of this Report, there are no restrictions on the transfer of securities, such as limits on the
ownership of securities or the need to obtain approval by the Group or other holders of securities.
Significant shareholdings
As at 30 June 2016, significant shareholdings in the Group’s equity, as resulting from the notices given
pursuant to Article 120 of the TUF and from the findings in the Register of Shareholders, were the following:
Shareholder Investment No. of shares % of share capital
Stefano Neri Direct 125,697 0.29%
through Italeaf S.p.A. (*) 19,867,103 45.06%
TerniEnergia S.p.A. Direct (**) 4,012,998 9.10%
(*) Italeaf is controlled by Stefano Neri, who owns 2.67% of the share capital directly and 51.15% indirectly, through Skill & Trust Holding, of which
he holds 62.92% of the share capital directly.
(**) own shares
Stefano Neri, Fabrizio Venturi and Monica Federici are directors of the Parent Company and shareholders,
with investments held directly and indirectly. More precisely, the shareholdings are as follows:
31/12/2015 Changes 30/06/2016
Total No. of shares 44,089,550 44,089,550
Shares % Purchases Sales Shares %
Italeaf S.p.A. 20,717,103 46.99% 850,000 19,867,103 45.06%
Fabrizio Venturi 74,654 0.17% 74,654 0.17%
Monica Federici 10,240 0.02% 10,240 0.02%
Stefano Neri 120,697 0.27% 5,000 125,697 0.29%
26
Stefano Neri directly holds 0.29% of the share capital of the Parent Company and controls Italeaf SpA, of
which he holds 2.67% directly and 51.15% indirectly through Skill & Trust Holding, of which he owns a
controlling stake of 62.92% of the share capital.
Securities conferring special rights
At the date of this Report, the Group has not issued securities which confer special control rights.
Restrictions on voting rights
At the date of this Report, the By-laws do not provide for restrictions on the right to vote.
Shareholder agreements
At the date of this report, there are no shareholder agreements or agreements between significant
shareholders pursuant to Art. 122 of the TUF.
Own shares
As of 30 June 2016, the own shares in the portfolio totalled 4,012,998, corresponding to 9.10% of the
ordinary share capital.
1.13 OTHER INFORMATION
Litigation, investigations and judicial proceedings in progress
With respect to litigations, investigations and legal proceedings, please refer to what is stated in the
explanatory notes under note 3.5.11.
Legislative Decree 231/2001 and Code of Ethics
The Parent Company has a specific governance structure that is essentially geared to the objective of
creating value for shareholders, while acknowledging the importance of social activities, in which it is
engaged.
In addition, an organisational and management model in accordance with Legislative Decree 231/2001 is in
force. This model is composed of a General Section, a Special Section and the Code of Ethics.
In the general section, the main contents of the model, the essential components and adopted auditing
tools have been defined.
The Model has three external appendices:
- the Code of Ethics, which, designed as a "charter of values", sets out the general principles which the
company's activities must comply with and in some parts is more extensive than the Decree, as it describes
27
the “ethical” commitment of the company, regardless of any criminal and administrative liability (and hence
also stigmatised behaviours which in themselves could potentially breach or circumvent the provisions of
the Decree);
- the Disciplinary System, which acts as a penalty instrument based on the general national labour contract
category and integrates the missing requirement provided for by the Consolidated Labour Act (Art. 30,
Legislative Decree 81/08) for the protection of Health and Safety at Work (SSL);
- the Articles of Association (with the Operating Regulations) of the Supervisory Board, a body in charge of
overseeing the functioning and observance of the Model, which must receive specific disclosures on
corporate activities.
The Code of Ethics is an integral part of the System of Internal Control and Risk Management and expresses
the principles of business ethics which the Group recognises as its own and with which directors,
employees, consultants and partners must comply. This code was revised in December 2013 to further
enhance the importance of sustainable operations that take into account the legitimate interests of all
stakeholders.
The Company performs on-going activities to promote the Code with respect to all its interlocutors, while
at the same time carrying out initiatives to improve working life in the field of training and information to
its employees.
Italian Legislative Decree No. 196/2003
The Parent Company, in accordance with Italian Legislative Decree No. 196/2003, has developed ad hoc
procedures for management control and information technology, in order to protect the confidentiality of
data of any kind and in general the privacy, both outwards and within the company.
The norm is consistent with the ISO 9001 quality management system, which reduces, to the extent
possible, the risk of destruction or accidental loss of data from unauthorised access or handling. The aim is
to protect the organisation from committing offenses involving administrative liability, such as computer
crime and illegal data processing, pursuant to Art. 24-bis of Legislative Decree 231/2001.
28
Performance of the Parent Company on the stock exchange
During the first half of 2016 TerniEnergia stock saw a negative trend up until the end of the first quarter,
with a loss of around 24%, coinciding with a corresponding drop in the STAR index (up until February) and
with the same trend as the FTSE Small Cap. TerniEnergia stock suffered from the deconsolidation of Free
Energia, in a moment of difficulty for the Italian financial markets, which in the latter months was affected
by systemic agitation and problems. Another aspect is represented by the difficulties suffered by the
reference sector (renewable energy), also in relation to the drop in electricity demand coinciding with the
government decisions on incentive policies, which produced a phase of extreme legislative uncertainty over
the year and, in conclusion, a reduction of the benefits for the companies in the sector. Signals that were
interpreted as evidence of weakness in the economy were reflected in petroleum prices, which began a
negative trend, nearly reaching historic minimum levels. Above all else the companies in the energy and
utilities sector suffered the consequences, a sector level. In the second quarter, by contrast, the
TerniEnergia stock had a constant trend up until May, with a drop under the value of Euro 1 coinciding with
the dividend registration and a consequent drop to all-time lows coinciding with the serious Italian bank
securities crisis and with the negative trend of the European energy and utility companies, subject - in the
period - to bearish strategies at continental level.
The stock reported, during the course of the year, an average price of Euro 1.54 and average daily volumes
of 44,772 shares. On 4 January 2016, the price reported a maximum value of Euro 1.573; the peak in
29
volumes (252,760) occurred on 16 June 2016.
Since the IPO and following the admission into the STAR segment of Borsa Italiana at the end of 2010,
TerniEnergia maintains open and constant communications with investors and stakeholders through an
effective policy of communications implemented by the internal and external Investor Relations
department, which is entrusted with managing relations with the financial community.
During the first half of 2016, the Investor Relations team participated in requested one-to-one meetings
with analysts and investors in addition to taking part in public events such as:
- Presentation of the “HUB” - Turn on the energy saving project (Milan - Hotel Principe di Savoia) -
Presentation to the business and financial community: 11 February 2016.
The stock is followed by Intermonte Sim through coverage studies and notes published periodically.
1.14 SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD CLOSED AS AT 30 JUNE 2016
For significant events occurred after the closing of the year, refer to the information in the explanatory
notes under note 3.9 "Other information".
1.15 BUSINESS OUTLOOK
TerniEnergia, as announced in the strategic development guidelines and in various press releases, has
developed scouting activities for the purpose of using the portfolio of own shares as payment within the
sphere of extraordinary transactions for the finalisation of alliances and industrial or strategic mergers. This
process concluded with the identification of two target companies in the digital energy sector, as illustrated
in the section “Subsequent events” in the explanatory notes, “Softeco-Sismat Srl and Selesoft Consulting
Srl”, while it is still underway with regard to a company in the Energy management sector. Including, as a
consequence, in the next half year the potential effects of the finalisation of the agreements for the
acquisition of controlling interests in Softeco-Sismat Srl and Selesoft Consulting Srl (whose contribution will
essentially materialise in the fourth quarter of the year), in the smart energy sector, and of a target company
already identified in the Energy management sector, a significant contribution to revenues is reasonably
estimated for the current year from as early as the second half of 2016 along with a significant strategic
repositioning of TerniEnergia.
In detail, the Group intends to consolidate the entry into the sector of services and industrial production
and development of smart technologies and solutions for the transmission and distribution of energy (smart
grid), the flexible and prompt management of the energy production and consumption, the energy
efficiency, the management of the renewable energies and the Cleantechs (energy stations). The
transaction with the target companies Softeco-Sismat and Selesoft Consulting will make it possible to
supplement the activities in the renewables area, in energy efficiency and in Energy management with
30
innovative systems and solutions with high added value, which make it possible to introduce new
technologies in the chain capable of acting as a bridge between the industrial and “physical” bridge and
those digital and “virtual” ones.
Likewise, the integration transaction envisaged in the Gas&Power sector, will make it possible to strengthen
the Energy Management Business Line, developing the Power generation from renewable sources plants
and generating a wide array of strategic services and offers so as to pursue the validation on the dual fuel
market for industrial customers and public administration authorities.
In the Technical services sector, the Group is consolidating the commercial activities for the development
of new projects and for participation in new international tenders as “EPC contractor” for large utility
companies or investors of primary standing. Specifically, the opening of a site in Zambia is envisaged in the
second half of the year, for the construction of an industrial size photovoltaic plant with total power of 34
MWp on behalf of a leading Italian utility company. Furthermore, TerniEnergia aims to develop new growth
opportunities in countries with an ample growth potential, with the aim of consolidating its international
presence, as well as with a view to geographic diversification and maximisation of the value created with
the internationalisation strategy. In detail, in the photovoltaic sector, activities are underway preliminary
to the attainment of important contracts in emerging target countries characterised by abundant
renewable resources, stability of the regulatory systems and high economic growth. In this context,
negotiations are being finalised for the construction of a new giant photovoltaic plant using the EPC formula
(Engineering, procurement and construction) in South Africa, of a size similar to the two already recently
connected to the network.
Furthermore, TerniEnergia intends to enhance the Energy Saving Business Line activities. This objective,
pursued via the “Hub” project, operating formula to open up the industrial energy efficiency market
through “third party financing” in Italy, will see interesting growth prospects from the financial and
commercial partnership agreements entered into respectively with investment funds and with operators in
the Energy management sector, for cross-selling activities.
Within the sphere of the Cleantech business line activities, in the second half of the year the decision to
proceed with any sales of the assets will be assessed, according to operating methods to be defined, on a
consistent basis with the strategic choice of focusing on the smart energy business, deriving from the
expected positive outcome of the integration of the target companies.
31
2 FINANCIAL STATEMENTS
2.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 30 June 31 December (in Euro) 2016 2015 ASSETS Intangible fixed assets 3.4.1 5,309,242 4,460,745 Tangible fixed assets 3.4.2 81,280,641 82,616,544 Equity investments 3.4.3 1,188,986 2,157,923 Deferred tax asset 3.4.4 14,062,412 13,133,614 Non-current financial receivables 3.4.5 22,643,440 23,591,350
Total non-current financial assets 124,484,721 125,960,176
Inventories 3.4.6 13,893,554 23,329,978 Trade receivables 3.4.7 31,843,192 52,361,935 Other current assets 3.4.8 20,320,750 24,104,536 Financial receivables 3.4.9 3,300,155 4,192,193 Cash and cash equivalents 3.4.10 22,317,328 11,893,388
Total current financial assets 91,674,979 115,882,030
TOTAL ASSETS 216,159,700 241,842,206
LIABILITIES AND SHAREHOLDERS’ EQUITY Share capital 57,007,230 57,007,230 Reserves (4,158,425) (3,964,935) Result for the period 894,094 1,947,386
Total Group equity 53,742,899 54,989,681
Minority interests 717,047 191,614 Result of the period attributable to minority interests 213,588 610,058
Total equity 3.5.1 54,673,534 55,791,353
Provisions for employee benefits 3.5.2 1,386,500 1,149,966 Deferred taxes 3.5.3 1,208,935 1,294,323 Non-current financial payables 3.5.4 79,532,172 79,272,033 Other non-current liabilities 3.5.5 268,227 247,492 Derivatives 3.5.6 3,547,885 3,251,759
Total non-current liabilities 85,943,719 85,215,573
Trade payables 3.5.7 44,066,235 63,543,245 Payables and other financial liabilities 3.5.8 25,446,988 24,185,097 Taxes payable 3.5.9 3,270,671 1,330,322 Other current liabilities 3.5.10 2,758,553 11,776,616
Total current liabilities 75,542,447 100,835,280
TOTAL LIABILITIES 161,486,166 186,050,853
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 216,159,700 241,842,206
2.2 CONSOLIDATED INCOME STATEMENT
32
Note Six months ended 30 June
2016
Six months ended 30 June
2015 (in Euro)
Revenues 3.6.1 47,082,929 147,929,109
Other operating revenues 3.6.1 3,452,784 3,341,547
Change in inventories of semi-finished and finished products 3.6.2 6,476 (211,255)
Cost of raw materials, consumables and goods 3.6.3 (23,489,441) (57,219,816)
Costs for services 3.6.4 (14,585,423) (77,961,000)
Personnel costs 3.6.5 (2,174,503) (3,502,480)
Other operating costs 3.6.6 (789,372) (1,640,562)
Amortisation, depreciation, allocations and write-downs 3.6.7 (3,554,529) (2,869,611)
Operating result 5,948,923 7,865,932
Financial income 3.6.8 743,102 422,793
Financial charges 3.6.8 (4,347,073) (5,634,601)
Profit share from joint ventures 3.6.9 619,659 49,532
Pre-tax result 2,964,611 2,703,657
Taxes 3.6.10 (1,856,929) (1,219,317)
Net (profit)/loss of the year 1,107,682 1,484,340
- of which pertaining to the Group 894,094 1,359,326
- of which pertaining to minority interests 213,588 125,014
Earnings per share - base and diluted 0.021 0.031
33
2.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 30 June
(in Euro) 2016 2015
Net profit for the period 1,107,682 1,484,340
Change in cash flow hedge reserve (921,592) 947,542
Translation difference (478,759) (41,146)
Tax effect of charges/(income) recognised in equity 221,182 (260,574)
Total other income statement items of the period that will be recognised later in the income statement 3.5.1 (1,179,169) 645,822
Actuarial gains/(losses) from employee termination indemnities (114,989)
Tax effect of charges/(income) recognised in equity 27,597
Total other income statement items of the period that will not be recognised later in the income statement 3.5.1 (87,392)
Total comprehensive income for the period (158,879) 2,130,162
- of which pertaining to the Group (372,467) 2,005,149
- of which pertaining to minority interests 213,588 125,014
34
2.4 STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
Description
Share capital
Reserves Total
reserves Result for the
period Total Group
equity Minority interests Total equity
(in Euro) Price
premium reserve
Legal reserve
Extraordinary reserve Other
Balance as of 31 December 2015 57,007,230 13,285,035 2,142,138 10,181,064 (29,573,172) (3,964,935) 1,947,387 54,989,682 801,672 55,791,353
Result for the period 105,276 1,842,110 1,947,387 (1,947,387)
Dividend distribution (1,001,814) (1,001,814) (1,001,814) (1,001,814)
Other movements 127,498 127,498 127,498 (84,624) 42,873
Transactions with shareholders 105,276 967,794 1,073,070 (1,947,387) (874,316) (84,624) (958,940)
Net profit for the period - - - - - - 894,094 894,094 213,588 1,107,682 Other items of the statement of comprehensive income - - - - (1,266,561) (1,266,561) (1,266,561) (1,266,561)
Total profit for the period (1,266,561) (1,266,561) 894,094 (372,467) 213,588 (158,879)
Balance as of 30 June 2016 57,007,230 13,285,035 2,247,414 10,181,064 (29,871,939) (4,158,425) 894,094 53,742,899 930,635 54,673,534
35
2.5 CONSOLIDATED CASH FLOW STATEMENT
30 June (in Euro) Note 2016 2015
Pre-tax profit 2,964,611 2,703,657
Amortisation/Depreciation 2,430,429 2,752,250 Write-downs of fixed assets and receivables 1,124,100 117,361 Allocations to the employee benefits fund 183,185 106,885 Result of joint ventures accounted for at equity and reversal of margin (619,659) (49,532) Effect of derivatives in income statement (273,507) Change in inventories 9,436,424 (37,724,503) Change in trade receivables 20,518,743 3,482,600 Change in other assets 3,515,044 (7,932,200) Change in trade payables (19,477,010) 33,465,371 Change in other liabilities (9,928,094) 13,694,648 Payment of employee benefits (34,043) (88,715)
Net cash flow (used in)/generated by operating activities 9,840,221 10,527,821
Investments in tangible fixed assets (983,222) (3,368,643) Investments in intangible fixed assets (959,800) (507,700) Equity investments 464,496 177,604 Change in receivables and other financial assets 1,839,948 3,669,127
Net cash flow used in investing activities 361,422 (29,612)
Change in payables and other financial assets 1,261,891 (2,224,218) Change in non-current financial payables (91,821) (2,208,352) Other changes in shareholders’ equity 54,041 (176,084) Payment of dividends (1,001,814) (2,865,821) Net cash flow generated by financing activities 222,297 (7,474,475)
Comprehensive cash flow for the period 10,423,940 3,023,735 Cash and cash equivalents at the beginning of the period 11,893,389 14,177,490 Cash and cash equivalents at the end of the period 22,317,328 17,201,225
Interest (paid)/collected (3,220,056) (4,476,829)
36
3 EXPLANATORY NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT 30
JUNE 2016
3.1 GENERAL INFORMATION
TerniEnergia S.p.A. (“TerniEnergia”, “Company” or “Parent Company”) is a joint stock company with
registered office in Narni (Italy), Strada dello Stabilimento 1, listed on the Italian Stock Exchange on the Star
segment of MTA.
