FIRST QUARTER 2014 CONSOLIDATED FINANCIAL …€¦ · 2 CORPORATE DETAILS TERNIENERGIA S.P.A. Registered office: Strada dello Stabilimento, 1 05035 Narni (TR) Authorised, issued and

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FIRST QUARTER 2014

CONSOLIDATED FINANCIAL STATEMENTS

OF THE TERNIENERGIA GROUP

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CORPORATE DETAILS

TERNIENERGIA S.P.A. Registered office: Strada dello Stabilimento, 1 05035 Narni (TR)

Authorised, issued and paid-up share capital: Euro 50,529,680

Terni Register of Companies: no. 01339010553

BRANCHES AND OFFICES Narni – Strada dello stabilimento, 1

Milano – Via Borgogna, 7

Lecce – Via Costadura, 3

Atene – 52, AKADIMIAS STREET

Cape Town - Boulevard office Park, 2nd floor, Block D, Searle. District of Woodstock

Varsavia - Sw. Krolewska 16, 00-103

Bucarest - Str. Popa Petre 5

BOARD OF DIRECTORS CHAIRMAN AND CEO

Stefano Neri

DIRECTORS

Francesca Ricci

Fabrizio Venturi

Monica Federici

Paolo Ottone Migliavacca

Mario Marco Molteni

Domenico De Marinis

BOARD OF STATUTORY AUDITORS Ernesto Santaniello (Presidente)

Vittorio Pellegrini

Simonetta Magni

INDEPENDENT AUDITORS PricewaterhouseCoopers S.p.A.

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Index

1 MANAGEMENT REPORT ..................................................................................................................................... 5

1.1 BUSINESS AND MISSION OF THE GROUP .......................................................................................................... 5

1.2 THE GROUP’S STRUCTURE ................................................................................................................................ 7

1.3 SIGNIFICANT EVENTS OCCURRED DURING THE FINANCIAL YEAR ENDED AS AT MARCH 31, 2014.................. 8

1.3.1 ISSUE BOND “TerniEnergia 2019” ................................................................................................................ 8

1.3.2 THE BOARD OF DIRECTORS PROPOSES THE START OF A PROGRAM FOR THE PURCHASE OF OWN

SHARES (BUY-BACK) .................................................................................................................................................. 8

1.4 ECONOMIC DEVELOPMENT OF THE GROUP ................................................................................................... 10

1.5 BALANCE SHEET .............................................................................................................................................. 12

1.6 BUSINESS OUTLOOK ........................................................................................................................................ 14

2 FINANCIAL STATEMENTS ...................................................................................................................................17

2.1 STATEMENT OF CONSOLIDATED FINANCIAL SHEET ....................................................................................... 17

2.2 CONSOLIDATED INCOME STATEMENT ........................................................................................................... 18

2.3 INCOME TOTAL CONSOLIDATED STATEMENT ................................................................................................ 19

2.4 STATEMENT OF CHANGES IN EQUITY ............................................................................................................. 20

2.5. CONSOLIDATED STATEMENT ................................................................................................................................ 21

3 EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT MARCH 31, 2014 ....................22

3.1 GENERAL INFORMATION ................................................................................................................................ 22

3.2 FORM, CONTENTS AND ACCOUNTING POLICIES ADOPTED ........................................................................... 22

3.3 COMMENTS ON THE MAIN BALANCE SHEET ITEMS ....................................................................................... 26

3.3.1 INTANGIBLE ASSETS ................................................................................................................................... 26

3.3.2 TANGIBLE FIXED ASSETS ............................................................................................................................. 28

3.3.3 EQUITY INVESTMENTS ............................................................................................................................... 30

3.3.4 DEFERRED TAX ............................................................................................................................................ 34

3.3.5 NON CURRENT FINANCIAL RECEIVABLES ................................................................................................... 35

3.3.6 INVENTORIES .............................................................................................................................................. 36

3.3.7 TRADE RECEIVABLES ................................................................................................................................... 36

3.3.8 OTHER CURRENT ASSETS ............................................................................................................................ 38

3.3.9 FINANCIAL RECEIVABLES ............................................................................................................................ 38

3.3.10 3.3.10 CASH AND CASH EQUIVALENT .................................................................................................... 39

3.4 COMMENTS ON THE PRINCIPAL LIABILITIES................................................................................................... 40

3.4.1 3.4.1 NET ASSETS ........................................................................................................................................ 40

3.4.2 FUND FOR EMPLOYEE BENEFIT .................................................................................................................. 40

3.4.3 DEFERRED TAXATION ................................................................................................................................. 41

3.4.4 FINANCIAL NON CURRENT LIABILITIES ...................................................................................................... 41

3.4.5 DERIVATIVES ............................................................................................................................................... 42

3.4.6 TRADE PAYABLE ......................................................................................................................................... 43

3.4.7 DEBT AND OTHER FINANCIAL LIABILITIES .................................................................................................. 44

3.4.8 TAX DEBIT ON INCOME .............................................................................................................................. 46

3.4.9 FURTHER CURRENT LIABILITIES .................................................................................................................. 46

3.4.10 COMMITMENTS AND GUARANTEES GIVEN .......................................................................................... 47

3.5 COMMENTS ON THE MAIN INCOME ITEMS ................................................................................................... 51

3.5.1 REVENUES ................................................................................................................................................... 51

3.5.2 CHANGES IN INVENTORIES OF SEMI-FINISHED PRODUCTS ....................................................................... 52

