independent auditors’ report in accordance with … · depreciation 1.484 1.283 amortization 235...

INDEPENDENT AUDITORS’ REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF 27 JANUARY 2010 To the sole shareholder of Building Energy SpA Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of the Building Energy Group, which comprise the statement of financial position as of 31 December 2016, the statement of comprehensive income, statement of changes in shareholders’ equity and statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the consolidated financial statements The directors of Building Energy SpA are responsible for the preparation of consolidated financial statements that give a true and fair view in compliance with International Financial Reporting Standards as adopted by the European Union. Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA Italia) drawn up pursuant to article 11 of Legislative Decree No. 39 of 27 January 2010. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The audit procedures selected depend on the auditor’s professional judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Building Energy Group as of 31 December 2016 and of the result of its operations and cash flows for the year then ended in compliance with International Financial Reporting Standards as adopted by the European Union. Report on compliance with other laws and regulations Opinion on the consistency of the report on operations with the consolidated financial statements We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to express an opinion, as required by law, on the consistency of the report on operations, , which is the responsibility of the directors of Building Energy SpA, with the consolidated financial statements of the Building Energy Group as of 31 December 2016. In our opinion, the report on operations is consistent with the consolidated financial statements of the Building Energy Group as of 31 December 2016. Milan, 28 June 2017 PricewaterhouseCoopers SpA Signed by Giulio Grandi (Partner) This report has been translated into English from the Italian original solely for the convenience of international readers

Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016

BUILDING ENERGY GROUP

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31st, 2016

Registered Office VIA TORTONA 15, 20100 MILAN (MI). Share capital € 12,000,000.00 fully paid-in

Companies Registration Office No.: 09230261001 Economic and Administrative Register No. 1937961

www.buildingenergy.it


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Consolidated Balance Sheet ............................................................................................................................... 4

Consolidated Comprehensive Income Statement ............................................................................................... 5

Consolidated Cash Flow Statement .................................................................................................................... 6

Statement of changes in Consolidated Shareholders’ Equity .............................................................................. 7

Explanatory Notes .............................................................................................................................................. 8

General information................................................................................................................................... 8

Summary of accounting principles ............................................................................................................. 8

Accounting standards approved by the European Union, but not yet applied and adopted in advance by

the Group ................................................................................................................................................. 22

Accounting standards not yet approved by the European Union ............................................................ 24

Accounting standards approved by the European Union although applicable in subsequent years. ...... 25

Risks and uncertainties .................................................................................................................................... 27

Financial risk management ...................................................................................................................... 27

Classification of financial assets and liabilities ......................................................................................... 30

Notes to the Consolidated Balance Sheet ......................................................................................................... 31

Assets ........................................................................................................................................................... 31

1. Property, plant and equipment ........................................................................................................ 31

2. Intangible assets .............................................................................................................................. 33

3. Goodwill ........................................................................................................................................... 34

4. Investments measured under the equity method ........................................................................... 34

5. Deferred tax assets .......................................................................................................................... 39

6. Other non-current assets ................................................................................................................. 40

7. Inventories ....................................................................................................................................... 40

8. Trade receivables ............................................................................................................................. 41

9. Other current receivables ................................................................................................................ 41

10. Cash and cash equivalents ........................................................................................................... 42

11. Non-current assets for sale .......................................................................................................... 42

12. Shareholders` Equity .................................................................................................................... 43

Liabilities ...................................................................................................................................................... 44

13. Bank and other lenders ................................................................................................................ 44

14. Other payables and non-current liabilities ................................................................................... 47

15. Trade payables, taxes and other non-current liabilities ............................................................... 48

Income Statement ....................................................................................................................................... 49

16. Revenues ...................................................................................................................................... 49


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17. Operating costs ............................................................................................................................ 50

18. Net financial income/(charges) .................................................................................................... 52

19. Income taxes ................................................................................................................................ 53

20. Other comprehensive income items ............................................................................................ 54

Other information ............................................................................................................................................ 55


4

Consolidated Balance Sheet

(Euro/thousand) notes 31st Dec 2016 31st Dec 2015

Property, plants and equipment 1 98.099 36.420

Intangible as s ets 2 26.827 21.759

Goodwi l l 3 400 400

Inves tments valued by the equity method 4 13.239 14.112

Inves tments in subs idiaries (0) 1

Deferred taxes 5 2.129 1.951

Other non-current ass ets 6 7.648 9.020

Total non-current assets 148.342 83.663

Wip

Inventories 7 35 80

Trade and other receivables 8 2.639 5.553

Current financi a l ass ets 9 310 51

Derivatives - -

Other current as s ets 9 1.505 2.050

Accrua ls and prepayments 9 2.645 579

Tax receivabl es 9 2.728 2.189

Cas h and cas h equivalents 10 3.783 9.894

Total current assets 13.646 20.396

Non current as set avai lable for s a le 11 1.493 1.493

Non current asset available for sale 1.493 1.493

TOTAL ASSETS 163.481 105.553

Share capita l 12 12.000 12.000

Share premium reserves 12 17.020 17.020

Res erves and retai ned earnings 12 (3.934) 8.457

Profi t/(los s ) of the period 12 (6.589) (9.748)

TOTAL GROUP SHAREHOLDERS’S EQUITY 18.498 27.728

Equity of non-control l ing interes t 12 7.086 2.018

Profi t/(los s ) of non-control l ing interes t 12 383 237

TOTAL EQUITY 25.966 29.983

Debt towards banks and other lenders > 1y 13 57.331 49.627

Deferred tax 14 1.617 197

Sta ff related funds 14 612 601

Provi s ions for ri s ks 14 386 190

Other non current l iabi l i ties 1 -

Total non-current liabilities 59.947 50.615

Debi ts towards banks and other lenders < 1y 13 38.655 5.979

Trade and other payables 15 27.544 12.626

Tax l iabi l i ties 15 3.316 1.824

Accrua ls and deferrals 15 391 299

Advances 15 3.269 11

Other current l iabi l i ties 15 4.393 4.215

Total current liabilities 77.567 24.954

TOTAL LIABILITIES 137.515 75.569

TOTAL LIBILITIES AND EQUITY 163.481 105.553


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Consolidated Comprehensive Income Statement

(Euro/thousand) notes 31st Dec 2016 31st Dec 2015

Revenues 16 5.473 8.374

Cha nges in work in progress 16 - 0

Other opera ting income 16 1.756 1.344

Increase in a ssets for internal work 16 10.596 8.635

Ra w materia l s , semi -finished and finished products 17 (123) (86)

Costs of services 17 (12.282) (10.714)

Personnel 17 (7.188) (7.330)

Other opera ting costs 17 (637) (1.046)

Deprciation, amorti sation and provi s ions 17 (2.731) (5.730)

Operating result (5.135) (6.554)

Capita l ga ins/losses 18 (127) 0

Financia l income a nd charges 18 1.359 (3.554)

Sha re of resul t from pa rtecipa ting interests valued by the equity method 18 (788) 749

Result before tax (4.691) (9.358)

Tax 19 (1.514) (153)

Result of the year (6.206) (9.511)

Result attributable to the Group (6.589) (9.748)

Result attributable to Thi rd Parts 383 237

Other components of comprehens ive income s ta tement

Conversion reserve 20 (872) 569

Sha re of other comprehens ive income components of investments accounted by the equi ty method - 93

Total of other comprehensive income (872) 662

Net result of the year (7.078) (8.849)

Net result of the year a ttributa ble to the Group (7.461) (9.086)

Net result of the year a ttributa ble to minorities 383 237


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Consolidated Cash Flow Statement

(Euro/thousand) 31st Dec 2016 31st Dec 2015

Profit (loss) before income taxes, interest, dividends and gains/loss on disposal) (1.528) (8.112)

Profit (loss ) (6.206) (9.511)

Current income taxes 209 581

Deferred taxes 1.305 (428)

Interest (income)/charges 3.163 1.258

(Dividend) -

(Capi ta l Ga in)/capita l los s from as set di spos a l (12)

Cash flow before changes in net working capital 7.674 7.721

Provis ion 78 45

Staff related provis ion 247 432

Impairment 1.108

Depreciation 1.484 1.283

Amorti zation 235 4.403

Other adjustments for non-cas h i tems - (749)

Convers ion adjus tment 4.522 2.308

Cash flow after changes in net working capital 17.368 980

Decrease/(increas e) in inventories 45 16

Decrease/(increas e) in receivables 2.914 (6.870)

Increas e/(decrease) in trade payables 10.396 5.981

Decrease/(increas e) in prepayments (2.067) 457

Increas e/(decrease) in prepayments 92 1.615

Other changes in net working capita l 5.987 (219)

Cash flow after other adjustments (1.286) 2.962

Other adjustments 2.189 2.367

Cas hed interest income/(charges) (3.407) (267)

Cas hed dividend 862

Ris k provis ion di spos a l (69)

A) Cash flows from operating profit (indirect method) 22.227 3.552

cash flows from investing activities

Fixed assets (63.163) (18.126)

(Inves tment) (63.163) (18.126)

Dispos a l

Intangible asset (6.412) (12.056)

(Inves tment) (6.412) (12.056)

Dispos a l

Financial asset 874 (1.760)

(Inves tment) 874 (267)

(Inves tment in as set for s a le) (1.493)

Dispos a l -

Current Financial asset (259) (129)

(Inves tment) (259) (129)

Dispos a l

Acquisition or disposal of subsidiaries or other business units net of cash and cash equivalents -

B) Cash flows from investing activities (68.960) (32.071)

C. Cash flows from financing activities

third part sources 40.623 34.859

Increas e current l iabi l i ties to banks 7.948 1.499

New funds 34.706 33.842

Refunds (2.031) (482)

Group sources - -

Capi tal increase -

Dispos a l (purchase) of Treas ury s hares -

Dividends (and advance payments on dividends) pa id -

C) Cash flows from financing activities 40.623 34.859

0

Increase (decrease) in cash (6.110) 6.339

0

Cas h ava i lable at beginning of the year 9.894 3.555

Cas h ava i lable at the end of the year 3.783 9.894


7

Statement of changes in Consolidated Shareholders’ Equity

(Euro Thousand)Equity

Share premium

reserve

Translation

reserv eHedging reserv e Retained earnings O ther reserv es Result of the year Third part Equity

Dec ember, 31st 2014 12.000 17 .020 3 40 7 .888 922 (2 .344) 35.528 1.175 36.704

Share capital increase - - - -

Tota l transaction with shareho lders - - - - - - - - - -

Result of the year (9.748) (9.748) 237 (9.512)

Allocation of previous year result (2.344) 2.344 - -

Translation reserve 582 582 145 727

Result of investment evaluated for using the equity method -

Tota l resu lt o f the year - - 581,57 - (2 .344 ,05) - (7 .404) (9 .167) 382 (8 .785)

Change in consolidation scope 10 10 508 518

Other variatuion of Reisa' reserves 308 308 308

Altre variazioni riserve 241 808 1.049 190 1.240

Total o ther changes - - 308 251 808 - 1 .367 698 2 .065

Dec ember, 31st 2015 12.000 17 .020 584 348 5 .795 1.730 (9 .748) 27.728 2.255 29.983

Share capital increase - - - -

Total o f dea l with shareho lders - - - - - - - - - -

Result of the year (6.589) (6.589) 383 (6.206)

Allocation of previous year result (9.748) 9.748 - -

Translation reserve (872) (872) 21 (852)

Result of investment evaluated for using the equity method -

Tota l resu lt o f the year - - (872 ,29) - (9 .748 ,47) - 3 .160 (7 .461) 404 (7 .057)

Change in third part equity for sale of shares 4.823 4.823

Cahnge in consolidation area (1.834) (1.834) (1.834)

Other changes (0) (479) 543 66 13- 52

Total o ther changes - - - (0 ) (479) (1 .290) - (1 .768) 4 .810 3 .042

Dec ember, 31st 2016 12.000 17 .020 (288) 347 (4 .433) 439 (6 .589) 18.499 7.469 25.966

Group

Shareholders'

Equity

Total Equity


8

Explanatory Notes

General information

Building Energy S.p.A. (hereafter “BE” or “Be S.p.A.) and

its subsidiaries (the Group) are engaged in Italy and

Overseas in the development, construction,

management and maintenance of renewable power

generation plant, drawing on specialised know-how

throughout all phases of renewable energy creation:

from initial development to engineering and project

design and from financial structuring to construction

and management, principally on its own behalf. The

Group has operated in Italy since the end of 2010 (and

since 2011 on the international market) through an

investment and partnership programme with leading

institutional investors involved in the construction of

renewable energy power plant; in the last three-year

period, the group stepped up its investment on

international markets with the setting up of new

subsidiaries (sub-holdings and special purpose vehicles

– “SPV’s”) on almost all continents. The Group’s

financial position and overall operating performance,

significant events after year-end, transactions with

related parties, Group activities, in addition to the

outlook, are illustrated in the Directors’ Report.

The Directors’ Report outlines the actions taken by

management to overcome the liquidity problems

existing at 31/12/2016. These particularly include the

drafting of strategic agreements to guarantee the

funding necessary for the development of operations in

North America and in South Africa and the proposed

issue of a convertible bond loan of Euro 100 million,

currently in an advanced state of preparation.

BE is a company subject to the laws of the Italian

Republic. The share capital, subscribed and paid-in,

amounts to Euro 12,000,000 and comprises 12,000,000

ordinary shares with a nominal value of Euro 1.00 each.

The sole shareholder is Building Energy Holding S.p.A.,

which holds 100% of the shares subscribed. The

registered office of the company is in Milan, via Tortona

No. 15.

Summary of accounting principles

The main accounting principles adopted in the

preparation of the Group consolidated financial

statements are reported below. These principles were

applied consistently for all the periods presented in this

document.

Basis of preparation

European Regulation (EU) No. 1606/2002 of July 19,

2002 introduced the obligation, from the year 2005, to

apply International Financial Reporting Standards

(“IFRS”) issued by the International Accounting

Standards Board (“IASB”) and adopted by the European

Union (“EU IFRS” or “International Accounting

Standards”) for the preparation of the consolidated

financial statements of companies listed on regulated

European markets. Following the above-mentioned

European Regulation, Legislative Decree No. 38 was

enacted on February 28, 2005 which governs the option

to apply IFRS for the preparation of the consolidated

financial statements of non-listed companies. BE

decided to apply this option for the preparation of the


9

consolidated financial statements commencing for the

year ended December 31, 2013. The present

consolidated financial statements were prepared in

accordance with EU IFRS in force at their approval date.

The term EU IFRS includes all of the International

Financial Reporting Standards, all of the International

Accounting Standards and all of the interpretations of

the International Financial Reporting Interpretations

Committee (“IFRIC”), previously called the Standing

Interpretations Committee (“SIC”), approved and

adopted by the European Union. The EU IFRS were

applied consistently for all the periods presented in this

document. The consolidated financial statements were

prepared on the basis of the best information on the EU

IFRS and taking into account best practice; any further

orientations and interpretative updates will be reflected

in subsequent years, in accordance with the provisions

of the accounting standards. The consolidated financial

statements were prepared in accordance with the

historical cost convention, except for the measurement

of financial assets and liabilities where the obligatory

application of the fair value criterion is required

(payment for which an asset may be exchanged or a

liability settled, among knowledgeable and available

parties, in a transaction between third parties)

according to the going concern principle. These

consolidated financial statements were approved by the

Board of Directors of the company on June 20, 2017.

Form and content of the financial statements

In relation to the presentation of the consolidated

financial statements, the Group has chosen the

following options:

- the current and non-current assets and current

and non-current liabilities are presented as

separate classifications in the Balance Sheet;

- the Consolidated Statement of Comprehensive

Income classifies costs and revenues by nature;

- the Consolidated Cash Flow Statement is

presented based on the indirect method.

The Group chose to prepare the statement of

comprehensive income which includes, in addition to

the result for the period, also the changes to equity

relating to income items which, in accordance with

International Accounting Standards, are recognised

under equity items. The financial statements utilised, as

outlined above, are those which best represent the

result, equity and financial position of the Group. The

present financial statements are prepared in Euro (the

operational currency of the Group). All the amounts

reported in the financial statements and in the tables

within the explanatory notes are expressed in thousands

of Euro, unless otherwise indicated. These financial

statements were audited by PricewaterhouseCoopers

S.p.A., auditor of the Company and of the Group.


10

Consolidation scope and changes in the year

The present consolidated financial statements include

the financial statements for the year ended December

31, 2016 of the Parent Company Building Energy S.p.A.,

prepared by the Board of Directors, and the financial

statements of the subsidiaries prepared by the

respective Board of Directors or where available, the

financial statements approved by the respective

Shareholders’ Meetings. These financial statements

were adjusted, where necessary, in accordance with EU

IFRS. The companies included in the consolidation scope

at December 31, 2016, including details of the share

capital, holding and consolidation method utilised for

the preparation of the Group consolidated financial

statements, are reported in Attachment 1 to the present

document. At the end of the above-mentioned

attachment we report the investments not consolidated

as their inclusion would be insignificant in relation to the

result, equity and financial position of the Group, as the

majority of these companies are non-operative.

Basis of Consolidation

The main criteria adopted by the Group for the definition of the consolidation scope and the relative consolidation

principles are illustrated below.

Subsidiaries

Subsidiaries are those companies in which the Group

has the power to determine, directly or indirectly, the

financial and operating policies and to obtain the

relative benefits. Control is exercised either through

directly or indirectly holding a majority of voting rights

or based on contractual or legal agreements, without

reference to the holding in the company. The existence

of potential exercisable voting rights at the reporting

date is considered in order to determine control.

Control is generally presumed when the Group holds,

directly or indirectly, more than half of the voting rights.

Subsidiaries are consolidated under the line-by-line

method from the date control is effectively transferred

to the Group, and cease to be consolidated from the

date on which control is transferred outside the Group.

The criteria adopted for line-by-line consolidation were

as follows:

- the assets and liabilities and the charges and

income of the companies fully consolidated are

recorded line-by-line, attributing to the

minority shareholders, where applicable, the

share of the net equity and net result for the

period pertaining to them. Minority interests

are reported separately under consolidated

equity and in the consolidated income

statement;

- the significant gains and losses, with the

relative fiscal effect, deriving from operations

between fully consolidated companies and not

yet realised with third parties, are eliminated,

except for losses which are not eliminated

where the transaction indicates a reduction in

the value of the asset transferred. The effects

deriving from reciprocal payables and

receivables, costs and revenues, as well as


11

financial income and charges are also

eliminated if significant.

Associated companies

Associated companies are companies over which the

Group has significant influence, which is presumed to

exist when between 20% and 50% of voting rights are

held. The investments in associated companies are

valued under the equity method and are initially

recorded at cost. The equity method is as described

below:

- the book value of these investments are in line

with the net equity adjusted, where necessary,

to reflect the application of IFRS and includes

the recording of the higher value attributed to

the assets and liabilities and to any goodwill,

identified on acquisition;

- the profits and losses pertaining to the Group

are recognised when the significant influence

begins and until the significant influence

ceases to exist. In the case where, due to

losses, the company valued under this method

indicates a negative net equity, the carrying

value of the investment is written down and

any excess pertaining to the Group, where this

latter is committed to comply with legal or

implicit obligations of the investee, or in any

case to cover the losses, is recorded in a

specific provision; the equity changes of the

companies valued under the equity method,

not recorded through the income statement,

are recorded directly as an adjustment to

equity reserves;

- the unrealised gains, generated on

transactions between the Parent Company and

the investee valued under the equity method,

are eliminated based on the share pertaining to

the Group in the investee; the unrealised losses

are eliminated, except when they represent a

reduction in value.

Joint Arrangements

Joint arrangements are agreements based on rights and

obligations deriving from a contract. They are broken

down between joint ventures and joint operations. Joint

ventures are companies based on joint control

agreements in which the participants have a right to a

share of the net assets or the result deriving from the

agreement. Joint ventures are measured under the

equity method. Joint operations are agreements in

which the parties share joint control of the agreement

and have rights to the assets and liabilities arising from

the contract. The joint operations are consolidated

based on the assets, liabilities, revenues and costs

arising from the rights and obligations of the contract.


12

Business combinations

Business combinations are recognised according to the

acquisition method. According to this method:

- the amount transferred to a business

combination is valued at fair value, calculated

as the sum of the fair value of the assets

transferred and the liabilities assumed by the

Group at the acquisition date and of the equity

instruments issued in exchange for control of

the company acquired. Accessory charges to

the transaction are recorded to the income

statement when they are incurred;

- at the acquisition date, the identifiable assets

acquired and the liabilities assumed are

recorded at fair value at the acquisition date;

exceptions to this are the deferred tax assets

and liabilities, employee benefit assets and

liabilities, liabilities or equity instruments

relating to share-based payments of the entity

acquired or share-based payments relating to

the Group issued in replacement of the

contracts of the entity acquired, and the assets

(or group of assets and liabilities) held-for-sale,

which are instead valued according to the

applicable standard;

- goodwill is calculated as the excess of the

amounts transferred to the business

combination, of the value of minority interests’

net equity and the fair value of any holding

previously held in the acquired company

compared to the fair value of the net assets

acquired and liabilities assumed at the

acquisition date. If the value of the net assets

acquired and the liabilities assumed at the

acquisition date exceeds the sum of amounts

transferred, of any minority interest and the

fair value of any holding previously held in the

acquired company, this excess is immediately

recorded to the income statement as income

deriving from the transaction concluded;

- any amount subject to conditions established

by the business combination contract are

valued at fair value at the acquisition date and

included in the value of the amounts

transferred to the business combination for

the determination of goodwill.

In the case of business combinations undertaken in a

series of phases, the holding previously held in the

acquired entity is revalued at fair value at the acquisition

of control date and any profit or loss is recorded to the

income statement. If the initial values of a business

combination are incomplete at the period-end in which

the business combination took place, the Group reports

in its consolidated financial statements the provisional

values of the items for which the final calculations could

not be made. These provisional values are adjusted in

the measurement period to take account of the new

information obtained on the facts and circumstances

existing at the acquisition date which, if known, would

have had effects on the value of assets and liabilities

recognised at this date.


13

Translation of foreign companies' financial statements

The financial statements of subsidiaries are prepared in

the primary currency in which they operate. The rules

for the translation of financial statements of companies

which operate in a currency other than the Euro are as

follows:

- the assets and the liabilities were translated

using the exchange rate at the reporting date;

- the costs and revenues are translated at the

average exchange rate for the period;

- the “translation reserve” recorded within the

Statement of Comprehensive Income, includes

both the currency differences generated from the

translation of foreign currency transactions at a

different rate from that at the reporting date and

those generated from the translation of the

opening shareholders’ equity at a different rate

from that at the reporting date.

The subsidiaries with operational currency other than

the Euro included in the consolidation scope at

December 31, 2016 are listed in the Directors’ Report.

The exchange rates utilised for the conversion of these

financial statements are shown in the table below:

Foreign currency transactions

Transactions in currencies other than the Euro are

recognised at the exchange rate at the date of the

transaction. Assets and liabilities denominated in

currencies other than the Euro are subsequently

adjusted to the exchange rate at the reporting date.

Exchange differences are recognised to the income

Currency 2016 2015

Rand (ZAR) 16,26 14,17

U.S. Dollar (USD) 1,11 1,11

Japanese Yen (JPY) 120,20 134,31

Serbian Dinar (RSD) 123,11 120,69

Zambian Kwacha (ZMW) 11,40 9,56

Balboa (PAB) 1,11 1,11

Chilean Peso (CLP) 748,48 726,41

Croatian kuna (HRK) 7,53 7,61

Ugandan Shill ing (UGX) 3782,52 3.601,17

at December 31st at December 31st

Currency 2016 2015

Rand (ZAR) 14,46 16,95

U.S. Dollar (USD) 1,05 1,09

Japanese Yen (JPY) 123,40 131,07

Serbian Dinar (RSD) 123,40 121,45

Zambian Kwacha (ZMW) 10,43 11,94

Balboa (PAB) 1,05 1,09

Chilean Peso (CLP) 704,95 772,71

Croatian kuna (HRK) 7,56 7,64

Ugandan Shill ing (UGX) 3798,57 3.679,68

Average value of the period

currency amount for 1 Euro

Value as of the date of the consolidated financial statement

currency amount for 1 Euro


14

statement. Non-monetary assets and liabilities

denominated in currencies other than the Euro are

recorded at historical cost, utilising the exchange rate on

the initial recording of the transaction.

