FINANCIAL REPORT at 31 DECEMBER 2018 This Book Is Printed on FSC® Forest Friendly Paper

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FINANCIAL REPORT at 31 DECEMBER 2018 This Book Is Printed on FSC® Forest Friendly Paper FINANCIAL REPORT AT 31 DECEMBER 2018 This book is printed on FSC® forest friendly paper. The FSC® logo identifies products that contain paper coming from forests managed according to strict environmental standards, economic and social policies defined by the Forest Stewardship Council. FALCK RENEWABLES SpA Share capital € 291,413,891 fully paid Direction and coordination by Falck SpA Registered and fiscal address 20121 Milan – Corso Venezia, 16 REA Milano 1675378 Milan Companies Register 03457730962 VAT and tax code 03457730962 Financial Report at 31 December 2018 Letter from the Chairman and Chief Executive Officer to shareholders and stakeholders 6 1 Notice of annual general meeting 9 2 Company officers 13 3 Group Structure 14 4 Consolidated financial highlights 16 5 Directors’ Report 17 5.1 Economic framework 19 5.2 Falck Renewables Group operating and financial review 25 5.2.1 Falck Renewables Group profile 25 5.2.2 Regulatory framework 26 5.2.3 Performance 44 5.2.4 Non-financial performance indicators 51 5.2.5 Share price performance 52 5.2.6 Performance of the business sectors 53 5.2.7 Review of business in 2018 61 5.2.8 Employees 64 5.2.9 Environment, health and safety 64 5.2.10 Research and development activities 66 5.2.11 Risks and uncertainties 66 5.2.12 Significant events after the balance sheet date 83 5.2.13 Management outlook and going concern 84 5.3 Operating and financial review of Falck Renewables SpA 84 5.3.1 Financial highlights 84 5.3.2 Performance and review of business 84 5.3.3 Employees 85 5.3.4 Capital expenditure 85 5.3.5 Directors, statutory auditors, key managers and their interests 85 5.3.6 Related party transactions 85 5.3.7 Direction and coordination activities 86 5.3.8 Holding of own shares or parent company shares 86 5.3.9 Purchase and sale of own shares or parent company shares 87 5.3.10 Share schemes 87 5.3.11 Corporate governance and Code of Self Discipline 87 5.3.12 Participation in the opt-out regime 88 5.3.13 Legislative decree 231/2001 88 5.3.14 Proposed appropriation of profit for the year 88 6 Consolidated financial statements 89 6.1 Balance sheet 90 6.2 Income statement 91 6.3 Consolidated statement of comprehensive income 92 6.4 Statement of cash flows 93 6.5 Statement of changes in equity 94 6.6 Explanatory notes 95 6.6.1 Basis of preparation of the consolidated financial statements 95 6.6.2 Scope of consolidation 96 6.6.3 Principles of consolidation 107 6.6.4 Accounting policies 108 6.6.5 Financial risk management: objectives and criteria 126 6.6.6 Capital risk management 127 6.6.7 Segment information 127 6.6.8 Balance sheet contents and movements 129 6.6.9 Income statement content and movements 155 6.7 Additional disclosures on financial instruments in accordance with IFRS 7 170 7 Supplementary information to the consolidated financial statements 199 7.1 List of investments in subsidiaries and associates 200 8 Falck Renewables SpA separate financial statements at 31 December 2018 203 8.1 Falck Renewables SpA balance sheet 204 8.2 Falck Renewables SpA income statement 205 8.3 Falck Renewables SpA statement of comprehensive income 206 8.4 Falck Renewables SpA statement of cash flows 207 8.5 Falck Renewables SpA statement of changes in equity 208 8.6 Falck Renewables SpA notes to the financial statements 208 8.6.1 Accounting policies 211 8.6.2 Balance sheet contents and movements 219 8.6.3 Income statement content and movements 238 8.7 Additional disclosures on financial instruments in accordance with IFRS 7 247 9 Supplementary information to the separate financial statements of Falck Renewables SpA 257 9.1 List of direct and indirect investments in subsidiaries and associates 258 9.2 Summary of significant financial data from latest financial statements of subsidiaries and associates 261 10 Certification of the consolidated financial statements pursuant to article 81-ter of Consob Regulation no. 11971 dated 14 May 1999 as amended 267 11 Report of the Board of Statutory Auditors to the Shareholders’ Meeting 273 12 Independent Auditors’ Report 281 Letter from the Chairman and Chief Executive Officer to shareholders and stakeholders he fight against climate change and the drive - our lowest ever. We have achieved consolidated Tfor decarbonisation and technological develop- revenue growth of approximately 17% in compari- ment - to name but a couple of the most striking el- son to 2017, EBITDA growth of more than 28%, and ements - are changing the mix of energy sources we more than doubled the Group's net profit. use, reshaping our economic system. The renewable energy industry is one of the sectors undergoing the We have continued with our investment plan, most significant changes, placing itself