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3.5.3 COSTS OF RAW MATERIALS, SUPPLIES AND GOODS ................................................................................. 53

3.5.4 COSTS FOR SERVICES .................................................................................................................................. 53

3.5.5 STAFF’COSTS ............................................................................................................................................... 54

3.5.6 FURTHER OPERATING COSTS ..................................................................................................................... 54

3.5.7 DEPRECIATION,IMPAIRMENT AND PROVISIONS ....................................................................................... 55

3.5.8 FINANANCIAL INCOME AND CHARGE ....................................................................................................... 55

3.5.9 JOINT VENTURE INCOME ........................................................................................................................... 56

3.5.10 TAX ......................................................................................................................................................... 57

3.6 RELATIONS WITH RELATED PARTIES ............................................................................................................... 57

3.7 3.7ATYPICAL AND/OR UNUSUAL TRANSACTIONS ......................................................................................... 65

3.8 OTHER INFORMATION .................................................................................................................................... 66

Shareholders’ meeting approves 2013 financial Statements and a distribution of dividends equal to Euro 0.06

per share .................................................................................................................................................................. 67

Signed manifestation of interest for the acquisition of Free Energia S.p.A. ......................................................... 67

Signed a strategic agreement with Khalid Al Hamed Group LLC for the development of renewable energy and

environmental business in the Middle East and the Gulf Countries ...................................................................... 68

4 CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLE 154-BIS OF

LEGISLATIVE DECREE 58/98 AND ARTICLE 81-TER OF CONSOB REGULATION NO. 11971/99, AS AMENDED AND

SUPPLEMENTED .........................................................................................................................................................70

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1 MANAGEMENT REPORT

1.1 BUSINESS AND MISSION OF THE GROUP

TerniEnergia Group is the first Italian pure player in green industry, the production of energy from

renewable sources, the circular economy and energy efficiency, listed on the STAR segment of the Italian

Stock Exchange. In particular, the Group is a leading integrated environmental activities in the European

and pursues the best practices identified by the main international agreements on limiting greenhouse gas

emissions.

Thanks to a diversification policy of its activities and the full technological independence with a portfolio of

related and complementary activities, all related to the area of the green industry and renewable energies,

TerniEnergia as the only national player active in three segments of the "Climate Package" of the European

Union. In particular, the Group is active in increasing energy production from renewable sources

(particularly solar, biogas and solid biomass), energy savings through energy efficiency investments,

recovery of materials through technologically advanced equipment (tires and water treatment purification)

and reduction of CO2 emissions by means of investments to implement solutions and systems with low

environmental impact.

As at March 31, 2014 TerniEnergia made 272 photovoltaic systems with a total power of 274.1 MWp in

Italy, Greece and Romania, built and operates two biomass plants totaling 1.5 MW and 2 MWt and has

implemented energy efficiency measures for more than 400 million kWh saved, contributing significantly to

the national energy mix, to the achievement of national objectives at Community level and making

significant innovations on the technological front.

Through an intensive development and diversification of activities, which has seen the business alongside

that of the EPC construction of plants for their own solar and biomass electricity generation and the sale of

equipment already connected to the network, TerniEnergia has assumed the configuration of a green

company "asset owner" active in the renewable energy segment.

The business model, based on the development of the main activities in-house, has enabled the rapid

growth of TerniEnergia in the industry and its affirmation of the main operators at national level. Following

to modify Italian regulatory framework, the Group has made the choice to internationalize their activities,

taking on the strategic direction of strengthening the EPC photovoltaic business outside the country, even

to react to the gradual decline of national policies to promote renewable energy . The Company, therefore,

has completed the setting up of affiliated companies in Greece, South Africa, Poland and Romania, with the

objective to conclude important projects of industrial partnership with utilities of international relevance.

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Consistent with the strategy of business diversification, TerniEnergia has recently initiated a process of

research aimed at the identification of new areas of development that can provide an opportunity for the

Company, always within the scope of the green industry. In particular, the Company has identified

attractive opportunities for growth in the segment of industrial energy efficiency and has started a research

in the energy storage.

At the national level, in the photovoltaic industry, TerniEnergia Group continue to operate in the

production of electricity by converting solar energy, through the joint venture jointly controlled with

industrial partners and the systems made directly on their own behalf. In particular, the Group currently

holds 34 photovoltaic plants with a total installed capacity of 34.3 MW, and holds in joint venture 50%

respectively 10 additional plants with a total capacity of 8.1 MWp.

Photovoltaic systems made by the Group generally have a power close to 1 MWp.

In relation to the objective of reducing energy consumption, however, TerniEnergia, through its subsidiary

Lucos Alternative Energies S.p.A., has acquired considerable know-how in the field focusing the energy

efficiency of industrial scale, developing the business on the basis of the same scheme already used for

photovoltaics. TerniEnergia aims both as an EPC (manufacturer on behalf of clients interests) either as an

investor through the system FTT (via the schema defined Third Party Financing - ESCO). Lucos Alternative

Energies has already carried out, among others, energy saving measures in public lighting in different

industrial companies of considerable size, in various Italian towns, and created alliances and partnerships

with industry.

On the environmental side are operational plants for recovery of secondary raw material from end of life

tyres (ELTs), Greenasm biodigester and composting plant and finally water treatment plants in Nera

Montoro.