Financial year of the consolidated financial statements

The financial year of the consolidated financial

statements (concluding December 31, 2016) coincides

with the financial year of the parent company and all of

the companies included in the consolidated financial

statements. For the following companies, classified as

joint ventures, the financial year-end is as follows:

WBHO/Building Energy LTD (Pty): June 30; Renewable

Energy Solution (LTD): October 31, they were measured

under the equity method through the preparation of

accounts at the date of the consolidated financial

statements.

Accounting policies

Property, plant and equipment

Property, plant and equipment are measured at

purchase or production cost, net of accumulated

depreciation and any loss in value. The cost includes

charges directly incurred for bringing the asset to a

condition for use, as well as dismantling and removal

charges which will be incurred under contractual

obligations which require the asset to be returned to its

original condition. Borrowing costs that are directly

attributable to the acquisition, construction or

production of a qualifying asset pursuant to IAS 23 and

IAS 16 are capitalised as part of the cost of that asset.

The expenses incurred for the maintenance and repairs

of an ordinary and/or cyclical nature are directly

charged to the income statement when they are

incurred. The capitalisation of costs relative to the

expansion, modernisation or improvement of the

structural elements whether owned or leased, is solely

made within the limits established to be separately

classified as assets or part of an asset. The property,

plant and equipment held through finance lease

contracts, where the majority of the risks and rewards

related to the ownership of an asset have been

transferred to the Group, are recognised as assets of the

Group at their fair value or, if lower, at the present value

of the minimum lease payments, including any

redemption amounts to be paid. The corresponding

liability due to the lessor is recorded in the financial

statements under financial payables. The assets are

depreciated applying the same criteria and rates as

indicated below for the other tangible assets, except

where the duration of the lease contract is lower than

the useful life and there is not a reasonable certainty of

the transfer of ownership of the asset at the normal

expiry date of the contract; in this case, the depreciation

is over the duration of the lease contract. The leased

assets where the lessor bears the majority of the risks

and rewards related to an asset are recorded as

operating leases. Costs related to operating leases are

recognised on a straight-line basis over the duration of

the lease. Depreciation is charged on a straight-line

basis, which depreciates the asset over its useful life.

The useful life of property, plant and equipment and

their residual value are reviewed and updated, where

necessary, on the preparation of the financial

statements. The useful life estimated by the Group for


15

the various categories of property, plant and equipment

are as follows:

Goodwill

Goodwill is calculated as the excess of the amounts

transferred to the business combination, of the value of

minority interests’ net equity and the fair value of any

holding previously held in the acquired company

compared to the fair value of the net assets acquired

and liabilities assumed at the acquisition date. If the

value of the net assets acquired and the liabilities

assumed at the acquisition date exceeds the sum of

amounts transferred, of any minority interest and the

fair value of any holding previously held in the acquired

company, this excess is immediately recorded to the

income statement as income. Goodwill is not amortised,

but is subject to an impairment test at least annually.

This test is made with reference to the “cash generating

unit” or “CGU” to which the goodwill is attributed. A

reduction in the value of the goodwill is recorded when

the recoverable value of the goodwill is lower than the

carrying value. The recoverable value is the higher

between the fair value of the CGU, less costs to sell, and

its value in use. Goodwill may not be restated in

subsequent years. When the reduction in value deriving

from the test is higher than the value of the goodwill

allocated to the CGU the residual amount is allocated to

the assets included in the CGU, in proportion to their

carrying value. The test is carried out at least annually,

or whenever there is an indication of loss in value.

Other intangible assets

An intangible asset is a non-monetary asset, identifiable

and without physical substance, controllable and

capable of generating future economic benefits. These

assets are recorded at purchase and/or production cost,

including the costs of bringing the asset to its current

use, net of accumulated amortisation, and any loss in

value. The costs strictly associated to the development

and design for the construction of renewable energy

plant are capitalised under intangible assets in progress

where all the conditions required for their capitalisation

are satisfied; in addition, financial charges incurred

during development as per IAS 23 are capitalised. When

the plant commences operation these costs are

reclassified to increase the value of the plant and are

depreciated over the useful life of the plant. In the case

of the impossibility to complete construction or where a

significant amount of time has passed since their

expenditure, these costs are expensed to the income

Rate %

Photovoltaic plants from 4% to 5%

Other fixed assets from 6% to 20%

Improvements on third party assets lesser of the remaining term of the contract

and the useful l ife of the asset


16

statement. Amortisation begins when the asset is

available for use and is recognised on a straight-line

basis in relation to the residual possibility of use and

thus over the estimated useful life of the asset. The

estimated useful life for the Group of the various

categories of intangible fixed assets is as follows:

Impairment of property, plant and equipment and intangible assets

At each reporting date, property, plant and equipment

and intangible assets not fully depreciated or amortised

are analysed in order to identify any indications of a

reduction in value. Where such indicators exist, an

estimate of the recoverable value of these assets is

made, recording any write-down compared to the book

value to the income statement. The recoverable value

of an asset is the higher between the fair value, less

costs to sell, and its value in use, where this latter is the

fair value of the estimated future cash flows for this

asset. For an asset that does not generate sufficient

independent cash flows, the realisable value is

determined in relation to the cash-generating unit to

which the asset belongs. In defining the value in use, the

expected future cash flows are discounted utilising a

discount rate that reflects the current market

assessment of the time value of money, and the specific

risks of the activity. A reduction in value is recognised to

the income statement when the carrying value of the

asset is higher than the recoverable amount. When the

reasons for the write-down no longer exist, the book

value of the asset is restated through the income

statement, up to the value at which the asset would be

recorded if no write-down had taken place and

amortisation had been recorded.

Financial assets

Rate %

Patent, trade marks 5,56%

Software 33,33%

Other long term costs 20,00%


17

a) Classification

The Group classifies financial assets in the following

categories: “loans and receivables” and “assets

available-for-sale”. Classification depends on the

purpose for which the financial asset was acquired.

Classification of financial assets is made on their initial

recognition.

Loans and receivables are non-derivative financial assets

with fixed or determinable payments, which are not

listed on an active market. These financial assets are

classified under current assets if they mature within 12

months, otherwise they are classified under non-current

assets. Loans and receivables of the Group include the

accounts “trade receivables”, “other receivables and

current and non-current assets” and “cash and cash

equivalents”.

Assets held-for-sale are non-derivative financial assets,

specifically designated to this category by the Group and

which do not fall under any other financial asset

category according to International Accounting

Standards. They are included under non-current

financial assets unless the financial asset has matured or

management intends to dispose of them within 12

months from the reporting date.

b) Recognition and measurement

Financial assets are initially recognised at fair value,

including any accessory costs, with the exception of

financial assets measured at fair value recorded through

P&L where the accessory costs are recorded to the P&L

on initial recognition.

Subsequent to initial recognition, loans and receivables

are measured at amortised cost using the effective

interest rate method and subject to verifications for

reductions in value.

Subsequent to initial recognition, assets available-for-

sale are recognised at fair value. Gains and losses on

financial assets available-for-sale are recognised in the

statement of comprehensive income.

The accounting elimination of a financial asset from the

balance sheet is generally permitted where:

- the cash flows from the financial asset have

been transferred or have ceased; and

- all of the risks and rewards of ownership of the

financial asset have been transferred.

c) Impairments

The Group assesses at each reporting date whether a

financial asset or a group of financial assets have

incurred a loss in value. A financial asset or group of

financial assets has incurred a loss in value and must be

written-down only if there is an clear indication of a loss

in value as a result of one or more events occurring after

the initial booking of the asset and which has had an

impact, reliably estimated, on the future cash flows

generated. The loss in value of the assets may result

from the following circumstances:

- significant financial difficulties of the debtor;

- breach of contracts or failure to pay interest or

capital;

- the creditor, due to economic or legal reasons

relating to the financial difficulties of the

debitor, extends to the debtor a concession

which would not otherwise have been granted;

- it is probable that the debtor will be declared

bankrupt or subject to administrative

procedures; or

- elimination of an active market for the financial

assets.


18

With reference to the financial assets classified under

“loans and receivables”, the amount of the loss is equal

to the difference between the book value of the asset

and the present value of the expected future cash flows

utilising the original effective interest rate of the

instrument. The book value of the asset is reduced

directly or through the creation of a write-down

provision. The amount of the loss is recognised in the

income statement.

In the case of “assets available-for-sale”, where there is

a significant and prolonged loss in the value of the asset,

the accumulated loss, initially recognised under other

items of the statement of comprehensive income, must

be reversed from the other items of the statement of

comprehensive income and recognised through the

income statement. The amount of the loss is the

difference between the cost and the fair value of the

financial instrument.

Inventories

Inventories are recorded at the lower of purchase or

production cost and realisable value represented by the

amount that the Group expects to obtain from their sale

in the normal course of operations. The cost of

inventories is calculated applying the specific cost

method.

Cash and cash equivalents

Cash and cash equivalents includes cash, bank current

accounts and deposits on demand and other highly

liquid short-term financial investments, readily

convertible into cash, that is transferable into cash

within 90 days from the original acquisition date, and

that do not have a significant risk of a change in value.

Shareholders’ Equity

Share capital This represents the value of capital

contributions by the shareholders.

Share premium reserve This comprises the amounts

received by the company for the issue of shares above

their nominal value.

Other reserves This refers to common reserves which

may be allocated on a general or specific basis. Normally

they are not different from the previous years.

Retained earnings|accumulated losses reserve The

reserve includes the results of previous years, not

distributed or not allocated to other reserves or losses

not covered.

Trade and other payables, bank payables and other lenders

Financial liabilities (with the exclusion of derivative

financial instruments) relate to trade and other payables

and are initially recorded at fair value, net of directly

allocated accessory costs, and subsequently recorded at

amortised cost, using the effective interest rate. When

there is a change in the expected cash flows, the value

of the liabilities are recalculated to reflect this change,

based on the new present value of the expected cash

flows and on the internal yield initially determined.

Financial liabilities are classified under current liabilities,


19

except when the Group has an unconditional right to

defer their payment for at least 12 months after the

reporting date. Financial liabilities are derecognised

from the balance sheet when they are settled and the

Group has transferred all the risks and rewards relating

to the instrument.

Employee provisions

Employee provisions paid on or subsequent to the

employment period principally refer to post-

employment benefit provisions (TFR), in accordance

with Article 2120 of the Civil Code. TFR represents a

defined benefit plan, or rather a programme for benefits

subsequent to the employment period which

constitutes a future obligation and for which the Group

is responsible for the actuarial risks and relative

investments. In accordance with IAS 19, the Group

utilises the Projected Unit Credit Method to determine

the present value of its obligations and related current

service cost; this method requires the utilisation of

objective and compatible actuarial assumptions on

demographic (mortality rate, staff turnover rate) and

financial (discount rate, future salary increases)

variables. The actuarial gains and losses are recognised

under equity.

Following the pension law reform, from January 1, 2007,

the TFR maturing is allocated to pension funds or to the

INPS treasury fund or, in the case of companies with less

than 50 employees, remains in the company similar to

the treatment prior to the pension law reform.

Employees had the right to choose their preference for

the allocation of their employee leaving indemnity up to

June 30, 2007. Following the allocation of the TFR

maturing to the pension funds or the INPS fund, part of

the TFR maturing is classified as a defined contribution

plan as the obligation of the company is exclusively

represented by the payment of the contributions to the

pension fund or to the INPS fund. The liability relating to

the prior benefits matured continue to represent a

defined benefit plan measured based on actuarial

assumptions.

Provisions for risks and charges

Provisions for risks and charges are recorded to cover

known or likely losses or liabilities, the timing and extent

of which are not known with certainty at the reporting

date. They are recorded only where a present obligation

exists (legal or implicit) for a future payment resulting

from past events and it is probable that the obligation

will be settled. This amount represents the best

estimate of the costs required to settle the obligation.

The rate used in the determination of the present value

of the liability reflects the current market values and the

specific risk associated to each liability. If the financial

effect of the period is significant and the payment dates

of the obligations can be reliably estimated, the

provisions are valued at the present value of the

expected payment, utilising a rate which reflects market

conditions, the change in the cost of money in the

period and the specific risk related to the obligation. The

increase in the value of the provision from changes in

the cost of money in the period is recognised as a

financial expense. Possible risks that may result in a

liability are disclosed in the notes on potential liabilities

without any provision.


Revenue recognition

Sales revenues are recognised on the transfer to the

client of the risks and benefits concerning the products,

normally coinciding with the delivery or shipment of the

goods to the client; service revenues are recognised in

the period in which they are provided.

With reference to the construction of plant for the

generation of renewable energy, the construction

margin is recognised on the completion of the plant or

under the percentage completion criterion based on the

capacity of the buyer to influence the design of these

plant, in accordance with the specific contractual

provisions.

Revenues are recognised at the fair value of the amount

paid. They are calculated following the deduction of

VAT, expected returns, rebates and discounts.

Recognition of costs

Costs are recognised on the acquisition of the goods or service.

Financial income and charges

Interest is recognised in accordance with the effective interest rate method utilising therefore the interest rate which is

financially equivalent to all the cash inflows and outflows which comprise an operation.

Income taxes

Current income taxes are calculated based on the

assessable income for the year, applying the current tax

rates at the balance sheet date. Deferred taxes are

calculated on all differences between the tax value of an

asset or liability and the relative book value. The

deferred tax assets, including those relating to losses

carried forward, for the portion not offset by deferred

tax liabilities, are recognised only for those amounts for

which it is probable there will be future assessable

income to recover the amounts. The deferred taxes are

calculated utilising the tax rates which are expected to

be applied in the years when the temporary differences

will be realised or settled, based on the tax rates in force

or substantially in force at the reporting date. Current

and deferred income taxes are recorded in the income

statement, except those relating to accounts directly

credited or debited to equity, in which case the fiscal

effect is recognised directly to equity. Taxes are offset

when the income tax is applied by the same fiscal

authority and when there is a legal right of

compensation. The tax charge of the company and its

accounting treatment takes into account the effects

deriving from the national Tax Consolidation

implemented by the companies of the Group resident in

Italy.


Estimates and assumptions

The preparation of the financial statements require the

Directors to apply accounting principles and methods

that, in some circumstances, are founded on valuations

and estimates based on historical experience and

assumptions which are from time to time considered

reasonable and realistic under the relative

circumstances. The application of these estimates and

assumptions impact upon the amounts reported in the

financial statements and on the disclosures. The final

outcome of the accounts in the financial statements

which use the above-mentioned estimates and

assumptions may differ from those reported in the

financial statements due to the uncertainty which

characterises the assumptions and the conditions upon

which the estimates are based. The accounting

principles utilised by the Group which require greater

subjectivity by the Directors in the preparation of the

estimates and for which a change in the underlying

conditions or the assumptions may have a significant

impact on the financial results of the Group are briefly

described below. Impairment test: goodwill is subject to

an impairment test on an annual basis. The reduction in

value is recorded as a write-down when the net book

value of the cash-generating unit to which the asset is

allocated is higher than the recoverable value (defined

as the higher value between the value in use and the fair

value of the asset). The verification of the value requires

the directors to make valuations based on the

information available within the Group and from the

market, as well as historical experience. In addition,

when it is determined that there may be a potential

reduction in value, the Group determines this through

using the most appropriate technical valuation methods

available. The same verifications of value and the same

valuation techniques are applied on the intangible and

tangible assets with a finite useful life when there are

indications of the difficulty for the recovery of the

relative net book value through its use. The correct

identification of the indicators of the existence of a

potential reduction in value as well as the estimates for

their determination depends on factors which may vary

over time impacting upon the valuations and estimates

made by the Directors. Doubtful debts provision: the

doubtful debt provision reflects the directors estimate

on losses on the client portfolio. This estimate is based

on the expected losses by the Group, based on past

experience for similar receivables, current and historic

amounts overdue, careful monitoring of the credit

quality and projections on economic and market

conditions. Deferred tax assets: the accounting of the

deferred tax assets is made on the basis of the

expectations of future assessable income to recover the

asset value. The evaluation of the expected assessable

income in order to record the deferred tax asset

depends upon factors which may change over time and

result in significant effects on the recovery of the asset.

Determination of the correct inventory levels and any

obsolescence provision: the Group, as distributor of

photovoltaic models, generally holds finished products

in warehouses in order to quickly satisfy the demands of

its clients. The level of inventory held is constantly

monitored by company management based on sales

forecasts and expected demand from Group clients. The

directors, in evaluating forecast sales, take into

consideration a number of factors which may change

over time and which may significantly impact the level

of Group inventories. Where these estimates are not

accurate, due to rapid technological obsolescence of the

photovoltaic components, it may be necessary to write-

down the inventories to align the book value with

realisable value. Development costs capitalised: the

costs strictly associated to the development and design

of new initiatives for the construction of renewable

energy plant are capitalised where all the conditions


22

required for their capitalisation are satisfied. The

Directors take into consideration a series of factors

which may change over time and impact decisions upon

the continuance of particular initiatives and

consequently result in the write-down in the income

statement of development costs previously capitalised.

The Group continuously monitors the existence of

conditions to maintain the capitalisation of such costs:

where one or more of these requirements are absent,

the Group carries out revaluations and where necessary

writes down the cost where their capitalisation may no

longer be justified.

Accounting standards approved by the European Union, but not yet applied and adopted in advance by the Group

The new documents issued by the IASB, approved by the

EU, to be adopted obligatorily from financial statements

beginning January 1, 2016, were the following:

- IFRS 11 “Joint arrangements”: issued by the

IASB on May 6, 2014, the amendment to the standard

provides guidelines on the accounting treatment to be

adopted in the case of the acquisition of holdings in joint

arrangements, whose operations may be defined as a

“business” as per IFRS 3 “Business combinations”;

- IAS 1 “Presentation of financial statements”:

issued by the IASB on December 18, 2014 and applicable

from January 1, 2016, the amendment to the standard

explicitly clarifies that non-significant disclosure is not

required even if expressly required by a specific IFRS.

With regards to the Explanatory Notes to the financial

statements, a specific order is not required and

therefore the company may also decide to present the

notes by individual account, commenting upon the

content and the changes in the period together with a

description of the accounting standard applied for the

relative account. The amendment to the standard in

addition clarifies the aggregation or disaggregation of

financial statement accounts where their amount is

relevant or “material”. In particular, the amendment to

the standard requires that financial statement items

with differing characteristics are not aggregated and are

not are not disaggregated when such would create

difficulties for disclosure and understanding of the

financial statements. In addition, with regards to the

presentation of the financial position of an entity, the

amendment clarifies the need to disaggregate certain

accounts cited under paragraphs 54 (Financial Position)

and 82 (Income statement) of IAS 1. There are no

impacts for the company, as the disclosure in the

financial statements at December 31, 2016 was

compliant with the amendments introduced by this

standard;

- IAS 16 “Property, plant and equipment” and IAS

38 “Intangible assets”: this amendment to the two

standards, issued by the IASB on May 12, 2014, clarifies

that the depreciation process based on revenues may

not be applied with reference to property, plant and

equipment, in that this method is based on factors, for

example volumes and sales prices, which do not

represent the effective consumption of the economic

benefits of the underlying asset. The above-stated

prohibition was included also in IAS 38, according to

which intangible assets may be amortised on the basis

of revenues only if it is demonstrated that the revenues

and the consumption of the economic benefits of the

intangible assets are highly related. No impacts are

noted as the company has never applied this

methodology;


23

- IAS 16 “Property, plant and equipment” and IAS

41 “Agriculture”: with the amendments to these

standards, the IASB established that fruit-bearing plants,

used exclusively for the cultivation of agricultural

products over a number of periods, should be subject to

the same accounting treatment as property, plant and

equipment in accordance with IAS 16 “Property, plant

and equipment” as their “functioning” is similar to that

of manufacturing. The amendments are applicable from

January 1, 2016. No impacts are noted as the company

has never applied this methodology;

- IFRS 10 “Consolidated financial statements”:

the amendment to this standard issued on December

18, 2014 concerns the exemption from the presentation

of consolidated financial statements where the parent

company has holdings in “investment entities” who

measure their subsidiaries at fair value. The

amendment to the standard is applicable with

retroactive effect from January 1, 2016. There are no

impacts as these circumstances do not exist for the

company;

- IAS 28 “Investments in associates and joint

ventures”: on December 18, 2014, this standard was

amended with regards to investments in associates or

joint ventures which are “investment entities”: these

investments may be measured at fair value or using the

net equity method. This amendment is applicable from

January 1, 2016; There are no impacts as these

circumstances do not exist for the company. Annual

amendments to IFRS 2012-2014: on September 25,

2014, the IASB published a series of amendments to a

number of international accounting standards,

applicable from January 1, 2016. The amendments

concern: (i) IFRS 5 “Non-current assets held-for-sale and

discontinued operations”: (ii) IFRS 7 “Financial

instruments: disclosures”; (iii) IAS 19 “Employee

benefits”; (iv) IAS 34 “Interim Financial reporting”. With

regards to the first point, the amendment clarifies that

the financial statements do not need to be restated

where an asset or a group of assets available for sale are

reclassified as “held for distribution” or vice versa.

There are no impacts as these circumstances do not

exist for the company. With reference to IFRS 7, the

amendment establishes that where an entity transfers a

financial asset at conditions which permit the

“derecognition” of the asset, disclosure regarding the

residual involvement of the entity in the asset

transferred is required, where a services contract has

been agreed which stipulates an interest of the entity in

the future performance of the financial assets

transferred. There are no impacts as these

circumstances do not exist for the company. The

proposed amendment to IAS 19 clarifies that the

discount rate used for post-employment benefit

obligations is calculated on the basis of the market yields

of leading corporate bonds, and in countries in which

there is no “central market” for such bonds, the market

yields of government securities is used. No impacts are

indicated as the company has already applied this

accounting treatment. The amendment proposed to IAS

34 requires the indication of cross references between

the figures reported in the interim financial statements

and the related disclosure. There are no impacts as

these circumstances do not exist for the company.