TerniEnergia, founded in the month of September 2005 and part of the Italeaf Group, is the first “Italian
smart energy company” and operates in the renewable energy field, in energy efficiency and in energy and
waste management. TerniEnergia acts as a system integrator, with a turnkey offer for industrial
photovoltaic plants, both on behalf of third parties and on its own, including through joint ventures with
primary national operators. The Company seeks to strengthen sales of solar energy. TerniEnergia operates
in waste management, in the recovery of material and energy and in the development and production of
technologies. In particular, the Company is active in the recovery of out-of-use tyres; in the treatment of
biodegradable waste through the implementation of biodigesters; in the production of energy from
biomass; in the management of biological depuration plants; in the decommissioning of industrial plants;
in the recovery of metals that must be demolished and the improvement of industrial plants; and in the
development and production of technological equipment. The Group is active in energy management, the
sale of energy to high energy-consuming customers, and is a provider of administrative, financial and credit
management services. In addition, TerniEnergia operates in the development of energy efficiency plants
both in EPC and FTT (financing by third parties) with the objective of increasing energy production from
renewable sources, energy savings and decreasing emissions according to the European environmental
policies.
3.2 SEGMENT REPORTING
In accordance with IFRS 8, the information relating to the sector as at 30 June 2016 is provided below.
The Group operates through four business units:
• Technical Service business unit: production of energy from various renewable sources
(photovoltaic) as well as the realisation of plants from renewable sources (EPC and O&M activities);
• the Cleantech business unit: efficient management of energy recovery plants and recovery of
materials from marginal resources (biodigestion and pyrogasification, used tyre treatment,
37
recovery of waters) in addition to the management of plants for the production of renewable
energy from traced and sustainable vegetable oil and the sale of vegetable oil.
• Energy Management business unit: sale of energy to high energy-consumption customers,
administrative, financial and credit management services.
• Energy Saving business unit: solutions for lighting and industrial energy efficiency with highly
innovative technologies, ESco activities (by means of financing through third parties) and ESPco
(epc and consulting).
From a geographical point of view, the Technical Service segment includes Euro 15,226 thousand which
refers to the revenues realised by the South African subsidiaries for the construction of two large scale
photovoltaic plants, upon commission by a major European utility company.
With reference to the other segments, the Group operates primarily in Italy.
The criteria used to identify areas of activity subject to reporting are in line with the ways in which the
management manages the Group. In particular, the structuring of the business segments disclosed
corresponds to the structure of the report periodically reviewed by the Board of Directors for the purposes
of managing the business of the Group.
The Group's management assesses the performance of the various operating segments, using the following
indicators:
• revenues by operating segment;
• gross operating margin by operating segment.
The criteria used for the allocation of revenues for each operating segment is based on the volume of sales
made in each sector. The costs are allocated directly to each operating segment.
Tecnical service Clean Tech Energy
Saving Energy
management Totale
Ricavi 41.178.787 4.572.924 884.954 3.899.049 50.535.714
Costi Operativi (33.468.437) (2.961.375) (600.934) (4.001.516) (41.032.262)
EBITDA 7.710.350 1.611.549 284.020 (102.467) 9.503.452
Ammortamenti ed accantonamenti (2.779.803) (774.726) 0 0 (3.554.529)
EBIT 4.930.547 836.823 284.020 (102.467) 5.948.923
Technical Service Cleantech Energy Saving Energy Management Total
Fixed assets 58,563,095 40,176,478 11,531,299 151,438 110,422,309
Net working capital 13,175,456 803,926 504,437 75,835 14,559,655
38
3.3 FORM, CONTENT AND APPLIED ACCOUNTING PRINCIPLES
These consolidated Financial Statements have been prepared on a going-concern basis, as the Directors
have verified that no financial, operational or other indicators exist which might report any critical factors
about the Group’s capacity to meet its obligations in the foreseeable future and, specifically, in the next 12
months.
These Half-year condensed consolidated financial statements were prepared in compliance with the
International Financial Reporting Standards (IFRS) as endorsed by the European Commission pursuant to
regulation (EC) no. 1606/2002 by the European Parliament and Council on 19 July 2002, and in particular
IAS 34 Interim Financial Statements, and the regulations issued in implementation of art. 9 of Italian
Legislative Decree No. 38/2005. From among the options allowed by IAS 34, the Group chose to publish
these half-year condensed financial statements in condensed form. The information contained herein must
therefore be read together with the consolidated financial statements for the financial year ended 31
December 2015, which were prepared in compliance with the IFRS, and reference is expressly made to the
latter.
The half-year condensed consolidated financial statements are expressed in Euros since this is the currency
in which the transactions of the Group companies are carried out. All data reported in the notes to the
financial statements are expressed in Euros, except as otherwise stated.
Any other classifications used in the current financial period for certain items, aiming to better represent
the Company's financial position, operating results and cash flows, have also been applied to the
corresponding amounts of the comparison period, pursuant to Art. 2423 ter, par. 5, of the Italian Civil Code
and the IAS/IFRS applied to the preparations of these half-year condensed consolidated financial
statements.
The Group has opted to use the income statement by nature, while assets and liabilities in the statement
of financial position are divided into current and non-current items. The cash flow statement has been
prepared according to the indirect method. It should be noted that, in order to comply with the indications
contained in CONSOB Resolution no. 15519 of 28 July 2006 “Provisions on financial statement formats”
(Disposizioni in materia di schemi di bilancio), note 3.6 reports the consolidated income statement, the
consolidated statement of financial position and the consolidated cash flow statement, specifying
significant amounts of positions or settlement agreements arising from transactions carried out with
related parties, for any individual item in the financial statements.
39
The preparation of the condensed consolidated financial statements requires estimates and assumptions
that affect the reported amounts of assets and liabilities and the related disclosures, as well as on the
assets and liabilities at the date of the financial statements. The estimates and associated assumptions are
based on historical experience and other factors considered reasonable in the circumstances and are
adopted when the accounting value of assets and liabilities is not easily inferable from other sources. The
actual results could differ from such estimates. Estimates and assumptions are reviewed periodically and
the effects of any changes are reflected in the income statement if they involve only that year. In the event
that the revision affects both current and future periods, the change is recognised in the period in which
the revision is made and in future years.
These half-year condensed consolidated financial statements were approved by the Parent Company's
Board of Directors as at 29 July 2016.
RECENTLY ISSUED ACCOUNTING STANDARDS
The accounting standards and valuation criteria applied in the preparation of these half-year condensed
consolidated financial statements as at 30 June 2016 are conformant with those adopted for the
preparation of the consolidated financial statements for the year ended 31 December 2015, which you are
referred to for further information. We furthermore note that from 1 January 2016 the following
interpretation and amendments were made to existing standards:
The following accounting standards, interpretations and amendments are applicable from 1 January 2016:
• 2010-2012 IFRS Annual Improvement Cycle adopted with EU Regulation No. 28/2015 as part of the
annual improvements and general review of international accounting standards.
• IAS 19 - Employee Benefits - Defined Benefit Plans: employee contributions, adopted with EU
Regulation No. 29/2015. The amendment provides clarification on the application of IAS 19 to
defined benefit plans that imply involuntary contributions from employees or third parties. These
contributions reduce the cost of the entity to provide benefits and, to the extent they are
commensurate with the service provided by the employee in a given period, can be fully deducted
from the period’s costs, rather than spread over the working life of said employee.
• IFRS 11 - Joint Arrangements, amended with EU Regulation no. 2173/2015. The amendment
establishes that an entity adopts the standards in IFRS 3 to recognise the accounting effects of the
acquisition of an interest in a joint arrangement that constitutes a business. The new element
introduced applies to both the acquisition of an initial interest as well as subsequent acquisitions
of additional interests. Conversely, an investment held prior to the effective date of the change, is
not restated if the acquisition of an additional interest results in joint control being maintained (or
40
rather, the acquisition of an additional interest does not result in obtaining control of the investee).
The IFRS 3 principles involved include:
• Measurement of assets and liabilities at fair value;
• Recognition of costs related to the acquisition as expenses for the period in which they were
incurred and services received, with the exception of costs to issue debt or equity securities that
are recognised in accordance with IFRS 3;
• Recognition of deferred taxes resulting from the initial recognition in assets and liabilities, with the
exception of those related to goodwill, as required by IFRS 3 and IAS 12;
• Recognition of the surplus in the payment made with respect to the net value of the amounts of
assets acquired and liabilities assumed identifiable as goodwill;
• Review to reduce the value of a CGU to which goodwill was allocated, to be performed at least
annually, or any time there is an indication of impairment, pursuant to IAS 36.
• IAS 16 - Property, Plant and Equipment and IAS 38 - Intangible Assets, amended with EU Regulation
no. 2231/2015. The amendment introduces certain clarifications on the depreciation/amortisation
method based on revenues (among those allowed by pre-existing versions of IAS 16 and IAS 38,
respectively, for tangible and intangible assets), defining them as unsuitable for tangible assets and
reserving the right to apply them to intangible assets only in circumstances in which it can be
demonstrated that the revenues and consumption of economic benefits deriving from the asset
are closely correlated. Based on this amendment, the cases in which revenues generated by the
activity that envisage the use of a depreciable/amortisable asset reflect different factors from the
expected consumption of the resulting economic benefits, such as, for example, the sale of asset,
performance of a different production process, and changes in sales prices.
• 2012-2014 IFRS Annual Improvement Cycle adopted with EU Regulation No. 2343/2015 as part of
the annual improvements and general review of international accounting standards.
• IAS 1 - Presentation of Financial Statements, amended with EU Regulation no. 2406/2015. The
amendment aims to improve the effectiveness and clarity of financial statement disclosure,
encouraging companies to express and represent their professional judgment in presenting the
necessary information. In particular, the changes introduced explain the guidelines contained in
the accounting standard on materiality, aggregation of items, presentation of sub-totals, the
financial statement structure and disclosure of accounting policies adopted. The information
requirements for the section of other components of comprehensive income were also changed.
In particular, the amendment explicitly requires that the portion of comprehensive income relating
to associates and joint ventures is reported, using the equity method and indicating whether these
amounts will or will not be subsequently reclassified in the profit or loss for the year.
• IAS 27 - Separate Financial Statements, amended with EU Regulation no. 2441/2015. With regard
to entities that prepare separate financial statements, the amendment introduces the option of
41
adopting the equity method to recognise investments in subsidiaries, associates and joint ventures.
The recognition option is in addition to those already allowed in previous version of the accounting
standard (cost method and IAS 39 method). The amendment also provides a clearer definition of
separate financial statements.
Finally, at the approval date of these financial statements, IASB had issued certain accounting standards,
amendments and interpretations that had not yet been endorsed by the European Commission:
• IFRS 9 - Financial Instruments;
• IFRS 14 - Regulatory Deferral Accounts;
• IFRS 15 - Revenues from Contracts with Customers;
• IFRS 16 - Leases;
• Amendments to IFRS 10, IFRS 12, and IAS 28 - Investment Entities: applying the consolidation
exception;
• Amendments to IFRS 10 and IAS 28 - Sales or Contributions of Assets between an Investor and its
Associate or Joint Venture;
• Amendment to IAS 12 regarding recognition of deferred tax assets for unrealised losses.