The Group, therefore, despite the significant changes described herein will continue to face, in essence, as

a provider of integrated plant once the installation of photovoltaic systems for industrial and / or

installations of efficiency and energy recovery. This type of business involves offering "turnkey" through a

business model that involves the integration and control of the entire process of development,

implementation and management of systems (business marketing, design, installation and maintenance of

the same ). The Group has in fact, progressively internalized all the "core" processes, from technical design

to the management of administrative relationships, the realization in their own facilities of the support

structure and the electrical panels, the design and implementation of remote control systems (TRSUN) and

safety (iGreen Patrol).

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1.2 THE GROUP’S STRUCTURE

100%

NEWCOENERGY S.R.L.

CAPITAL SOLAR S.R.L.

INVESTIMENTI INFRASTRUTTURE S.R.L.

CAPITAL ENERGY S.R.L.

ENERGIA NUOVA S.R.L.

MEET SOLAR S.R.L.

DT S.R.L. SAIM ENERGY 2 S.R.L.

RINNOVA S.R.L.

50%

GIRASOLE S.R.L.

ENERGIA BASILICATA S.R.L.

SOL TARENTI S.R.L.

ENERGIA LUCANA S.R.L. GUGLIONESI S.R.L.

VERDE ENERGIA S.R.L. GREEN ASM S.R.L.

FESTINA S.R.L.

70%

SOCIETA' AGRICOLA PADRIA SRL

LUCOS ALTERNATIVE ENERGIES S.P.A.

SOC AGR FOTOSOLARA CHEREMULE S.R.L. 70%

SOC AGR FOTOSOLARA BONNANARA S.R.L. LYTENERGY S.R.L.

SOC AGR FOTOSOLARA ORISTANO S.R.L.

SOC AGR FOTOSOLARA ITTIREDDU S.R.L. 80% TEVASA L.t.d.

TECI S.R.L. TERNIENERGIA PROJECT L.t.d.

MEET GREEN ITALIA S.R.L.

69,5%

IGREEN PATROL S.R.L.

INFOCACIUCCI S.R.L.

TERNIENERGIA POLSKA Sp.z.o.o.

TERNIENERGIA SOLAR SOUTH AFRICA L.t.d.

TERNIENERGIA S.p.A. HELLAS M.E.P.E.

TERNIENERGIAROMANIA S.R.L.

T.E.R.N.I. SOLARENERGY S.R.L.

ENERGIA ALTERNATIVA S.R.L.

SOLTER S.R.L.

ALCHIMIA ENERGY 3

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1.3 SIGNIFICANT EVENTS OCCURRED DURING THE FINANCIAL YEAR ENDED AS AT MARCH 31, 2014

1.3.1 ISSUE BOND “TerniEnergia 2019”

As at Jenuary 27, 2014, Board of Directors approves the issuance of a bond for a maximum nominal

amount of Euro 25 million and a period of five years, with a gross fixed rate equal to 6.875% and an annual

coupon.

TerniEnergia optimizes its financial structure to support the business plan "Discover the new green era

2014-2016" through the listing of the bond at ExtraMOT PRO, the professional segment of the EXTRAMOT

bond market managed by Borsa Italiana.The bonds will be underwritten by a Lead manager already

identified, for a subscription price equal to 100% of nominal value, net of a discount rate of 0.50%, and

their release will not constitute a public offer of securities.

As at February 4, 2014, the bond “TerniEnergia 2019” (ISIN: IT0004991573) was admitted to trading on

ExtraMOT PRO market, managed by the Borsa Italiana. The issuance of Euro 25 million, five-year fixed rate

equal to 6.875% with a gross annual postponed coupon, was signed and fully placed by the Sole Lead

Manager, JCI Capital Limited Investment & Asset Management, to institutional investors.

From February 6th, 2014 the bonds may be traded on the market ExtraMOT PRO, the professional segment

of the ExtraMOT market managed by the Italian Stock Exchange and dedicated to the listing of bonds,

finance bills, equity instruments and project bonds.

1.3.2 THE BOARD OF DIRECTORS PROPOSES THE START OF A PROGRAM FOR THE PURCHASE OF OWN

SHARES (BUY-BACK)

As at March 31, 2014 The Board of Directors of TerniEnergia, has presented today a plan for the purchase

of own shares ( buy-back), to be submitted to the examination of the Ordinary Shareholders Meeting.The

Board of Directors has determined to give mandate to the Chairman and Chief Executive Officer, Mr.

Stefano Neri, to convene the Ordinary General Meeting of Shareholders to vote on the plan.

Reasons for the request for authorization

The main objectives that the Board of Directors intends to pursue through this operation are:

- Acquire a portfolio consisting of TerniEnergia common shares to be used as consideration as part of any

extraordinary transactions, through an exchange of equity or as a subject of the transfer, or for other

purposes deemed of stratic, financial, industrial and/or operational interest for company;

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- Providing shareholders with an additional tool to monetize their investment;

- Buy shares in a medium and long term investment perspective;

- Intervening directly or through intermediaries, in accordance with the existing provisions, to contain

abnormal movements in prices or to stabilize the performance of trading and prices in the event of

momentary phenomena caused by an excess volatility or low trading liquidity.

Purchase transactions are not instrumental to the reduction of share capital by cancellation of treasury

shares purchased, nor intentionally aimed at delisting the Company’s operations.

Maximum number of shares purchased

The share capital, fully subscribed and paid in, amounts to Euro 50,529,680.00 and is represented by n.

37,612,000 common shares, without par value.

This proposal concerns the authorization to the Board of Directors to purchase one or more times its own

shares up to the maximum amount of 2,656,720 shares, up to 6% of the share capital, taking into account

the treasury shares held directly and those held from any subsidiary companies .