24

Accounting standards not yet approved by the European Union

The following standards and amendments to pre-

existing standards are still in the approval phase by the

European Union and therefore are not applicable by the

company. The dates indicated reflect the date of

expected efficacy as stated in the standards; this date is

however subject to effective approval by the competent

bodies of the European Union:

- on September 11, 2014, the IASB published the

amendment to IFRS 10 “Consolidated financial

statements” and IAS 28 “Investments in associates and

joint ventures”, in order to resolve the conflict between

IAS 28 and IFRS 10. According to IAS 28, the profit or loss

from the sale or conferment of a non-monetary asset to

a joint venture or associate in exchange for a share of

the capital of this latter is limited to the share held in the

joint venture or associate by external investors to the

transaction. On the other hand, IFRS 10 provides for the

recognition of the entire profit or loss in the case of loss

of control of a subsidiary, also if the entity continues to

hold a non-controlling holding, including also upon the

sale or conferment of a subsidiary to a joint venture or

associate. The amendments introduced establish that

for the disposal or conferment of an asset or of a

subsidiary to a joint venture or associated company, the

amount of profit or loss to be recognized to the financial

statements of the disposing company (conferring

company) depends on whether the asset or the

subsidiary disposed of (conferred) constitutes a

business, in the definition established by IFRS 3. In the

case in which the assets or the subsidiary disposed

represents a business, the entity should recognize the

profit or the loss on the entire share previously held;

while, in the contrary case, the share of the profit or loss

concerning the stake still held by the entity should be

eliminated. For these amendments, a date of first

application has not yet been established;

- IFRS 14 “Regulatory deferral accounts”: the

transitory standard, issued by the IASB on January 30,

2014, enables entities adopting for the first time

IAS/IFRS international accounting standards to continue

to apply the previous GAAP accounting policies for the

valuation (including impairment) and elimination of

regulatory deferral accounts. This standard, still

awaiting approval, will be applicable with retroactive

effect from January 1, 2016:

- Amendment to IFRS 15 “Revenue from

contracts with customers”: the amendment, issued on

April 12, 2016 and applicable from January 1, 2018,

clarifies the guidelines for identifying an obligation to

sell an asset or provide one or more services, and in

addition provides clarifications upon the accounting of

intellectual property licenses;

- IFRS 16 “Leasing”: this standard, issued by the

IASB on January 13, 2016, replaces IAS 17 and sets

criteria for the recognition, measurement and

presentation of leasing contracts. IFRS 16 is applicable

from January 1, 2019, although early adoption is

permitted for entities applying also IFRS 15;

- IFRS 7 “Financial instruments disclosures”: the

amendment to the standard, applicable from January 1,

2017, was issued by the IASB on January 29, 2016 and

requires an entity to provide disclosure which permits

users of the financial statements to assess the changes

to liabilities arising from financial activities;

- IAS 12 “Income taxes”: on January 19, 2016,

the IASB published a number of amendments which

clarify the accounting of deferred tax assets relating to

debt instruments measured at fair value. The

amendments are applicable from January 1, 2017;

- IFRS 4 “Insurance contracts”: the amendment

issued by the IASB on September 12, 2016 covers the

effects from application of the standard together with


25

those related to the adoption of IFRS 9 “Financial

instruments” in the financial statements of companies

issuing insurance contracts. This amendment is

applicable from January 1, 2018;

- On December 8, 2016, the IASB issued a

number of amendments to the standards approved in

the 2014-2016 three-year period, in particular IFRS 1

“First time application of international accounting

standards”, IFRS 12 “Disclosure of interests in other

entities” and IAS 28 “Investments in associates”: (i) with

regard to IFRS 1, a number of exemptions established by

specific paragraphs of the standard were eliminated; (ii)

the amendment to IAS 18 establishes that, in the case in

which the parent company is a venture capital company,

it has the option to value its investments in associates

and joint ventures at fair value with the recognition of

changes to the Income Statement; (iii) the amendment

to IFRS 12 establishes that the disclosure requirements

are applied also in cases in which the investments in

subsidiaries, associates and joint ventures are classified

to the account “Non-current assets held-for-sale” in

accordance with IFRS 5;

- On December 8, 2016, the IASB issued an

amendment to IAS 40 “Investment property” which

clarifies when an entity should transfer the ownership

of property (including that under construction). It is in

addition established that the intention alone of

management to modify the use of a building does not

constitute evidence of a change in use of investment

property. The amendment to the standard, although

early adoption is permitted, is applicable retrospectively

from January 1, 2018;

- IFRIC 22 “Foreign currency transactions and

advance consideration”: this interpretation was issued

by the IASB on December 8, 2016 and clarifies the

accounting of operations which include the payment or

receipt of advances in currencies other than the Euro.

In particular, the present interpretation governs the

exchange rates to be adopted for transactions in foreign

currencies in which non-monetary assets and liabilities

arise related to the receipt or payment of accounts,

before recognition of the relative assets, costs or

revenues. This interpretation is applicable from January

1, 2018.

Accounting standards approved by the European Union although applicable in subsequent years.

The following standards have been approved by the

European Union but shall be applied from 2018:

therefore, they are not considered by the company in

the preparation of the financial statements at December

31, 2016:

- IFRS 9 “Financial instruments”: this standard,

approved by the European Union on November 29,

2016, entirely replaces IAS 39 “Financial instruments:

recognition and measurement” and introduces new

criteria for the classification and valuation of financial

assets and liabilities. The principal new issues

introduced by IFRS 9 may be summarised as: financial

assets may be classified in only two categories – at “fair

value” or at “amortised cost”. The “loans and

receivables”, the AFS financial assets and the “held to

maturity” financial assets categories no longer exist. The

classification to the two categories is based on the

business model of the entity and in relation to the

characteristics of the cash flows generated by the

activities. A financial asset is valued at amortised cost

where both the following requirements are met: the

business model of the entity establishes that the

financial asset is held for collection of the relative cash

flows (therefore, in substance, not for trading profits)


26

and the characteristics of the cash flows of the asset

correspond only to the payment of capital and interest.

In the opposite case, the financial asset should be

measured at fair value. The rules for the recognition of

embedded derivatives were simplified: the separate

recognition of the embedded derivative and the

financial asset which “hosts” it is no longer required. All

equity instruments – both listed and non listed – must

be valued at fair value. (IAS 39 established however that,

if the fair value may not be determined in a reliable

manner, the non listed equity instruments are valued at

cost). The entity has the option to record in

shareholders' equity the fair value changes of the equity

instruments which are not held for trading. This

allocation is made on initial recognition, may be made

by individual security and is irrevocable. Where this

option is chosen, the changes to the fair value of these

instruments may never be reclassified from

Shareholders’ equity to the Income statement. The

dividends however continue to be recognised to the

Income Statement;

- IFRS 15 “Revenues from contracts with

customers”: the standard, issued by the IASB on May 28,

2014 and approved by the European Union on October

29, 2016, is the result of convergence by the IASB and

FASB (“Financial Accounting Standard Board”, the body

charged with issuing new accounting standards in the

United States), in order to develop a single model for the

recognition of revenues applicable both within the

scope of IFRS and US GAAP. The new standard will be

applicable to all contracts with customers, including

works in progress on orders, and will however substitute

the current IAS 18 - Revenues and IAS 11 - Construction

contracts and all relative interpretations. The key

element of IFRS 15 is the recognition of revenues at an

amount which reflects the consideration which the

Group would expect to have the right to receive against

the transfer of the assets and/or services. The standard

is applied where the following criteria are

contemporaneously met: (i) the parties have approved

the contract and have committed to execute the

respective obligations; (ii) the rights of each of the

parties concerning the assets and the services to be

transferred, in addition to the payment terms, have

been identified; (iii) the contract signed has commercial

substance (the risks, the timings and the amount of

future cash flows of the entity may alter as a result of

the contract); (iv) the probability to receive and pay the

amounts related to execution of the contract exists.

IFRS 15 includes also significantly extended disclosure

obligations compared to the existing standard with

regards to the nature, amount, timing and uncertainty

of revenues and cash flows deriving from contracts with

customers.

(Currency/thousand)

ZAR USD JPY RSD ZMW PAB CLP EGP HRK

trade credit 6.599 471 - 302 - - 376 - -

other current asset - 56 - - - - - - -

prepayments 4.698 3.184 - 88 - - - - 8

tax credit 1.982 - - 1.861 - - 13.888 - 16

cash and cash equivalent 4.621 3.290 161 1.520 60 2 7.070 - 29

cash and cash equivalent 17.901 7.002 161 3.771 60 2 21.333 - 52

equivalent to €/000 1.238 6.642 1 31 6 2 30 - 7

trade payable 4.352 19.482 454 45.386 40 - 84.501 - -

other current payable 1.590 645 - 7 - - 293 - -

prepayments - 400 - - - - - - -

tax debt - 376 70 800 - - - - -

current debts towards banks 1.877 36.008 - 161 - - - - -

Total current liabilities 7.819 56.911 524 46.355 40 - 84.793 - -

equivalent to €/000 541 53.990 4 376 4 - 120 - -

Balance 10.082 (49.909) (363) (42.584) 20 2 (63.460) - 52

equivalent to €/000 697 (47.348) (3) (345) 2 2 (90) - 7

Amounts expressed in foreign currency in the financial statements of consolidated companies at December 31st, 2016

Currency riskc analysis


27

Risks and uncertainties

Pursuant to Article 2428, paragraph 2, point 6-bis of the

Civil Code, information relating to the use of financial

instruments is detailed below, as such is relevant for an

assessment of the company’s equity and financial

position and to highlight the objectives of company

management and the policies and criteria used to

measure, monitor and control the risks and

uncertainties, including also significant quantitative

information and to provide indications on the extent of

the risks undertaken by the Group.

Financial risk management

The principal business risks identified, monitored and, as

illustrated below, actively managed by the Group are as

follows:

- currency risk, deriving from fluctuations in

exchange rates between the Euro and the

other currencies in which the Group operates

and the interest rate;

- credit risk, deriving from the possibility of

default by a counterparty;

- interest rate risk;

- liquidity risk, deriving from insufficient financial

resources to meet financial commitments.

The following section provides qualitative and

quantitative information on the uncertainly of these

risks.

Currency risk

Operating on international markets and with companies

located in different geographic regions, the Group is

exposed to currency risk. Fluctuations in exchange rates

impact the Group results in various manners. A

significant impact concerns the translation effect arising

from the conversion of the financial statements of

foreign subsidiaries into Euro. In addition, as part of the

revenues and costs of the Group are denominated in

currencies other than the Euro, movements in the Euro

against these currencies could impact the consolidated

financial statements of the Building Energy Group.

However, as within each country the revenues and

relative costs are normally denominated in the same

currency, the Group largely benefits from an automatic

hedging effect. The principal exchange rates to which

the Group is exposed are the Euro/RAND and

Euro/Dollar, in relation to the multitude of activities

undertaken for the construction of photovoltaic plant in

South Africa and in the United States and in Uganda (the

financial statements of Tororo Solar North are prepared

in US Dollars).

A sensitivity analysis is illustrated below which shows

the effects on the net equity and net result deriving

from an increase/decrease in the exchange rates of 5%

compared to the exchange rate at December 31, 2016.


Credit risk

The credit risk represents the exposure of the Group to

potential losses deriving from the non-compliance of

obligations by commercial and financial counterparties.

The financial assets of the Group are considered of good

credit quality. The Group does not have significant credit

risk concentration, although procedures are in place to

ensure the sale of products and services to reliable

customers, taking into account their financial position,

historical experience and other factors. Doubtful

receivables are covered by the doubtful debt provision.

The maximum exposure to the credit risk for the Group

at December 31, 2016 and 2015 is represented by the

book value of the financial assets recorded in the

accounts, as illustrated in the table below.

Other current and non-current receivables include

advance payments of Tororo North on construction

works currently in an advanced state and receivables

from the associate REISA, of which a portion (Euro 4,156

thousand) due beyond 5 years. This loan will be repaid

in 20 years. Trade receivables include i) receivables from

the GSE and the US entities Nyserda/Cornell University

for the supply of electricity respectively for Euro 1,127

thousand and Euro 434 thousand, for which there are

no particular insolvency risks, and ii) receivables for

deferred revenues at year-end.

(Currency/thousand)

ZAR USD JPY RSD ZMW PAB CLP HRK totale

2016 balance 10.082 (49.909) (363) (42.584) 20 2 (63.460) 52

Rate exchange to € 14,457 1,054 123,400 123,403 10,433 1,054 704,945 7,560

5% 0,723 0,053 6,170 6,170 0,522 0,053 35,247 0,378

Financial impact in € 664 (45.093) (3) (329) 2 2 (86) 7 (44.842)

Economic impact in € (33) 2.255 0 16 (0) (0) 4 7 2.242

-5% (0,723) (0,053) (6,170) (6,170) (0,522) (0,053) (35,247) (0,378)

Financial impact in € 734 (49.840) (3) (363) 2 2 (95) 7 (49.109)

Economic impact in € 37 (2.492) (0) (18) 0 0 (5) 7 (2.455)

December 31st, 2016

Variance +/- 5% €/value change to 12/31/2016: estimated capital and economic effects

at Dec ember 31st at Dec ember 31st

(Euro thousand) 2016 2015

Other non current assets 7.648 9.020

Trade credits 2.654 5.568

Prepayments and accrued income 2.645 579

Tax credit 2.728 2.189

Other current assets 1.917 2.050

Gross total 17 .592 19.406

Provision (116) (15)

Total 17 .476 19.391

Credit risk


Interest rate risk

The exposure of the Group to interest rate risk

principally relates to long-term loans. The Group policy

is to, as far as possible, contain debt cost, but

particularly its variability. The majority of debt is in fact

at a fixed rate. Fixed rate loans expose the Group to a

fair value risk. Variable rate loans expose the Group to a

risk from interest rate volatility (“cash flow” risk).

Relating to the risk originating from these contracts, the

Group does not have specific hedging policies. Interest

rate exposure relates to medium/long-term debt

positions with financial institutions concerning the

project financing obtained at a fixed rate, without

therefore an appreciable market interest rate

fluctuation risk: the main sources of interest-bearing

Group funding is at a fixed interest rate, with the

exception of: i) a credit line for Rand 125,000 thousand;

ii) a finance lease for the construction of a photovoltaic

plant in Italy for Euro 3,057 thousand; iii) a corporate

loan of an original USD 1,000 thousand obtained by the

subsidiary Behus; iv) a corporate line of Euro 2,000

thousand obtained by Building Energy S.p.A.; v) a project

finance line obtained by Tororo Solar North in

November 2016, following a sensitivity analysis on the

effects in terms of a greater or lesser repayment on the

basis of a 1% interest rate variation on 2016.

Liquidity risk

The liquidity risk is associated with the capacity to meet

commitments. Prudent management of the liquidity risk

from normal operations implies the holding of an

adequate level of liquidity, short-term securities an

adequate funding from credit lines. The liquidity risk is

centrally managed by the Group based on the guidelines

defined by the Parent Company. Head office

administration periodically monitors the Group financial

position through updated and forecast cash flow

reports. In this manner, the Group aims to ensure

adequate coverage of its financial needs, closely

monitoring loans, open credit lines and relative

utilisations in order to ensure optimum management of

the resources and any temporary excess liquidity. The

Group objective is to ensure a financial structure which,

in line with business objectives, guarantees an adequate

level of liquidity, minimising the relative opportunity

cost by maintaining equilibrium in terms of duration and

type of debt. The following table analyses the financial

liabilities (including trade payables and other current

payables) based on maturity. The loans were included

based on the contractual maturities of repayments.

(Eu ro thousand)

Company Biotwin 2 Srl Zevoblox Ltd Building Energy SpA Tororo Solar North Ltd Building Energy Holding US LLC Total Total varaiation

Bank MPS Rand Merchant Bank Banca Intesa San Paolo Dutch Development Bank MPS banch US

Rate Euribor 1y 1,57%+ 4,51% Jibar 3m + 8% spread Euribor 3m + 3,45% Libor 6 mesi + 4,75% Libor 1w + 4,50%

Economic impact (69) (1.183) (32) (16) (47) (1.347)

+1% impact (69) (1 .1 95) (33) (17 ) (47) (1 .361) 14

-1% impact (68) (1 .1 71) (32) (16 ) (46) (1 .333) (14)

December 2016, 31st

Variance +/- 1% v ariable interest rate


30

Classification of financial assets and liabilities

The following table provides a breakdown of the financial assets and liabilities by category at December 31, 2016 and

2015.

(Euro thousand) <1 2-5 >5 Total

Debt towards banks and other lenders 38.655 16.312 41.020 95.987

Other non current assets 2.004 612 2.616

Trade payable 27.544 27.544

Tax debts 3.316 3.316

Prepayments 3.269 3.269

Accruals and deferrals 391 391

Other debts and current l iabi l ities 4.393 4.393

Total financial liabilities 77.567 18.316 41.632 137.516

Financial liabilities breakdown by years to maturity at December 31st, 2016

(Euro thousand)

Assets and financial

liabilities measured at fair

value with changes in

charged to income

statement Loans and receivables

Available for sale finacial

assets

Financial liabilities at

amortised cost

Financial liabilities

available for sale Total

Other assets and current assets 7.223 7.223

Trade credit 2.639 2.639

Other assets and non current assets 7.648 1.493 9.141

Total - 17.510 1.493 - - 19.004


Debts toward banks and leasing companies 95.986 95.986

Other payables and current liabilities 11.369 11.369

Other payables and non current liabilities 2.616 - 2.616

Total - - - 137.515 - 137.515

(Euro thousand)

Assets and financial

liabilities measured at fair

value with changes in

charged to income

statement Loans and receivables

Available for sale finacial

assets

Financial liabilities at

amortised cost

Financial liabilities

available for sale Total

Other assets and current assets 51 2.050 2.101

Trade credit 5.553 5.553

Other assets and non current assets 8.789 1.493 10.282

Total 51 16.392 1.493 - - 17.936


Debts toward banks and leasing companies 55.606 55.606

Other payables and current liabilities 6.530 6.530

Other payables and non current liabilities 988 988

Total - - - 75.750 - 75.750

At December 31st, 2016

At December 31st, 2015


31

Notes to the Consolidated Balance Sheet

Assets

1. Property, plant and equipment

The changes in property, plant and equipment and depreciation for the current year are illustrated below:

During 2016, further to the land already owned by the

Group in the municipality of Krusevac (Serbia), the

purchase of land in the region of Coquimbo in Chile

(+Euro 401 thousand) was added, on which the

Punitaqui (9 MW) plant will be constructed. The

increase in the Plant in use account relates principally to

entry into use in the first part of the year (and the

simultaneous equal reduction in “fixed assets in

progress”) of the second plant developed on the land at

Cornell University (State of New York - USA “Geneva”),

thanks to which the carrying amount of photovoltaic

parks increased approx. Euro 6,700 thousand. The

Geneva plant extended by 2.8 MW the capacity of the

plant already operating in the Municipalities of Asola

(Mantua), Ostellato (Ferrara), Voghera (Padua) and

Ascoli Piceno, and the first plant constructed at Cornell

University (Snyder Road). The Italian assets were

recognised on the basis of lease back contracts of 18-

year duration, all concluding in the 2030/2031 two-year

period (a year more than the previous conclusion thanks

to the refinancing of the contracts in 2016). At year-

end, as in the previous two years, the Group carried out

impairment tests on the CGU’s representing the Italian

photovoltaic plant to verify the robustness of the

relative carrying amount, following the negative impacts

from the “Incentive Decree” (Ministerial Decree of

16/10/2014 enacting the “Approval of the processes for

the issue of incentivised tariffs under Article 26,

paragraph 2 of Legislative Decree 24/06/2014”,

converted with amendments by Law No. 116 of

11/08/2014). On June 24, 2015, the Lazio Regional

Administration Court judgement was published (No.

08669/2015 Reg. Prov. Reg. No. 15359/2014 Circ. Reg.),

which established that the Constitutional Court should

definitively consider the unconstitutionality of the

“Incentive Decree” and specifically the legitimacy of its

retroactive application. On December 7, 2016, the Court

declared that the Legislative Decree (No. 91/2014) does



Fixed assets 98.099 36.420 61.679

98.099 36.420 61.679

Fixed assets

Variance



Land and buildings 484 14 - 401 - - 899

Plants in operation 21.895 6.333 - 21 (114) - 28.136

(Accomulated depreciation) (3.535) (39) - - - (1.220) (4.794)

Other plants and machinery 435 (2) - 2 - - 435

(Accomulated depreciation) (74) (7) - - - (106) (187)

Other fixed asset 443 (22) 17 52 (8) - 482

(Accomulated depreciation) (200) 22 - - 5 (78) (251)

Leasehold improvements 624 (198) - 156 - - 582

(Accomulated depreciation) (330) 44 - - - (79) (366)

Construction in progress 16.678 (2.588) 1.246 57.826 - - 73.162

36.420 3.557 1.263 58.458 (117) - (1.484) 98.099

Fixed assets

Other movements

(incl. Exch. Diff.)

Reclass from

Intangible Assets Increase Decrease Transfers Depreciation


32

not violate the Constitution in any way, and

subsequently issued its grounds for this decision with

the publication of judgment No. 16/2017 on January 24,

2017. The decree was therefore fully applicable and

effective from January 1, 2015. During the year, as a

result of and in order to tackle that indicated above, the

Group successfully renegotiated the leasing contracts

upon the plant of Ascoli Piceno, Ostellato, Voghera and

Asola with the Institution Mediocredito. The refinancing

of contracts, with effect from July 2016, enabled each of

the above-mentioned plant to:

i) extend the duration of the loan by one year until

conclusion of the benefit from the incentivised tariff;

ii) release the cash reserve provisioned at each in

service of the debt (reducing it therefore for an equal

amount);

iii) reduce the interest rate for the entire residual

repayment period of the loan. In executing the

impairment test therefore, the value in use of the Italian

plant was measured according to the “discounted cash

flow” (DCF) method, discounting the leveraged free

cash flow to equity at January 1, 2017, on a half-yearly

basis, for a horizon equal to the residual useful life of the

plant, estimated at 25 years (without application of the

Terminal Value, but considering the cash flows until

conclusion of the benefit from the incentivised tariff).

The discount rate utilised reflects market valuations of

the cost of money or the specific sector and regional

risks; or rather the discount rate utilised was based on

the cost of equity (“ke”) estimated on the basis of the

risk free rate supplemented by the market Levered Beta

plus the equity risk premium for each individual plant,

on the basis of the specific financial structure and taking

account of the renegotiation obtained. The discounted

cash flows were compared with the total capital value

invested by the Group for construction of the Italian

solar parks (valuation at 31/12/2016). At the reporting

date, their value is use, calculated as indicated above,

exceeded the carrying amount of the Group investment

and therefore no adjustment to book value was made.

The significant increase in Assets in progress in the

year was substantially due to a combined effect of

the increased investment in plant under

construction and positive currency differences

(approx. Euro 3,190 thousand), and specifically:

- the conclusion of construction of the wind park

in the State of Iowa (30 MW), initiated in 2015

and which, at the reporting date, had seen all

ten project turbines erected, eight of which

already connected to the network and with an

increase in the year in the investment’s value

of Euro 39,550 thousand;

- the construction of two additional photovoltaic

plant on the Cornell University site (State of

New York - Harford 2.8 MW and Musgrave 6.6

MW), substantially began and concluded

within the twelve months of 2016. The two

photovoltaic parks, which were under

development at the end of 2015 (for Euro

1,246 thousand), at December 31, 2016 were

overall worth Euro 18,084 thousand;

- the construction of the Ugandan photovoltaic

plant of Tororo North (10 MW) initiated at the

end of 2016 (+Euro 4,358 thousand).


33

2. Intangible assets

The changes in intangible assets and amortisation for the current year and the previous year are illustrated below.

The increase in Intangible assets (of Euro 5,068

thousand) principally concerns the increase in Assets in

progress, and positive currency differences, only in part

offset by the decrease due to the reclassification to the

corresponding property, plant and equipment account

of the amounts concerning the Harford and Musgrave

US projects (currently under construction), and the

impairments (-Euro 1,854 thousand) described in Note

16 (“Operating costs”). During the year, the Group

furthered the policy - adopted in the prior two-year

period - to focus investment on regions considered

more strategic by management, such as South Africa,

the United States, Latin America and Europe; as a result,

compared to the previous year, development activities

increased which, net of write-downs, decreases and

exchange differences were as follows:

- South Africa carried out developments for a

value of 39% of the increased Group annual

investment (+Euro 2,604 thousand), absorbed

mainly by the NNTP (Near Notice to Proceed)

projects at year-end, including Klaver,

Kruisvallei, Roggeveld and Sikasso;

- the Group invested 31% of total annual

development in Europe, principally in the

Serbian biomass project in the municipality of

Krusevac (+Euro 1,498 thousand) and

residually in two hydro projects (Simo and

Idrolap) in Italy (+Euro 586 thousand);

- in the United States, investment activities in

the year (increasing Euro 1,319 thousand)

principally concentrated on the Annapolis

photovoltaic project (16.8 MW) in an advanced

stage of development;

- the Chilean Punitaqui project accounted for

the highest percentage of Latin American

development activity, which overall

represented 10% of the increased value

generated by the Group in 2016.

In the year under analysis, the CSCADA (Central

Supervisory Control and Data Acquisition), a

software developed in 2015 by the Group, entered


(Euro thousand) 2016 2015 Variance

Intangible assets 26.827 21.759 5.068

26.827 21.759 5.068

Intangible assets



Patent 338 (1) - 96 - 248 - 681

(Accumulated depreciation) (111) - - - - - (217) (329)

Concessions, l icenses and tademarks 2 2 - 36 - - - 40

(Accumulated depreciation) (0) (1) - (5) - - (17) (23)

Other 7 (0) - 1 - 12 - 20

(Accumulated depreciation) (1) (0) - - - - (2) (3)

Intangible assets in progress 21.523 1.745 (1.263) 6.650 (1.953) (261) 26.441

21.759 1.744 (1.263) 6.777 (1.953) - (236) 26.827

Intangibles Assets

Exchange rate

differences

Reclass to

Fixed AssetsIncrease Decrease Transfert Depreciation


34

into use (value of Euro 248 thousand), ensuring the

management of data from monitored plant (both

owned and third party), their normalisation for

quantitative analysis, in addition to ticketing and

remote alarm activities for ordinary and

extraordinary maintenance management.