The adoption of the aforementioned accounting standards did not significantly affect these half-year
condensed consolidated financial statements as at 30 June 2016.
42
List of Companies consolidated on a line-by-line basis:
Name Registered office % owned by the Group
% contribution to the
Direct Indirect Group
Capital Energy S.r.l. Nardò - Via Don Milani, 4 100% - 100% Newcoenergy S.r.l. Nardò - Via Don Milani, 4 100% - 100% Capital Solar S.r.l. Nardò - Via Don Milani, 4 100% - 100% MeetSolar S.r.l. Nardò - Via Don Milani, 4 100% - 100% Festina S.r.l. Terni - Via Garibaldi, 43 100% - 100% Energia Basilicata S.r.l. Nardò - Via Don Milani, 4 100% - 100% Energia Lucana S.r.l. Nardò - Via Don Milani, 4 100% - 100% Energia Nuova S.r.l. Nardò - Via Don Milani, 4 100% - 100% Verde Energia S.r.l. Nardò - Via Don Milani, 4 100% - 100% Rinnova S.r.l. Nardò - Via Don Milani, 4 100% - 100% Soc. Agric. Fotosolara Cheremule S.r.l. Narni - Via dello Stabilimento, 1 100% - 100% Soc. Agricola Fotosolara Ittireddu S.r.l. Narni - Via dello Stabilimento, 1 100% - 100% T.e.c.i. costruzioni & ingegneria S.r.l. Gioia del Colle – Via Giosuè Carducci, 122 100% - 100% Meet Green Italia S.r.l. Nardò - Via Don Milani, 4 100% - 100% LyteEnergy S.r.l. Narni - Via dello Stabilimento, 1 70% - 70% Soc. Agricola Padria S.r.l. Narni - Via dello Stabilimento, 1 100% - 100% TerniEnergia. Hellas M.EPE. Athens – 52, Akadimiasstreet 100% - 100% TerniEnergia Polska Zoo Warsaw - Sw. Krolewska 16, 00-103 100% - 100% Tevasa L.t.d. Cape Town, 1 Waterhouse Place, Century City, 7441 80% - 80% IGreen Patrol S.r.l. Narni - Via dello Stabilimento, 1 100% - 100% Alchimia Energy 3 S.r.l. Narni - Via dello Stabilimento, 1 100% - 100% TerniEnergia Romania Srl Str. Popa Petre 5 - Bucharest 100% - 100% TerniEnergia Solar South Africa L.t.d. Woodstok, De Boulevard Searle Street 100% 100% TerniEnergia Project L.t.d. Woodstok, De Boulevard Searle Street 80% 80% GreenAsm S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Terni SolarEnergy S.r.l. Narni - Via dello Stabilimento, 1 100% - 100% Greenled Industry S.p.A. Narni - Via dello Stabilimento, 1 100% - 100% TerniEnergia Gas&Power S.p.A. Milan – Corso Magenta, 85 100% - 100% Companies added to the scope of the consolidation in the first half of 2016 Val di Taro Tyre Srl Narni - Via dello Stabilimento, 1 100% 100%
TerniEnergia Moçambique Limitada Rua Orlando Francisco Magumbwe, No. 32, cidade de Maputo
99% 99%
43
List of Companies consolidated with the equity method:
Name Registered office % owned by the Group % contribution to
the Direct Indirect Group
Girasole S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Guglionesi S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Energia Alternativa S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Solter S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Investimenti Infrastrutture Nardò - Via Don Milani, 4 50% - 50% Infocaciucci S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Soc. Agric. Fotosolara Bonnanaro S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Soc. Agric. Oristano S.r.l. Narni - Via dello Stabilimento, 1 50% - 50% Rebis Power Narni - Via dello Stabilimento, 1 50% - 50%
3.4 COMMENTS ON THE MAIN STATEMENT OF FINANCIAL POSITION ITEMS
NON-CURRENT ASSETS
3.4.1 INTANGIBLE FIXED ASSETS
The tables below show, respectively, the analysis of variations of the "Original Cost" (Table 1), the
"Accumulated amortisation" (Table 2) and "Net values" (Table 3) related to intangible assets as at 30 June
2016 and 31 December 2015 and the relative change:
(Table 1)
INTANGIBLE FIXED ASSETS ORIGINAL COST
Values as of 31/12/2015 Increases
Decreases for Write-downs/ Values as of 30/06/2016 (in Euro) disposals Reclassifications
Software 1,046,907 535,795 1,582,702
Other 1,598,765 426,106 2,024,871
Building lease 317,324 317,324
Authorisations 10,957 10,957
Goodwill 2,480,776 2,480,776
Patents 546,450 546,450
Total 6,001,178 961,901 6,963,079
44
(Table 2)
INTANGIBLE FIXED ASSETS ACCUMULATED AMORTISATION
Values as of 31/12/2015 Amortisation
Reclassifications/ Values as of 30/06/2016 (in Euro) Decreases
Software 624,722 55,869 680,591
Patents 246,047 21,500 267,547
Other 669,665 36,034 705,699
Total 1,540,433 113,403 1,653,837
(Table 3)
INTANGIBLE FIXED ASSETS
NET VALUES
As of 31 December 2015 As of 30 June 2016
ORIGINAL COST
Accum. Net values Original cost
Accum. Net values
(in Euro) Amort. Amort.
Software 1,046,907 (624,722) 422,185 1,582,702 (680,591) 902,111
Other 1,598,765 (669,665) 929,101 2,024,871 (705,699) 1,319,172
Building lease 317,324 317,324 317,324 317,324
Authorisations 10,957 10,957 10,957 10,957
Goodwill 2,480,776 2,480,776 2,480,776 2,480,776
Patents 546,450 (246,047) 300,403 546,450 (267,547) 278,903
Total 6,001,178 (1,540,433) 4,460,745 6,963,079 (1,653,837) 5,309,242 The item software mainly refers to the investment incurred for the management system as well as a number
of applications for the handling of Energy Management.
The item “Other” is mainly related to multi-year charges for Greenled Industry SpA for LED light bulb
developments.
The building rights relate to certain acquired rights and for the construction of photovoltaic systems.
Goodwill amounted to Euro 2,335 thousand and relates to the acquisition of control in Lucos Alternative
Energies S.p.A., a company active in the field of energy efficiency, which was then merged into TerniEnergia
in 2015. In addition, Euro 146 thousand related to the acquisition in 2015 of TerniEnergia Gas & Power, a
company active in the natural gas and LNG sector. This goodwill is justified by the synergies expected at the
time of acquisition from integrating the activities of these companies within TerniEnergia. Given that it is
an activity with indefinite time period, it is not subject to amortisation but subject to at least an annual
45
impairment test. As at 30 June 2016 there are no indicators such as to assume the possible impairment of
goodwill.
3.4.2 TANGIBLE FIXED ASSETS
The tables below show, respectively, the analysis of variations of the "Original Cost" (Table 1), the
"Accumulated depreciation and write-downs" (Table 2) and "Net values" (Table 3) relating to tangible fixed
assets as of 30 June 2016, 31 December 2015 and the relative change:
(Table 1)
TANGIBLE FIXED ASSETS ORIGINAL COST
Values as of 31/12/2015 Increases
Decreases for Reclassifications Values as of
30/06/2016 (in Euro) disposals
Land and buildings 4,827,808 4,827,808
Plant and machinery 82,238,537 133,943 (38,993) 82,333,486
Industrial equipment 864,724 79 864,803
Other assets 1,018,651 1,018,651
Work in progress 15,043,510 927,139 15,970,649
TOTAL 103,993,229 1,061,161 (38,993) 105,015,397
46
(Table 2)
TANGIBLE FIXED ASSETS ACCUMULATED DEPRECIATION AND WRITE-DOWNS
Values as of 31/12/2015 Depreciation
Other Reclassifications/ Values as of 30/06/2016 (in Euro) increases Other
Land and buildings 452,174 63,703 515,877
Plant and machinery 19,240,623 2,224,112 21,464,734
Industrial equipment 788,204 31,595 819,799
Other assets 895,685 38,661 934,345
TOTAL 21,376,685 2,358,071 23,734,756 (Table 3)
TANGIBLE FIXED ASSETS NET VALUES
As of 31 December 2015 As of 30 June 2016
(in Euro) Original cost Accum.
depr. and write-downs
Net values Original cost Accum.
depr. and write-downs
Net values
Land and buildings 4,827,808 (452,174) 4,375,634 4,827,808 (515,877) 4,311,931
Plant and machinery 82,238,537 (19,240,623) 62,997,914 82,333,486 (21,464,734) 60,868,752
Industrial equipment 864,724 (788,204) 76,521 864,803 (819,799) 45,004
Other assets 1,018,651 (895,685) 122,966 1,018,651 (934,345) 84,305
Work in progress 15,043,510 15,043,510 15,970,649 15,970,649
TOTAL 103,993,229 (21,376,685) 82,616,544 105,015,397 (23,734,756) 81,280,641
Investments in land and buildings amounted to Euro 4,311 thousand mainly due to the value of the
properties owned by the Group. In particular, these properties are represented by two industrial buildings
in the plant of Nera Montoro used for the Group's industrial operations, as well as the value of land
allocated for the construction of a composting plant in Lecce.
As of 30 June 2016, "Plant and equipment" includes the value of photovoltaic systems with a total capacity
of 12.5 MW as well as the value of two PFU treatment plants (used tyres), the biodigestion plant and the
treatment plant of groundwater, the latter all present within the Nera Montoro plant.
47
The item "Work in progress", amounting to Euro 17,878 thousand, includes investments in progress and
not yet completed in the period ended on 30 June 2016. These investments essentially relate to:
- the anaerobic digester and composting plant in Calimera (province of Lecce);
- the plant with cogeneration of energy through the pyrogasification of virgin wood to produce
electricity and heat, near the town of Borgosesia (province of Vercelli). Note that the delay in the date the
plant became operational was due to a series of environmental regulations and technological adaptations
that were still underway at the date these financial statements were drafted. After these interventions are
completed, the plant will be definitely placed in service. The cost of the investment will be entirely
recovered through its use.
Among the assets under construction are capitalised costs for Euro 1,128 thousand incurred in prior years
for the development of the 18 MWp wind farm located in the town of Stroncone. These costs will be
recovered through the realisation of the authorised plant, which may be carried out by the company alone
or in partnership with other industrial entities.
3.4.3 EQUITY INVESTMENTS
The table below provides a breakdown of investments related to shareholdings in joint ventures accounted
for with the equity method and the other equity investments as of 30 June 2016, 31 December 2015 and
the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Investments in JVs 1,069,165 914,002 155,163 17.0% Other investments 119,821 1,243,921 (1,124,100) (90.4)%
Total investments 1,188,986 2,157,923 (968,937) (44.9)%
The increase in the value of the equity investments in Joint Ventures is attributable to the recognition of
the results of the same relating to the first half of 2016, while the reduction in the item Other investments
is linked to the write-down of the Veneto Banca securities in the income statement for the first half of 2016.
The joint ventures are active in the identification, development, financing, design, construction and
commissioning of photovoltaic plants in Italy, and the sale of electricity produced by them.
It should be noted that the application of the equity method in prior years resulted in the elimination of
significant margin in relation to the volume of work undertaken on behalf of the Joint Ventures, with the
consequent reduction of the carrying value of the investment. After a reset of the value of investment,
48
further reduction is recognised as a liability. This liability, called "Deferred Margin", is recognised under
other liabilities (current and non-current), because it is not representative of a legal or implicit obligation
to cover the losses of the investee, but a decrease in the value of the joint venture investment consequent
to the elimination of deferred margins in subsequent years that will be recognised in the consolidated
income statement in accordance with the amortisation schedule of the transferred plants. A breakdown
follows:
Investment 30 June 2016 Equity investments
Deferred margin
Energia Alternativa S.r.l. 23,958 23,958
Solter (113,583) () (113,583)
Girasole S.r.l.. (25,541) () (25,541)
Guglionesi S.r.l. 247,683 247,682
Bonnanaro S.r.l. (51,208) (51,208)
Oristano S.r.l. (50,937) (50,937)
Investimenti Infrastrutture S.r.l. 5,755 5,755
Infocaciucci S.r.l. 228,110 228,110
Rebis Power S.r.l. 563,660 563,660
Total 827,896 1,069,165 (241,270)
In order to present more complete information, the following table sets forth the aggregate net financial
debt of the primary joint ventures at 30 June 2016.
49
Energia Alternativa Solter Girasole Guglionesi Rebis Power Investimenti
Infrastrutture
Soc. Agric. Fotosolara Bonnanaro
S.r.l.
Soc. Agric. Fotosolara
Oristano S.r.l.
Infocaciucci S.r.l. Total
Cash 167
Bank current accounts 1,097,913 73,941 281,034 73,406 9,728 8,661 55,095 14,576 16,316 1,630,670
Liquidity (A) 1,098,080 73,941 281,034 73,406 9,728 8,661 55,095 14,576 16,316 1,630,837
Current financial payables
Current bank payables
- mortgages (1,004,714) (680,000) (1,684,714)
- sale and leaseback (1,449,699) (666,223) (572,474) (111,005) (158,759) (68,027) (76,447) (101,780) (161,936) (3,366,350)
- to other shareholders (500,000) (85,000) (585,000)
- to TerniEnergia (618,622) (314,084) (438,939) (85,000) (4,019) (1,460,664)
Non-current financial payables
- mortgages (12,273,544) (840,000) (13,113,544)
- sale and leaseback (20,736,940) (9,275,412) (4,172,058) (2,034,639) (2,118,269) (1,063,017) (1,710,985) (2,277,987) (2,098,628) (45,487,933)
- to other shareholders (409,891) (288,738) (698,629)
- to TerniEnergia (7,549,686) (1,445,482) (508,671) (284,068) (907,079) (978,571) (1,202,199) (12,875,756)
Financial debt (B) (43,633,206) (11,701,201) (8,122,033) (2,888,451) (2,277,027) (2,038,123) (2,766,003) (3,581,966) (2,264,582) (79,272,590)
Net financial debt (A+B) (42,535,125) (11,627,260) (7,840,999) (2,815,045) (2,267,299) (2,029,461) (2,710,908) (3,567,389) (2,248,267) (77,641,753)
50
It should be noted that the 50% of the values of net financial debt shown in the table above refer to
TerniEnergia Group, equivalent to the stakes held by the Group in the joint ventures.
