FINANCIAL REPORT AT 31 DECEMBER 2014 FINANCIAL REPORT 31 DECEMBER AT 2014 Falck Renewables S.p.A. Falck Renewables S.p.A. Via Alberto Falck 4-16, 20099 Sesto San Giovanni (MI) - Italy Via Alberto Falck 4-16, 20099 Sesto San Giovanni (MI) phone +39.02.24332360 phone +39.02.24331 www.falckrenewables.eu - [email protected] www.falckrenewables.eu - [email protected] Annual report for the year ended 31 December 2014 Chairman’s letter to the shareholders and stakeholders pag. 4 Chief Executive Officer’s letter to the shareholders and stakeholders pag. 6 1 Notice of annual general meeting pag. 9 2 Company officers pag. 12 3 Group structure pag. 13 4 Consolidated financial highlights pag. 14 5 Directors’ report 5.1 Economic framework pag. 17 5.2 Falck Renewables group operating and financial review 5.2.1 Falck Renewables group profile pag. 26 5.2.2 Regulatory framework pag. 27 5.2.3 Performance pag. 38 5.2.4 Non-financial performance indicators pag. 45 5.2.5 Share price performance pag. 46 5.2.6 Performance of business sectors pag. 47 5.2.7 Review of business in 2014 pag. 51 5.2.8 Employees pag. 56 5.2.9 Environment, health and safety pag. 56 5.2.10 Research and development activities pag. 58 5.2.11 Risks and uncertainties pag. 58 5.2.12 Significant events after the balance sheet date pag. 76 5.2.13 Management outlook and going concern pag. 77 5.3 Operating and financial review of Falck Renewables SpA . 5.3.1 Financial highlights pag. 78 5.3.2 Performance and review of business in 2014 pag. 78 5.3.3 Employees pag. 79 5.3.4 Capital expenditure pag. 79 5.3.5 Directors, statutory auditors, key managers and their interests pag. 79 5.3.6 Related party transactions pag. 79 5.3.7 Direction and coordination activities pag. 80 5.3.8 Holding of own or parent company shares pag. 80 5.3.9 Purchase and sale of own shares or parent company shares pag. 80 5.3.10 Share schemes pag. 80 5.3.11 Corporate governance and code of self-discipline pag. 81 5.3.12 Participation in opt-out regime pag. 81 5.3.13 Legislative decree 231/01 pag. 81 5.3.14 Proposed appropriation of profit for the year pag. 82 2 6 Consolidated financial information 6.1 Balance sheet pag. 85 6.2 Income statement pag. 86 6.3 Statement of comprehensive income pag. 87 6.4 Statement of cash flows pag. 88 6.5 Statement of changes in equity pag. 89 6.6 Notes to the consolidated financial statements pag. 89 6.7 Additional disclosures regarding financial instruments in accordance with IFRS7 pag. 144 7 Supplementary information to the consolidated financial statements 7.1 List of investments in subsidiaries and associates pag. 167 8 Falck Renewables SpA separate financial statements 8.1 Balance sheet pag. 171 8.2 Income statement pag. 172 8.3 Statement of comprehensive income pag. 173 8.4 Statement of cash flows pag. 174 8.5 Statement of changes in equity pag. 175 8.6 Notes to the financial statements pag. 175 8.7 Additional disclosures regarding financial instruments in accordance with IFRS7 pag. 214 9 Supplementary information to the Falck Renewables SpA separate financial statements 9.1 List of direct and indirect investments in subsidiaries and associatese pag. 225 9.2 Summary of significant financial data from latest financial statements of subsidiaries and associates pag. 227 10 Certifications on consolidated and parent company financial statements pursuant to article 81-ter of Consob Regulation 11971 of 14 May 1999 as amended pag. 233 11 Report of the board of statutory auditors to the annual general meeting pag. 239 12 Independent auditors’ reports pag. 247 3 Chairman’s letter to the shareholders and stakeholders The past year was one The diversification into asset management of of particular impor- various types of renewable energy generating tance to our company plants will be our future industrial driver in this as we demonstrated market segment. our ability to survive a longstanding global Last but not least, 2014 saw the first Europe- crisis and implement- an hybrid renewable plant enter into service ed, with courage and and the continued development of Waste to consistency, the cru- Energy activities. cial steps of Falck Re- newables’ industrial On the other hand, in tandem with a year strategies. packed with events important to business development, the microeconomic situation, Not only did we not just in Italy, only showed some positive demonstrate courage, signals that alone may not be taken as indi- tenacity and consist- cators of a full recovery that the Italian indus- ency, but also sustain- try needs. Looking at the electricity market in ability and an industrial vision of markets and general, in particular that of renewables, it is technologies. These encompass our values obvious that the difficulties have not yet been and represent the key words that motivate overcome however they have highlighted our and give substance to the sustainable growth ability to react and create new stimulus and and industrial evolution of our company. impulse for growth and investment. 