3. Goodwill

The balance represents the consolidation difference

arising on the first consolidation of the investee Biotwin

S.r.l. (100% subsidiary and owner of the photovoltaic

plant at Asola, total power of 4 MWp). The Parent

Company carried out an impairment test on this

goodwill, without any substantial difference compared

to the values in the previous year. The impairment test

is undertaken comparing the book value of the goodwill

and of the net assets independently capable of

producing revenue streams (cash generating unit),

which are reasonably allocated, with the value in use of

the cash generating unit. The cash generating unit was

identified as the company which owns the asset. The

cash flows were identified taking into consideration the

long-term performance assumptions of the main

variables contributing to cash flows, the average

residual useful life of the assets and the duration of the

incentivised tariff. For further details on the test

methodology, reference should be made to Note 1.

The tests illustrated that the estimated recoverable

value of the cash generating units exceeded the relative

book value.

4. Investments measured under the equity method

During the year there were no amendments (acquisitions or disposals) to the consolidation scope of the associates and

joint ventures.



Goodwill 400 400 -

400 400 -

Goodwill


2016 2015 Variance

Investments accounted for using the equity method 13.236 14.111 (875)

13.236 14.111 (875)

Investments accounted as fou using the equity method


35

Investments in associates

Among the associates, the changes in the year principally

concerned the performances of REISA LTD and RES LLC:

i) REISA LTD, the owner of the Kathu (81 MW)

photovoltaic plant, improved its operating performance

on the previous year. The positive effect of plant

management was however at year-end entirely offset

by the very poor performance of financial instruments

held by the vehicle and measured at fair value

(recognised to the income statement). The Group

annually subjects the investment in the South African

vehicle to an impairment test. For 2016, the free cash

flow to equity to be discounted was measured according

to the best information available at the time of the

estimate: future half-yearly distributions were taken

into consideration, updated at the end of 2016, for a

period equal to the residual useful life of the plant,

coinciding with conclusion of the Power Purchase

Agreement (“PPA”) with ESKOM (South African Electric

public utility); in addition, a Terminal value with

revamping and extension of the plant life was

considered. For further details on the test

methodology, reference should be made to Note 1. No

impairments emerged from the valuations. The other

changes of the investment are due to essentially

measurement related considerations established from

the year analysed: the initial recognition value of REISA

Ltd to the consolidated financial statements represents

the share of plant held by the Group measured at fair

value. This latter was therefore subject to amortisation

for a period covering the residual duration of the PPA

with the South African utility.

ii) Renewable Energy Solution LLC (RES LLC) in

2016 accumulated losses which substantially cancelled

the value of shareholders’ equity, with the Group

consequently writing down the value of the

corresponding investment recognised to the financial

statements.

The financial highlights of the main associates (valued at 100%) are presented below

at December 31st Acquisitions/ Others at December 31st

(Euro thousand) 2015 % Nationality (Dismissioni) Dividends

(inc. Exc.

differences) 2016

Investment in associated companies

REISA LTD 13.086 10% Sud Africa - (84) (48) - (1.215) 11.739

Building Energy Development Latino America SA - 60% Panama - 3 - - 3

Renewable Energy Solution LLC 78 49% Stati Uniti - (126) - - 48 -

Investment in joint ventures

WBHO_BE LTD 938 30% Sud Africa - 635 - - (131) 1.442

Guma BE 8 51% Sud Africa - 36 - - 7 52

14.111 464 (48) - (1.290) 13.236

Investments accounted for using the equity method

Result at

Income Statement

Other components

at OCI


36

The table below illustrates the reconciliation between the net equity value of the main associated companies and the

corresponding book value of the investments:

at December 3 1st at Dec ember 31 st at December 3 1st at Dec ember 31 st

(Euro thousand) 2 016 20 15 2 01 6 20 15

Non current asset 189.040 169.950 - -

Financial non current asset 3.947 8.502 - -

Total non c urrent asset 19 2.98 8 1 78 .4 52 - -

Trade receivables 11.724 - 228 3.909

Other credit and current asset - 9.759 - 226

Cash and cash equivalent 38.144 40.877 464 724

Total current asset 4 9.869 50 .6 35 69 2 4 .8 58

TOTAL ASSET 24 2.85 7 2 29 .0 88 69 2 4 .8 58

Equity 3.965 4 .5 99 5 8 6 50

Debt towards banks and other lenders 209.733 194.623 - -

Other non current liabilities 6.001 4.960 - -

Total non c urrent l iab i l i ties 21 5.73 4 1 99 .5 83 - -

Trade payables 5.917 6.468 634 3.192

Other current liabilities 17.240 18.438 - 1.016

Total current l iabi l i ties 2 3.157 24 .9 05 63 4 4 .2 08

TOTAL LIABILITIES 24 2.85 7 2 29 .0 88 69 2 4 .8 58

(Euro thousand) 2 016 20 15 2 01 6 20 15

Revenues 41.351 45.123 2.025 4.749

Operating Costs (5.314) (6.036) (2.597) (4.549)

Depreciation and provision (9.492) (10.634) - -

EBITDA 2 6.546 28 .4 53 (572) 200

Financial Income 2.238 2.266 - -

Fair value adj (4.550) 8.290 - -

Financial charges (24.921) (29.306) - -

EBIT 2 4.234 9 .7 03 (572) 200

Taxes (153) (3.229) - -

Resu lt of the year 2 4.081 6 .4 74 (572) 200

Other components of comprehensive income statement - - - -

Net Resu lt of the year 2 4.081 6 .4 74 (572) 200

REISA (Pty) Ltd RES LLC



37

Investments in joint ventures

The jv’s include:

i) WBHO Building Energy LTD (WBHO_BE):

South African joint venture (group share of 30%, WBHO

LTD share of 70%) incorporated in 2012 for the

construction of the Kathu photovoltaic plant reported

for the year an operating profit, which slightly reduced

on 2015 due to the substantial conclusion of plant

operations;

ii) GUMA BUILDING ENERGY PTY (GUMA_BE) in

2016 carried out maintenance activities on the Kathu

plant, with results in line with the previous year;

iii) Tororo Solar North Ltd, a Ugandan joint

venture incorporated in 2014, non-operative at

December 31, 2015, which in 2016 became a Group

96.60% holding and a subsidiary as per IFRS 10 and was

therefore fully consolidated at the reporting date. The

key financial highlights (valued at 100%) of the main

investments in joint ventures are presented below.




Equity as at 1 January 2015 4.599 650

Result of the year (840) (572)

Other component s of comprehensive income statement

Other (12)

Exchange differences 689 (7)

Equity as at 31 December 2015 4.448 58

Ownership 10% 49%

Group's Equity 445 29

Other 23 (240)

Consolidated adjustments (1.254) 212

Fair value carrying value 12.525 -

11.739 0


38

The table below illustrates the reconciliation between the net equity value of the main joint ventures and the

corresponding book value of the investments.

at December 3 1st at Dec ember 31 st at December 3 1st at Dec ember 31 st

(Euro thousand) 2 016 20 15 2 01 6 20 15

Non current asset - 272 296

Financial non current asset 335 532 - -

Total non c urrent asset 335 5 32 27 2 2 96

Trade receivables - - - 517

Other credit and current asset 1.037 467 550 -

Cash and cash equivalent 7.079 6.404 604 176

Total current asset 8.116 6 .8 70 1.15 4 6 92

TOTAL ASSET 8.452 7 .4 02 1.42 5 9 88

Equity 4.806 3 .1 65 10 3 15

Debt towards banks and other lenders - - 36

Other non current liabilities 3.645 2.700 - -

Total non c urrent l iab i l i ties 3.645 2 .7 00 - 36

Trade payables 1.537 1.323 888

Other current liabilities - - 49

Total current l iabi l i ties - 1 .5 37 1.32 3 9 38

TOTAL LIABILITIES 8.452 7 .4 02 1.42 5 9 88

(Euro thousand) 2016 2015 2016 2015

Revenues 940 1.762 3.638 3.721

Operating Costs (90) (28) (3.447) (3.594)

Depreciation and provision - - (91) (92)

EBITDA 850 1.734 100 35

Financial income - 616 - -

Fair value adj - - - -

Financial charges - (2) (9) (6)

EBIT 850 2.349 91 29

Taxes (378) (800) (21) (12)

Result of the year 472 1.549 70 16

Other components of comprehensive income statement - - - -

Net Result of the year 472 1.549 70 16

WBHO_BE (Pyt) Ltd Guma BE (Pty) Ltd

WBHO _BE (P yt) Ltd Guma BE (Pty) Ltd


39

5. Deferred tax assets

Deferred tax assets at December 31, 2016 amounted to

Euro 2,129 thousand, increasing Euro 178 thousand on

the previous year. The account consists of:

- Euro 773 thousand in 2016 concerns deferred

tax assets on tax losses carried forward of BESA Ltd

(South African subsidiary), unchanged on the previous

year, although increasing in the financial statements

due to a positive currency effect of Euro 113

thousand;

- the remaining income tax changes were

generated in the consolidated financial statements

due to a series of inter-company margin reversals

and temporary differences in treatment between

local GAAP, used to prepare the financial statements

of the companies included in the consolidation

scope for local purposes, and IAS/IFRS used for the

preparation of these financial statements.

WBHOBE (Pty) Ltd Guma BE (Pty) Ltd



Equity as at 1 January 2015 3.165 15

Result of the year 472 70

Other component s of comprehensive income statement

Other

Exchange differences 606 17

Equity as at 31 December 2015 4.243 102

Ownership 30% 51%

Group's Equity 1.273 52

Other (12) -

Consolidated adjustments 12

Fair value carrying value -

1.273 52



Deferred/prepaid tax 2.129 1.951 178

2.129 1.951 178

Deferred tax


6. Other non-current assets

The movement in “Non-current assets” principally

relates to:

- the liquidation of securities which the parent

company had in portfolio;

- the payment of Euro 500 thousand on account

for investments in companies holding the preliminary

licenses for construction of two hydro plant (Simo and

Idrolap) currently under development by the Group;

- the release of the cash collateral held by the

parent company for an amount (-Euro 1,875 thousand)

deposited in 2015 in guarantee of a performance bond

issued by GUMA_BE (the bank guarantee was replaced

with an insurance guarantee);

- the release of the restricted cash held by the

vehicle companies owning the Italian photovoltaic

plant (BE Solar 2, BE Solar 4, BE Ascoli and Biotwin)

following the renegotiation of the leasing contracts

with Mediocredito. The released cash (-Euro 778

thousand) was used for early settlement of the

payable.

Under other receivables, the financial receivable from

the associate REISA PYT(Ltd) of the subsidiary Zevoblox

Lld remains substantially unchanged on 2015, although

increasing due to the positive currency difference

generated by the movement of the Euro against the

Rand (positive amount at year-end of Euro 4,156

thousand). For further details, reference should be

made to Notes 1 and 12.

7. Inventories

Inventories consist of panels required for the plant of

the Italian subsidiaries and stored at the warehouses of

the company Gondrand S.r.l. in Vignate (MI).



Other non current_securities 232 (232)

Other non current assets_other receivables 7.648 8.789 (1.141)

7.648 9.020 (1.372)

Other non current assets


(Euro thousand) 2015 Increase Decrease 2016

Finished goods 80 (45) 35

80 - (45) 35

Inventory


The change in the year is due to the sale of panels: the

final value, appropriately adjusted by the obsolescence

provision, represents the realisable value at the

reporting date.

8. Trade receivables

Trade receivables in 2016 reduced (-Euro 2,914

thousand) compared to 2015, a year in which success

fees of Euro 3,600 thousand were invoiced to REISA LTD

following completion of the Kathu plant (collected in

February 2016). This slightly distorted the historic trend

of the item, which therefore net of the success fees was

in line with preceding years. More specifically, in

December 2016, trade receivables from energy sales

(amounting to Euro 1,127 thousand, of which Euro 693

thousand due in Italy and Euro 434 thousand in the State

of New York - USA) increased by approx. Euro 460

thousand on 2015, following the entry into use of the

Geneva (Cornell University) plant during the year; all

trade receivables from IPP operations featured very low

average collection times. Receivables concerning

maintenance activities and consultancy services,

principally O&M on plant, amount to Euro 848 thousand

at the reporting date (Euro 406 thousand due in Italy,

Euro 442 thousand in South Africa). For further details,

reference should be made to the Credit risk paragraph.

9. Other current receivables

Other current receivables increased in 2016, essentially

due to increased tax receivables and payments on

account. The increase in tax receivables principally

concerns the parent company following the payment of

withholding taxes by its Ugandan branch involved in the

construction of the Tororo plant (for Euro 238

thousand), and at the South African subsidiary BESA Ltd

for the overpayment of income taxes for 2015,

at December 31st at December 31st(Euro thousand) 2016 2015 Variance

Trade credits 2.654 5.568 (2.914)

Bad debt provision (15) (15) 0

2.639 5.553 (2.914)

Trade credits

at December, 31st at December, 31st


Tax receivables 2.728 2.189 538

Financial current assets 310 51 (51)

Other current assets 1.503 2.050 (2.050)

Prepayments and accrued income 2.645 579 (579)

7.186 4.869 (2.141)

Other current assets


42

calculated on a provisional basis; this credit of Euro 116

thousand will be utilisable in the coming years. In

addition, tax receivables for indirect taxes increased due

to the choice by a number of Italian companies to

request the repayment of VAT accumulated in 2015,

differing from that undertaken in previous years in

which the matured receivable was generally utilised to

offset other Tax agency debt positions. The VAT

receivable normally matured in the period is added to

this amount. These effects are offset, in other

receivables, from the almost entire receipt in 2016 of

the receivable recorded in the 2015 financial statements

of Zevoblox Ltd from REISA Ltd. The payment was

approx. Euro 893 thousand at the year-end exchange

rate.

Prepayments, finally, reported an increase in payments

on account following the advance recognised by Tororo

Solar North Ltd for the construction of its plant for Euro

2,487 thousand.

10. Cash and cash equivalents

The account only includes immediately available current

accounts and bank deposits, with the exception of a

restricted cash account held by BEHUS LLC for an

amount of Euro 1,871 thousand, as guarantee on the

construction activities at the IOWA plant. On conclusion

of the process (April 2017), the amount was almost

totally released. For further details, reference should be

made to the cash flow statement.

11. Non-current assets for sale

Assets are classified as available for sale where their

carrying amount will be recovered principally through

sale; in particular, the amounts indicated refer to the

total value of the investments in 2 Egyptian companies

for which management expects to finalise preparatory

sales agreements.



Cash and cash equivalent 3.783 9.894 (6.111)

3.783 9.894 (6.111)

Cash and cash equivalent

at December, 31st at December, 31st


Non current asset available for sale 1.493 1.493 -

1.493 1.493 -

Non current asset available for sale


43

Shareholders` Equity

12. Shareholders` Equity

The share capital comprises 12,000,000 shares of a par

value of Euro 1.00; the entire share capital is held by the

company Building Energy Holding S.p.A..

The translation and hedging reserve movements refer to

the changes in the year (see also the section “Other

items of comprehensive income”).

The change in the minority interest share on the

previous year relates entirely to the United States,

where during the year the following operations were

executed:

- following the share capital increase

contributed by Nationwide as Tax Equity

Investors (financial partner with which the

Group has constructed all functioning plant

and those under construction at the Cornell

University site) to the companies owning the

Geneva, Harford and Musgrave plant;

- investment in the share capital of the new

company set up to manage the US plant in

operation (HOLD.CO) by Alliance Fund for an

amount, at the reporting date, of Euro 756

thousand. For further details on the corporate

operation above, reference should be made to

the Significant events paragraph in the

Directors’ Report.

The translation reserve includes the effects of the

conversion of the financial statements of the

subsidiaries with differing local currencies from the

functional currency. The reserve is negative at

December 31, 2016, decreasing on 2015, due to the

net appreciation of the functional currency against

the overseas currencies of the subsidiaries.


Liabilities

13. Bank and other lenders

Liabilities increased Euro 61,946 thousand in the year, with 66% relating to the increase in payables to banks and other

lenders.

The bank undertook in the year new loans, essentially to

support the construction of projects in an advanced

stage of development. In fact, during the year

construction loans particularly rose, in addition to

payables specifically concerning plant under

construction or completed during 2016. The following

table breaks down payables for the funding of projects

at 31/12/2016:

In particular:

1) BEWI LLC, owner of the 30 MW wind plant in

Iowa, signed a construction loan specifically to support

construction activities for Euro 33,800 thousand

(nominal value) at the reporting date with Hannon

Armstrong Inc. (HA). Under the agreement, BEWI

extended in the initial months of 2017 the loan amount



Debts 137.515 75.569 61.946

137.515 75.569 61.946

Payables


(Euro thousand) 2016 <1y >1y 2015 <1y >1y

Corporate financing 42.294 1.852 40.442 40.948 4.764 36.183

of which credit facilities 2.824 1.449 1.375 4.296 3.102 1.195

of which debenture 30.807 292 30.516 28.967 - 28.967

of which loan-facility 8.663 111 8.552 7.684 1.663 6.021

Project Financing 50.545 33.749 16.796 14.659 1.215 13.444

of which project financing 17.705 910 16.796 13.658 517 13.141

of which back construction loan 32.839 32.839 - 769 467 303

Other financing 3.147 3.054 93 232 232 -

95.986 38.655 57.331 55.606 5.979 49.627

Debts to banks and other lenders

at December 31st

(Euro thousand) 2016 <1y 2-5y >5y Currency Rate type Rate

Project financing 17.705 910 6.293 10.503

Biotwin 2 Srl (Medole) 2.034 108 502 1.425 Euro (EUR) varibile

Euribor 1y 1,57%+

4,51%

Biotwin Srl (Asola) 6.131 254 1.222 4.655 Euro (EUR) fisso 7,21%

Be Solar 2 Srl (Ostel lato) 1.440 62 291 1.087 Euro (EUR) fisso 6,08%

Be Solar 4 Srl (Voghera) 1.442 61 288 1.092 Euro (EUR) fisso 6,32%

Be Ascol i Srl (Ascol i Piceno) 1.489 63 296 1.131 Euro (EUR) fisso 6,43%

Odyssey Solar 2 Llc (Geneva) 2.133 361 659 1.113 Dollaro (USD) fisso 5,00%

Tororo Solar North Ltd (Tororo) 3.036 - 3.036 - Dollaro (USD) fisso Libor 6 mesi + 4,75%

Construction Loan 32.839 32.839 - -

Building Energy Wind Iowa (Iowa) 32.839 32.839 - - Dollaro (USD) fisso 5,00%

50.545 33.749 6.293 10.503

Project financing


45

to a nominal Euro 42,615 thousand, reaching the

maximum limit agreed with HA. On March 30, 2017,

thanks to the undertaking of a stake in the plant as a Tax

Equity Investor by Capital One NA – a leading US bank -

the loan was repaid in a single settlement for an amount

of approx. Euro 31,400 thousand, while the remaining

part, of approx. Euro 11,215 thousand was converted

into a permanent loan of ten-year duration;

2) Odyssey Solar 2 LLC agreed a loan with

National Cooperative Bank NA(NCB). According to the

agreement, dated June 16, 2016, the bank financed the

vehicle for a nominal Euro 2,301 thousand, to be repaid

in fifteen years, thanks to which the company has

substantially paid the payables contracted during the

construction phase in the previous year;

3) Tororo Solar North Ltd signed a project

finance loan agreement for a total USD 14,665 thousand

with FMO (Dutch Development Bank - an institution

supporting emerging and developing market private

sector growth), of which at the reporting date USD

3,199 thousand had been effectively received

(corresponding to Euro 3,036 thousand). The loan will

be fully received on completion of project construction,

scheduled for the end of 2017. The duration of the loan

coincides with the useful life of the plant under

construction and therefore will be fully repaid in

September 2033;

4) the renegotiation with Mediocredito

Centrale (Banca Intesa Group) of the terms and

conditions of the finance lease signed in relation to the

construction of the Italian plant (BE Solar 2, BE Solar 4,

BE Ascoli and Biortwin) was completed in the year,

following which the average cost of the underlying loans

decreased from 9.10% in 2015 to 6.51% in 2016.

Simultaneously, the duration of the contracts was

increased by one year, to coincide with the duration of

the benefits from the incentivised tariff, with the

combination of that above reducing the fees incurred by

the four vehicle companies from July 2016;

5) the back-leverage loan granted by Hannon

Armstrong to the subsidiary Building Energy Asset

Management (BEAM) for the Cornell - Snyder Road

project was fully repaid at year-end. The following table

outlines interest rate payments on corporate financing

according to maturity.

at December 31st

(Euro thousand) 2016 <1y 2-5y >5y

Project financing 9.078 1.126 3.305 4.647

Biotwin 2 Srl (Medole) 1.960 121 414 1.425

Biotwin Srl (Asola) 3.715 434 1.532 1.749

Be Solar 2 Srl (Ostellato) 744 86 302 356

Be Solar 4 Srl (Voghera) 777 89 315 373

Be Ascoli Srl (Ascoli Piceno) 819 94 332 393

Odyssey Solar 2 Llc (Geneva) 770 105 313 351

Tororo Solar North Ltd (Tororo) 294 196 98 -

Construction Loan 414 414 - -

Building Energy Wind Iowa (Iowa) 414 414 - -

9.491 1.539 3.305 4.647

Interest on project financing


As part of the corporate debt, no new credit lines were

subscribed by the parent company which during the

year repaid the credit lines in place at December 2015

for a total of Euro 1,906 thousand with Banco Tre

Venezie and Banca Popolare di Sondrio, while a loan

contract with Banca Intesa San Paolo was subscribed for

a nominal Euro 2,000 thousand of five year duration.

The New York branch of Monte dei Paschi di Siena,

following the Committed Credit Facility Agreement

dated May 2014, guaranteed also for 2016 the USD

1,000 thousand credit facility line, corresponding to

Euro 949 thousand at the reporting date, to the US

Group subholding BEHUS Llc.

The outstanding payable on the bond concerns that

subscribed by the Three Hills Capital Partners fund in

July 2015 for a nominal value of Euro 30 million. The

bond is a financial instrument listed on the ExtraMOT

PRO market in Italy; the bond’s duration is five years,

with a single repayment in July 2020. The interest rate

totalling 9% annually requires payment of 4% annually,

with the remaining 5% paid on maturity together with

the capital amount. The bond stipulates financial

covenants requiring the company to fulfil both financial

and operating requirements which protect creditors in

the case of violation. In general, these contractual

clauses cover three types of covenants:

- general: operational type limitations which

require approval by signees, principally

concerning transactions with related parties,

the carrying out of corporate operations, the

sale or transfer of assets, the distribution of

dividends, pledges on Company shares,

according to that set out under the bond

regulation;

- financial: maintenance of a set LTV 1 ratio

indicator (“Loan to Value”, ratio between the

amount of bond capital including interest

matured) and the NAV (“Net Asset Value”,

therefore the present value - established

according to the “Free Cash Flow to Equity”

method - of operating plant, of projects close

to completion and of other assets/liabilities,

reduced by the Group net debt), as detailed in

the bond regulation;

- disclosure: the mandatory publication on the

company website of the consolidated

quarterly, half-year and annual accounts

according to the established timeframes. The

measurement of the financial covenants and

the other contractual commitments is

monitored on an ongoing basis by the

Company. At December 31, 2016, all

parameters had been complied with. The non-

compliance with covenants and other

contractual commitments applied to the

above-mentioned bond, where not

appropriately remedied within agreed

at December 31st

(Euro thousand) 2016 <1y 2-5y >5y Currency Rate type Rate

Credit /Loan facilities 2.824 1.449 1.375 -

Building Energy SpA 1.875 500 1.375 - Euro (EUR) indicizzato Euribor 3m + 3,45%

Building Energy Holding US LLC 949 949 - - Dollaro (USD) variabile Libor 1w + 4,50%

Debenture 30.807 292 30.516 -

Building Energy SpA 30.807 292 30.516 - Euro (EUR) fixed 4% + 5% PIK

Loan-facility 8.663 111 4.909 3.643

Zevoblox 8.663 111 4.909 3.643 Rand (ZAR) floating Jibar 3m + 8% spread

42.294 1.852 36.800 3.643

Corporate financing


47

timeframes, may require the advance

repayment of the outstanding payable.