Joint ventures generally finance investments in photovoltaic systems through loans granted by
shareholders or through medium to long -term loans from financial institutions and leasing companies. The
Parent Company has issued - in favour of some joint ventures - takeover agreements amounting to Euro
18.8 million at 30 June 2016 (for further details see Note 3.5.11 Commitments and guarantees as well as
3.7 Related parties).
3.4.4 DEFERRED TAX ASSET
The table below provides a breakdown of deferred tax asset as of 30 June 2016, 31 December 2015 and the
relevant change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Deferred Tax Asset 14,062,412 13,133,614 928,798 7.1%
Total deferred tax asset 14,062,412 13,133,614 928,798 7.1%
Deferred taxes refer primarily to the Parent Company TerniEnergia and TERNI Solarenergy S.r.l., and the
deferred taxes recognised in the Group consolidated financial statements. The change in the period is
mainly due to the deferred taxes accrued on period tax losses.
IRES - DTA 31/12/2015 Increases Uses 30/06/2016
Remuneration of corporate bodies 44,000 15,600 (8,400) 51,200
Write-downs 1,104,454 1,104,454
FTA changes 111,620 128,943 (38,166) 202,397
Reversal of deferred margin 194,600 16,918 211,518
Tax losses 10,968,662 858,555 (4,792) 11,822,424
Cancellation of UCC capital gains 543,415 (38,673) 504,742
TOTAL 12,966,751 1,020,016 (90,031) 13,896,736
51
IRAP - DTA 31/12/2015 Increases Uses 30/06/2016
FTA changes 1,213
1,213
Reversal of deferred margin 88,596 (1,187) 87,409
Cancellation of UCC capital gains 77,054 77,054
TOTAL 166,864 (1,187) 165,677
Deferred taxes relative to fiscal losses refer in part to the losses accrued by the parent company
TerniEnergia and partly to the fiscal benefit recognised in 2014 as a result of the application of the so-called
“Tremonti Ambientale” law (environmental law). These losses are internally assessed to be recoverable in
light of the Group’s forecasts and industrial plan. With regard to the effects deriving from the application,
in 2014, of the “Tremonti Ambientale”, refer to that reported below.
Article 6, paragraphs 13-19 of Law no. 388/00 (subsequently repealed by means of Legislative Decree no.
83/2012), which refers to the tax incentive known as “Tremonti Ambientale” for small and medium-sized
companies. It envisages that the portion of income allocated to environmental investments, including
photovoltaic plants designed to decrease consumption of conventional electrical energy by companies, is
not relevant for purposes of calculating income taxes.
As a result, and although the norm was very detailed and provided for an incentive that was also applicable
to investments in photovoltaic plants, Energia Alternativa Srl and T.E.R.NI Solarenergy Srl – similar to many
other companies operating in the photovoltaic sector – did not utilise the incentive as it was not specified
if the incentive was in addition to the so-called “energy account”.
In light of that specified above, as a result, and despite the facts that Energia Alternativa s.r.l. and T.E.R.NI
Solarenergy Srl had, during the 2009 and 2010 tax periods (i.e. during the period of effectiveness of the
energy account law), realised “environmental investments” that were potentially subject to facilitation,
they never utilised the environmental tax deductions due to the regulatory uncertainty as to whether it was
in addition to the governmental energy account contribution.
In 2012, the following ended this uncertainty:
i) article 19 of the so-called “V energy account” provides for cumulability within certain limits;
ii) the Ministry of Economic Development confirmed this interpretation.
The Companies had therefore carried out in-depth analyses – including with the support of knowledgeable
consultants – regarding the possibility of using the incentive and decided to take advantage of it,
recognising the relative effects in the financial statements as of 31 December 2014.
52
3.4.5 NON CURRENT FINANCIAL RECEIVABLES
The following table provides a breakdown of non-current financial receivables as of 30 June 2016, 31
December 2015 and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Soc. Agricola Fotosolara Bonnanaro S.r.l. 842,852 842,852 0.0% Solter S.r.l. 1,445,909 1,445,909 0.0% Investimenti Infrastrutture S.r.l. 874,304 874,304 0.0% Soltarenti S.r.l. 1,297,513 1,477,513 (180,000) (12.2)% Energia Alternativa S.r.l. 7,903,521 7,903,521 0.0% Soc. Agricola Fotosolara Oristano S.r.l. 1,015,045 1,015,045 0.0% Girasole S.r.l. 708,695 708,695 0.0% Guglionesi S.r.l. 374,216 402,799 (28,583) (7.1)% Financial assets 7,434,614 8,173,942 (739,328) (9.0)% Security deposits 746,770 746,770 0.0%
Total non-current financial receivables 22,643,440 23,591,350 (947,911) (4.0)%
This item includes Euro 7,435 thousand in financial receivables recorded as a result of the application of
IFRIC 12 and IFRIC 4 to contracts for energy efficiency.
These receivables represent the fair value of the expected cash flows from energy efficiency activities
carried out on a number of municipalities and industrial plants. These contracts are intended to improve
the energy efficiency of public lighting systems. The services performed consist of the planning, design and
maintenance of interventions aimed at efficiency.
The decrease recorded in the item "Financial assets energy efficiency" compared to the previous year is
due to the period collections.
The receivables due from Group companies mainly represent interest-bearing loans granted which tacitly
renew year after year subject to notice to quit. The changes reported with respect to 31 December 2015
depended on the collection of dividends from Soltarenti (Euro 180 thousand) and Guglionesi (Euro 28
thousand).
The item “Security deposits” primarily includes the sums deposited by the special purpose companies which
own the photovoltaic plants as guarantees for the leasing contracts stipulated for the financing of the plants
themselves.
53
CURRENT ASSETS
3.4.6 INVENTORIES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Raw materials 5,532,788 16,406,222 (10,873,434) (66.3)%
Finished products 454,561 448,085 6,476 1.4%
Work in progress 7,906,205 6,475,671 1,430,534 22.1%
Total inventories 13,893,554 23,329,978 (9,436,425) (40.4)%
The item “Raw materials” primarily refers to spare parts, essentially cables and metalwork and
miscellaneous material used for the construction of photovoltaic plants. The installation in the South
African sites of the majority of the panels in the first half of 2016 led to the majority of the change with
respect to 31 December 2015.
The finished products as of 30 June 2016 mainly relate to the raw and secondary materials arising from the
recovery of used tyres, as well as to the "TR Gridless" equipment (apparatus for providing low voltage power
using stand-alone photovoltaic energy and batteries) and "TR WOC" equipment (sensor to detect weld
defects in real time). For these products, the company is implementing a strategy for marketing abroad.
Work in progress essentially includes design costs, in particular linked to the Technical Service, referring to
ventures abroad, and Energy Saving.
3.4.7 TRADE RECEIVABLES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Receivables from customers 30,244,425 51,517,555 (21,273,130) (41.3)% Receivables from joint ventures 772,739 444,370 328,369 73.9% Receivables from parent company 1,037,865 613,981 423,884 n.a. Receivables from associates 117,803 115,668 2,135 1.8% Allowance for bad debts (329,640) (329,640) 0.0%
Total trade receivables 31,843,192 52,361,935 (20,518,742) (39.2)%
54
As of 30 June 2016, trade receivables, mainly from customers, amount to Euro 31,843 thousand. The change
in trade receivables with respect to 31 December 2015 is linked to the amounts collected relating to the
EPC photovoltaic contracts in South Africa (Tom Burke and Paleisheuwel).
The receivables from customers include an amount of approximately Euro 2.9 million, which is the balance
of an original consideration of Euro 40 million from the sale, in 2011, of two photovoltaic plants totalling
approximately 12 megawatts of power, which are currently fully deployed. The other party did not honour
its obligations for this receivable, although in December 2012 an agreement had been reached for the
payment of the amount due. Despite repeated attempts to settle the issue out of court, in August 2013 the
Parent Company was forced to initiate legal action to recover this receivable. In particular, the Parent
Company, with the assistance of its legal advisors, believes the other party’s reasons for refusing to pay are
specious in light of the serious and concrete factual and legal elements. Therefore, as of the reporting date,
the Parent Company is reasonably certain that it will not have a liability with said company, also considering
that there are no indicators that would suggest the counterparty is at risk of not having the economic-
financial resources to honour its obligations with TerniEnergia. For more details, please refer to Note 3.5.11.
The amount of trade receivables is adjusted by an allowance for bad debt of Euro 330 thousand to cover
the risk of default of certain receivables arising in previous years. The allowance for bad debt did not
undergo any change since the first half of 2016.
For a breakdown of receivables from joint ventures, please refer to the paragraph 3.7, which lists all the
relations with the related parties as of 30 June 2016.
As of 30 June 2016, the nominal value of trade receivables approximates their fair value.
3.4.8 OTHER CURRENT ASSETS
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
55
VAT receivable 2,169,650 3,310,416 (1,140,765) (34.5)% Advances to suppliers 593,335 606,851 (13,516) (2.2)% Deferred charges 864,432 1,045,778 (181,346) (17.3)% Other receivables 16,693,333 19,141,492 (2,448,158) (12.8)%
Total other current assets 20,320,750 24,104,536 (3,783,786) (15.7)%
The item "Other receivables" primarily includes the receivable, equal to Euro 8,994 thousand, accrued for
the sale of 50% of the shares of the companies Solter and Energia Alternativa and 45% of Soltarenti. The
change with respect to 31 December 2015 is mainly linked to the collection in January of a receivable of
Euro 1,640 thousand deriving from the disposal to Renewable European Investment Italy 3 - REI III Srl of
50% of the Special Purpose Vehicles Investimenti Infrastrutture Srl, Società Agricola Fotosolara Oristano Srl,
Società Agricola Fotosolara Bonnanaro Srl and Infocaciucci Srl.
With regard to the remaining balance, the item includes a receivable for around Euro 3.3 million accrued
further to the application of the so-called “Tremonti Ambientale” rule to certain companies of the Group
(mainly Terni Solar Energy, recognised in previous years, and Cheremule, recognised in the first half of 2016
as illustrated further on in the item revenues) which own photovoltaic plants, and the remainder mainly
consisting of security deposits, advances to suppliers and receivables from GSE.
The decrease in the net VAT receivable is mainly attributable to the dynamics linked to the invoicing and
VAT payments of the subsidiary TerniEnergia Project.
3.4.9 FINANCIAL RECEIVABLES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Financial receivables from joint ventures 2,167,115 1,959,249 207,866 10.6% Financial receivables from MPS 1,000,000 1,000,000 0.0% Financial receivables from others 133,041 1,232,944 (1,099,903) (89.2)%
Total financial receivables 3,300,155 4,192,193 (892,037) (21.3)%
Financial receivables due from the joint ventures refer to shareholder loans disbursed by the Parent
Company in favour of the JVs during previous years.
The balance relating to financial receivables from Monte dei Paschi di Siena S.p.A. refers an escrow account
to guarantee the relationship between the Parent Company and said bank.
56
The decrease in financial receivables is mainly attributable to the disposal of 358,668 shares of Free Energia
SpA within the sphere of the divestment transaction fully described in the statutory and consolidated
financial statements as at 31 December 2015 to which reference is made.
3.4.10 CASH AND CASH EQUIVALENTS
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Bank current accounts 22,287,218 11,873,035 10,414,183 87.7% Cash 30,109 20,354 9,755 47.9%
Total cash and cash equivalents 22,317,328 11,893,389 10,423,938 87.6%
The change in cash and cash equivalents with respect to 31 December 2015 was affected by the collections
relating to the invoicing of the milestones linked to the stage of completion of the activities care of the
South African sites. A significant part of this liquidity, around Euro 11 million, was used at the beginning of
July 2016 to pay one of the tranches of the panels relating to the suppliers in South Africa.
For an analysis of the change outlined above, also refer to the Cash Flow Statement.
57
3.5 COMMENTS ON THE MAIN LIABILITY AND EQUITY ITEMS
3.5.1 SHAREHOLDERS’ EQUITY
As of 30 June 2016, the subscribed and paid share capital of the Parent Company amounted to Euro
57,007,230 divided into 44,089,550 ordinary shares of no par value.
As of 30 June 2016, the legal reserve amounted to Euro 2,247 thousand and was increased by Euro 105
thousand, following the shareholders’ resolution to allocate the profit for the year ended 31 December
2015.
As of 30 June 2016, the item "Other reserves" includes the value of the reserve for cash flow hedges,
negative and totalling Euro 5,224 thousand. This reserve reflects the lower negative fair value, net of related
tax effects, of derivative instruments to hedge the risk of changes in cash flows related to fluctuations in
interest rates on some medium/long-term loans. These derivative contracts meet IFRS requirements for
hedge accounting and, therefore, changes in the fair value of these derivatives are recognised - solely for
the "effective" portion - in a specific equity reserve ("cash flow hedge reserve").
The “Other reserves” item also includes the negative difference, for Euro 2,091 thousand, between the fair
value of the investment in Greenled Industry S.p.A. (from appraisal), included in the scope of consolidation
effective 31 December 2015, and the net book value of the assets acquired from said company. This was
considered a transaction “under common control”, which is not included in the application scope of IFRS 3
and the accounting treatment adopted conforms with the provisions of OPI 1.
The equity of minority interests is accounted for mainly by the share capital and reserves belonging to the
minority shareholders of GreenASM S.r.l. and the South African companies, TerniEnergia Project and
Tevasa.
Taking into consideration the transactions described above, the number of own shares in the portfolio at
the close of the quarter was equivalent to 4,012,998, or 9.10% of the Company’s share capital.
3.5.2 PROVISIONS FOR EMPLOYEE BENEFITS
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
58
30 June 31 December Change Change (in Euro) 2016 2015 %
Provisions for employee benefits 1,386,500 1,149,966 236,536 20.6%
Total provisions for employee benefits 1,386,500 1,149,966 236,536 20.6%
The change is the provision for the first six months of 2016, net of the amounts paid to employees.