The Company does not currently hold any treasury shares.

Period of validity of the Shareholders’ Meeting authorization

The authorization to purchase treasury shares is requested for a period of 18 months from the date of the

Shareholders Meeting which has approved the authorization. The authorization to dispose of treasury

shares purchased from time to time and held in the portfolio is no time limit.

The Board of Directors may proceed with the completion of the authorized operations on one or more

occasions and at all times.

Indication of the minimum and maximum price

The unit price for the purchase of shares can not be higher or lower than 10% compared to the reference

price recorded by the shares in the trading session prior to each individual transaction.

From the point of view of the consideration for the sale of treasury shares purchased, the Board of

Directors shall have the discretion to determine, from time to time, price and/or any additional condition,

mode and time of use of treasury shares, had about the performance of the share price in the period prior

to the transaction and the best interests of the Company, in each case with the procedures, terms and

requirements conform to accepted market practice and in compliance with the regulations from time to

time applicable.

Manner of making the purchase

The transactions of purchase and disposal of treasury shares, for which authorization is requested, will be

performed in compliance with Article 144-bis of Consob Regulation implementing Legislative Decree 24

February 1998 n . 58 and, in general, in compliance with the applicable legislation, in particular the national

and EU laws and regulations.

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1.4 ECONOMIC DEVELOPMENT OF THE GROUP

A summary of the key financial highlights of the Group as at March 31, 2014 compared with the

corresponding figures for the previous year.

The financial results of the Group are summarized below represented:

As at March, 31 As at March, 31 Change

Change

(in Euro) 2014 2013 %

Net revenues from sales and services 10,384,088 8,667,200 1,716,888 19.8%

Production costs (4,467,570) (6,013,374) 1,545,804 (25.7)%

Added value 5,916,518 2,653,826 3,262,692 122.9%

Personnel costs (1,355,267) (1,522,905) 167,638 (11.0)%

EBITDA 4,561,251 1,130,921 3,430,330 n.a.

Amortization, depreciation, provisions and

write-downs (1,757,993) (972,518) (785,475) 80.8%

EBIT 2,803,258 158,403 2,644,855 n.a.

Financial income and charges (2,317,572) 1,634,576 (3,952,148) n.a.

Portions of results attributable to the JV 23,142 (146,721) 169,863 (115.8)%

Pre-tax result 508,828 1,646,258 (1,137,430) (69.1)%

Income taxes 151,627 7,474 144,153 n.a.

Net profit for the period 660,455 1,653,732 (993,277) (60.1)%

As at March 31, 2014, the Group recorded consolidated revenues from sales and services of Euro 10,384

thousand, an increase of 19.81% over the same period of 2013 (euro 8,667 thousand). Revenue of EPC in

the photovoltaic sector amounted to EUR 4,924 thousand, and are related to work for the realization of

photovoltaic systems in the quarter in South Africa. Revenues from the Management of Photovoltaic plants

(PV Power Generation) in the period amounted to euro 3,042 thousand, a significant increase compared to

the same period of 2013 (euro 786 thousand ), as a result of operations consolidation of facilities previously

held in the JV that occurred during 2013. The environment business has recorded revenues of euro 1,554

thousand, an increase of 11. 5% over the same period of 2013. Direct production costs, for the most part of

a variable nature, amounted to euro 4,467 thousand a decrease of 25.71% compared to the previous year

(Euro 6,013 thousand), mainly because of the different type of work carried out by the EPC line of business,

which has been characterized in the quarter under review, mainly of design activities with high added

value. EBITDA increased from euro 1,131 thousand in the first quarter of 2013 to euro 4,561 thousand in

the first three months of 2014. The significant increase in EBITDA was attributable to the higher incidence

in the quarter of revenues from power generation and environmental, both characterized by high margins

(to March 31, 2014 represented approximately 44% of revenues, compared to 25% last year). In addition,

the increase in EBITDA is also attributable to the recognition, in the quarter ended March 31, 2014,

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between the proceeds of EPC, the price received for activities in preparation and planning made on behalf

of a leading Italian utility and finalized the construction of two industrial sized photovoltaic plants in South

Africa.

Depreciation recorded a significant increase, rising from euro 973 thousand to euro 1,758 thousand due to

the increase in the number of plants held in full ownership by the Group over the same period of 2013.

Financial management, negative for approximately Euro 2,318 thousand, a record increase in absolute

value of Euro 3,952 thousand compared to the same period last year. The change was due, in part, to

enrollment, in the quarter ended March 31, 2013, a gain, amounting to 2,760 thousand , resulting from the

revaluation of 50% of the shares already held in the company Energia Alternativa Srl whose parent

company had acquired the remaining 50% on March 28, 2013, and in part, to the increased debt resulting

consolidation of the operation that took place during 2013, the company previously held in the JV.

The net result for the period to March 31, 2014 shows a positive balance of Euro 660 thousand, a decrease

in absolute value of € 993 thousand compared to the corresponding period of the previous year (euro 1,654

thousand), due to the above-described .

Consolidated net revenues

Consolidated net revenues recorded in the first three months of 2014 were higher than those of the

corresponding period of the previous year, mainly due to the impact of revenues from power generation

that saw an increase in absolute value of Euro 2,256 thousand. This change is due to the greater number of

plants held in full ownership as a result of the consolidation of the companies previously held in joint

venture during the year 2013. An important contribution to the financial results as of March 31, 2014,

especially in terms of profitability, is also represented by the revenues "Environment", amounting to Euro

1,554 thousand (up by 11, 5% over the same period of 2013). They are represented by the revenues from

the management of the biodigester plant in Nera Montoro, as well as the treatment plants of the PFU (Life

Tyres) and from the water treatment plants.