The subordinated loan relates to the outstanding

amount of the payable granted, also in July 2015 by

Rand Merchant Bank to Zevoblox Ltd - original

amount of R 125,000 thousand - subordinated to

the senior loan project finance on the Kathu

project. The 16 year repayment plan is based on

cash flows from an estimate of dividends which will

be distributed by REISA Ltd until May 2031. The

following table indicates the amount of interest

payments on corporate loans according to

maturity.

14. Other payables and non-current liabilities

Other payables and non-current liabilities increased Euro 1,627 thousand, principally due to higher deferred tax

liabilities of Euro 1,420 thousand.

Deferred tax liabilities increased in the year Euro 1,081

following the recognition to the consolidated financial

statements of the tax effect from the capitalisation of

financial charges from development and construction

activities, as per IAS 23. The remaining increase, net of

currency effects of Euro 17 thousand, relates to the

increase in deferred tax of Euro 253 thousand

concerning BEHUS LLC, based on the consolidated tax

result of the companies operating in the United States.

The post-employment benefit provision reflects the

Group's liability to all employees at December 31, 2016,

net of advance payments made. The increase in the risks

provisions relates for Euro 77 thousand to the accrual

for two legal disputes which at December 31 were still

in progress. The remainder of the increase concerns the

asset retirement obligation (ARO) accrual concerning

at December 31st

(Euro thousand) 2016 <1y 2-5y >5y

Credit /Loan facilities 170 105 66 -

Building Energy SpA 119 54 66 -

Building Energy Holding US LLC 51 51 - -

Debenture 4.198 1.200 2.998 -

Building Energy SpA 4.198 1.200 2.998 -

Loan-facility 15.572 1.068 5.115 9.389

Zevoblox 15.572 1.068 5.115 9.389

19.941 2.373 8.179 9.389

Interest on corporate financing


(Euro thousand) 2015 Increase Decrease 2016

Post-employment benefit provision 601 137 (126) 612

Other risks provisions 190 224 (29) 386

Deferred taxes 197 1.420 1.617

988 1.782 (155) 2.615

Other non current liabilities


48

the US photovoltaic plant at Snyder Road, Geneva,

Hartford and Musgrave.

15. Trade payables, taxes and other non-current liabilities

The increase in trade payables of Euro 14,919 thousand

is substantially due to the construction activities at

Hartford and Musgrave (for an amount of Euro 13,172

thousand). These payables were settled for a total of

Euro 11,856 thousand in the initial months of 2017,

following an additional capital contribution from the Tax

Equity Investor partner to the two photovoltaic vehicle

companies for Euro 4,450 thousand and due to the

agreement of a loan with National Cooperative Bank for

Euro 9,008 thousand.

The change in payments on account relates for Euro

2,400 thousand to the advance recognised to the

Group’s Ugandan branch by Tororo Solar North Ltd on

construction activities at the plant of the same name.

The remainder of the movement concerns the advance

received from BEHUS LLC, which received from Alliance

Fund USD 600 thousand on the sale of investments in

the vehicle companies holding the plant at Iowa and at

Hartford and Musgrave. The operation was successfully

concluded in the initial months of 2017, contributing

cash to the US subholding of USD 10,250 thousand.

Tax payables include:

- at the parent company payables for overdue

taxes of Euro 169 thousand, payables for

withholding taxes on employees and contractors

for Euro 2,514 thousand and payables for tax

agency withholding taxes for Euro 149 thousand;

- in Tororo Solar North Ltd Euro 356 thousand

related to withholding taxes of 6% on EPC

activities (advances and milestone) for which

invoices have been received at the reporting

date. The withholding taxes were paid in January

2017.



Trade payables 27.545 12.626 14.919

Current tax payables 3.316 1.824 1.492

Advances 3.269 11 3.257

Accrual and deferrals 390 299 91

Other current liabi lities 4.395 4.215 180

Total current liabilities 38.914 18.975 19.939

Passività correnti


Income Statement

16. Revenues

The Group as a renewables market operator, as in the

previous year, through its operations generated

revenues from development activities, from plant

construction, from renewable energy production and

from energy trading.

Revenues from sales and services relate for Euro 3,754

thousand to energy sales, for Euro 394 thousand to

energy trading and for Euro 1,585 thousand to

maintenance and consultancy services, principally

O&M. Energy sales increased Euro 528 thousand

following the entry into use of the 2.8 MW photovoltaic

plant in Geneva; in fact, the Italian plant produced

energy for an amount of Euro 2,379 thousand, in line

with 2015, while in the United States the value

increased from Euro 706 thousand in 2015 to Euro 1,375

thousand in 2016. Revenues from operation and

maintenance (O&M) activities amount to Euro 1,585

thousand (+Euro 370 thousand on 2015), of which Euro

799 thousand concerning the subsidiary Homes S.r.l. for

third party plant, increasing (Euro 269 thousand) on the

previous year, due to greater extraordinary works on

third party plant; the remainder mostly concerns

management fees due to the Group for O&M activities

on the Kathu plant. The total decrease in this account in

2016, as outlined in Note 8, relates to the non-recurring

invoicing in the previous year of success fees for Euro

3,600 thousand to REISA LTD, arising on completion of

the Kathu plant. Revenues from sales and services are

broken down by region as follows.

The increase of fixed assets on the previous year

principally relates to EPC contractor activities by the

parent company branch for the Ugandan plant under

construction (+Euro 3,490 thousand); net of this

increase, the account decreased (-Euro 1,529 thousand)

following the reduction in the year of development

activities which satisfy the capitalisation requirements

of IAS 38. The Group during the year in fact mainly


Revenues 5.473 8.374 (2.901)

Increase in fixed assets for internal work 10.596 8.635 1.961

Other operating revenues 1.756 1.344 413

17.825 18.352 (527)

Revenues

Breakdown by geographical area

(Euro thousand) Revenues from sales and services

Europe & Asia 3.295

Africa & Middle East 682

North America 1.496

5.473


50

focused on the execution of developments substantially

completed in previous periods (Tororo, Hartford,

Musgrave, Iowa) and the selection of new opportunities

to be developed which - as still in an initial scouting

phase - do not meet the requirements for their

capitalisation. For further details, reference should be

made to the D&C section of the Directors’ Report and

Note 14 of this document.

Other revenues and income principally comprise the

reversal of bonuses for personnel accrued in 2015 but

not paid for Euro 533 thousand, the reversal of a trade

payable to a South African supplier for Euro 214

thousand and the recognition of liquidated damages

obtained by Argos LLC from the EPC contractor

responsible for the construction of its Geneva plant of

Euro 251 thousand, following the failure to achieve a

number of milestones, as set out in the relative EPC

Agreement.

17. Operating costs

The change in operating costs, overall reducing on 2015, substantially concerns the increase in costs for services, offset

by a reduction in impairments in the year.

The increase in costs for services relates to technical

expenses, due to the entry into use of a new plant

(Cornell Geneva) and, as stated in Note 16, the focus on

the search for new development opportunities which

are still in the initial scouting phase and therefore the

relative costs, which may not be capitalised, with a

greater impact on the income statement. Technical

expenses increased 16% compared to 2015.

.


Raw materials, semi-finished goods and finished products 123 86 37

Cost of services 12.282 10.714 1.568

Personnel 7.188 7.330 (142)

Other operating costs 637 1.046 (409)

Depreciation, impairment and provision 2.731 5.730 (3.000)

22.960 24.906 (1.946)

Operating costs


Labour costs reduced, although the headcount

increased during the year. This is due to a number of

factors, principally the non-recognition of the bonuses

in the year in comparison to the previous year, which

amount to Euro 533 thousand, while salary increases

due to the expansion of the organisation and currency

changes had an opposing effect.

Amortisation and depreciation, principally in line with

the previous year, increased with the entry into use of

the plant held by Argos LLC (Cornell – Geneva) for an

amount of Euro 188 thousand compared to 2015 and of

SCADA software (+Euro 108 thousand). Write-downs

entirely relate to projects which were no longer

considered feasible during the year.

Cost of services

(Euro thousand) 2016

O&M for operating pv plants 1.303

Techical and professional fees 4.243

Travels 1.454

Board of Direction 1.040

Board of statutory 38

Facil ities 719

Insurance 225

Car expenses 469

IT, phones and mobile expenses 381

Legal fees 303

Tax consulting 172

Administrative consulting 270

Payroll 33

Audit 330

Training 47

Bank charges 143

Marketing 291

Miscellaneous 823

Total 12.282


Executives 11 11 -

Employees 85 77 8

96 88 8

Head count


52

18. Net financial income/(charges)

Financial interest increased on the previous year, as in

2016 financial charges on the bond loan and on the

payable to the Rand Merchant Bank contributed for all

12 months of the year, whereas in the previous year only

contributing for a half-year period. These costs are in

addition to those on the payable to NCB contracted by

Odyssey Solar 2. For further details, reference should be

made to Note 12.

Currency gains and losses relates to the adjustments on

amounts in foreign currencies; the balance is the

difference between currency gains and losses

(respectively + Euro 5,518 thousand and - Euro 1,199

thousand), with the currency contributing greatest to

the overall currency gains being the South African Rand.

The Share of investments measured at equity includes

the results of the companies within the Group

consolidation measured under the equity method. For

further details, reference should be made to Note 4.

Depreciation, impairment and

provision

(Euro thousand) 2016

Amortization & Depriciation 1.720

Impairment 1.089

Provision (78)

2.731


Other financial income (672) 12 (684)

Interest (2.415) (1.258) (1.157)

Exchange rate gain or loss 4.319 (2.308) 6.626

1.232 (3.554) 4.785

Financial income and charges


Revenues from partecipating interests valued bu equity method 671 897 (226)

WBHO_BE 635 422 213

GUMA_BE 36 9 27

BEDLA 3 3

Charges from partecipating interests valued bu equity method (126) (147) 21

REISA (1.336) 466 (1.802)

RENEWABLE ENERGY SOLUTION (126) (147) 21

(913) 749 (1.663)

Share of result from partecipating interests valued bu equity

method


53

19. Income taxes

The deferred tax assets are calculated based on the

global allocation criteria, taking into account the

cumulative amount of all of the temporary differences,

based on the average expected rates in force when

these temporary differences reverse. Direct taxes derive

exclusively from the tax income of the Italian registered

companies owning plant and suppliers of O&M services;

the Parent Company tax charge however concerns the

write-down of the tax receivable arising in previous

years which is no longer recoverable. Deferred taxes

principally concern the recognition of tax losses which

are expected to be recovered through future tax profits

(principally in South Africa), in addition to income taxes

generated under the consolidation from the recognition

of capitalised financial interest. For further details,

reference should be made to Note 14.

The table below shows the reconciliation between the theoretical tax rate and the actual tax rate of the Parent Company

for the year 2016:

No deferred tax assets were recorded on the temporary

differences and prior year and current year tax losses of


Current taxes (209) (581) 372

Deferred taxes (1.305) 428 (1.733)

(1.514) (153) (1.361)

Income taxes

(Euro thousand) Value Tax

Result before tax (5.179)

Theorethical tax rate 27,50% (1.424)

Taxable temporary differences in subsequent years (1.246) (343)

Deductible temporary differences in subsequent years 3.247 893

Turning to temporary differences from previous years (89) (25)

Differences that will not be reserved in subsequent years (770) (212)

Taxable IRES profit (4 .0 37 )

(Euro thousand) Value Tax

Difference between value and cost of production (2.822)

Interests (2.084) (116)

Theorethical tax rate 5,57% (157)

Deductible temporary differences in subsequent years - -

Taxable IRAP profit (4 .9 06 ) (2 7 3)

IRES rec onc i l iation

IRAP rec onc i l iation


54

the Parent Company, as in accordance with the

prudence principle it is not possible to currently make a

reliable estimate on the timing of the recovery.

20. Other comprehensive income items

The account refers principally to the changes in the translation reserve. For further details, reference should be made to

Note 12.


55

Other information

The Group has undertaken a number of commitments

and issued guarantees to third parties with regards to

commitments undertaken by the parent company and

the subsidiaries. The contractual commitments

undertaken by the Group with third parties at December

31, 2016 with regards to the acquisition of investments

in vehicle companies, not yet reflected in the financial

statements, total Euro 22,500 thousand. These

contracts, undertaken by the Group through South

African subsidiaries, related to the wind projects of

Roggeveld, Karreebosh, Wiberg, Banna Ba Pifhu and

Wolseley, and provide for: the recognition of a set fee

for the acquisition of the investment in the vehicle

company which owns the relative initiative, subject to

certain conditions and to be paid in a number of

tranches on reaching Preferred Bidder status and

subsequently Financial Close. At December 31, 2016,

the commitments concerning these payments totalled

Euro 9,400 thousand; the recognition of a fee for

support services provided by vendors during the

development phase (Development Service Fees) to be

paid on reaching Financial Close. At December 31, 2016,

commitments for Development Service Fees totalled

Euro 13,100 thousand. In this regard, the conditions

indicated in the agreements relate to established steps

which bring projects closer to realisation and therefore

an increasing commercial value which comfortably

justify the investment. The non-occurrence of the

required conditions render the related financial

commitment void. The amounts indicated may be

subject to adjustment, depending on the percentage

holding which the Group will have in the vehicle

company on financial close. The Group also has in place

with various third party companies non-binding

agreements concerning potential developments which

may translate into financial commitments only on

satisfying set conditions, not yet verified at December

31, 2016: therefore these agreements do not generate

any type of contractual commitment to third parties.

The table below outlines the guarantees given:

(Euro thousand)

Guarantor Guaranteed Beneficiary Amount Maturity date

Building Energy SpA Homes Germana 210 automatic renewal

Bui lding Energy South Africa Pty Ltd Kruisval lei DOE RSA 65 31/12/2025

Bui lding Energy South Africa Pty Ltd Roggeveld DOE RSA 1.937 31/12/2025

Boesmanland Solar Farm Pty Ltd Aggeneis DOE RSA 519 31/12/2025

Lokian Trading and Investments Pty Ltd Kathu II DOE RSA 173 31/12/2025

Bui lding Energy South Africa Pty Ltd Witberg DOE RSA 457 31/12/2025

Bui lding Energy South Africa Pty Ltd Banna ba Pifhu DOE RSA 212 31/12/2025

Bui lding Energy South Africa Pty Ltd Klawer DOE RSA 5 31/12/2025

Navosync Pty Ltd Mkuze DOE RSA 228 31/12/2025

Bui lding Energy South Africa Pty Ltd Masen ALFANAR 2.656 29/03/2017

Tororo Solar North Limited Tororo solar north ERA 14 28/02/2017

Tororo Solar North Limited Tororo solar north ERA 7 30/09/2017

Bui lding Energy SpA Kathu1 REISA 3.747 31/08/2017

Bui lding Energy SpA Ethiopia EEP 21 10/11/2017

Bui lding Energy SpA Tororo solar north Tororo Solar North 157 01/07/2017

Bui lding Energy SpA Tororo solar north Tororo Solar North 157 01/07/2017

Bui lding Energy SpA Namibia Nampower 28 31/03/2017

Bui lding Energy South Africa Pty Ltd Gauteng GAUTENG DEP OF INF DEV 7 28/07/2017



Scuitdrift Solar Pty Ltd Scuitdrift DOE RSA 5 01/02/2018

KHOI-SUN Development Pty Ltd Scuitdrift 2 DOE RSA 5 01/02/2018

Bui lding Energy SpA Ciprea 50 31/12/2022

Bui lding Energy SpA Ciprea 25 30/09/2023

10.697

Guarantees given


The parent company is also a guarantor for its US

subsidiaries and for US beneficiaries for a total amount

of Euro 53,417 thousand, however stated in the

financial statements at December 31, 2016 as

commercial financial payables. At the preparation date

of these notes, many of these guarantees (for a total of

Euro 34,162 thousand) were no longer in place.

With regards to disclosure on transactions with related

parties and upon fees paid to the independent auditors,

the Board of Directors and the control boards, reference

should be made to the Directors’ Report.

Gian Luca Bandini

Chairman of the Board of Directors

Gruppo Building Energy Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016

BUILDING ENERGY GROUP

DIRECTORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31st, 2016

Registered Office in VIATORTONA 15 20100 MILAN (MI). Share capital € 12,000,000.00 fully paid-in

Companies Registration Office No.: 09230261001; Economic and Administrative Register No. 1937961

www.buildingenergy.it

Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016

2

Introduction ....................................................................................................................................................... 4

Group structure at December 31, 2016: The Americas ....................................................................................... 6

Group structure at December 31, 2016: Europe and Asia ................................................................................... 7

Group structure at December 31, 2016: Africa and Middle East ......................................................................... 8

Market overview ................................................................................................................................................ 9

Europe and Asia ........................................................................................................................................... 10

Africa and the Middle East........................................................................................................................... 10

North America ............................................................................................................................................. 10

Latin America ............................................................................................................................................... 11

Regulatory framework .......................................................................................................................................12

Operating performance .....................................................................................................................................15

Introduction ................................................................................................................................................. 15

Plant in use .................................................................................................................................................. 16

Plant under construction ............................................................................................................................. 16

Projects under development ....................................................................................................................... 16

Significant Events in the year .............................................................................................................................18

Financial Statements .........................................................................................................................................21

Balance Sheet .............................................................................................................................................. 21

Income Statement ....................................................................................................................................... 22

Cash Flow Statement ................................................................................................................................... 24

IPP ................................................................................................................................................................ 26

O&M ............................................................................................................................................................ 28

D&C ............................................................................................................................................................. 29

Reclassified Financial Statements ......................................................................................................................30

Reclassified balance sheet .................................................................................................................................30

Reclassified income statement ..........................................................................................................................30

Key Financial Indicators .....................................................................................................................................32

Transactions with group companies and related parties ....................................................................................35

Treasury shares and shares of holding companies .............................................................................................36

Tax consolidation and tax transparency .............................................................................................................37

Subsequent events ............................................................................................................................................38

Outlook .............................................................................................................................................................39

Adoption of the Organisational Model as per Legislative Decree 231/2001 .......................................................40

Workplace safety as per Legislative Decree 81/2009 .........................................................................................41

Management system certification .....................................................................................................................42

Human resources ..............................................................................................................................................43


3

Privacy ...............................................................................................................................................................44

Corporate Boards ..............................................................................................................................................46


4

Introduction

Dear Shareholders,

the financial statements which we present

for your approval, whose changes compared to the

previous year are illustrated in the Explanatory Notes,

present a true and fair view of your Group at December

31, 2016.

This report illustrates a reliable, fair and exhaustive

overview of the Building Energy Group (hereafter also

the “Group”) and the operating performance for the

year, drawing your attention to the main aspects

pursuant to Article 2428 of the Civil Code, as amended

by Article 1, paragraph 1, of Legislative Decree No.

32/2007. The amounts are expressed in thousands of

Euro, unless otherwise indicated.

The Group has operated in Italy since 2010 (and since

2011 on the international market) through an

investment and partnership programme with leading

institutional investors involved in the renewable plant

construction and energy production sector; in the four-

year period 2013/2016, the Group significantly stepped

up its investment on international markets with the

setting up of new subsidiaries (sub-holdings and special

purpose vehicles – “SPV’s”) on 4 continents.

In 2016, we finally began to see tangible results from the

development activities initiated in the preceding years:

a number of plant construction operations were

consolidated in the year (the IOWA wind plant was

almost completed by December 2016, in addition to 2

photovoltaic plant at Hartford and Musgrave), while

another has begun (the photovoltaic plant construction

in Uganda).

In terms of new initiative development and investment,

the Group continued to seize opportunities assessed as

promising by management, beginning as soon as

possible the financing and construction phases.

Also from a strategic standpoint and with a view to

establishing a diversified energy market portfolio, the

Group has proven itself to be forward looking and highly

attentive to new sector developments: while

maintaining its “historic” focus as an EPC contractor,

Developer, IPP operator and O&M service provider, the

Group has laid the foundations to extend its scope -

while remaining committed to renewable energies - and

completing therefore its industrial profile as a supplier

of new products and services, targeting not just

industrial clients (principally in terms of energy trading),

but end-users (with company electric car fleet leasing

and related energy sales through recharging pods);

these new activities will become fully operative during

the current year, also through the establishment of new

corporate entities.

In order to deliver upon the industrial plan and support

growth both through “historic” operations and those

introduced more recently, the Group in 2016 and

throughout the first half year of 2017 successfully

accelerated the sourcing of financing required to

achieve the objectives established both in terms of the

delivery of in portfolio projects and with regards to the

continued research for new developments and

initiatives - which are the true creators of Group value.

In particular:

- through agreements with leading investment

institutions and funds in the USA and South

Africa, between December 2016 and Q1 2017

industrial and financial partnership

agreements were signed which guarantee the

completion of projects already under

development and/or authorised, in the

absence of which the dilution of share capital

in the subholdings would compromise the

parent company’s control;


5

- through the issue of a new financial instrument

(outlined in greater detail in the subsequent

events section, to which reference should be

made), in the completion phase at the

preparation date of this report, which the

Group expects to provide the basis to

consolidate and support its growth on the

domestic and international market.

Also from a more strictly accounting viewpoint, the

Group has consolidated its growth through the setting

up of an IT system for the entire consolidation process

(SAP BPC). The upcoming installation of a centralised

treasury management system, the issue of the Group

accounting manual and the future integration of the

various accounting systems into a single platform will

also further improve the internal control process.


6

Group structure at December 31, 2016: The Americas

BUILDING ENERGY SPA

BUILDING

ENERGY

HOLDING US LLC

BUILDING

ENERGY

DEVELOPMENT

US LLC

MICHELANGELO

WIND 1 LLC

MICHELANGELO

WIND 4 LLC

OPTIMUM

WIND 7 LLC

RENEWENERGY

SOLUTION LLC

VENUS WIND 3

LLC

BE PANAMA S.A.

BE DEVELOPMENT L.A.

PANAMA SOLAR

ENERGY

PROVIDERS S.A.

(PSEP)

EMPRESA DE

PRODUCTION DE

ENERGIA LIMPIA S.A.

(EPEL)

BE ASSET

MANAGEMENT

LLC

ODYSSEY

SOLAR 1 LLC

PENELOPE

SOLAR LLC

ULYSSE

SOLAR 1 LLC

MICHELANGELO

WIND 3 LLC

OPTIMUM

WIND 3 LLC

OPTIMUM

WIND 5 LLC

OPTIMUM

WIND 6 LLC

OPTIMUM

WIND 4 LLC

ODYSSEY

SOLAR 2 LLC

TELEMACHUS

SOLAR LLC

ARGOS

SOLAR LLC

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

49%

49%

1%

1%

51%

51%

95%

95%

49%

35%

43%

SOLAR

PIEMONTE SPA .

90%

BE WIND IOWA LLC

100%

SOLAR

PIEMONTE UNO

SPA.