within the consolidated our growth in the US solar market, evolution that the system as a whole is experiencing. and are continuing with the construction of five wind farms in Sweden, Norway and Spain, while The shift from stimulated growth to growth driv- strengthening the service sector through targeted en by a conscious and evolving demand for envi- acquisitions. With a 51% stake in Energy Team SpA, ronmentally conscious options at market prices we have entered fast-growing sectors such as con- poses new challenges and requires us to anticipate sumption monitoring and flexibility management the needs of a changing environment. With this in in the electricity markets. With the acquisition of mind, we have taken a proactive strategy that seeks 100% of Windfor Srl, we have strengthened our ex- to optimise the allocation of capital between propri- pertise in technical advisory services for the wind etary assets, energy services for end consumers and energy sector, confirming our growth trend and the development of new production projects from strategic interest in services for renewable assets. renewable sources. These results allow us to confidently look to a fu- This has led us to close 2018 with our best results ture that sets even more ambitious goals that must ever, cementing a positive growth trend that began be met if we are to successfully face the new chal- some years ago. We have surpassed all the profit- lenges of the evolving economic situation. Starting ability targets we had set, generating an extraor- with digital innovation, which is the main driver dinary level of cash flow that has allowed us to of development for providing new, increasingly ad- achieve a net financial position/EBITDA ratio of 2.9 vanced services. 6 In short, the results achieved confirm a virtuous cycle process of generating shared value, triggering pos- in which we can give continuity and positivity to the itive development paths. relationship between vision, activities and results, to the satisfaction of all stakeholders, both internal Thanks to this modus operandi, we are able to cre- and external, who share the Group's vision with us ate long-term and sustainable improvements in in various ways. Starting with all our shareholders performance, making our business stronger. who believed in our project and to whom we have - as a duty - guaranteed a fair return on invested cap- For us, sustainability means the ability to generate ital, with a dividend increasing by 19% per annum. long-term value while maintaining the relation- ships between the business and its surroundings Based on these significant results, on 12 December that allow it to continue. Sustainability is, therefore, 2018 we presented the update of the Business Plan an intrinsic driver of our business strategy. proposing more ambitious targets, a renewed fi- nancial solidity and greater attention to balancing In practice, our activities transform different types the allocation of capital. We have raised our 2021 of capital - financial, human, social and relational targets for installed capacity (+4%), service EBIT- - in order to create value and to pursue our goals DA (+55%) and Group Net Profit (+33%) compared with ever greater conviction. to the previous plan. The capital allocated to asset development and services almost doubled in the In an effort to share our vision in this area, the period 2018 - 2021, while 77% continues to be used Group will soon be publishing a specific sustain- to increase assets on the balance sheet. ability report on its economic, environmental and social results, with particular attention to the im- All our activities are moving in a very precise direc- pacts on local communities and the global context, tion: the convergence and alignment of all share- representing our contribution to creating a better holders' and other stakeholders' interests in the world. For us and for our children. Chairman Chief Executive Officer Enrico Falck Toni Volpe 7 1 Notice of annual general meeting Shareholders eligible to vote are invited at the Ordinary Shareholders’ Meeting convened on 15th April 2019 at 11 a.m., on first call, at the Mediobanca offices in Milan, Via Filodrammatici 3, and, if necessary, on 16th of April 2019, on second call, same time and location, to discuss and resolve upon the following Agenda 1. Proposed Approval of the Financial Statements at 31st December 2018, together with the Board of Di- rectors’ Report on Operations, the Statutory Auditors’ Report and the Legal Auditing Firms’ Report. Allocation of the profit for the year and dividend distribution to Shareholders: related and consequent resolutions. Presentation of the Consolidated Financial Statements at 31st December 2018. 2. Presentation of the Remuneration Report pursuant to Articles 123-ter of Legislative Decree No. 58/98, and 84-quarter of CONSOB Resolution No.
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