2014 started with the partnership with Co- After many years of financial and economic penhagen Infrastructure I, the Danish fund crisis, the signals coming from our country’s sponsored by Pension Danmark. The agree- real economy and the international frame- ment involved the sale of 49% of the UK wind work in which we operate are cautiously op- farms, allowing us to generate the funds re- timistic, which has also been the case in the quired to finance future industrial develop- past. Today however two positive factors ex- ment strategies, and an agreement to co-de- ist that had only been hoped for in the past: velop new wind farms in the UK. 2014 also greater stability in the European banking sec- witnessed the company acquiring the author- tor thanks to instruments such as Quantita- isations to construct 2 wind farms in Scotland tive Easing and the change in the Euro/Dollar and France and the construction of two more exchange rate that is having a positive impact wind farms in England for a total installed ca- on exports. pacity of approximately 100 MW. The macroeconomic data of the Eurozone The year continued with the acquisition of also appears to confirm the higher than fore- Vector Cuatro, which mainly operates in pro- cast results, overall these are modest in di- viding asset management services to photo- mension, however if confirmed in the next voltaic plants. Thanks to synergies between round of statistics they certainly indicate a our two companies, the diversification into in- structural trend reversal. I refer to both growth dustrial services to renewable energy power in GDP and the increase in industrial produc- plants will be possible in a short timeframe. tion. In a number of cases the indicators of 4 public confidence, propensity to consume dustrial processes and operations and we are and unemployment have shown the same proud to present the results for the year just signs of reversal but are still weak in terms of passed and declare a substantial increase in their impact on the real economy. dividends. All of the industrial and strategic activities undertaken by the group in 2014, a year in which the micro economy was still fragile, were carried out with a view to containing The Chairman costs and improving the efficiency of the in- Enrico Falck 5 Chief Executive Officer’s letter to the shareholders and stakeholders I am particularly sat- company a world leader in this sector. isfied to be able to The combination of these initiatives enables present to you another us to conceive and implement new strategic excellent year for Falck developments and pay a significantly higher Renewables. dividend than in recent years. We faced 2014 with the usual commitment, These results take on even greater signifi- renewed curiosity for cance when certain critical events, both op- new projects and in erational and structural that were dealt with the knowledge that the immediately, are taken into consideration: of skills and dedication of particular note are the low wind levels over all Falck Renewables the summer period, the accident at the Trezzo employees togeth- sull’Adda plant, cancellation of renewables’ er with our strategic incentives in Spain and the fall in electricity course of action, our prices compared to the previous year across passion for achieving the whole of Europe. These events were off- results and the social set by the insurance compensation for the element of our investments, our distinguish- fire at the Trezzo plant, the increased installed ing feature, would guarantee success: even capacity of a number of plants, renegotiation in these difficult years in terms of macroeco- of existing contracts, the operating effective- nomics, social, demographic and financial ness of the current structure and the ability to constraints, which greatly impact the demand maximise corporate finances. With regard to for and supply of energy that safeguards the research and development, the hybrid ther- environment in which we live, we managed to modynamic solar and biomass plant in Rende improve our asset base and continue invest- was launched representing a clear example of ment in sustainable development. our technological innovation skills, confirmed by the recent recognition by the Italian GSE of We achieved revenue growth compared to incentives for this generation of plant, which previous years, gross profit was higher than for the first time awarded the incentive tar- market expectations and we recorded a iff prescribed by the Legislative Decree of 11 marked decrease in net indebtedness while April 2008 to the first hybrid renewable power at the same time executing all of the extraor- plant operating in Europe.