100%

ODYSSEY

SOLAR 3 LLC

LAERTE

SOLAR LLC

GREEN

CYCLONES LLC

95%

100%

APOLLO

SOLAR LLC

DAPNHE

SOLAR LLC

ARTEMIS

SOLAR LLC

100%

51%

1%

100%

SCILLA SOLAR

LLC

1%

49%

LEONARDO 1

LLC

100%

BUILDING

ENERGY

HOLDCO I° LLC

HOLDING

SUBHOLDING

SPV

JV


7

Group structure at December 31, 2016: Europe and Asia

BUILDING ENERGY SPA

BE SOLAR 4

SRL

BE SOLAR 2

SRL

BIOTWIN 2

SRL

BE ASCOLI

SRL

BIOTWIN SRL

HOMES SRL

BUILDING ENERGY

JAPAN GODO

KAISHA

BE KRUSEVAC

DOO

BE BALKAN DOO100%

100%

100%

100%

100%

100%

100%

80%

BUILDING ENERGY

CROATIA DOO

51%100%

SIE SOLAR SRL

51%

BUILDING ENERGY

SLAVONIJA 1 DOO

100%

BE HYDRO

VERBANO SRL

50%

HOLDING

SUBHOLDING

SPV

JV


8

Group structure at December 31, 2016: Africa and Middle East

0

BUILDING ENERGY SPA

BEDA SRL BEDA 2 SRLBEDA 3 SRL BEDA 4 SRL

BEDA 5 SRL

ZEVOBLOX

(PTY) LTD

BLU SKY

SOLAR (PTY)

LTD

LOKIAN (PTY) LTD

LETIFLASH

(PTY) LTD

ALVIPROX (PTY) LTD

GREEN SKY

SOLAR (PTY)

LTD

RED SKY

SOLAR (PTY)

LTD

PAULPUST (PTY) LTD

ALVIFORCE

(PTY) LTD

SCUITDRIFT (PTY) LTD

KHOI SUN (PTY) LTD

BOESMANLAND SOLAR FARM (PTY)

LTD

ZEVOBUZZ (PTY)

LTD

TOKIRITE (PTY) LTD

ROGGEWELD

(PTY) LTD

ZAMBHOLDING

LTD

NICHELENGE

SOLAR LTD

MWENSE

SOLAR LTD

KAWAMBWA

SOLAR LTD

MANSA

SOLAR LTD

EAST AFRICA

SOLAR

ENERGY LTD

BUILDINEG

ENERGY

SOUTH AFRICA

(PTY) LTD

VENDISYS

(PTY) LTD

KIRACODE (PTY)

LTD

KIRAPAX (PTY)

LTD

TORORO SOLAR

NORTH LIMITED

TORORO SOLAR

SOUTH LIMITED

BE SOLAR

ZAMBIA LTD

WBHO-BE

(PTY) LTD

GUMA BUILDING

ENERGY (PTY) LTD

KIRADEX (PTY)

LTD

KIRANIX (PTY)

LTD

GONDONETIX

(PTY) LTD

VENDIRITE

(PTY) LTD

REISA

(PTY) LTD

NAVOSYNC

(PTY) LTD

100%

100%

10%

100%100% 100% 100%

1%

1%

100%

100%

100%

1%

1%

1%

1%

1C

99%

100%

100%

100%

100%

100%

100%

100%

50%

30%

51%

100%

100%

80%

80%

96,66%

50%

99%

99%

99%

99%

100%

BUILDING

ENERGY EGYPT

JSC

ACCESS

BUILDING

ENERGY SOLAR

ONE

55% 30%100%

VENDIWELL

(PTY) LTD

100%

HYPERION (EX

CYRACOM (PTY

LTD

CYRALEX

(PTY) LTD

CYRAGUARD

(PTY) LTD

SOL

INVICTUS

(PTY) LTD

CYRACLOX

(PTY) LTD

CYRAFUSION

(PTY) LTD

CYRACRAFT

(PTY) LTD

100%

100%

100%

100%

ALUPROX

(PTY) LTD100%

100%

100%

100%

100%

BE CONCESSION

LESOTHO

(PTY) LTD

49%

K201521612

1 (PTY) LTD

BE Uganda

(PTY) LTD

99%

NOMISPAN

(PTY) LTD

NOMISPARK

(PTY) LTD

NOMISPOT

(PTY) LTD

100%

100%

100%

100%

EURONOTUS

(PTY) LTD100%

99%

BREZZA

AFRICANA

(PTY) LTD

100%

HOLDING

SUBHOLDING

SPV

JV

100%

100%

100%

100%

100%

100%


9

Market overview

The Building Energy Group is involved in the production

of electricity from renewable sources, both in Italy and

internationally and employs an integrated approach for

direct input into all operations typical of the sector.

Upon foundation, through its network of subsidiaries

and associates, the Group worked toward establishing

itself as a photovoltaic plant Constructor (“EPC

contractor”); moving with domestic and international

market developments, over time the Group has been

able to pursue a different path, becoming an

independent power producer (“IPP”). With this goal in

mind, the Group has undertaken an increasingly

important role as a Developer of renewable energy

projects, providing engineering services in support of

project development and plant construction, while

retaining a focus on accessory maintenance and

assistance (“O&M”), in addition to own and third party

plant management (“Asset manager”).

Benefitting from growing international pressure for

renewable energies to combat climate change, the

sector - particularly outside of Italy - is quickly expanding

and offers good opportunities for reactive and flexible

players involved across numerous regions providing a

range of technical solutions for the production of

renewable energy (i.e. solar, wind, biomass and hydro-

electric), and in a position therefore to tap into available

opportunities: the latest example of this unprecedented

international drive was of course the global conference

in Paris (November/December 2015) at which more

than 170 countries agreed to a variable 1.5% to 2%

maximum global warming increase over the coming five

years (agreement thereafter signed in New York in April

2016). The recent step backwards by the US following

the election of the United States president who appears

to fully support fossil fuels is a let down for the signatory

countries; it appears however that this development will

not turn back the clock on what increasingly seems to

be the only option to fight climate change before it

becomes irreversible.

However, the support for “green” initiatives continues

to be disparate - as indeed the turnaround in this sense

by the United States indicates. In fact, alongside nations

significantly incentivising renewable energy production,

assisted also by the long-sightedness of local and

international financial institutions open to financing the

growth of renewables through supporting what are

often foreign industrial initiatives - mainly developing

economies, but also mature economies, although not

yet sufficiently developed in terms of renewables - other

states, such as Italy, following the provision of significant

support to the sector through a range of incentives from

2006 have put the brakes on the sector’s development,

introducing, among other matters, legislation (such as

the so-called “incentive decree”, upon which the

Constitutional Court has yet to pronounce with regards

to its constitutionality, raised by a number of parties due

to its retroactive application) which reduce economic

viability in terms of the return on photovoltaic plant

already constructed and in use, slowing the possible

further development of the sector, also in industrial

terms.

Therefore, the Group has increasingly focused on

overseas markets, where significant opportunities are

available: there were 88 companies in the Group

consolidation scope in 2016, 2 less than the previous

year as the net effect of the incorporation of new

entities and the liquidation of others.

The Regional distribution of Group companies is

presented below:


10

The major activities undertaken by the Group in the year by region are outlined below.

Europe and Asia

The main European operations concentrated principally

in the Balkans region and Italy. In particular, the

Krusevac (Serbia, 4MW electric equivalent and 16 MW

thermal) biomass project has almost completed its state

of development, while the development of a similar

project has begun in Croatia, where in 2016 a new SPV

was established after the setting up of the subholding in

the previous year.

The key developments in Italy were as follows:

i) 2 authorisations were obtained for the

construction of 2 hydro plant in the Alto Verbano

(Piedmont) area: the financing and start-up of

construction are scheduled for 2017;

ii) at the end of the year negotiations

began for the acquisition of a company engaged in the

energy trading sector: the preliminary agreement was

finalised in the current year.

Africa and the Middle East

In Africa, development activities continued, although

the financial closes originally scheduled for 2016 were

postponed due to reasons not owing to the Group.

The project for the Tororo (Uganda) photovoltaic plant

was completed, while in December a branch of Building

Energy S.p.A. set up on site to fulfill the contractual

requirements under the EPC contract began

construction.

As shall be outlined at a later point, major efforts were

employed to source on the market the funding

necessary for construction of the wind plant which will

reach financial close: during Q1 2017, an agreement was

signed with Old Mutual, a leading South African financial

institution, who will support the Group as an investor

and as a lender for the creation of the wind portfolio

ahead of construction.

North America

In 2016, the Group consolidated its position in the

United States.

The construction phase of the wind plant in Iowa (the

first Group Wind plant, of a total 30MW capacity) was

almost completed, while two additional photovoltaic

plant in the New York cluster were concluded, in

partnership with Cornell University (connected to the

network in Q1/2017).

In terms of development operations we highlight the

stepped up development of the Annapolis photovoltaic

plant, which is capable of satisfying a considerable

degree of the local city’s energy demand.

Similarly to that outlined for the South Africa Region,

also for the United States a “characteristic”

development activity was flanked at the end of the year

by a more corporate restructuring focussed operation

for the sourcing of the funding required to operate as a

developer. For further details, reference should be

made to the significant events section.

Holding Subholding SPV JV Totalof which not

consolidted

Europe & Asia 1 2 11 0 14 1

Africa & Middle East 0 0 0 0 0

North America 3 24 1 28 12

Latin America 2 4 0 6 1

1 7 39 1 48 14

Shareholding structure


11

Latin America

The development of a 45 MW photovoltaic project in

Panama City, Panama continued.

In Chile, the development of local projects began

through the acquisition of a company.

Through the agreement of a Joint-Venture with the

Scotto Group, an Italian company operating in Chile

since 2005 in the mini-hydroelectric sector, Building

Energy in 2016 laid the foundation for the development

of a portfolio of small projects for a total of approx. 20

MW in the Andean country. The portfolio is based on a

mix of solar photovoltaic and mini-hydro projects for

balanced electricity generation on the Chilean domestic

energy market. The development and license

acquisition process, in part directly managed by the

Joint-Venture and partly coordinated by local

businesses, was completed in the first half of 2017. The

first two plant will begin construction by the end of

2017, with connection to the network by Q1/2018. A

non-recourse loan with Chilean financial institutions is

currently being sourced.

In 2016, the decision was taken to increase the nominal

capacity of the “Punitaqui” photovoltaic project,

acquired in 2015, from an installed 3 MW to 9 MW. In

this regard, as required by Law 20.402 - accurate

environmental studies were conducted for the

presentation of an EIS (Environmental Impact

Statement) to the SEA (Environmental Evaluation

Service), officially submitted in June 2017. The project,

located in one of the areas harvesting most sunlight in

the country, will be ready for construction by the first

quarter of 2018.

With regards to the technology employed breakdown,

there are no significant differences compared to the

prior year; the graph below presents MW in

development by technology (source: Internal Project

Dashboard December 2016), compared with

2015/2016:


12

Regulatory framework

The regulatory framework of incentives for renewable

electricity production comprises various mechanisms

based on (i) the date of entry into use of plant, (ii) the

type of renewable source utilised and (iii) the power of

the plant.

For the internal market, the types of incentives available

to the Group are reported below.

The Feed-in tariff (Conto Energia) for photovoltaic plant

only (Ministerial Decree 06/08/10).

Conto Energia is the incentive instrument for

photovoltaic plant, originally governed by Ministerial

Decree of February 19, 2007 and subsequent

amendments and supplements (which replaces the

previous Ministerial Decrees of 28/07/05 and

06/02/06). For plant entering into use between January

1, 2008 and December 31, 2010, the Ministerial Decree

establishes an energy production tariff incentive broken

down according to the features of the plant themselves

(integrated, partially integrated, not integrated) and the

nominal power (between 1 and 3 kW; between 3 and 20

kW; greater than 20 kW). The incentive is provided by

the GSE for a period of 20 years.

More in particular, in accordance with Law No. 129 of

August 13, 2010, the tariff incentives under the Conto

Energia, governed by Ministerial Decree of February 19

2007, continue to be applied to photovoltaic plant

entering into use also subsequent to December 31,

2010, on the condition that (i) by December 31, 2010

the installation of photovoltaic plant is completed and

the conclusion of works is communicated to the

relevant authorities and (ii) such plant have entered into

use by June 30, 2011.

Ministerial Decree 06/08/10 fixes also a national

cumulative power installation objective by 2020 of 8

GW, with an incentivised power ceiling of 3 GW for solar

photovoltaic plant, 300 MW for integrated plant with

innovative features and 200 MW for concentration

plant. Ministerial Decree 06/08/10 does not distinguish

any longer between plant in terms of their integration

with existing buildings, but according to “constructed

upon buildings” and “other plant”.

Legislative Decree No. 28 of March 3, 2011, enacting

directive 2009/EC/28 (Legislative Decree), establishes

that the provisions of Ministerial Decree 06/08/10 apply

to plant entering into use by May 31, 2011.

In terms of recent developments, under Legislative

Decree 91/2014 of June 24, 2014, the Government has

laid the foundations for a unilateral restructuring

(lowering) of income from the Conto Energia for the full

range of operators: a number of positions have been

taken against this provision both by sector organisations

and the banking sector (the former against the

significant cut in the incentives announced - with major

impacts on profitability for all sector enterprises, the

former in terms of a regulation which puts the capacity

of enterprises to repay loans undertaken for the

construction of plant in serious jeopardy) and by a

number of legal experts, invoking its lack of

constitutionality due to the retroactive effect of its

provisions.

The Conto Energia in 2014 was significantly cut under

the so-called “Incentives Decree” (Ministry for

Economic Development Decree No. 268 of 18/11/2014),

which resulted in a reduction of approx. 8% in Conto

Energia (Feed-in tariff) income (in this regard, on June

24, 2015, the Lazio Regional Administration Court

judgement was published (No. 08669/2015 Reg. Prov.

Reg. No. 15359/2014 Circ. Reg.) which establishes that

the Constitutional Court should definitively consider the

unconstitutionality of the above-stated decree and as to

the legitimacy of retroactive application).


13

We in addition report below the main features of the regulatory frameworks of:

a) South Africa;

b) United States;

c) Panama;

d) Chile;

e) Serbia;

f) Egypt;

a) South Africa.

South Africa published in August 2011 the Renewable

Energy Independent Power Producers Procurement

Program (REIPPPP), which established an initial

allocation of 3,725 MW through a number of public

tenders, subsequently extended to approx. 5,000 MW,

for all renewable technologies, including photovoltaic,

wind, biomass, hydro and concentrated solar. The

country introduced a policy to increase energy

production, in particular from renewables, for two

underlying reasons: the first has a major social value:

this concerns in fact the bringing of basic services to

communities (particularly rural but also many suburban

areas) which have yet to put them in place; the second

is due to the fact that the high cost and insufficient

availability of energy now act as a bottleneck which

holds back - as has happened in the past during load

shedding periods - the economic growth required for

the country to create jobs. This is accompanied in

addition by the need to reduce the high emission levels

caused by a very high dependence on coal-sourced

energy.

This initial allocation was completed during the fourth

tender held on August 19, 2014. The REIPPPP is part of

the twenty-year Integrated Resource Plan (IRP) on

energy, periodically reviewed and updated, and

therefore it is expected that in the new IRP 2017 fresh

allocations of MW will be provided for among the

various renewable technologies as per the usual tender

mechanism under the REIPPPP.

The South African program is considered a global

success story and particularly by all Sub-Saharan African

Governments, who have published or are readying

themselves to launch renewable programs (e.g. Zambia

and Uganda). In fact, in the five years since South Africa

launched its first program with the 2011 tender, the

production costs of solar and wind energy have

respectively dropped by over 400% and 100%. The

opening of new markets with the adoption of renewable

energy investment programs by the main Sub-Saharan

African Governments provides a major growth

opportunity for the market. Overall Sub-Saharan Africa,

with all of its complexities, is a market of over 600

million persons; according to a McKinsey study only

seven countries - Ivory Coast, Gabon, Ghana, Namibia,

Senegal and South Africa - have electricity access levels

of at least 50%, with the remainder reporting less than

20% and average consumption, with the exception of

South Africa, of lower than 150KWh.

b) USA

The United States has a long history of support for

energy infrastructure. The growth of the market is

supported by regulatory certainty, which incentivises

over the long-term private investment, both through tax

breaks (ITC or PTC) for photovoltaic sector investment

and through a programme of a range of incentives from

the US Treasury at federal and state level, according to

the differing types of renewable technologies.

Wind plant incentives: Production Tax Credit (PTC) or

Investment Tax Credit (ITC)


14

Under the American Recovery and Reinvestment Plan

(ARRA) approved on February 17, 2009 by the Obama

administration, a wind programme could choose

between ITC or PTC, although only one of the two.

Where a wind project opted for the ITC incentive it could

receive tax breaks (as previously was the case under the

ARRA) or cash - and however up to 30% of the total

investment. The Cash Grant option was available only

until the end of 2011, thereafter the only option being

tax breaks such as the ITC or PTC.

The Production Tax Credit (PTC) is based on production

in kWh. For 2014, this incentive was fixed at USD

23/MWh for 10 years. The ITC for the wind sector acts

in the same manner as for solar plant but is utilised less

as – as wind has a higher load factor – it is more

advantageous to maximise production and receive the

PTC rather than use the ITC based on an investment tax

discount.

Solar plant incentives: InvestmentTax Credit (ITC)

Solar energy sector incentives are known as Investment

Tax Credits (ITC), tax breaks based on the cost of the

project and not on production in kWh terms.

The ITC reduces the tax charge for individuals or

businesses investing in solar technologies, allowing a

recovery of 30% of the project cost.

Other tax exemptions for solar plant

Additional “solar” tax breaks, including exemptions on

plant ownership and the sale of energy, are provided by

state and local administrations to reduce the costs of

ownership of solar energy plant.

Treasury Program 1603 “Safe Harbour”.

Section 1603 of the “Cash Grant” Program of the US

Treasury has established a major incentive for the

development of renewable energy projects over recent

years, allowing owners of such projects to receive a cash

incentive in place of federal tax credits.

The project was initially introduced until 2010, although

was extended to enable projects entering into service

until the end of 2011 to receive direct cash incentives.

In addition, projects which began construction by the

end of 2011 and entering into service by 2012 (the

majority of which renewable) or 2016 (only for solar)

may use the “Cash” incentive programme, while in all

other cases the ITC or PTC tax incentive, according to

the type of technology, remained an option.

Accelerated depreciation

Similar to many other sectors of the economy, the

United States tax regulations allow enterprises investing

in solar energy to recover some capex costs through tax

deductions and accelerated depreciation.

Solar energy incentive funding policy

The Department of Energy (DoE) through the Loan

Guarantee Programme (LGP) supports the funding of

renewable projects and component and product

production plant for the renewable energy market.

c) Panama

A renewable electricity production incentives system is

not in place in Panama: currently, the only “advantage”

for green energy producers is the priority for supply

over conventional sources and the favourable outlook

of the Government upon the construction of works

suitable to develop the country’s infrastructure.

d) Chile

The Chilean market does not offer renewable energy

production incentives. However, given the abundant

amount of natural resources available, in particular solar

and hydro-electric, renewables have become

competitive with traditional energy sources. Local

distributors have also put in place tenders for the


15

awarding of long-term energy contracts.

For plant smaller than 9 MW, the possibility in addition

exists to opt for stabilised tariffs to minimise electricity

market volatility risk.

e) Serbia

The Serbian renewables market received a boost in

recent years, with the publication of an ad hoc decree in

January 2013 by the local government. The decree

requires by 2020 renewable production comprising at

least 27% of total production, guaranteeing investors

(across all technologies) a Feed in tariff (in Euro) for a

duration of 12 years: given the topography of the

country, particularly rich in forests, 55% of the

renewable production quota is expected to come from

biomass plant, in which the Group is heavily investing.

f) Egypt

The Egyptian government has drawn up a renewables

development plan, which paves the way - among other

matters - for reaching production from renewables of

49 TWh/year by 2022, to contribute 20% of total annual

electricity production.

In addition, together with the Egyptian network

manager EETC tenders have been opened to

international investors for 250 MW of wind power, for

200 MW of photovoltaic and for 50 MW of thermal-

dynamic solar by 2017. The first major step was the

launch in November 2014 of a selection process for the

awarding of 40 lots of land for the installation of 2 GW

in the Ben Ban area with a Feed-in-Tariff of USD 14.34

cents per KWh. This process concluded in 2015 with the

announcement of 40 Preferred Bidders to construct

photovoltaic parks and operate them for the coming 25

years. The Egyptian government will undertake all

network connection infrastructural works.

Operating performance

Introduction

The Group has prepared the consolidated financial

statements from the year ending December 31, 2013 in

accordance with IAS (“International Accounting

Standards”) and IFRS (“International Financial Reporting

Standards”). Investments in joint ventures are therefore

consolidated as per IFRS 11 at equity, with the reflection

of economic impacts to the income statement and

balance sheet respectively in income/charges from

investments and as a change in the value of

investments.

Notwithstanding the required accounting treatment to

consolidate joint ventures, the Group considers their

operations as strategic. Therefore, in order to clearly

represent the Group’s business, a management-based

view of the financial statement figures is provided in this

report, through Proportionate Consolidation and the

“deconsolidation” of equity adjustments and the

consolidation of joint ventures line-by-line,

proportionally to the share held. According to

management in fact, the statutory (hereafter “IFRS” or

“line-by-line consolidation”) and management views are

complementary and necessary for a clearer

understanding of the Group’s operating performance.

The proportionate consolidation figures are not

significant for accounting purposes and are therefore

not audited.

In addition, again for a clearer understanding, the 2016

and 2015 income statements are broken down by


16

Group segment: IPP (Independent Power Producer),

O&M (Operation & Maintenance), D&C (Development &

Construction) and Corporate (accessory activities):

therefore EBITDA may be broken down by segment in

order to better understand profit generation.

Plant in use

The following table breaks down the operational plant

portfolio at December 31, 2016:

The only increase concerns the Cornell – Geneva (USA) plant, fully entering into use in January 2016.

Plant under construction

The following table breaks down plant under construction at December 31, 2016:

In 2016, the wind plant located in Iowa was still under

construction (although practically completed) and was

connected to the network in Q1/2017; similarly, 2

photovoltaic plant in Hartford and Musgrave were also

almost completed by December 31, 2016.

The construction of the photovoltaic plant owned by the

subsidiary Tororo Solar North is however in the initial

phases (order completion at December 31, 2016: 24%).

This plant was constructed internally by Building Energy

S.p.A. through a local EPC contractor.

Projects under development

The table below breaks down plant under development at December 31, 2016:

(MW) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 Δ

Ascoli (ITA) 0,8 0,8 0,8 0,8 -

Ostellato (ITA) 1,0 1,0 1,0 1,0 -

Voghera (ITA) 0,8 0,8 0,8 0,8 -

Asola (ITA) 4,0 4,0 4,0 4,0 -

Medole (ITA) 0,9 0,9 0,9 0,9 -

Cornell Snyder Road (USA) 2,1 2,1 2,1 2,1 -

Cornell Snyder Geneva (USA) 2,8 2,8 2,8

12,4 9,6 12,4 9,6 -

MW by technology

Total Solar

(MW) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 Δ

Tororo (Uganda) 10 - - - 10,0 - 10,0

Hartord (USA) 3 - - - 3,0 - 3,0

Musgrave (USA) 6 - - - 6,0 - 6,0

Cornell Geneva (USA) - 2,8 - - - 2,8 (2,8)

Iowa (USA) - - 30,0 30,0 30,0 30,0 -

Total 19,0 2,8 30,0 30,0 49,0 32,8 16,2

MW by technology

Solar Wind Total


17

Overall, MW in development increased by 100 units

compared to the 2015 pipeline, as a net effect between

the reduction in Hydro sector MW due to the loss of the

bids on the Mozambique projects and the increased

MW in the wind sector, concentrated in South Africa

and the United States.

The table below outlines the projects by state of

advancement in terms of the authorisation process and

the probability of reaching financial close; in particular,

the Group breaks down projects based on the

satisfaction of the following technical and financial

requirements:

- “Projects Backup” projects: valid projects

which have passed the initial screening

concerning forecast returns for the Group and

the funding necessary for development;

- “Backlog” projects: according to whether

concerning public tenders or regulated

markets, backlog projects have at least: (i)

participated in bids and await the outcome

and/or have been “preselected”; (ii) received

network connection approval, at least signed

an option agreement for the use of the land

where the plant will be located and have in

place a financial model which ensures return

on the investment; for backlog projects the

Group estimates a probability of success of at

least 90%.