3.5.3 PROVISIONS FOR DEFERRED TAXES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Provisions for deferred taxes 1,208,935 1,294,323 (85,388) (6.6)%
Total provisions for deferred taxes 1,208,935 1,294,323 (85,388) (6.6)%
The balance of deferred tax liabilities mainly relates to deferred taxes recognised at the time of transition
of the financial statements of certain subsidiaries from Italian GAAP to IFRS.
3.5.4 NON CURRENT FINANCIAL PAYABLES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Financial payables for leasing 23,716,098 21,609,012 2,107,086 9.8%
Non-current financial payables (other lenders) 161,954 140,704 21,250 15.1%
Non-current financial payables (mortgages) 31,164,975 33,102,464 (1,937,489) (5.9)%
Bonds 24,489,145 24,419,853 69,292 0.3%
Total non-current financial receivables 79,532,172 79,272,033 260,140 0.3%
The increase in non-current financial payables is attributable to the entering into of a lease agreement
relating to the PFU plant at Borgo Taro, partly offset by the reimbursements made during the period.
59
Financial payables for leasing, amounting to Euro 23,507 thousand, relate to loans contracted for finance
company-owned plants. In particular, they refer to "non-recourse" debt for photovoltaic plants owned by
the Group, the OFMSW (Organic Fraction Municipal Solid Waste) treatment plant in the Nera Montoro
facility, as well as the PFU (used tyres) treatment plants in Nera Montoro and, as from the second quarter
of 2016, Borgo Val di Taro. These loans do not include covenants and restrictions to the distribution of
generated profits.
The item "Non-current financial payables (mortgages)", amounting to Euro 32,136 thousand, mainly
includes the non-current portion of loans related to 7 photovoltaic plants owned by TERNI SolarEnergy S.r.l.,
which were disbursed in the form of project financing. As a guarantee of this financing stipulated in 2010,
a pledge was created on the shares of TERNI SolarEnergy itself. The remainder of the balance relates to
corporate financing granted to the Parent Company TerniEnergia, made up mainly by the non-current
portion of an unsecured loan issued at the end of 2013 for an original amount of Euro 10 million and a
period of 60 months, repayable in 20 quarterly instalments, in addition to an unsecured loan of Euro 5
million with a duration of 60 months, repayable in one instalment at maturity, both provided by Veneto
Banca.
The “Bonds” item refers to the bond issue from the Parent Company TerniEnergia in February 2014. The
bond issue, named “TerniEnergia 2019”, is equal to Euro 25 million with a five-year duration and gross fixed
rate equal to 6.875% with annual coupon, traded in the ExtraMOT PRO market, the professional segment
of the ExtraMOT bond market managed by Borsa Italiana. The payable is reported net of issue costs.
3.5.5 OTHER NON CURRENT LIABILITIES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Other non-current liabilities 50,000 50,000 0.0%
Deferred margin 218,227 197,492 20,735 0.0%
Total other non-current liabilities 268,227 247,492 20,735 0.0%
The item “other non-current liabilities” includes the long-term period portion of deferred margin booked
in the financial statements after the cancellation of the equity investments in joint ventures in order to
incorporate the additional decrease generated by the booking of equity.
60
3.5.6 DERIVATIVES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Hedging derivatives 3,547,885 3,251,759 296,125 9.1%
Total derivatives 3,547,885 3,251,759 296,125 9.1%
As of 30 June 2016, the Group has no listed derivative instruments. The fair value of unlisted derivatives is
measured using financial valuation techniques, in particular discounting back the future cash flows
according to market parameters.
The item "Hedging derivatives", amounting to Euro 3,548 thousand, mainly refers to several IRS (Interest
Rate Swap) derivative contracts to cover any fluctuations in interest rates on long-term debt for the
financing of company-owned plants These derivative contracts primarily relate to financing of the company
TERNI SolarEnergy S.r.l.
3.5.7 TRADE PAYABLES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Payables to suppliers 42,132,400 61,948,854 (19,816,454) (47.0)%
Payables to parent company 1,427,190 1,147,077 280,113 19.6%
Payables to associates 65,944 33,333 32,611 49.5%
Payables to joint ventures 440,701 413,980 26,720 6.1%
Total trade payables 44,066,235 63,543,245 (19,477,010) (44.2)%
Trade payables amounted to Euro 44,125 thousand as of 30 June 2016 and refer to the supply of materials
as well as the acquisition of goods and services. The decrease, which is mainly highlighted in payables to
suppliers, depends on the payments of the payables relating to the supplies in South Africa, essentially
inverters and the first tranche of the payable for the panels.
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3.5.8 FINANCIAL PAYABLES AND OTHER LIABILITIES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Current bank payables (current account overdrafts) 4,363,217 3,683,254 679,963 18.5%
Current bank payables (advances) 8,529,217 7,867,675 661,542 8.4%
Financial payables due to other lenders n.a.
Current portion of leasing payables 2,294,250 1,882,573 411,677 21.9%
Short-term financing 9,575,578 9,207,073 368,505 4.0%
Bonds 684,726 1,544,521 (859,795) (55.7)%
Total payables and other financial liabilities 25,446,988 24,185,097 1,261,891 5.2%
The item “Payables and other financial liabilities” mainly refer to payables to banks for overdrafts and
advances on the account contracts and invoices, as well as the short-term portion of debt for financing and
leasing.
It should be noted that current financial payables comprise part of the payments incurred for investments
already made or still under construction and for which – as of 30 June 2016 – a specific contract for financing
in the medium - long term had not yet been stipulated. In particular, this refers to a pyrogasification plant
already connected to the grid in the month of December 2012, and a composting plant under construction
in Puglia.
The following table presents the net financial debt at 30 June 2016 and 31 December 2015:
30 June 31 December (in Euro) 2016 2015
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Cash (30,109) (20,354) Available bank current accounts (22,287,218) (11,873,035) Liquidity (22,317,328) (11,893,389)
Bonds 684,726 1,544,521 Current bank payables (current account overdrafts) 4,363,217 3,683,254 Current bank payables (advances) 8,529,217 7,867,675 Current portion of leasing payables 2,294,250 1,882,573 Short-term financing 9,575,578 9,207,073 Financial payables/(receivables) (3,300,155) (4,192,193) Current financial debt 22,146,833 19,992,904
Net current financial debt (170,495) 8,099,515
Bonds 24,489,145 24,419,853 Non-current financing 31,326,929 33,243,168 Financial payables due to leasing companies 23,716,098 21,609,012
Net non-current financial debt 79,532,172 79,272,033
Total net financial position 79,361,677 87,371,548
As described in the Report on Operations, the significant reduction of the net financial position compared
to 31 December 2015 is evidence of the attention paid by management to maintaining the financial balance
of the Group, and also shows the positive effect of the collections at the end of 2016 relating to the invoicing
of the milestones linked to stage of completion of the activities care of the South African sites.
For more details, please refer to the Report on Operations under the heading "Financial Position".
Italeaf S.p.A., the company which effectively controls the parent company, issued bank guarantees in favour
of the parent company for a total amount of Euro 56.5 million at the date of approval of this report.
At the date of approval of the consolidated interim financial statements as of 30 June 2016, the Group has
available credit lines with various banks for around Euro 67 million (considering the loans for credit
appropriations).
3.5.9 INCOME TAX PAYABLES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
63
30 June 31 December Change Change (in Euro) 2016 2015 %
Direct taxes 3,270,671 1,330,322 1,940,349 145.9%
Total income taxes payable 3,270,671 1,330,322 1,940,349 145.9%
The item "direct taxes" refers to payables for taxes primarily from the subsidiary TerniEnergia Project. The
change is mainly due to the current tax accrued on the income of said subsidiary as at 30 June 2016.
3.5.10 OTHER CURRENT LIABILITIES
The following table provides a breakdown of the item in question as of 30 June 2016, 31 December 2015
and the related change:
30 June 31 December Change Change (in Euro) 2016 2015 %
Withholding tax 162,063 85,078 76,985 90.5% Payables to personnel 845,013 892,675 (47,662) (5.3)% Payables to social security and welfare institutions
385,300 360,617 24,683 6.8%
Deferred margin 23,043 23,043 0.0% Other current liabilities 1,343,135 10,415,202 (9,072,067) (87.1)%
Total other current liabilities 2,758,555 11,776,615 (9,018,062) (76.6)%
The item other current liabilities as of 31 December 2015 was essentially made up of advances invoiced to
customers relating to contracts in South Africa. These advances were recognised under the revenues
pertaining to the first half of 2016 on a consistent basis with the stage of completion of the sites, therefore
justifying the decrease in the item as of 30 June 2016.
3.5.11 COMMITMENTS AND GUARANTEES ISSUED AND POTENTIAL LIABILITIES
Guarantees issued
In some cases, the customers of the Parent Company have funded the purchase of the photovoltaic system
through lease agreements with leasing companies. For some of these customers, the Parent Company has
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signed with the leasing company an agreement providing for the replacement of the customer in the lease
agreement in the event of, and subject to, the breach of the respective customers. The customers have
committed, in this case, to transfer to TerniEnergia the leasing agreement and any debt outstanding at the
date of transfer, if generated by a power plant under contract.
The directors of TerniEnergia believe that the probability of occurrence of transfer is extremely remote,
since, in practice and with the exception of the initial maxi-rents, the leasing contracts are made in order
to allow the financial coverage of the instalments from the income flows generated by the plant.
Considering also the existence of an initial maxi-rent paid by the customer to the leasing company, the
values in effect at the time of the replacement - based on current development plans for the cash flows of
photovoltaic systems affected - would see a future excess flows generated by energy production compared
to outflows for rents due.
As of 30 June 2016, residual payables due from customers to leasing companies for which the above
mentioned agreements were made amount to Euro 55.7 million, of which Euro 38.4 million for companies
managed or owned by related parties. In reference to the related parties, Euro 18.8 million are from joint
ventures, Euro 1.8 million from the parent companies and Euro 17.7 million for other related parties. The
remainder of the balance, equivalent to Euro 17.2 million, refers to other third-party customers.
For the same reasons outlined above, the directors also believe that a potential replacement in the lease
agreements by the parent company would not adversely affect the economic situation of TerniEnergia. See
also Note 3.7 Related parties.
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Potential liabilities
Litigation, investigations and judicial proceedings in progress
As of 30 June 2016 there were no legal proceedings or litigations pending against the TerniEnergia or other
Group companies, except as outlined below.
As of 30 June 2016 there were no legal proceedings or litigations pending against the TerniEnergia or other
Group companies, except as outlined below.
Litigation with Milis Energy SpA
The dispute concerns the divestment made by Milis Energy against TerniEnergia on a photovoltaic system
on greenhouses constructed in Sardinia in the Municipality of Milis. Milis Energy has alleged that
TerniEnergia S.p.A. has breached the contract for the construction of this plant and for that reason it has
suspended payment of Euro 7 million, claiming that bolts (allegedly impaired) must be replaced, with the
amount of work estimated at Euro 50 thousand.
By virtue of this, Milis Energy then proceeded to exclude TerniEnergia from the work site, with an expulsion
deed dated 17 July 2013.
TerniEnergia filed an appeal before the Court of Oristano, which issued an order dated 4 February 2014
declaring this expulsion illegal and ordering Milis Energy to immediately reinstate TerniEnergia with full
possession of the works covered by the contract. Milis Energy appealed this ruling, which was admitted by
the multi-member Court of Oristano.
TerniEnergia sought and obtained an injunction against a receivable owed to Milis Energy S.p.A. in the
amount of Euro 5,940,000.00, as compensation due from Milis for the contract referred to in the preceding
paragraph.
The Court of Milan upheld the appeal and issued the injunction that has been duly served.
The party has appealed and the first hearing took place on 27 May 2014; on that date, the judge attempted
an unsuccessful mediation. By means of an order dated 17 September 2014, the Court of Milan issued a
ruling on the request for provisional execution put forth by TerniEnergia, accepting the request for an
amount totalling Euro 5,089,991.93, excluding interest and granting the provisional execution of the
opposing decree. The aforementioned sum was paid by the counterparty at the beginning of October 2014.
The judge recognised the provisional execution for an amount less than that due to the customer, as a
prudential measure given that, in the estimate by Milis, the defects and faults resulted in alleged damage
of Euro 850 thousand. The judge ordered an expert opinion to be developed, which is currently underway.
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In addition, the Company has two other receivables with this customer, not included in the injunction
decree, for a premium, equal to Euro 1,050 thousand, and for the supply and instalment of panels for Euro
1,038 thousand. As regards the former, Milis, despite payment requests, has no intention of paying the
amount, stating that there is a dispute with GSE as to the proven completion of the work as of 31 December
2010 and the consequent recognition of the related energy account. This dispute was resolved with the
ruling of the Council of State No. 2823/2014 and subsequent ruling no. 4122/2015 (following the appeal for
revocation by GSE). In fact, these decisions established that the works were completed by 31 December
2010, and as a result of these rulings, Milis is collecting the contribution from GSE relative to the plants
completed by 31 December 2010.
In relation to the receivable for panel installation, Milis has objected that the price of the panels should
have been included in the amount of the original contract. This objection is considered groundless as these
panels weren’t part of the original agreement, as they were commissioned by Milis at a later date.
TerniEnergia had not as yet undertaken legal action to recover these amounts as the ruling of the Council
of State was only recently finalised, but has since made a request for payment. Should Milis not respond to
the request, the company will take legal action. In this connection, the subpoena to recover this receivable
has not yet been served given the contact with the counterparty at this time aimed at settling the issue.
The Company does not believe that there are significant risks for the recovery of the entire receivable, given
the financial capacity of Milis and considering the opinion of the Company’s legal advisors responsible for
the case, who confirmed that there are no plausible reasons for Milis to not pay the amount due and the
high probability of success of any legal action.
With regard to this dispute, there are no significant up-dates to be reported with respect to 31 December
2015.
Litigation with Mada Srl
The litigation is due to the default on payment of a photovoltaic plant with a capacity of 997 kWp on the
part of the company Mada Srl.