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1.5 BALANCE SHEET

Below is summarised the Group’s balance sheet:

As at March, 31 As at December, 31 Change Change

(in Euro) 2014 2013 %

Intangible assets 4,294,972 4,337,960 (42,988) (1.0)%

Property, plant and equipment 159,724,069 160,574,401 (850,332) (0.5)%

Financial fixed assets and other

intangible assets 20,757,205 17,493,201 3,264,004 18.7%

Fixed Assets 184,776,247 182,405,562 2,370,684 1.3%

Inventories 8,611,581 8,208,886 402,695 4.9%

Trade receivables 31,613,976 28,063,651 3,550,325 12.7%

Other assets 11,141,912 16,573,353 (5,431,441) (32.8)%

Trade payables (22,527,800) (31,416,529) 8,888,729 (28.3)%

Other liabilities (6,988,950) (7,329,882) 340,932 (4.7)%

Net working capital 21,850,719 14,099,479 7,751,240 55.0%

Provisions and other non-trade

liabilities (8,468,018) (7,444,424) (1,023,594) 13.7%

Net Invested Capital 198,158,948 189,060,617 9,098,331 4.8%

Shareholders’ Equity 53,560,013 53,887,823 (327,810) (0.6)%

Current net financial position 4,821,435 18,161,094 (13,339,659) (73.5)%

Non-current net financial position 139,777,499 117,011,700 22,765,799 19.5%

Total net financial position 144,598,935 135,172,794 9,426,141 7.0%

Net Invested Capital 198,158,948 189,060,617 9,098,331 4.8%

Net invested capital

As at March 31, 2014 Net invested capital amounted to Euro 198,158 thousand from 184,776 thousand

represented by fixed assets, from Euro 21,851 thousand and net current assets of Euro 8,468 thousand

from the funds and other non-commercial.

Compared to the year ended on December 31, 2013, the net invested capital increased by Euro 9,098

thousand due primarily (Euro 7,751 thousand) an increase in net working capital, resulting in part to the

increase in turnover and in part to the reduction of 'overall exposure to suppliers.

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Net financial position

As at March, 31 As at December, 31

(in Euro) 2014 2013

Cash (22,140) (17,909)

Available bank current accounts (17,669,393) (13,038,001)

Liquidity (17,691,533) (13,055,910)

Bond debt 249,572

Current bank debt (current account overdraft) 2,866,901 4,793,838

Current bank debt (advance) 6,720,255 11,945,016

Financial payables to other lenders 1,377,131 948,034

Current financial debt (other lenders) 3,779,357 3,734,434


Current financial receivables (2,466,630) (2,656,483)

Current financial debt 22,512,968 31,217,004

Current net financial position 4,821,435 18,161,094

Bond debt 24,146,753

Non-current financial debt (other lenders) 47,598,000 48,015,688

Financial payables to other lenders 35,430 35,430

Non-current financial debt (Leasing) 67,997,316 68,960,582

Non-current net financial position 139,777,499 117,011,700

Total net financial position 144,598,935 135,172,794

As at March 31, 2014 Net financial debt amounted to Euro 144, 599 thousand, divided into short-term

portion of Euro 4,821 thousand and long-term portion of euro 139,777 thousand. The long-term portion is

mainly attributable to leases and loan agreements entered into with major financial institutions to cover

the financial requirements needed for the development of photovoltaic parks taught entirely fully available

to the company, as well as for the biodigester plant and the end of life tyres plant in Nera Montoro. The

non-current financial debt also includes the share over the 12 months of corporate loans granted to the

parent company TerniEnergia the end of 2013, made up mainly from a unsecured loan of Euro 10 million

for a period of 60 months, repayable in 20 quarterly installments and an unsecured loan of Euro 5 million

for a period of 60 months, repayable in one installment at maturity, both provided by Veneto Banca.

Finally, the non-current financial debt also includes the bond, equal to nominal amount of Euro 25 million,

for 5 year, annual coupon of 6,875% and repayable in a single payment at maturity (February 2019). Please

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note that the bond issued in February, 2014, is traded on ExtraMOT PRO, the professional segment of the

bond market ExtraMOT managed by the Italian Stock Exchange.

It is noted that the current financial payables comprise part of the payments incurred for investments

already made or still under construction and for which at March 31, 2014 had not yet been entered into a

specific contract financing in the medium - long term. In particular, it is the second end of life tyres plant in

progress of a pirogasification plant already connected to the grid in December 2012 and a composting plant

under construction in Puglia.

The financial position in the short term for an amount of Euro 4,821 thousand is mainly made up of short-

term debt to banks for overdrafts (euro 2,867 thousand) or advances on invoices and / or contracts (Euro

6,720 thousand), Euro 9,986 thousand represented by short-term loans to banks, from Euro 3,779

thousand represented by the short-term portion of lease payables from Euro 17,691 thousand of cash,

from Euro 2,466 thousand from short-term portion of loans receivable.

The change in the net financial position is largely attributable to the bond issue, which has increased its

non-current borrowings, partially offset by the decrease of current financial debt, due to repayments made

by the Parent Company on the lines short-term financial term.