- “Near Notice to Proceed” projects: in this case

also, according to whether concerning public

tenders or regulated markets, projects defined

as close to initiation have at least: (i) been

selected to proceed with plant construction

(“Preferred bidder status” , in particular with

regard to the South African market and/or

completed the development phase and

received all construction permits and are

therefore close to signing contracts to begin

construction, in particular both debt and

capital funding contracts (financial close). For

Notice To Proceed (hereafter “NTP”) projects,

the Group estimates a probability of success of

between 90 and 100%.

The NTP projects are broken down as follows:

(MW) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015

Europa & Asia 17 17 2 - 67 67 - 86 84 3% 3%

Africa & MENA 17 17 5 105 1.597 1.675 765 485 2.384 2.282 91% 91%

North America - - 25 35 - 25 35 1% 1%

Latin America - - 124 118 - 124 118 5% 5%

Total MW 34 33 7 105 1.813 1.896 765 485 2.619 2.519 100% 100%

MW by technology

Biomass Hydro Solar PV Wind Total MW %

Backup Backlog Near NTP Totale

Europa & Asia 79 7 86

Africa & MENA 1.683 477 223 2.383

Nord America 8 17 25

America Latina 70 9 45 124

Totale 1.840 503 275 2.618

MW per status


18

Significant Events in the year

In 2016, the Group sharpened its focus on renewable

energy plant development and management projects,

consolidating its positions, while attracting also outside

investment with the THCP fund becoming a Group

financier; in particular:

Building Energy awarded 50 MW photovoltaic project in

Mali

In February 2016, Building Energy was awarded a

generation license for a photovoltaic plant of over 50

MWp as part of the program promoted by the Mali

Ministry for Energy and Electricity. Completion of

network studies and environmental authorisation is

expected in 2017, in addition to the financial close, with

construction scheduled to begin in 2018.

Photovoltaic project in Tororo reaches financial close

In November 2016, Building Energy completed the

financial close and began construction of the 100 MWp

photovoltaic plant in Tororo, Uganda. The project,

awarded as part of the GET FiT tender managed by KfW,

will be constructed and become operative during 2017.

Building Energy awarded two Small Scale REIPPPP

photovoltaic projects in South Africa for 10 MWp

In December 2016, Building Energy was granted a

license for the generation of two photovoltaic plant in

Northern Cape as part of the REIPPPP Small Scale

program promoted by the South African Government.

Construction is scheduled for completion in 2018.

Building Energy completes proprietary photovoltaic plant

portfolio generating photovoltaic energy acquired by

Cornell University (USA)

The successful construction of the initial photovoltaic

projects on the sites owned at Cornell University in New

York state have enabled Building Energy to continue

with the construction of three further plant in 2016,

reaching a total installed capacity of approx. 14 MW.

Alongside the Snyder Road and Geneva photovoltaic

plant constructed in 2014 and 2015, in 2016 the

Harford, Musgrave East and Musgrave West plants were

added, all located in various localities around the

University Campus.

For the last three plant constructed in 2016 and

entering into use in December, Building Energy

obtained and finalised the “tax equity agreement”,

again with the Nationwide finance partner. The entire

portfolio - which includes in fact five photovoltaic plant

- will satisfy approx. 7% of the University Campuses

entire energy consumption.

Building Energy completes construction works for new

Project Country MW Technology Construction

Idrolap Italy 1 Hidro Q3/2017

Simo Italy 1 Hidro Q3/2017

Klawer South Africa 5 Wind Q4/2017

Kruisvallei South Africa 5 Hidro Q4/2017

Krusevac Serbia 5 Biomass Q4/2017

Mkuze South Africa 17 Biomass Q1/2018

Roggeweld South Africa 147 Wind Q4/2017

Sikasso Mali 50 Solar PV Q4/2018

Tocumen Solar PV 45 Solar PV Q3/20107

Total 275

Projects in Near NTP


19

wind plant in North America

On February 4, 2016, the financial close of the first

Building Energy wind project was reached, with the

conclusion of the Loan Agreement (Construction

Loan+Perm Loan) with Hannon Armstrong

Infrastructure Fund (NYSE:HASI), a US infrastructure

fund listed on the NYSE and specialised in renewable

project funding. After closing the Tax Equity with Capital

One Bank at the end of 2015, this additional agreement

completes the entire financing for the project.

The plant, of a value of approx. USD 58 million, were

constructed throughout 2016 and partly entered into

use at the end of 2016, with some entering into use in

the initial months of 2017.

All the energy produced, estimated at approx. 110 GWh,

will be sold to the local utility Alliant Energy on the basis

of a long-term electricity sales contract (PPA) of 10 year

duration, with an additional 10 year renewal option for

BE.

The plant located in four counties in the State of Iowa

will in addition supply renewable energy to many local

communities through the distribution network,

satisfying therefore the needs of approx. 11,000 US

families and reducing CO2 emissions by approx. 100,000

tonnes.

Building Energy completes development of the largest

photovoltaic plant in a landfill in the United States

The Annapolis Solar Park 18MW project which is part of

the Annapolis Renewable Energy Park (AREP) program

promoted by the municipality of Annapolis completed

the development process in 2016.

The plant will be capable of producing approx. 22 GWh

per year - approx. 12% of the entire city of Annapolis’

demand.

Agreements for the sale of energy were in addition

completed on the basis of 20 year contracts with the

City of Annapolis which owns the site on which the

photovoltaic plant will be constructed, in addition to

Anne Arundel County which will purchase a substantial

portion of energy generated by the plant, as will the

department managing the County’s schools, which lastly

will acquire a portion of energy generated by the plant.

Currently, the project is in the funding stage with a

leading US commercial bank, which will operate both as

a Tax Equity partner and a debt structuring bank.

The start-up of on site works is scheduled before the

end of June 2017, with connection to the Utility BGE

network by the first quarter of 2018.

Building Energy completes operation with Goldenset

Capital Partner to fund further North American

development.

Building Energy Holding US completed a USD 12 million

agreement for investment in a Preferred Equity

operation with the Alliance North Sky Capital II Fund.

The agreement stipulates the provision in two tranches

by BEHUS of 43 MW of solar and wind projects operative

at the end of 2016 and at the beginning of 2017 to a

newly established Holdco, while the fund will contribute

USD 12 million for the purchase of newly issued Holdco

preference shares. This Holdco will be fully held by

BEHUS which holds 100% of the class B ordinary shares,

while the fund holds 100% of the class A preference

shares.

The investment was organised and managed by

GoldenSet Capital Partners LLC (a subagent of Alliance

Fund II), while BEHUS was represented by MVP Capital,

one of the leading consultants for renewable energy

businesses and investors, based in San Francisco.

With this operation, BEHUS continues to invest in new

developments to support growth in North America over

the coming years.

Building Energy secures the option to construct 2 hydro

plant in the Alto Verbano area

In November 2016, the GSE published the list of projects

awarded hydro energy incentives: two projects of

companies which will in the future belong to the Group

were selected, and therefore once the preliminary

phase for the acquisition of holdings in the 2 SPV’s is


20

completed, Building Energy through its subholding may

begin the financing phase and launch the construction

phase as the EPC contractor of the two plant, which

overall total 1.8 MW.

Building Energy SPA signs EPC contract for USD

15,330,000

In November 2016, Building Energy signed a contract for

the construction of a 10 MW photovoltaic plant for its

subsidiary Tororo Solar North. The plant will be

constructed through a specially established Be S.p.A.

branch in Uganda.

Building Energy directly enters the energy trading market

In December 2016, Building Energy signed a preliminary

purchase contract for the company 4Energia s.r.l.,

operating since 2015 on the Italian electricity trading

market: the aim is to further diversify, adding to the

Group “value chain” also accessory renewable

production services to guarantee the company greater

stability in terms of revenues and cash flows, in a sector

which has not yet reached maturity and which offers

therefore significant room for growth.


21

Financial Statements

As stated in the introduction, the financial statements

are presented on two separate bases: IFRS and

Proportionate Consolidation.

Proportionate Consolidation, based on the same

statutory result, presents the revenue and cost accounts

inclusive of the proportional results of the joint

ventures.

In particular, the following joint ventures were

consolidated proportionally:

- WBHO/Building Energy Pty (Ltd) (also

WBHO/BE): company (held 30%) operating as

an EPC contractor for the construction of the

Kathu (South Africa) 81 MW photovoltaic

plant.

- Guma/Building Energy Pty (Ltd) (also

Guma/BE): company (held 51%, although not

controlled) acting as an O&M contractor for

the maintenance of the Kathu 81 photovoltaic

plant.

- Renewable Energy Solution LLC: company

(held 49%) acting as an EPC contractor and

O&M service provider for photovoltaic plant in

the United States, both on behalf of the Group

and third parties.

Balance Sheet

Non-current assets increased Euro 64,679 thousand,

principally due to the increase in property, plant and

equipment (+Euro 61,679 thousand) and intangible

assets (+Euro 5,069 thousand), as reflected in the “plant

in use”, “plant under construction” and “projects under

development” categories.

The differences compared to Proportionate

Consolidation were not significant.

Current assets decreased Euro 6,751 thousand, as a

combined effect of the contraction of trade receivables

(-Euro 2,914 thousand) - which in the previous year

included also one-off invoicing of the final tranche of the

success fees to the associate REISA - and the contraction

of cash and cash equivalents (-Euro 6,111 thousand) due

to the non-achievement of a number of financial closes

which would have generated success fees for collection.

The differences in terms of the Proportionate

Consolidation are reduced as the movement in cash and

cash equivalents for the proportionate consolidation

were more contained, which in 2015 reflected greater

cash and cash equivalents, particularly with regards to

the proportionate contribution of WBHO/BE.

Assets for sale (for Euro 1,493 thousand) include the

investments in the Egyptian companies incorporated for

(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance

TOTAL ASSET 163.481 105.553 55% 165.624 110.330 50%

Total non current asset 148.342 83.663 77% 147.101 83.017 77%

Total current asset 13.646 20.397 (33%) 17.030 25.820 (34%)

Total asset for sale 1.493 1.493 0% 1.493 1.493 0%

TOTAL EQUITY & LIABILITIES 163.481 105.553 55% 165.624 110.330 50%

TOTAL EQUITY 25.966 29.983 (13%) 25.966 29.983 (13%)

Total Group Shareholders' equity 18.498 27.728 (33%) 18.498 27.728 (33%)

Third part equity 7.469 2.255 231% 7.469 2.255 231%

TOTAL LIABILITIES 137.515 75.570 82% 139.658 80.347 74%

Total non current l iabil ities 59.947 50.615 18% 59.947 50.978 18%

Total current l iabil ities 77.567 24.955 211% 79.711 29.369 171%

Total l iabil ities for sale - - n/a - - n/a

Statutory Proportionate consolidation


22

the construction of two photovoltaic plant of 65 MW

capacity each, whose sale is expected upon financial

close.

Shareholders’ equity principally decreased as a result of

the following factors:

- the net result (-Euro 6,205 thousand),

- the change in the translation reserve due to

currency movements against the Euro as the

reference currency (-Euro 872 thousand);

- the increase in the minority shareholder

portion due to the operation concluded with

Golden Set in the United States (+Euro 4,823

thousand);

- the exit from the consolidation scope of the

liquidated companies (-Euro 1,834 thousand).

There were no changes compared to the proportionate

consolidation.

Non-current liabilities increased Euro 9,332 thousand,

principally due to greater payables to banks and other

lenders for Euro 7,704 thousand and of deferred taxes

for Euro 1,421 thousand.

For further details on these loans, reference should be

made to the Explanatory Notes to the consolidated

financial statements.

The differences compared to Proportionate

Consolidation were not significant.

Finally, current liabilities increased significantly, for Euro

52,613 thousand, principally due to the following

factors:

- the increase in the financial payable to banks

for the subscription of a short-term

“construction loan” for the Iowa wind plant

(+Euro 32,839 thousand);

- increased trade payables to suppliers for the

construction of the above plant;

- increased advances recognised to suppliers

and subcontractors for the construction of the

photovoltaic plant in Uganda.

Income Statement

EBITDA decreased Euro 1,581 thousand on the previous

year; this reduction - partially offset by the recognition

of extraordinary items for Euro 750 thousand - is due to

the fact that during 2015 the final tranche of the success

fees relating to the Reisa plant were recognised which,

net of the release to the income statement of the

related costs, contributed for approx. Euro 2,200

thousand to the previous year’s EBITDA. There were no

significant changes in terms of the proportionate

consolidation. A more detailed analysis of the


INCOME STATEMENT

Value of production 17.825 18.352 (527) 20.955 23.812 (2.857)

Consumption of materials and dervices (13.042) (11.845) (1.197) (15.519) (16.756) 1.238

Value Added 4.783 6.507 (1.724) 5.436 7.055 (1.619)

Labour (7.188) (7.330) 142 (7.614) (7.489) (125)

EBITDA (2.404) (823) (1.581) (2.178) (433) (1.744)

Depreciation and amortization (2.731) (5.730) 3.000 (2.777) (5.777) 3.000

EBITD (5.135) (6.554) 1.419 (4.955) (6.210) 1.256

Financial income and charges 1.359 (3.565) 4.924 1.848 (3.370) 5.218

Value adj of financial assets (915) 761 (1.676) (1.461) 471 (1.931)

Operating profit attribuitable to minority - - - -

PROFIT BEFORE EXTRAORDOINARY ITEMS AND TAXES (4.691) (9.358) 4.667 (4.567) (9.110) 4.543

Extraordinary income and expenses - - - - - -

PROFIT BEFORE TAX (4.691) (9.358) 4.667 (4.567) (9.110) 4.543

Tax (1.514) (153) (1.361) (1.639) (401) (1.237)

NET PROFOT/LOSS FOR THE PERIOD (6.206) (9.511) 3.306 (6.206) (9.511) 3.305

Net profit/loss attribuitable to minority 383 237 146 383 237 146

Other components of comprehensive income (872) 662 (1.534) (872) 662 (1.534)

NET PROFOT/LOSS OF PARENT COMPANY (7.078) (8.849) 1.771 (7.078) (8.849) 1.771



23

consolidated income statement accounts is presented below.

Revenues decreased Euro 2,901 thousand, partially

offset by increased internal works capitalised (+Euro

1,961 thousand) due to the construction of the Tororo

plant, which was absent in the year.

Other operating revenues rose due to the recognition of

extraordinary and non-recurring items. Service costs

increased as a result of higher EPC costs relating to the

Tororo project. Personnel costs and other operating

costs did not report significant changes compared to the

previous year, while amortisation, depreciation and

write-downs improved due to the fact that in 2016 the

Group, although recognising write-downs on projects

no longer considered feasible, did not write-down any

of the projects belonging to entire regions from which it

was decided to fully divest.

A full consolidation EBITDA loss is reported (Euro 2,404

thousand), while the management view reported an

improvement of Euro 227 thousand (loss therefore of

Euro 2,178 thousand), as reflecting the operating

margins of Joint ventures, reporting an overall net profit

(in particular WBHO/BE and Guma/BE, while RES

reported a loss).

Financial management improved overall compared to

the previous year, due to the following developments:

- currency effect (favorable) on foreign

currencies against the Euro (+Euro 4,521

thousand);

- impact (negative) from the valuation at equity

of the JV’s, principally due to the amortisation

of the fair value calculated on the gain

emerging in the year in which the Group

disposed of 90% of the associate REISA PTY

(LTD);

- impact (negative) of financial charges on loans,

due to the greater recourse to such for the

entire financial year, where in the previous

year the most significant (the Euro 30 million

bond loan and the Rand 125 million Future

Growth facility) contributed only from the

month of July.


24

Cash Flow Statement

Net cash flows were generated from operations due to

changes in net working capital, particularly the increase

in trade payables not settled at December 31, 2016.

Cash flows from investing activities (absorption of Euro

68,960 thousand) principally concern the absorption of

cash to fund expenditure on property, plant and

equipment (for plant under construction) and intangible

assets (relating to the loan for project development).

Cash flows from financing activities relate to the new

debt instruments undertaken by the Group during the

year: the significant increase concerns the short-term

lines subscribed for the construction of the Iowa wind

plant.


Cash flows from operating profit (indirect method) 22.227 3.552 >100% 21.360 2.484 >100%

Cash flows from investing activities (68.960) (32.071) 115% (68.438) (32.163) 113%

Cash flows from financing activities 40.623 34.859 17% 41.085 34.701 18%

INCREASE/DECREASE IN CASH (6.110) 6.339 <(100%) (5.994) 5.021 <(100%)



25

Results by operating segment

A reconstruction of EBITDA by the Independent power

producer (“IPP”)”, Operation & Maintenance (“O&M”),

Advanced Energy Services (“AES”) and Design &

Construction (“D&C”) segments, together with an

EBITDA comparison between IFRS and management

through Proportionate Consolidation is shown below.

(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance

Revenues 3.754 3.226 528 1.849 1.545 304 395 - 395 114 3.931 (3.817) 248 339 (90) (599) (667) 68

Other revenues - - - - - - - - - - - - 1.835 1.372 463 (79) (28) (51)

Increase in fixed asset - - - - - - - - - 10.308 8.635 1.673 - - - - 0 (0)

Total Revenues 3.754 3.226 528 1.849 1.545 304 395 - 395 10.422 12.566 (2.144) 2.083 1.710 373 (678) (695) 17

Consumables - - - (6) (5) (1) - - - - - - (118) (81) (36) (0) - (0)

Services (512) (529) 17 (662) (433) (229) (392) - (392) (8.182) (7.656) (526) (3.133) (3.336) 203 599 1.240 (640)

Personnel - - - - (210) 210 - - - (3.740) (4.205) 465 (3.447) (2.915) (532) (0) - (0)

Other operating cost (715) (181) (534) - - - - - - - - - - (864) 864 78 - 78

EBITDA 2.527 2.516 11 1.182 898 284 3 - 3 (1.500) 705 (2.205) (4.615) (5.486) 872 (1) 545 (545)

(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance

Revenues 3.754 3.226 528 3.703 3.470 233 395 - 395 1.389 7.463 (6.074) 248 339 (90) (599) (667) 68

Other revenues - - - 1 - 1 - - - - - - 1.835 1.374 461 (79) (28) (51)

Increase in fixed asset - - - - - - - - - 10.308 8.635 1.673 - - - - 0 (0)

Total Revenues 3.754 3.226 528 3.704 3.470 234 395 - 395 11.696 16.098 (4.401) 2.083 1.713 370 (678) (695) 17

Consumables - - - (6) (5) (1) - - - - - - (118) (81) (36) (0) - (0)

Services (512) (529) 17 (2.101) (2.226) 125 (392) - (392) (9.230) (10.681) 1.451 (3.133) (3.429) 296 599 1.240 (640)

Personnel - - - (319) (210) (109) - - - (3.848) (4.205) 358 (3.447) (3.074) (374) (0) - (0)

Other operating cost (715) (181) (534) - - - - - - 10 - 10 - (864) 864 78 - 78

EBITDA 2.527 2.516 11 1.279 1.030 249 3 - 3 (1.371) 1.211 (2.582) (4.615) (5.735) 1.121 (1) 545 (545)

(Euro thousand) 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance

Revenues - - - (1.854) (1.925) 71 - - - (1.274) (3.532) 2.258 - - - - - -

Other revenues - - - (1) - (1) - - - - - - - (3) 3 - - -

Increase in fixed asset - - - - - - - - - - 0 (0) - - - - - -

Total Revenues - - - (1.855) (1.925) 69 - - - (1.274) (3.532) 2.258 - (3) 3 - - -

Consumables - - - - - - - - - - - - - - - - - -

Services - - - 1.439 1.793 (354) - - - 1.048 3.025 (1.977) - 93 (93) - - -

Personnel - - - 319 - 319 - - - 107 (0) 107 - 159 (159) - - -

Other operating cost - - - - - - - - - (10) - (10) - - - - - -

EBITDA - - - (97) (132) 34 - - - (129) (507) 377 - 249 (249) - - -

IPP O&M (+ Asset Management) AES Desing & construction Corporate Conso Entries

Proportionate consolidation


Differences between fully and proportionate consoliated



26

IPP

The Group IPP (“Independent power producer”)

revenues comprise the sale of energy produced by plant

owned by the subsidiaries; from 2016, trading activity

revenues are presented in the AES (“Advance Energy

System”) section.

Group energy production concerns 7 photovoltaic plant

(all fully functional in 2015) and a Green Energy

Temporary Solution (“G.E.T.S.”) plant in use from

October 2015 to May 2016.

Energy sales increased due to the contribution

throughout the year of the Cornell University

photovoltaic plant (Geneva, 2.8 MW photovoltaic),

connected in September 2014.

All IPP revenues generated in 2016 derive from

photovoltaic plant.

The following table compares energy production in the

2015-2016 two-year period:

There were no changes between the statutory view and

Proportionate Consolidation as the Joint ventures taken

into consideration in the Proportionate Consolidation

do not carry out IPP activities.

However, management reports the results not just of

the Joint ventures (included in the proportionate

consolidation in the tables at page 28), but also of the

non-controlled SPV’s involved in IPP activities, which are

not defined at JV’s. For this reason EBITDA Adj (“Earning

Before Interests, Taxes, Depreciation and Amortisation

Adjusted”) was defined as the Group management

EBITDA plus the proportionate share of the JV and SPV

EBITDA. EBITDA Adj is not a recognised accounting

indicator and consequently may not be compared with

other similar indicators used by sector companies.

Specifically, reference is made to the company REISA

LTD which owns the Kathu 81 plant, with a Group

holding of 10% consolidated (both on an IFRS and

Proportionate Consolidation basis of the JV’s) at equity.

The net profit of REISA, following amortisation,

Plant 31st Dec 2016 31st Dec 2015 Δ

Ascoli 995.671 1.011.381 (15.710) -2%

Medole 1.144.996 1.162.837 (17.841) -2%

Asola 4.449.934 4.445.617 4.317 0%

Ostellato 1.082.160 1.091.027 (8.867) -1%

Voghera 2 852.955 831.078 21.877 3%

Total Italy 8.525.716 8.541.940 (16.224)

Italy energy sales (€/000) 2.373 2.486

Average selling price 0,28€ 0,29€

Cornell Snyder Road 2.518.744 2.134.571 384.173 18%

Cornell Geneva 2.699.041 - 2.699.041 n/a

Total US 5.217.785 2.134.571 3.083.214

USA energy sales (€/000) 1.375 706


Saudi Arabia 20.840 7.674 13.167 172% PPA

GETS Total 20.840 7.674 13.167

GETS energy sales (€/000) 6 2


Total 13.764.341 10.684.185 3.080.156

Tetal revenues 3.754 3.194


Price components

Power production (KWh)

market price (*) + Government feed in tariff (IV Conto Energia)





market price + fedreal feed in tariff (Nyserda)

market price + fedreal feed in tariff (Nyserda)


27

depreciation and write-downs, financial management

and income taxes, amounts to Euro 3,603 thousand,

slightly reducing on 2015 (-Euro 200 thousand),

exclusively due to the currency effect, as in fact the

operating profit in the local currency improved 6%.

The following table reports the JV and SPV

Proportionate Consolidation results, together with the

EBITDA Adj indicator, both as an impact on the total

operating result and on the operating result of the b.l.

IPP alone.

(Euro thousand) 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631 dicembre 2015 Δ

Total revenues 20.955 23.812 (2.857) 3.754 3.226 528

REISA 10% 4.135 4.390 (255) 4.135 4.390 (255)

Total Revenues Adj 25.090 28.202 (3.112) 7.889 7.617 273

Ebitda (2.178) (433) (1.744) 2.527 2.516 11

REISA 10% 3.604 3.803 (199) 3.604 3.803 (199)

Ebitda Adj 1.426 3.370 (1.944) 6.131 6.319 (188)

Proportionate consolidation + REISA 10% IPP


28

O&M

The Group operates as an O&M contractor (“Operation

& maintenance” i.e. “provider of renewable energy

plant management and maintenance services”) for both

owned plant and third party plant through the following

companies:

- Homes S.r.l. (subsidiary) which provides

management and maintenance services to

photovoltaic plant owners in Italy;

- RES Llc (Joint Venture) which provides O&M

services to photovoltaic plant owners in

America;

- Guma/BE Pty Ltd (Joint Venture) which

provides management and maintenance

services exclusively for the Kathu plant in South

Africa. The following table, reporting also

“contractualised” MW, compares the key

statutory and management figures for 2016-

2015.