Accordingly, the Parent Company, only after repeated requests for payment:
· has taken steps to remove the solar panels and other removable materials from the site (in compliance
with what was decided in the previous private correspondence between the parties);
· filed a subpoena to appear before the Court of Terni, in order to confirm the serious default of the
customer with respect to contractual obligations and therefore to obtain the termination of said contract
pursuant to Art. 1453 of the Italian Civil Code, resulting in the sentencing of the customer to pay all damages
suffered and the amount of Euro 1,046,890.00 (the amount identified as the loss of earnings, calculated as
30% of the contract price, whose total amount was Euro 3,489,640.00) or a greater or smaller amount that
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will be determined in the course of the proceedings. The case was registered under general registry
2005/11. In the course of the proceedings referred to in the previous point, TerniEnergia was notified of a
deed of appointment of an arbitrator and request for arbitration, on 7 December 2011. Opposition to
arbitration was implemented by serving a deed dated 27 December 2011 and, in any case, by identifying its
arbitrator in the unlikely event that the ordinary judge was not deemed to retain jurisdiction. On the date
of preparation of these financial statements, the arbitration ruling was issued dismissing the claim for
compensation of Mada. With regard to the proceedings before the Court of Terni, the judge remitted the
case to 14 April 2014 in order to await the ruling, and to avoid a conflict between definitive sentences. The
counterparty contested the ruling before the Court of Appeals of Perugia. It is not believed, however, that
this appeal will be accepted given the justifications for the ruling and the reasons for appeal themselves.
Upon conclusion of the hearing of 11 June 2015, in which the counterparty demanded that the preliminary
investigation be repeated, the Court decided to postpone the conclusion of the hearing to 20 October 2016.
As a result, notwithstanding the uncertainty that characterises each dispute and – on the basis of the
assessments already developed by our lawyers - the Parent Company believes that there are reasonable
grounds for considering success highly probable in the civil action above. Based on the above summary of
the facts, expressed in the civil case that the Parent Company has furthered, and given a possible
reconciliation with the customer resulting in the conclusion of the supply, it is not considered appropriate
to apply any residual impairment of costs (approximately Euro 0.4 million), included in work in progress as
of 30 June 2016.
With regard to this dispute, there are no significant up-dates to be reported with respect to 31 December
2015.
Litigation with Regni
The Parent Company is involved in two disputes with the heirs of Regni, which arose as a result of the failure
by the latter to grant a right of easement necessary for the passage of the cable duct of a photovoltaic
system owned by the Group. The first dispute is pending before the Council of State, on appeal, and
concerns the trial and appeal of the order for demolition and restoration of part of the cable duct realised
in the absence of the security authorisation of easement of the land on which it was placed, issued by the
Municipality of Perugia. The second dispute was initiated by the Parent Company against the Regni heirs
before the Court of Perugia in order to obtain the concession of the power line easement, pursuant to the
commitments made by the Regni themselves, when they awarded TerniEnergia the photovoltaic plant
project and the surface rights relating to the land on which it was to be constructed.
In reference to the former, a suspension was granted of the decision of the TAR authorising the demolition
and restoration and the hearing on the merits is expected. In reference to the latter, a referral for
negotiations was arranged. In fact, with reference to pending lawsuits, the heirs of Regni have made
68
proposals for settlement. The negotiations are still on-going. In the meantime, the judge accepted the
request for technical appraisal in order to ascertain whether the original draft, by Mr Regni, Engineer, was
lacking or incorrect. At the moment, the expert survey ordered by the judge and relative to the status of
the sites and project is underway.
The Parent Company, with the assistance of its legal counsel, has reasonable grounds to believe that a
probable liability is not likely to be borne by the Parent Company, nor, at present, are there elements such
as to forecast a loss in value of the investment in the subsidiary which owns the photovoltaic plant in
question.
With regard to this dispute, there are no significant up-dates to be reported with respect to 31 December
2015.
TerniEnergia tax issues
Notice of assessment referring to "black list costs"
On 20 July 2013, the company was served a tax assessment notice by the auditors of the Tax Audit
Department of the Regional Division of Umbria, which asserted the existence of commercial dealings
undertaken in 2010 between TerniEnergia and companies located in countries with privileged taxation
systems for the purchase of photovoltaic panels. In order for these costs to be deducted, Art. 110, par. 10
of the TUIR requires that one of the following be proven (and the burden of proof falls on the taxpayer): (i)
that the foreign companies mainly carry out an actual commercial activity (ii) or that the transactions that
were carried out correspond to an actual financial interest and were correctly executed.
Subsequently, on 28 March 2014, the Italian Inland Revenue Service served TerniEnergia a notification
requesting that it provide documentation in proof of either of the requirements of Art. 110. The Company
provided the requested documentation. On 13 February 2015, the Inland Revenue Service/Audit
Department of the Regional Division of Umbria compiled cross-examination minutes, formalising the audits
and the documentation submitted by the company, which it deemed inadequate in terms of fulfilling the
requirements. Subsequently, on 10 April 2015, the Company produced additional documentation which it
had in the meantime acquired to apply toward proving the deductibility of the costs in question.
On 3 June 2015, the Inland Revenue Service ruled the copious documentation provided by the Company as
inadequate and served a notice of assessment with which it assessed a higher tax for IRES (Corporate
Income Tax) of Euro 1,886 thousand, for the alleged undue deduction of the costs relative to the suppliers
located in the so-called "black list" countries, as well as a financial penalty of Euro 1,886 thousand plus legal
interest.
The Parent Company immediately considered the elements mentioned by the Inland Revenue Service in its
notice of assessment to be completely unfounded, and given the valid arguments and copious
69
documentation in its possession, will challenge the assessment in court. As such, on 1 September 2015, the
Parent Company submitted an appeal with the Provincial Tax Commission of Perugia, and added a request
for suspension that was received by said Commission on 14 October 2015. The hearing was held on 17
November 2015. On 26 January 2016, the Provincial Tax Commission of Perugia issued its ruling, which
upheld the appeal by TerniEnergia.
In May 2016, the Italian Inland Revenue Service presented an appeal before the Umbria Regional Tax
Commission.
On the basis of the above, TerniEnergia believes that the current risk linked to the aforementioned event
should be considered remote and therefore should not require a provision in the financial statements.
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3.6 COMMENTS ON THE MAIN INCOME STATEMENT ITEMS
3.6.1 REVENUES
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Sei mesi
chiusi al 30 Giugno
2016
Sei mesi chiusi al 30
Giugno 2015 Variazioni Variazioni
% (in Euro)
Revenues Clean Technologies 4.572.924 4.967.532 (394.608) -7,94%
Revenues Technical services 41.178.787 19.350.758 21.828.029 112,80%
Revenues Energy Saving 884.954 1.255.757 (370.803) -29,53%
Revenues Energy Management 3.899.049 125.696.609 (121.797.560) -96,90%
Total 50.535.714 151.270.656 (100.734.942) -66,59%
As at 30 June 2016, the Group recognised consolidated revenues from sales and services for Euro 50,536
thousand, a decrease of Euro 100,735 thousand compared to the first half of 2015 (Euro 151,271 thousand),
due mainly to the exit from the scope of consolidation of the company Free Energia on 30 November 2015.
Revenues from Technical Service activities totalled Euro 41,179 thousand, of which Euro 34,773 thousand
relating to the EPC activities carried out care of the two South African sites of Paleisheuwel and Tom Burke.
On a residual basis, the item includes revenues for EPC activities carried out on smaller plants, revenues
from the running of Photovoltaic Plants deriving from the generation and sale of energy from solar sources
produced by the photovoltaic plants owned by the Group (so-called “Power generation”) and the revenues
from maintenance services carried out by the parent company TerniEnergia, based on multi-year deals on
photovoltaic plants constructed for its own customers. The increase with respect to the first half of the
previous year, when the revenues amounted to Euro 19,350, is attributable to the stage of completion of
the sites.
The revenues also include the recognition of income for Euro 2,021 thousand deriving from the application
of the so-called “Tremonti Ambientale” law for the company Cheremule, owner of a photovoltaic plant. In
this connection, on the basis of the analysis of the complex legislation and practices of the sector currently
available and also supported by the opinions of outside consultants, the Company recognising the
conditions recorded said income, also deeming that legislative restrictions to the accumulation of the
concessions regulated by the Tremonti Ambientale law with the incentive tariffs as per the IV Energy
Account do not exist (also see the matters illustrated in section 3.4.4 – Deferred Tax Asset).
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The effect of the Tremonti Ambientale law was also recognised for the JV Guglionesi, having a positive
effect on the income statement for Euro 285 thousand recognised in the share of the results of the Joint
Ventures.
The “Cleantech” business line reported, as of 30 June 2016, total revenues of Euro 4,573 thousand which
are mainly due to revenues from the biodigestion and composting plant of Nera Montoro (these revenues
are not only composed of the compensation received for the collection of waste - Organic Fraction
Municipal Solid Waste - but also from the sale of energy produced through the recovery of biogas deriving
from the process of anaerobic biodigestion), activities for the treatment of used tyres and the management
of the plant for purification of groundwater in the plant of Nera Montoro. This change with respect to 30
June 2015 is attributable to the combined effect of the presence of revenues deriving from the PFU plant
at Borgo Val di Taro, which entered service at the end of 2015, and the exit from the scope of consolidation
of the company Feed SpA (controlled by Free Energia), which in the first half of 2015 had contributed to the
revenues of the Group by means of its new vegetable oil trading activities.
The revenues of the Energy Saving business amounted to Euro 885 thousand, down with respect to the first
half of 2015, when they came to Euro 1,256 thousand, further to the postponement in the subsequent
quarters of the realisation of numerous energy efficiency projects in relation to which advanced
negotiations are underway at present.
The Energy Management revenues amounted to Euro 3,899 thousand, down considerably with respect to
the first half of 2015 (Euro 125,696 thousand) due to the effect illustrated above of the exit of Free Energia
from the scope of consolidation.
3.6.2 CHANGE IN INVENTORIES OF SEMI-FINISHED AND FINISHED PRODUCTS
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro) Finished products 6,476 (211,255) 217,731 (103.07)%
Total 6,476 (211,255) 217,731 (103.07)%
The reduction in the item is linked to the decrease in Finished Product inventories.
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3.6.3 COST OF RAW MATERIALS, CONSUMABLES AND GOODS
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months
ended 30 June 2016
Six months ended 30 June
2015 Change % Change
(in Euro) Purchase of materials 12,141,432 6,426,762 5,714,670 88.9% Consumables 159,084 (159,084) (100.0)% Fuels and lubricants 109,328 114,041 (4,713) (4.1)% Change in inventories of raw materials, consumables and goods 10,851,251 (731,065) 11,582,315 n.a. Purchase of energy 387,430 51,250,993 (50,863,563) (99.2)%
Total 23,489,441 57,219,816 (33,730,374) (58.9)%
The decrease in costs for raw materials, consumables and goods for resale is attributable to the combined
effect, on the one hand, of the exit from the scope of consolidation of Free Energia, an aspect which has
led to minor purchases of energy and, on the other hand, the change in the inventories of raw materials
linked in particular to the use at the sites of Tome Burke and Paleisheuwel of the panels in stock as of 31
December 2015 and the purchases of materials linked to the stage of completion of work on the two South
African sites.
3.6.4 COSTS FOR SERVICES
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months
ended 30 June 2016
Six months ended 30 June
2015 Change % Change
(in Euro) Consultancy and external collaborators 1,489,986 2,347,306 (857,319) (57.5)% Rental and hire 584,735 221,705 363,030 62.1% Parent company services 840,312 1,121,783 (281,471) (33.5)% Leasing of real estate properties 113,183 69,786 43,397 38.3% Transportation 156,807 151,877 4,930 3.1% Energy/Gas services 62,424,823 (62,424,823) n.a. Maintenance, repairs and assistance 696,315 557,374 138,942 20.0% Security and insurance 764,425 468,820 295,605 63.1% Other costs for services 9,939,659 10,597,527 (657,868) (6.21)%
Total 14,585,423 77,961,000 (63,375,578) (81.3)%
The change in the item with respect to the same period in the previous year is mainly attributable to the
cessation of the costs for services associated with the Energy Management activities, relative to Free
73
Energia, which left the scope of consolidation on 30 November 2015, as highlighted by the writing off of
the item “Energy/Gas services”, which as of 30 June amounted to Euro 62,425 thousand, and the decrease
in the item “Consultancy and external collaborators”.
The “Parent company services" item includes the compensation paid by the Parent Company of the Group
for services provided by the parent company Italeaf S.p.A., which decreased due to the deconsolidation of
Free Energia. For more details also refer to note 3.7.
3.6.5 PERSONNEL COSTS
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro) Wages and salaries 1,409,925 2,033,683 (623,758) (30.7)% Social security contributions 461,877 927,550 (465,673) (50.2)% Remuneration of directors 100,350 308,667 (208,317) (67.5)% Allocation to the provision for employee benefits 88,329 2,306 86,023 n.a. Temporary staff 114,022 230,274 (116,253) (50.5)%
Total 2,174,503 3,502,480 (1,327,977) (37.9)%
The change in personnel costs is attributable to the greater weight during the period of the capitalisations
of design costs relating to significant investments, mainly foreign, with respect to the same period in the
previous year.
3.6.6 OTHER OPERATING COSTS
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro) Taxes other than income 83,270 235,780 (152,510) (64.7)% Other operating costs 706,102 1,404,782 (698,680) (49.7)%
Total 789,372 1,640,562 (851,190) (51.9)%
The reduction in other operating costs is attributable to the minor taxes and dues not relating to income
for the period.
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3.6.7 AMORTISATION, DEPRECIATION, ALLOCATIONS AND WRITE-DOWNS
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro) Amortisation of intangible fixed assets 111,303 325,805 (214,502) (65.8)% Depreciation of tangible fixed assets 2,319,125 2,426,445 (107,319) (4.4)% Allocation to the allowance for bad debts n.a. Write-downs of non-current assets 1,124,100 117,361 1,006,739 n.a.
Total 3,554,529 2,869,611 684,918 23.9%
The change in the item "Depreciation of tangible fixed assets" is attributable to the decrease in the number
of photovoltaic plants in operation and owned by the Group with respect to the first half of 2015.