Net equity

As at March 31, 2014 net equity, comprehensive income for the period, amounted to Euro 53,56 thousand,

with a decrease from the previous year to Euro 324 thousand. This change is due primarily to the change in

the reserve for cash flow hedges and net income in the period.

1.6 BUSINESS OUTLOOK

The current market situation is characterized by strong global growth of investments in the photovoltaic

and environment industry, but there are critical issues arising from the audit ventilated Italian regulatory

system and incentives for renewable energy sources, the quota restrictions on access to capital, the growth

of the size of the plants and the consequent need for careful and prospective vision of financial

management of projects.

Because of this changing market, TerniEnergia has diversified its sources of access to capital through the

bond issue, has changed its business model from which to derive cash flow stability with growth

opportunities arising from the replicability, has differentiated the country risk and the counterparty in B2B.

At the same time, precisely because of the rumors of the development of legal and regulatory framework,

the Company has had to deal with a delay in fund rasing for the placement of the draft ended real estate

investment trust, taking the opportunity to consolidate the full ownership of the assets photovoltaic power

15

generation activity, increasing its assets and maintaining a bouquet of assets to be valued in the event of

future opportunities at very high margins, resulting in a reduction in the NFP. TerniEnergia confirms,

therefore, for the future, a strategy that combines the size of the business, growth and development policy

of relations with capital markets and debt.

As a result, the Company expects the following lines of development:

• International Development - In the period 2014/2015 is planned the construction of a project in the

portfolio in South Africa for an amount of approximately Euro 140 million; in the short term it is

planned to establish a company in partnership with Al Hamed Group, called TerniEnergia Gulf LLC,

headquartered in Abu Dhabi, active in the fields of power generation, waste to energy and waste

management. By 2014 it is expected to open early sites and the construction of a plant for the

recovery of used tires.

• Italian Development - Strengthening tremendous growth in the areas of smart energy and the

energy efficiency. In particular, the initiation of negotiations for the acquisition of Free Energy SpA

allow a completion of the value chain downstream power generation plants owned by

TerniEnergia, thanks to the sales network of the same Free Energy. The operation, thanks to the

simultaneous acquisition of 100% of Lucos Alternative Energies, already contracted for next June,

will allow strong potential synergies and opportunities for the integration of the business, which

will be the basis for a strong growth in energy efficiency and enhancement of energy production

from renewable sources.

• Strategic Development - Focus on business lines with higher margins, consolidating, without

recourse to new investments, lines of business at a lower potential return and growth, on which is

based the recent development (EPC, O & M). Concentration on the activity of power generation

technology with full independence and diversification of sources and technologies themselves, to

enhance the opportunities for the short term and the coverage requirements of the demand curve.

TerniEnergia intends to have a balanced portfolio for the country in the process of internationalization of

photovoltaic and environmental EPC business. In particular, continues to conduct intensive scouting

activities to promote development projects in the most attractive countries for the installation of large-

scale plants.

16

The Company will also continue the process of strengthening the scope of the environmental assets,

completing a new facility for the treatment and recovery of "secondary raw material" of life tires (ELT) in

Northern Italy and exploiting a new plant in South Italy for energy recovery through composting and

anaerobic biodigestion. Finally, the new plant will be completed for the treatment of industrial waste fluids

in Nera Montoro (TR), an advanced authorization phase, which will intercept a substantial demand in a

market segment with high technological content and high growth prospects. On the financial side,

TerniEnergia intends to consolidate the excellent reputation with investors, using their presence on the

Stock Exchange for a candidate to be an investment platform for institutional investors, creating conditions,

through the stability of cash flows, using the debt in a manner efficient with respect to changes in demand.

17

2 FINANCIAL STATEMENTS

2.1 STATEMENT OF CONSOLIDATED FINANCIAL SHEET

Note As at March, 31 As at December, 31

(in Euro) 2014 2013

ASSETS

Intangible assets 3.3.1 4,294,972 4,337,960

Property, plant and equipment 3.3.2 159,724,069 160,574,401

Equity investments 3.3.3 1,176,337 1,168,140

Deferred tax assets 3.3.4 11,195,716 7,823,865

Non-current financial receivables 3.3.5 8,385,152 8,501,196

Total non-current assets 184,776,246 182,405,562

Inventories 3.3.6 8,611,581 8,208,886

Trade receivables 3.3.7 31,613,976 28,063,651

Other current assets 3.3.8 11,141,912 16,573,353

Financial receivables 3.3.9 2,466,630 2,656,483

Cash and cash equivalents 3.3.10 17,691,532 13,055,910

Total current assets 71,525,631 68,558,283

TOTAL ASSETS 256,301,877 250,963,845

LIABILITIES AND SHAREHOLDERS’ EQUITY

Share capital 50,529,680 50,529,680

Reserves 1,918,506 (3,638,119)

Result for the period 503,607 6,708,295

Total Group equity 52,951,793 53,599,856

Equity attributable to minority 451,372 155,218

Profit for the period of the third 156,848 132,749

Total equity 3.4.1 53,560,013 53,887,823

Provision for employee benefits 3.4.2 710,112 668,789

Deferred tax liabilities 3.4.3 1,304,189 1,195,886

Non-current financial payables 3.4.4 139,777,499 117,011,700

Derivatives 3.4.5 6,453,717 5,579,749

Total non-current liabilities 148,245,517 124,456,124

Trade payables 3.4.6 22,527,800 31,416,529

Payables and other financial liabilities 3.4.7 24,979,597 33,873,487

Taxes payable 3.4.8 1,140,708 563,611

Other current liabilities 3.4.9 5,848,242 6,766,271

Total current liabilities 54,496,347 72,619,898

TOTAL LIABILITIES 202,741,864 197,076,022

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUTY 256,301,877 250,963,845

18

2.2 CONSOLIDATED INCOME STATEMENT


(in Euro) 2014 2013

Revenues 3.5.1 9,997,180 7,858,994

Other operating income 386,908 808,206

Change in inventories of semi-finished and finished

products 3.5.2 221,611 (167,029)