IFRS revenues from O&M activities increased Euro 304

thousand, principally due to increased extraordinary

maintenance, particularly in Italy where during the year

there was a normal turnover of new contracts and

concluding contracts. For the Proportionate

Consolidation the contribution from Kathu plant

activities is greater as the revenues of the Guma/BE JV

are considered, in addition to the consultancy services

provided by the Group. The EBITDA difference between

the statutory and management figures is not significant

as both Joint ventures only contribute marginally.

Plant 31st Dec 2016 31st Dec 2015 Δ 31st Dec 2016 31st Dec 2015 Δ

Ascoli 0,80 0,80 - 0,80 0,80 -

Asola 3,95 3,95 - 3,95 3,95 -

Medole 0,92 0,92 - 0,92 0,92 -

Ostellato 0,98 0,98 - 0,98 0,98 -

Voghera 2 0,83 0,83 - 0,83 0,83 -

Casamassima I 1,00 1,00 - 1,00 1,00 -

Casamassima II 1,00 1,00 - 1,00 1,00 -

Conversano I 1,00 1,00 - 1,00 1,00 -

Conversano II 1,00 1,00 - 1,00 1,00 -

Pieve di Cento 1,69 1,69 - 0,00 - -

Poggiardo 0,92 0,92 - 0,00 - -

Rutigliano 1,00 1,00 - 0,00 - -

Voghera 1 0,58 0,58 - 0,00 - -

Alanno (PE) 1,00 - 1 1,00 - 1

Torricella 0,97 - 1 0,00 - -

Montenerodomo 1,60 - 2 1,60 - 2

San Benedetto 0,60 - 1 0,60 - 1

Torricella Peligna 0,99 - 1 0,00 - -

Lesegno 1,00 - 1 0,00 - -

Rivolta d'Adda Land 1,00 - 1 0,00 - -

Rivolta d'Adda Roof 1,00 - 1 1,00 - 1

Cremona 1,00 - 1 0,00 - -

Rio Martino 0,00 1,73 (2) 0,00 1,73 (2)

Montalto di castro 0,00 2,74 (3) 0,00 2,74 (3)

Borgo Piave 0,00 3,52 (4) 0,00 3,52 (4)

Nettuno 0,00 2,55 (3) 0,00 2,55 (3)

Total Italy (MW) 24,80 26,2 9 15,68 22,0 4

Totale revenues Italy (€/000) 1.062 859 1.062 859

Cornell Snyder Road 2,10 2,10 - 2,10 2,10 -

Cornell Geneva 2,80 - 3 - - -

Baltimora - 1,20 (1) - 1,20 (1)

Total Usa (MW) 4,90 3,30 2 2,10 3,30 (1)

Totale revenues USA (€/000) 121 - 121 29

Kathu 81,00 81,00 - 81,00 81,00 -

Total Africa (MW) 81,00 81,00 - 81,00 81,00 -

Totale revenues Africa (€/000) 666 686 2.520 2.581

Total O&M revenues 1.849 1.545 304 3.703 3.470 233

Relationship between MW under O&M contracts and main financial data



29

D&C

The Group is engaged in development and construction,

undertaking an integrated approach.

Project development (which includes, among others,

feasibility studies, system design, permit applications,

grid connection, negotiation of PPA and other

agreements) is managed directly by the Group through

the holding company and its local subholdings.

Revenues from this activity are broken down as follows:

- development revenues, including (i) revenues

from invoicing of third party consultancy and

(ii) revenues from development completion

(“Success Fees”);

- increase in fixed assets for internal work, which

represents the development of proprietary

projects.

During the construction phase, the Group carries out

both EPC contractor operations and engineering,

procurement and design services in support of

construction.

EPC contractor activities are generally carried out by

Joint ventures (WBHO/BE and RES) and generate direct

EPC revenues. WBHO/BE is operative in South Africa and

was incorporated in 2012 together with the industrial

partner WBHO PTY, for the construction of the Kathu 81

MW photovoltaic plant, while RES is operative in the

United States and was incorporated in 2013 with the

industrial partner ABM to identify industrial

opportunities for the construction of onsite

photovoltaic plant (in addition to the management of

O&M activities in the same region).

In 2016, however, the parent company returned to

directly execute EPC contractor operations: through the

incorporation of a branch in Uganda, Building Energy

S.p.A. operated as a contractor for the construction of a

10 MW photovoltaic plant under construction in

Uganda, on behalf of the subsidiary Tororo Solar North.

The increase in revenues on 2015 with regards to the

EPC activities reflects the construction operations,

which reached 24% completion by 31/12/2016.

The following table compares the key statutory and

management figures for 2016/2015.

In general, D&C division revenues reduced on the

previous year, principally due to the non-recognition of

success fees related to the financial closes (in 2016

there were no financial closes, while in 2015 - as

previously stated - the final tranche of the success fees

related to the REISA plant were recognised for Euro

(Euro thousand)31st Dec 2016 31st Dec 2015 Δ 31st Dec 2016 31st Dec 2015 Δ

Revenues from Success fees (€/000) - 3.600 (3.600) - 3.600 (3.600)

Revenues from development advisory fees (€/000) 114 80 35 1.389 80 1.309

Total development fees revenues (€/000) 114 3.680 (3.565) 1.389 3.680 (2.291)

Total increase in fixed asset for internal work (€/000) 6.817 8.635 (1.818) 5.543 8.635 (3.091)

Total increase in fixed asset for internal work (€/000) 6.817 8.635 (1.818) 5.543 8.635 (3.091)

- -

Different plants - - 992 992

Scilla - 251 (251) - 2.538 (2.538)

Total EPC USA - 251 (251) 992 2.538 (1.546)

Uganda 3.490 3.490 3.490 3.490

Kathu - - 282 1.245 (963)

Total EPC South Africa 3.490 - 3.490 3.772 1.245 2.528

Total revenues from D&C activities 10.422 12.566 (2.144) 11.696 16.098 (4.401)


D&C


30

3,600 thousand).

The increase for internal works was greater than the

previous year: the reduction in capitalised development

activities (reflecting the increased generic development

and scouting operations in the year) were offset by

increased activities concerning the internal construction

of the Tororo plant.

The management view (Proportionate Consolidation),

includes the amounts for the construction of the Kathu

plant (Joint Venture WBHO/BE) and the plant

constructed during the year in America (RES Joint

Venture). Revenues decreased on the previous year

due to the substantial conclusion of the Kathu plant

construction; the contribution of American operations

reduced on the previous year.

Reclassified Financial Statements

The “reclassified” balance sheet and income statement

are reported below, along with the key financial

indicators.

Reclassified balance sheet

Reclassified income statement


-

-

A) TOTAL NON CURRENT ASSETS 138.565 72.691 65.874 137.149 71.824 65.324

Intangible assets 27.227 22.159 5.069 27.227 22.159 5.069

Fixed asset 98.099 36.420 61.679 98.234 36.571 61.663

Fiancial asset 13.239 14.113 (874) 11.688 13.095 (1.407)

B) WORKING CAPITAL (20.967) (7.221) (13.746) (22.158) (8.863) (13.295)

Trade receivables 2.639 5.553 (2.914) 2.639 8.478 (5.839)

Other current asset 8.717 6.391 2.325 9.669 6.575 3.094

Payable (27.544) (12.627) (14.917) (27.544) (16.236) (11.308)

Provision for riscks (386) (190) (195) (386) (535) 149

Other current l iabil ities (4.393) (6.349) 1.956 (6.536) (7.145) 609

C) INVESTED CAPITAL NET OF WC (A+B) 117.598 65.470 52.128 114.991 62.962 52.029

D) STAFF RELATED FUNDS (612) (601) (12) (612) (601) (12)

E) INVESTED CAPITAL NET OF WC AND STAFFREL. FUNDS (S+D) 116.986 64.869 52.117 114.378 62.361 52.017

F) EQUITY 25.966 29.983 (4.017) 25.966 29.983 (4.017)

Group's equity 18.498 27.728 (9.231) 18.498 27.728 (9.231)

Third parte equity 7.469 2.255 5.214 7.469 2.255 5.214

G) MEDIUM AND LONG TERM FINANCIAL DEBTS 64.307 49.627 14.679 64.307 49.646 14.661

Short term debts toward banks 57.331 49.627 7.704 57.331 49.646 7.685

Short term debts toward other lenders - - - -

Short term debts and other current financila asset 6.976 - 6.976 6.976 - 6.976

H) SHORT TERM FINANCIAL DEBTS 26.712 (14.741) 41.453 24.105 (17.268) 41.374

Short term debts toward banks 38.655 5.979 32.675 38.655 5.988 32.667

Short term debts toward other lenders - - - -

Short term debts and other current financila asset (8.159) (10.775) 2.616 (8.334) (10.996) 2.662

Cash and cash available (3.783) (9.945) 6.161 (6.215) (12.260) 6.045

I) NET FINANCIAL POSITION (G+H) 91.019 34.887 56.133 88.412 32.378 56.035

J) SOURCES (F+I) 116.986 64.870 52.116 114.378 62.361 52.018


(Euro thousand) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015

FIXED ASSET FINANCING INDICES

Fixed asset to equity capilat margin (€/000) (112.599) (42.708) (111.182,50) (41.841)

Equity ratio 19% 41% 19% 42%

Fixed asset to capital employed margin (€/000) (48.292) 6.919 (46.875,65) 7.804

Return on total asser ratio 65% 110% 66% 111%

FINACIAL RATIOS

Total debt ratio 397% 185% 397% 186%

Total financial debts ratio 149% 20% 149% 20%

SOLVENCY RATIOS

Net working capital (€/000) (63.922) (4.558) (62.680,99) (3.549)

Current ratio 18% 82% 21% 88%

Current l iabil ities to l iquidity margin (€/000) (66.136) (6.040) (65.672,24) (8.005)

Proportionate consolidationStatutory


31

We highlight that due to the type of activities

undertaken by the company and its subsidiaries as well

as the timeframe normally required for the

development of initiatives relating to the construction

of renewable energy production plant, some indicators

may not be particularly significant.


INCOME STATEMENT

Value of production 17.825 18.352 (527) 20.955 23.812 (2.857)

Consumption of materials and dervices (13.042) (11.845) (1.197) (15.519) (16.756) 1.238

Value Added 4.783 6.507 (1.724) 5.436 7.055 (1.619)

Labour (7.188) (7.330) 142 (7.614) (7.489) (125)

EBITDA (2.404) (823) (1.581) (2.178) (433) (1.744)

Depreciation and amortization (2.731) (5.730) 3.000 (2.777) (5.777) 3.000

EBITD (5.135) (6.554) 1.419 (4.955) (6.210) 1.256

Financial income and charges 1.359 (3.565) 4.924 1.848 (3.370) 5.218

Value adj of financial assets (915) 761 (1.676) (1.461) 471 (1.931)

Operating profit attribuitable to minority - - - -

PROFIT BEFORE EXTRAORDOINARY ITEMS AND TAXES (4.691) (9.358) 4.667 (4.567) (9.110) 4.543

Extraordinary income and expenses - - - - - -

PROFIT BEFORE TAX (4.691) (9.358) 4.667 (4.567) (9.110) 4.543

Tax (1.514) (153) (1.361) (1.639) (401) (1.237)

NET PROFOT/LOSS FOR THE PERIOD (6.206) (9.511) 3.306 (6.206) (9.511) 3.305

Net profit/loss attribuitable to minority 383 237 146 383 237 146

Other components of comprehensive income (872) 662 (1.534) (872) 662 (1.534)

NET PROFOT/LOSS OF PARENT COMPANY (7.078) (8.849) 1.771 (7.078) (8.849) 1.771


31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015

PROFITTABILITY RATIOS

Net ROE (27%) (30%) (27%) (30%)

Gross ROE (18%) (31%) (18%) (30%)

ROI (4%) (10%) (4%) (10%)

ROS (29%) (78%) (24%) (45%)



32

Key Financial Indicators

12.74715.807

18.352 17.825

57.271

25.52223.812

20.955

-

10.000

20.000

30.000

40.000

50.000

60.000

70.000

2013 2014 2015 2016

Production value (€/000)

IFRS Prop. consolidation

(2.042)

(607)(823)

(2.404)

6.166

2.010

-433

-2.178(3.000)

(2.000)

(1.000)

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

2013 2014 2015 2016

EBITDA (€/000)



33

28.967

36.704

29.983

25.966

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2013 2014 2015 2016

Equity (€/000)


37.77442.383

64.869

116.986

21.242

38.754

62.962

114.378

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

2013 2014 2015 2016

Net Invested capital (€/000)



34

8.8075.679

34.887

91.019

1.518 1.532

32.378

114.378

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

2013 2014 2015

NFP (€/000)



35

Transactions with group companies and related parties

Transactions with group companies and/or related

parties are carried out in accordance with normal

market prices and conditions. During the year, the

following transactions took place:

Company RelationshipTrade

receivablesTrade payables

loan

receivablesloan payables Revenues Costs

BUILDING ENERGY HOLDING controllante 0 0 0 201 0 55

BIOTWIN SRL controllata 100 0 2.371 0 37 0

BIOTWIN 2 SRL controllata 5 0 611 0 17 0

BE SOLAR 4 SRL controllata 15 0 34 0 12 0

BE ASCOLI SRL controllata 25 0 314 0 12 0

BE SOLAR 2 SRL controllata 4 23 591 0 12 0

HOMES SRL controllata 30 243 0 0 34 177

SIE SOLAR SRL controllata 0 0 0 0 0 0

BUILDING ENERGY DEVELOPMENT AFRICA SRL controllata 72 0 6.579 0 7 0

BUILDING ENERGY DEVELOPMENT AFRICA 2 SRL controllata 9 12 43 0 7 12

BUILDING ENERGY DEVELOPMENT AFRICA 3 SRL controllata 9 24 3.927 0 7 24



BE Japan Godo Kaisha controllata 0 0 6 0 0 0

BE Holding U.S. LLC controllata 3.296 0 22.083 0 3.257 0

BOESMANLAND PTY (Ltd) controllata 0 0 0 0 0 0

BLUE SKY SOLAR PTY (Ltd) controllata 0 0 0 0 0 0

LOKIAN PTY (Ltd) controllata 0 0 0 0 0 0

SKUITDRIFT PTY (Ltd) controllata 0 0 0 0 0 0

GREEN SKY SOLAR PTY (Ltd) controllata 0 0 0 0 0 0

RED SKY SOLAR PTY (Ltd) controllata 0 0 0 0 0 0

NAVOSYNC PTY (Ltd) controllata 0 0 0 0 0 0

BE Service & Operation PTY (Ltd) controllata 2.499 4.540 8.084 0 1.691 0

BE BALKAN DOO controllata 41 0 660 0 31 0

BE KRUSEVAC controllata 3.248 0 0 0 1.264 0

BE PANAMA controllata 250 0 10 0 0 0

BUILDING ENERGY DEVELOPMENT LATINOAMERICAcontrollata 0 0 2.061 0 91 0

BE SOLAR PIEMONTE SPA controllata 36 0 448 0 34 0

BUILDING ENERGY CROATIA controllata 1 0 20 0 1 0

TORORO SOLAR NORTH controllata 507 0 2.685 0 0 0

0 0 0

WBHO-Building Energy PTY (Ltd) collegata 52 0 0 0 0 0

GUMA BUILDING ENERGY (PTY) LTD collegata 113 0 0 0 0 0

RENEWENERGY SOLUTIONS LLC collegata 69 0 0 0 3 0

BUILDING ENERGY EGYPT collegata 3 867 33 0 0 0

REISA collegata 0 0 0 0 0 0

BE ENERGY EGYPT JDC collegata 0 473 0 0 5 0

BE Uganda collegata 0 0 2 0 0 0

ACCESS BRE SOLAR ONE collegata 0 0 0 0 0 0

0 0 0

BRIFF SRL parte correlata 0 0 0 0 0 0

COMBIGAS parte correlata 0 500 0 0 0 0

SOLAR NRG SRL parte correlata 0 0 0 1.555 0 73

ADOBE SPA parte correlata 0 167 0 0 0 0

totale 10.387 6.865 50.564 1.756 6.537 351


36

Treasury shares and shares of holding companies

No treasury shares or parent company shares were held

at the reporting date. During the year, treasury shares

or parent company shares were not acquired, even

through trust companies or nominees.


37

Tax consolidation and tax transparency

In 2016, the following companies were involved in the

tax consolidation together with the parent company

Building Energy S.p.A.:

- Be Ascoli S.r.l.

- Be Solar 2 S.r.l.

- Be Solar 4 S.r.l.

- Beddom S.r.l.

- Biotwin S.r.l.

- Building Energy Development Africa S.r.l.

- Building Energy Development Africa 2 S.r.l.




From 2015, the National tax consolidation option was

exercised by Building Energy Holding S.p.A. which

permits the calculation of the IRES charge on a tax base

representing the aggregate of the taxable income and

tax losses of the individual companies.

The transactions, in addition to the reciprocal

responsibilities and obligations, between the

consolidating company and the previously-stated

subsidiaries, are defined within the individual contracts

for involvement in the national tax consolidation signed

between the consolidating company and the

subsidiaries, to which reference should be made for all

of the conditions.

The contracts establish that the tax benefits which will

be transferred to Building Energy Holding S.p.A. are paid

to the subsidiary only upon actual usage.


38

Subsequent events

- a partnership agreement was signed with the

South African investor Old Mutual, permitting

the Group to develop its wind project pipeline,

guaranteeing the funding necessary for

construction, both as an equity investor

through the acquisition of direct holdings in

the vehicle company, and as a lender of the

Group equity share;

- Building Energy S.p.A. concluded with the

Chilean developer Scotta Chile (already a

partner of the company Building Energy Solar

Piemonte S.r.l.) an agreement for the setting

up of a new on site company to optimise

developments in Chile, with Scotta’s deep

knowledge and understanding of the market

and its mechanisms putting the company in the

best position to profitability develop new

initiatives, alongside existing initiatives;

- having verified the conditions concerning the

purchase of the 4Energia S.r.l. holding, Building

Energy S.p.A. will acquire control of the

company, guaranteeing the Group greater

revenue and financial stability;

- full acquisitions were agreed for Simo S.r.l. and

Idrolap S.r.l. by the associate Building Energy

Hydro Verbano S.r.l.;

- an Italian JV was set up with the partner Refeel

for a start-up (“ReFeel eMobility”) to be

operational within the year involved in

innovative electric car sharing ideas both for

private individuals and corporate clients;

- the Hartford and Musgrave USA photovoltaic

plant were connected to the network in Q1

2017;

- the first wind plant in the history of Building

Energy S.p.A. was unveiled: in the state of

IOWA 10 3MW turbines entered into use (in

the first month, the project’s Tax Equity

Investor injected capital of USD 30,000,000);

- on June 5, an investment agreement was

signed concerning the issue of a convertible

bond loan for an amount of not less than Euro

100 million including the refinancing of the

current bond loan subscribed by THCP in July

2015 (the “Investment agreement”). The

agreement will enable the Group to source the

new funding of approx. Euro 68 million

required for the further growth of the

company as per its industrial plan. The closing

of the operation and the relative subscription

to the funds by the new investors is scheduled

for the end of the current month of June and

however not beyond July 24, 2017. The

Investment Agreement stipulates for the

signing and closing the completion of a number

of corporate operations for which

management does not foresee particular

difficulties; among these, we highlight the

initiation of the reverse merger through which

the parent company Building Energy Holding

S.p.A. will be incorporated into Building Energy

S.p.A (the merger, approved by the

Shareholders’ Meetings of the companies

involved on June 16, 2017, will however be

subject to the successful outcome of the

convertible bond issue).


39

Outlook

2017 is expected to figure as a key year in the company’s

recent history. At a strategic level, there will be

significant changes both for the business and in terms of

corporate governance. With regards to the former, the

injection of capital guaranteed by the issue of the new

bond loan will enable the Group to:

- consolidate its activities as an integrated

renewable energy producer, focusing all

resources necessary on finally completing the

projects closest to execution;

- guarantee in addition the funding necessary

for the fundamental development phase also

on new markets: it is highlighted that the

development phase has allowed in fact the

Group to become a highly rated independent

producer and in which leading third parties

continue to place their confidence and invest;

- develop new energy service businesses.

The following are expected at an operating level:

- conclusion of construction of the Tororo

photovoltaic plant and its entry into use by Q3

2017;

- the financial close of the water projects for the

two plant to be constructed in the Alto

Verbano area of Piedmont;

- the financial close of:

o African projects originally scheduled

for 2016;

o Krusevac (Serbian biomass plant) and

the beginning of its construction.


40

Adoption of the Organisational Model as per Legislative Decree 231/2001

The Group approved in December 2013 the internal

organisation model pursuant to Legislative Decree

231/2001.


41

Workplace safety as per Legislative Decree 81/2009

In 2012, the Parent Company Building Energy S.p.A.

appointed the positions established by Legislative

Decree 81/2008 in terms of worker safety and

protection. In 2015, these roles were appointed at all

Group companies employing workers.

In terms of workplace health and safety, during the year

the Company continued to provide training and

information to employees according to the program

shared with the employer and the prevention and

protection services manager: both new hires and

existing employees therefore attended medical visits

(and “follow-ups”) in addition to training and

information courses under the applicable regulation.


42

Management system certification

At the end of 2011 the Parent Company received UNI EN

ISO 9001:2008 Certification as possessing a quality

management system run on the basis of procedures and

processes which cover all phases of company

operations.

With a view to ongoing improvement, in subsequent

years the quality system was supplemented with Health,

Safety and Environmental Management Systems,

achieving the relative certifications according to the

OHSAS 18001:2007 and UNI EN ISO 14001:2004

protocols.

In 2016, following inspections by the relative Bodies, all

of the certifications indicated were renewed.

These company operating systems are applied to all

Group companies.


43

Human resources

No employees received fatal injuries in the course of

their duties during the year.

No serious workplace accidents took place during the

year which involved serious injury to employees.

No issues in relation to workplace health matters

concerning employees or ex-employees or misconduct

against the company arose in the year.


44

Privacy

As Parent Company, as well as undertaking

responsibility for the administrative, accounting and

contractual management of the subsidiaries, Building

Energy S.p.A. improved its internal security procedures,

installing two internal servers for data, protected by

security systems.

The privacy protection procedures were also improved.


45

Secondary offices

The Parent Company’s secondary offices are as follows:

- Faenza (RA), via Vittime civili di guerra, 5;

- Savona (SV) Largo delle Coffe, int. 14/1.


46

Corporate Boards

Board of Directors

In office since July 31, 2015 and until the approval of the

2017 Annual Accounts:

Gian Luca Bandini, Chairman

Fabrizio Zago, Director

Sergio Benocci, Director

Matteo Brambilla, Director

Mauro Moretti, Director

Gianfilippo Cuneo, Director

Alessandro Tatistscheff, Director

Statutory Auditors

In office since June 8, 2016 and until the approval of the


Roberto Spada, Chairman

Gabriele Lamanuzzi, Statutory Auditor

Carla Maria Monti, Statutory Auditor

Sardu Anna, Alternate Auditor

Luca Zoani, Alternate Auditor

Supervisory Board (appointed by the BoD on December

18, 2013)

In office since December 12, 2016, with three-year

mandate: Paolo Maria Trezzi, Chairman

Andrea Zoppi

Mario Chiodi


47

Independent Audit Firm

In office since June 8, 2016 and until the approval of the


PricewaterhouseCoopers S.p.A.

We thank you for the trust afforded to us and invite you to approve the financial statements as presented.

Milan, June 20, 2017

Gian Luca Bandini

Chairman of the Board of Directors

independent auditors’ report in accordance with … · depreciation 1.484 1.283 amortization 235...

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