The item write-downs of non-current assets discloses an increase with respect to the same period last year
further to the write-down recognised in the first half of 2016 on Veneto Banca securities.
3.6.8 FINANCIAL INCOME AND EXPENSES
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro) Interest expense on financial payables (2,625,179) (3,672,503) 1,047,324 (28.5)% Bank commission (793,647) (1,030,921) 237,274 (23.0)% Interest on bonds (928,247) (931,177) 2,930 (0.3)% Total financial charges (4,347,073) (5,634,601) 1,287,528 (22.9)%
Interest income on bank current accounts 87,375 75,154 12,221 16.3% Interest income from joint ventures 181,408 100,862 80,546 79.9% Other financial income 474,319 246,777 227,541 92.2% Total financial income 743,102 422,793 320,309 75.8%
Total (3,603,971) (5,211,808) 1,607,836 (30.8)%
Financial operations, a negative balance of around Euro 1,803 thousand, disclosed an improvement of
around 19% with respect to 31 March 2015 further to the reduction in interest expense linked to the minor
average borrowing and the exit from the scope of consolidation, as from 30 November 2015, of the Free
Energia Group.
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3.6.9 PROFIT SHARE FROM JOINT VENTURES
The item "Profit share from Joint Ventures”, with a positive balance of Euro 620 thousand, includes both
the results for the period - according to IFRS - from equity investments in joint ventures, to the extent
attributable to the Group, as well as the positive effect resulting from the recovery of margins eliminated
as a result of accounting with the equity method. The period result of Guglionesi was affected by the
recognition of income relating to the Tremonti Ambientale law, as previously illustrated in the section
relating to Revenues.
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro)
Energia Alternativa S.r.l. 178,263 (26,765) 205,028 n.a.
Solter S.r.l. 71,942 (70,277) 142,219 n.a.
Saim Energy 2 S.r.l. 57,123 (57,123) (100.0)%
Girasole S.r.l.. 85,072 71,784 13,288 18.5%
Guglionesi S.r.l. 264,545 8,685 255,860 n.a.
Bonnanaro S.r.l. 2,097 2,097 n.a.
Oristano S.r.l. (15,666) (15,666) n.a.
Investimenti Infrastrutture S.r.l. (29,523) (29,523) n.a.
Infocaciucci S.r.l. 69,365 69,365 n.a.
D.T. S.r.l. 8,982 (8,982) (100.0)%
Rebispower (6,436) (6,436) n.a.
Total 619,659 49,532 570,127 n.a.
76
3.6.10 TAXES
The following table presents the details of this item for the first six months ended 30 June 2016 and 2015:
Six months ended 30 June
2016
Six months ended 30 June
2015 Change % Change
(in Euro)
Current taxes 2,575,954 1,611,973 963,980 59.8%
Deferred tax asset (711,496) (385,921) (325,575) 84.4%
Deferred tax liabilities (7,528) (6,735) (793) 11.8%
Total 1,856,929 1,219,317 637,612 52.3%
The item taxation shows an increase of Euro 638 thousand with respect to 30 June 2015, with a tax rate
which increased mainly due to the different incidence of the tax adjustments as well as further to the
adjustment of the estimates of the taxes for the previous year.
With reference to the aspects linked to the application of the Tremonti Ambientale law, please see the
matters indicated in notes 3.6.1 and 3.4.4.
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3.7 RELATIONS WITH RELATED PARTIES
Shown below are the financial statements reporting relations with related parties, in compliance with
CONSOB Resolution no. 15519 dated 27 July 2006.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION PURSUANT TO CONSOB
RESOLUTION No. 15519 of 27 JULY 2006
30 June of which with 31
December of which with (in Euro) 2016 related parties 2015 related parties
ASSETS Intangible fixed assets 5,309,242 4,460,745 Tangible fixed assets 81,280,641 82,616,544 Equity investments 1,188,986 2,157,923 Deferred tax assets 14,062,412 13,133,614 Non-current financial receivables 22,643,440 14,463,826 23,591,350 14,670,638
Total non-current financial assets 124,484,721 14,463,826 125,960,176 14,670,638
Inventories 13,893,554 23,329,978 Trade receivables 31,843,192 2,081,960 52,361,935 1,535,425 Other current assets 20,320,750 2,207,788 24,104,536 6,449 Derivatives Financial receivables 3,300,155 2,167,115 4,192,193 1,959,249 Cash and cash equivalents 22,317,328 11,893,388
Total current financial assets 91,674,979 6,456,863 115,882,030 3,501,123
TOTAL ASSETS 216,159,700 20,920,689 241,842,206 18,171,761
LIABILITIES AND SHAREHOLDERS’ EQUITY Share capital 57,007,230 57,007,230 Reserves (4,158,425) (3,964,935) Result for the period 894,094 1,947,386
Total Group equity 53,742,899 54,989,681
Minority interests 717,047 191,614 Result of the period attributable to minority interests 213,588 610,058
Total equity 54,673,534 55,791,353
Provisions for employee benefits 1,386,500 1,149,966 Deferred taxes 1,208,935 1,294,323 Non-current financial payables 79,532,172 79,272,033 Other non-current liabilities 268,227 247,492 Derivatives 3,547,885 3,251,759
Total non-current liabilities 85,943,719 85,215,573
Trade payables 44,066,235 1,933,834 63,543,245 1,594,390 Payables and other financial liabilities 25,446,988 644,992 24,185,097 Taxes payable 3,270,671 1,330,322 Other current liabilities 2,758,553 217,093 11,776,616 25,842
Total current liabilities 75,542,447 2,795,919 100,835,280 1,620,232
TOTAL LIABILITIES 161,486,166 2,795,919 186,050,853 1,620,232
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 216,159,700 2,795,919 241,842,206 1,620,232
78
CONSOLIDATED INCOME STATEMENT PURSUANT TO CONSOB RESOLUTION No.
15519 of 27 July 2006
Six months ended 30 June 2016
of which with Six months ended 30 June 2015
of which with
(in Euro) related parties related parties
Revenues 47,082,929 747,524 147,929,109 30,322,193
Other operating revenues 3,452,784 3,341,547 1,418,219
Change in inventories of semi-finished and finished products 6,476 (211,255) Cost of raw materials, consumables and goods (23,489,441) (323,669) (57,219,816) (1,536,256)
Costs for services (14,585,423) (872,129) (77,961,000) (1,128,026)
Personnel costs (2,174,503) (272,990) (3,502,480) (268,064)
Other operating costs (789,372) (1,640,562) Amortisation, depreciation, allocations and write-downs (3,554,529) (2,869,611)
Operating result 5,948,923 7,865,932
Financial income 743,102 181,408 422,793 196,199
Financial charges (4,347,073) (532,272) (5,634,601) (491,739)
Profit share from joint ventures 619,659 49,532
Pre-tax result 2,964,611 2,703,657
Taxes (1,856,929) (1,219,317)
Net (profit)/loss of the year 1,107,682 1,484,340
79
CONSOLIDATED CASH FLOW STATEMENT PURSUANT TO CONSOB RESOLUTION No.
15519 of 27 JULY 2006
30 June (in Euro) 2016 2015
Pre-tax profit 2,964,611 2,703,657
Amortisation/Depreciation 2,430,429 2,752,250 Write-downs of fixed assets and receivables 1,124,100 117,361 Allocations to the employee benefits fund 183,185 106,885 Result of joint ventures accounted for at equity and reversal of margin (619,659) (49,532) Effect of derivatives in income statement (273,507) Change in inventories 9,436,424 (37,724,503) Change in trade receivables 20,518,743 3,482,600 Change in other assets 3,515,044 (7,932,200) Change in trade payables (19,477,010) 33,465,371 Change in other liabilities (9,928,094) 13,694,648 Payment of employee benefits (34,043) (88,715)
Net cash flow (used in)/generated by operating activities 9,840,221 10,527,821
of which with related parties (1,572,187) 12,953,027
Investments in tangible fixed assets (983,222) (3,368,643) Investments in intangible fixed assets (959,800) (507,700) Equity investments 464,496 177,604 Change in receivables and other financial assets 1,839,948 3,669,127
Net cash flow used in investing activities 361,422 (29,612)
of which with related parties (1,054) (391,027)
Change in payables and other financial assets 1,261,891 (2,224,218) Change in non-current financial payables (91,821) (2,208,352) Other changes in shareholders’ equity 54,041 (176,084) Payment of dividends (1,001,814) (2,865,821) Net cash flow generated by financing activities 222,297 (7,474,475)
of which with related parties
Comprehensive cash flow for the period 10,423,940 3,023,735 Cash and cash equivalents at the beginning of the period 11,893,389 14,177,490 Cash and cash equivalents at the end of the period 22,317,328 17,201,225
Interest (paid)/collected (3,220,056) (4,476,829)
80
Relations with related parties
Transactions with related parties are attributable to activities that relate to ordinary operations and are
based on normal market conditions, similar to the settlement of interest-bearing loans. As of 30 June 2016,
there were no significant transactions with related parties of a non–recurring nature or which were unusual
and/or atypical.
Transactions between the Parent Company, the joint ventures and other related parties mainly refer to:
• commercial transactions relating to the construction of photovoltaic plants and maintenance services
with joint ventures and companies managed or owned by related parties and companies participating
in joint ventures with TerniEnergia;
• financial relations relative to financing granted to joint ventures (see also 3.3.5 and 3.3.9 Financial
receivables);
• agreements for taking over leasing contracts related to photovoltaic plants in the cases of, and
subordinate to, the default on the part of some companies managed or owned by related parties,
joint ventures and the parent company Italeaf S.p.A. (see also note 3.5.11 Commitments and
guarantees);
• transactions involving the supply of services (technical, organisational, leasing of real estate, legal
and administrative) with the parent Italeaf S.p.A.;
• guarantees issued by the parent company Italeaf S.p.A. in favour of credit institutions which financed
TerniEnergia.
The following table details the economic and financial effects of transactions of commercial and
financial nature with related parties as of 30 June 2016.
81
Operations of commercial and miscellaneous nature
(in Euro) As of 30 June 2016 Financial statements as of 30 June 2016 Receivables Payables Other receivables Other receivables Costs Revenues
Name Goods Services Personnel Goods Services
Parent company Italeaf S.p.A. 1,018,050 1,427,190 19,815 96,000 323,669 832,129 28,827
Joint ventures
Girasole S.r.l. 82,108 55,019 46,587 46,440
Guglionesi S.r.l. 18,300 10,000
Energia Alternativa S.r.l. 342,516 496,744
Solter S.r.l. 178,689 97,985 63,026
Soc. Agric. Fotosolara Bonnanaro S.r.l. 43,139 6,872 14,000
Soc. Agric. Fotosolara Oristano S.r.l. 26,059 146 14,000
Investimenti Infrastrutture S.r.l. 26,114 280,825 6,303 12,100
Infocaciucci S.r.l. 45,120 8,400
Rebis Power S.rl. 4,245
Associates
T.E.R.N.I. Research S.p.A. 29,122 33,333 2,134,938 31,443 1,750
Italeaf UK L.t.d. 70,000
Skyrobotic S.r.l. 18,681 32,611
Other related parties
Sol Tarenti S.r.l. 46,901 40,150
Francesca Ricci
Lizzanello S.r.l. 53,640 9,553
Royal Club S.r.l.
Byom S.r.l. 40,000
Saim Energy 2 79,277 2,535
Senior management 89,650 272,990
Total 2,081,960 1,933,834 2,207,788 217,093 323,669 872,129 272,990 747,524
Book value 31,843,192 44,066,235 20,320,750 2,758,553 23,489,441 14,585,423 2,174,503 50,535,713
% Incidence 6.50% 4.40% 10.90% 7.90% 1.40% 6.00% 12.60% 1.50%
82
Operations of financial nature
(in Euro) As of 30 June 2016 Financial statements as of 30 June
2016
Name Receivables Payables Guarantees received
Takeover commitments
Charges Income
Parent company Italeaf S.p.A. 644,992 56,545,345 1,871,654 532,272
Joint ventures
Girasole S.r.l. 1,173,210 1,183,864
Guglionesi S.r.l. 374,216 11,417
Energia Alternativa S.r.l. 8,579,085 15,315,447 126,366
Solter S.r.l. 1,843,144 14,917
Soc. Agric. Fotosolara Bonnanaro S.r.l. 978,571 9,655
Soc. Agric. Fotosolara Oristano S.r.l. 1,202,199 11,278
Investimenti Infrastrutture S.r.l. 983,070 7,775
Infocaciucci S.r.l. 192,439 2,300,335
Rebis Power S.r.l. 5,724
Associates
T.E.R.N.I. Research S.p.A. 2,317,429
Other related parties
Sol Tarenti S.r.l. 1,297,513 7,880,805
Camene S.r.l. 2,708,894
Royal Club Snc 2,583,594
Lizzanello S.r.l. 1,770
Saim Energy 2 S.r.l. 2,253,646
Total 16,630,941 644,992 56,545,345 38,415,668 532,272 181,408
Book value 25,943,595 104,979,160 4,347,073 743,102
% Incidence 64.10% 0.60% 12.20% 24.40%
Below are brief comments on the transactions entered into between the Group and related parties:
Commercial transactions
Commercial transactions mainly related to:
• O&M contracts between the Joint Venture companies for photovoltaic plants and restoration
activities of the plants due to thefts;
• framework agreement between the Parent Company and Italeaf S.p.A. on the provision of
administrative and logistical services, including the leasing of the properties located in Narni, Strada
83
dello Stabilimento 1, in Milan, Via Borgogna and Lecce, the management of legal and corporate
affairs, and the management of human resources and IT systems;
• remuneration received by executive members of the Board of Directors and the executive with
strategic responsibility for services provided to the Group.
Operations of financial nature
Current and non-current financial receivables as well as financial income for the period ended 30 June 2016
relate to interest-bearing loans with joint ventures.
It should be noted that the effective parent company Italeaf S.p.A. has provided major banks, as of 30 June
2016, with guarantees on bank loans to TerniEnergia totalling Euro 56.5 million and for which it requested
– from the subsidiary - commission on sureties of Euro 532 thousand, included under financial charges.