Costs for raw materials, consumables and goods for resale 3.5.3 (1,882,958) (752,223)

Costs for services 3.5.4 (2,393,465) (4,854,906)

Personnel costs 3.5.5 (1,355,267) (1,522,905)

Other operating costs 3.5.6 (412,758) (239,216)

Amortisation, depreciation, provisions and writedowns 3.5.7 (1,757,993) (972,518)

Operating result 2,803,258 158,403

Financial income 3.5.8 426,588 2,896,670

Financial charges 3.5.8 (2,744,160) (1,262,094)

Portion of result attributable to the joint venture 3.5.9 23,142 (146,721)

Net profit before taxes 508,828 1,646,258

Taxes 3.5.10 151,627 7,474

Net profit for the period 660,455 1,653,732

- of which: attributable to the Group 503,607 1,663,728

- of which: attributable of Other 156,848 (9,996)

Earnings per share – Basic and diluted 3.8 0.018 0.044

19

2.3 INCOME TOTAL CONSOLIDATED STATEMENT

Note

31 March

(in Euro) 2014 2013

Net Profit for the Period 660,455 1,653,732

Net profit for the period (1,136,288) (1,691,371)

Change in the cash-flow hedge reserve of joint ventures (169,711)

Tax effect 312,479 465,127

Other comprehensive income 3.4.1. (993,520) (1,226,244)

Total comprehensive income for the period (333,065) 427,488

· of which: attributable to the Group (489,913) 437,484

· of which: attributable to third parties 156,848 (9,996)

20

2.4 STATEMENT OF CHANGES IN EQUITY

Values as at 31.12.2012 50,529,680 5,123,322 1,903,139 12,831,295 (28,730,223) (8,872,466) 6,880,120 48,537,334 232,128 48,769,462

Other Changes - - - - (8,452) (8,452) - (8,452) 8,218 (234)

Shareholder's Transactions - - - - (8,452) (8,452) - (8,452) 8,218 (234)

Net profit for the period - - - - - - 1,663,728 1,663,728 (9,996) 1,653,732

Other comprehensive - - - - (1,226,244) (1,226,244) - (1,226,244) - (1,226,244)

Total profit for the period - - - - (1,226,244) (1,226,244) 1,663,728 437,484 (9,996) 427,488

Value as at 31.03.2013 50,529,680 5,123,322 1,903,139 12,831,295 (29,964,919) (10,107,162) 8,543,848 48,966,366 230,350 49,196,716

Share capital

Total

Reserves

Result for

the period

Total net

assets of the

group

Equity

attributable

to minority

Total equity

(in Euro) Premium

Reserve

Legal

Reserve Extraordinary

Other

reserves

Values as at 31.12.2013 50,529,680 5,123,322 1,961,905 11,879,177 (22,602,524) (3,638,119) 6,708,295 53,599,856 287,967 53,887,823

Other Changes - -

(158,149) (158,149) (158,149) 163,405 5,256

Shareholder's Transactions - -

(158,149) (158,149) (158,149) 163,405 5,256

Net profit for the period - -

- - 503,607 503,607 156,848 660,455

Other comprehensive - -

(993,520) (993,520) (993,520) (993,520)

Total profit for the period

(993,520) (993,520) 503,607 (489,913) 156,848 (333,065)

Value as at 31.03.2014 50,529,680 5,123,322 1,961,905 11,879,177 (23,754,193) (4,789,789) 7,211,902 52,951,793 608,220 53,560,013

21

2.5. CONSOLIDATED STATEMENT

As At March, 31

(in Euro) Note 2014 2013

Profit before taxes

508,828 1,646,258

Amortisation and depreciation

1,757,993 972,518

Write-downs of fixed assets

Provision for employee benefits

41,323 68,687

Result of joint ventures accounted for at equity and reversal of margin (23,142) 146,721

Gains / Revaluations

Change in inventories

(402,695) 433,960

Change in trade receivables

(3,550,325) 12,514,408

Change in other assets

2,462,288 (4,193,254)

Change in trade payables

(8,888,729) (10,718,738)

Change in other liabilities

(325,985) (2,019,816)

Payment of employee benefits

Net cash flow (used in)/generated by operating activities (8,420,445) (1,149,257)

Investments in property, plant and equipment

(864,673) (1,351,693)

Disposals of property, plant and equipment

Investments in intangible assets

(2,668)

Disposals of intangible assets

Purchase Investments

697,169

Dividends from JV

160,000 640,000

Change in receivables and other financial assets

145,897 920,273

Net cash flow used in investing activities (558,776) 903,080

Change in payables and other financial liabilities

(8,893,890) (1,106,984)

Increase in non-current financial payables

22,503,479 2,381,218

Other Movements of Equity

5,255

Net cash flow generated by financing activities 13,614,844 1,274,234

Comprehensive cash flow for the period

4,635,624 1,028,057

Cash and cash equivalents at the beginning of the period 3.3.10 13,055,910 3,384,398

Cash and cash equivalents at the end of the period 3.3.10 17,691,532 4,412,456

22

3 EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT MARCH 31,

2014

3.1 GENERAL INFORMATION

TerniEnergia S.p.A. (“TerniEnergia”, “Company” or “Parent Company”) is a limited company with registered

office in Narni (Italy), strada dello stabilimento 1, listed on the italian stock Exchange . Since December

28th, 2010 TerniEnergia’s ordinary share are negotiated on Star segment of MTA.