For some customers who have financed the purchase of the PV plant through finance lease agreements
with leasing companies, the parent company signed an agreement with the latter taking over the lease in
the event of, and subject to, the failure by its customers. As of 30 June 2016, the remaining payables for
the leases for which these commitments were assumed amounted to Euro 55.7 million, of which Euro 38.4
million relative to related parties and Euro 17.3 million pertaining to other third-party customers.
3.8 ATYPICAL AND/OR UNUSUAL TRANSACTIONS
Pursuant to CONSOB communication notice DEM/6064293 of 28 July 2006 "Disclosure of listed issuers and
corporate issuers with financial instruments widely distributed among the public, in accordance with Art.
116 of the Consolidated Financial Act - Requests under Art. 114, paragraph 5, of Legislative Decree no.
58/98" it should be noted that:
• There were no transactions or events whose occurrence is not recurring or transactions or events
that do not occur frequently in the ordinary course of business;
• No atypical and/or unusual transactions were made.
3.9 OTHER INFORMATION
Earnings per share
The calculation of basic earnings per share due to ordinary shareholders by the company is based on the
average number of shares during the reporting period.
84
(in Euro) 30/06/2016 30/06/2015
Net profit for the period - Group 894,094 1,359,326
Average number of shares in the period 40,085,152 43,980,089
Earnings per share - base and diluted 0.021 0.031
There were no differences between base and diluted earnings per share as there are no classes of shares
with diluting effect.
Information regarding the opt-out regime
Pursuant to article 70, par. 8 of the Issuers' Regulation, we hereby inform you that in its meeting held on
19 December 2012, the Board of Directors resolved to participate in the "opt-out" regime as per articles 70,
par. 8 and 71, par. 1-bis of the Issuers' Regulation, thereby choosing to take the option of opting out of the
publication obligations for information documents required for significant operations involving mergers,
de-mergers, share capital increase via contributions in kind, acquisitions and disposals.
Subsequent events
Agreement for the without recourse factoring of receivables for around Euro 1.2 million
On 8 July 2016, TerniEnergia and a securitisation company which is a subsidiary of Susi Partners AG,
manager of the SUSI Energy Efficiency Fund, entered into an agreement for the without recourse factoring
of receivables for around Euro 1.2 million, paid in cash, referring to lighting energy efficiency activities
carried out by TerniEnergia.
The transaction envisages the factoring, with the without recourse formula, of a portfolio of receivables of
TerniEnergia deriving from contracts entered into with private parties. These receivables will be transferred
to an Italian vehicle company referring to Susi Partners AG within the sphere of the receivables
securitisation transaction pursuant to Italian Law No. 130/99. The transaction will permit TerniEnergia to
support the growth of the Energy Saving activities, by means of the proposal to private companies and
public bodies of services with high added value for the planning, accomplishment and management of
measures for the reduction of energy consumption, in the lighting sectors.
85
The agreement for the factoring of the receivables portfolio is conditional upon the occurrence, by 3
September 2016, of certain conditions precedent including the finalisation and signing of all the documents
relating to the transaction by the banks previously financers of the ESCo projects.
Roadshow for the presentation of HUB energy efficiency to the industrial community
A three-day roadshow for the presentation of HUB to the industrial community of the energy efficiency
sector in central-northern Italy concluded on 8 July. After the Milan presentation, in February, the Company
organised a cycle of events dedicated to the ideal partners of this platform (ESCo, engineering firms,
installers, technology producers), which involved the cities of Rome, Turin and Padua with three events
dedicated to the creation of a network conceived to resolve the difficulties of accessing finance for the
Energy Saving measures.
The key individuals of these workshops, who saw the participation of dozens of operators, were the most
operative and dynamic players of the Italian industrial-scale energy efficiency scenario, to whom the key
message of TerniEnergia was transmitted: ESCo, engineering firms, installers and technology producers are
not competitors, but precious allies to involve in the launch of an innovative instrument capable of opening
up the Italian market.
Outline agreement with Roma Gas & Power for collaboration on energy efficiency projects
TerniEnergia and Roma Gas & Power (RGP), one of the leading private Italian players in the Energy
Management sector, vertically integrated in the gas and electricity sector, present on all the most
important European Hubs, entered into a broad two-year outline agreement on 21 July 2016 in order to
collaborate on energy efficiency projects in the corporate and industrial sphere and for the public
administration authorities in Italy.
In detail, TerniEnergia operates as an ESCo (Energy Service Company) directly and via the “Hub” platform,
a new strategic alliance formula between all the players of the energy efficiency chain so as to open up the
sector to the capital market. Roma Gas & Power, by contrast, has created a specific vehicle for the energy
efficiency sector, Enershare (Advisory hub), and launched a series of scouting initiatives in the internet of
things (IoT) sector so as to seize the value of the new technologies placed at the service of energy.
The transaction forming the subject matter of the agreement envisages the possibility of proposing an
integrated and global range of energy efficiency performance (energy products and services), supply of
innovative financial instruments and technologies to potential customers (public administration
authorities, SMEs and large industries). The sphere of application of the mutual offers will therefore range
from production and generation of energy vectors for the production processes (electricity, heat, cooling,
etc.) to the modernisation, running and maintenance of energy systems for the public and working
86
environments (lighting, air conditioning, etc.). The co-operation is envisaged throughout the chain for the
preparation and realisation of the projects: from the initial negotiations with the potential customers
(also by means of cross-selling strategies with loyal RGP customers) to the energy audits, the proposal of
technical and commercial offers, up to the EPC (engineering, procurement and construction)
accomplishment of the measures.
The implementation of the projects on the industrial sites and in public infrastructures will make it
possible to integrate the related expertise. RGP will mainly be involved in the following phases:
- Development, seeing to the development of the market and the proposal and undertaking a role of co-
ordination of the project-related ventures for the purpose of integrating the adoption of technologies and
finance, by means of an advisory hub model;
- Supply and management of the energy, ensuring the coverage of the energy markets, the optimum
management of the supplies and the ability to handle the cash flows associated with the same;
- Support for and co-ordination of the dealings with the specialised financial operators and institutional
investors, with specific reference to efficiency projects addressing the market segment of the public
administration authorities.
TerniEnergia will mainly be involved in the following phases:
- Supply and selection of the technologies, ensuring a coverage of the markets of the technologies for
energy efficiency, both providing own products and ensuring important support in the procurement stage
for the purpose of optimising the project costs;
- Management and running of the project, seeing to the integration with local suppliers who will be
involved with a view to a “short chain” logic on the basis of their experience and methods developed over
the years by means of the achievement of works and plants in the engineering sector;
- Support for and co-ordination of the dealings with the specialised financial operators and institutional
investors, with specific reference to efficiency projects addressing the “HUB” project.
By means of the outline agreement entered into, the two companies intend to present themselves to the
market in a joint manner, by means of an executive form of co-operation capable of generating economies
of scale by means of sharing the specific expertise. The agreement will make it possible to overcome some
of the criticalities which have curbed the validation of the Energy Saving market. Specifically, the alliance
will make it possible to develop projects which can be standardised and repeated, ensuring a scalability of
the business; to adopt a model for integration and involvement of operators present and accredited in the
areas of intervention so as to implement a model for the execution of the works by means of the
development of the local skills; to become reference stakeholders for the institutional investors by means
of the activation of specific financial instruments; to identify forms of corporate collaboration, such as the
formation of permanent consortiums or dedicated companies, for the purposes of rendering the
Agreement operative.
87
Softeco-Sismat Srl and Selesoft Consulting Srl
On 29 July 2016, TerniEnergia’s Board of Directors approved two Memorandums of Understanding, one
with Ingefi S.p.A. (a company involved in the holding of equity investments in companies active in the
software design, development, marketing and maintenance sector) and its shareholders and the other with
B.Soft Group S.r.l. (a holding company operative in the ICT and Engineering sectors), both aimed at the
acquisition in two stages of 100% of the share capital of Softeco-Sismat Srl and Selesoft Consulting Srl
(Target companies).
Softeco Sismat and Selesoft Consulting, with offices in Genoa, Milan, Rome and Catania and more than 300
employees, with high skill and high level technical professional profiles, are leading companies at Italian
level in the industrial production and development of smart technologies and solutions for the transmission
and distribution of energy (smart grids), the flexible and prompt management of the energy production and
consumption, energy efficiency, the management of the renewable energies and the Cleantech (energy
stations) and in services, software and IT solutions. The two companies generated aggregate revenues in
2015 for around Euro 26.4 million, overall EBITDA of around Euro 2.2 million and a NFP of roughly Euro 6.2
million.
By means of the transaction, TerniEnergia may propose itself as an ideal industrial partner on the
international markets for large groups, with which operative partnerships or alliances are already underway
or being finalised, active in the automation of the transmission and distribution networks in the energy,
transport and telecommunications sectors. The agreement will create a player of international standing, in
more promising sectors of the energy chain, capable of combining the track record and industrial know-
how of TerniEnergia as system integrator and the excellence in the information and communication
technology sector of Softeco Sismat and Selesoft.
By means of the acquisition of the two Target Companies, TerniEnergia intends to complete the full
transformation into a smart energy company, entering the market of the digital energy sector, integrating
the industrial and “physical” businesses with the digital and “virtual” ones and completing its competitive
positioning throughout the entire value chain of the energy sector.
In detail, as a result of the Memorandums of Understanding entered into and mentioned above as well as
further to the finalisation of various equity investment transfer transactions between B.Soft Group S.r.l.,
Ingefi S.p.A. and AVM Asset Management Value S.p.A. (majority shareholder of B.Soft Group S.r.l.),
TerniEnergia will acquire an equity investment of around 66% in the Target Companies from Ingefi S.p.A.
and the remaining 34% roughly from B.Soft Group S.r.l., according to the terms, formalities and conditions
briefly summarised below.
88
The entering into of the investment agreements (closing) and the transfer of the ownership of the holdings,
envisaged by the deadline of 31 October 2016, is subordinate to the positive outcome of the legal,
accounting and tax-related due diligence as well as the occurrence of a series of conditions precedent,
including the attainment of consent, under the form of waiver, to the disposal of investment holdings in
the share capital of Softeco Sismat by the Bank which, in accordance with a loan agreement, holds the
entire holding representative of the share capital of said company under pledge.
TerniEnergia will acquire the Target Companies in two separate stages:
- 66% of the share capital of the Target Companies will be acquired from Ingefi S.p.A., for a
consideration equal to (i) two million TerniEnergia own shares (at the fixed and invariable value of
Euro 1.2 each) to be listed in the STAR segment of Borsa Italiana by 28 February 2017; and (ii) Euro
1 million to be paid over in cash by 30 November 2017, without the recognition of interest;
- the remaining 34% of the share capital of the Target Companies will be acquired from B.Soft Group,
for a consideration equal to (i) one million own shares to be listed in the STAR segment of Borsa
Italiana by 28 February 2017; and (ii) Euro 1.3 million to be paid over in cash by 31 March 2018,
without the recognition of interest.
The BoD therefore established to grant the Chairman and CEO, Stefano Neri, the mandate to call the
TerniEnergia S.p.A. shareholders’ meeting to resolve on the use of the own shares for the purpose of
acquiring Softeco Sismat and Selesoft Consulting.
TerniEnergia’s BoD resolved the inclusion of the company in the Proteco Consortium, made up of the
companies Softeco Sismat, Selesoft Consulting, Proxy and Technovo, so as to further the proposal to the
market of solutions in the energy and electricity networks, smart city and smart grid, transport and mobility,
telecommunications, internetworking and optical transport, big data and cloud applications sectors.
Participation in the Proteco Consortium will permit TerniEnergia to develop its industrial know-how and its
expertise and to integrate the activities in renewables, in energy efficiency and in Energy Management with
innovative systems and solutions with high added value, thanks to the collaboration with leaders in the
respective sectors complementary to those of the Group.
Memorandum of Understanding preliminary to the signing of a new EPC agreement with a leading
international investor
In conclusion, the BoD has approved the Memorandum of Understanding preliminary to the signing of a
subsequent EPC (Engineering, procurement and construction) agreement for the supply of panels and
inverters for the construction of a giant photovoltaic plant in South Africa with a total output of around 86
MW, on behalf of a leading international investor.
89
4 CERTIFICATION OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE
TERNIENERGIA GROUP AS AT 30 JUNE 2016 PURSUANT TO ARTICLE 154 BIS OF LEGISLATIVE
DECREE 58/98 AND ART. 81 TER OF CONSOB REGULATION NO. 11971/99, AND SUBSEQUENT
AMENDMENTS AND SUPPLEMENTS
1. The undersigned, Mr. Stefano Neri, acting in the capacity of Chairman and Chief Executive Officer, and
Mr Paolo Allegretti, acting in the capacity of Manager responsible for preparing corporate accounting
documents of TerniEnergia S.p.A., hereby certify, also by taking into account the provisions under Article
154 bis, paragraphs 3 and 4, of Legislative Decree No. 58 of 24 February 1998:
• the adequacy with reference to the characteristics of the enterprise;
• the effective application of the administrative and accounting procedures for the preparation of the
consolidated interim financial statements of the TerniEnergia Group as of 30 June 2016.
2. To this end, no further significant aspects emerged.
3. It is further certified that the consolidated interim financial statements as at 30 June 2016 of the
TerniEnergia Group:
(a) are consistent with the results reported in the books and in the accounting records;
(b) are prepared in accordance with International Financial Reporting Standards as endorsed by the
European Union pursuant to Regulation (EC) no. 1606/2002 and, to the best of our knowledge, provides a
true and fair view of the financial and economic position of the issue and of the overall companies included
within the scope of consolidation.
4. Finally, we certify that the consolidated interim financial statements as of 30 June 2016 of the
TerniEnergia Group include a reliable analysis of references to important events which occurred in the first
six months of 2016 and their effect on the consolidated financial statements in addition to a description of
the primary risks and uncertainties. The TerniEnergia Group consolidated interim financial statements as of
30 June 2016 also include a reliable analysis of significant information regarding relations with related
parties.
5. This certification is issued pursuant to and for the purposes of Art. 154 bis, paragraphs 2 and 5, of
Legislative Decree No. 58 of 1998.
Narni, Italy, 29 July 2016
The Chief Executive Officer The Manager responsible for preparing
corporate accounting documents