TerniEnergia operates in the field of renewable energy, energy efficiency and the environmental sector.

TerniEnergia is active as a system integrator, offering turnkey photovoltaic systems of industrial size, both

for third parties is also through its joint ventures with leading national operators. The Group also intends to

strengthen the business of selling energy produced from solar energy. TerniEnergia operates in the waste

management in the recovery of materials and energy in the development and production of technologies.

In particular, the Group is active in the recovery of used tires; in the treatment of biodegradable waste

through the implementation of biodigesters; in the production of energy from biomass; in the management

of a biological sewage treatment plant; in the decommissioning of industrial plants; in the recovery of

metals from demolition and reclamation of industrial sites; in the development and production of

technological equipment. TerniEnergia, through its subsidiary Lucos Alternative Energies, a developer of

energy efficient plants in both EPC and FTT (Third Party Financing), pursuing the goals of increasing energy

production from renewable sources, energy-saving and emission reduction dictated the European

environmental policy.

3.2 FORM, CONTENTS AND ACCOUNTING POLICIES ADOPTED

The present semiannual consolidated financial statements has been prepared in the going concern basis,

since the Directors have verified the absence of indicators of financial, managerial or other critical issues

that could report difficulties on the Group's ability to meet its obligations in the foreseeable future and in

particular over the next 12 months.

This document has been prepared in accordance with international accounting standards (IFRS) , issued

by IASB and recognized in the European community under regulation (EC) n. 1606/2002 of European

parliament and council of July 19,2002, and in particular IAS 34 – interim financial reporting, as well as

measures enacted to implement article 9 of legislative decree n. 38/2005. Under the options in IAS 34, the

group chose to publish, for the present semiannual consolidated financial statements a concise

23

information. The information herein should be read in conjunction with the consolidated financial

statements for the year ended December 31, 2013 prepared in accordance with IFRS, to which express

reference is made.

These Consolidated Financial Statement for the hal year is expressed in EUR (Euro) as this is the currency in

which operations are conducted by Group companies. All data presented in the notes to the financial

statements are, unless otherwise indicated in Euros.

The Group has elected to use the income statement by nature, while the assets and liabilities in the

statement of financial position are classified as current or non-current. The financial statements have been

prepared under the indirect method. It should be noted that in order to comply with the instructions

contained in Consob Resolution no. 15519 dated July 28, 2006 "Provisions on financial statements" in note

3.6 shows the diagrams were consolidated income statement, consolidated balance sheet and consolidated

cash flow statement, detailing for each balance sheet item of significant amounts of positions or

transactions deriving from transactions with related parties.

The preparation of these Consolidated Financial Statement requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and the related disclosures, as well as

on the assets and liabilities at the balance sheet date. The estimates and associated assumptions are based

on historical experience and other factors considered reasonable in the circumstances and are taken when

the carrying amount of assets and liabilities that are not readily apparent from other sources. The actual

results could differ from those estimates. The estimates and underlying assumptions are reviewed

periodically and the effects of any changes are reflected in the income statement, if they only involve the

exercise. In the event that the revision affects both current and future periods, the change is recognized in

the period in which the revision is made and in future years.

The actual results may differ, perhaps significantly, from these estimates as a result of possible changes in

the factors considered in determining these estimates.

This Consolidated Financial Statement has been approved by the Board of Directors of the Parent Company

on May 14, 2014.

24

NEW ACCOUNTING STANDARD

From January 1,2014, the Group adopted the following new accounting standards:

• IAS 27 Revised (separate financial statements): The standard was revised in conjunction with

the adoption of IFRS 10, limiting its scope to only separate financial statements;

• IAS 28 Revised (Investments in associates and joint ventures): The standard was revised by

specifying certain procedures for applying the equity method;

• IAS 32 Amendment (Financial Instruments - Presentation): the principle clarifies the

circumstances in which it is possible to compensate for financial assets and liabilities;

• IFRS 11 (agreements to joint control), the principle has eliminated the possibility of

consolidating on a proportionate basis the qualified joint arrangement as a joint venture under

dell'IFRS11, while the consolidated financial statements include the relevant portion of costs,

revenues, assets and liabilities of the joint operation;

• IFRS 12 (Details of investments in other entities): the principle requires you to explain in the

notes to all forms of participation in other entities, including associates, joint ventures, special

purpose vehicles, and other unconsolidated SPEs;

• IAS 36 (Disclosures on the recoverable value of non-financial assets): the principle requires you

to enter a disclosure in the notes on the recoverable value of assets that have suffered

impairment in value, in cases where the same has been calculated on the basis of fair value less

costs of sale or disposal.

The adoption of these accounting standards has not had a significant impact in this Consolidated

Financial Statement ended March 31, 2014.

Changes in consolidation

The consolidated financial statements at March 31, 2014 includes the financial statements of

the Parent TerniEnergia SpA and the balance sheet of all companies in which it holds directly or indirectly

control.

See below a list of the entities included in consolidation, and their percentage of direct or indirect

ownership by the Group as at March 31, 2014:

25

List of company consolidated using the integral method:

Company Location % of

Possession % % Group

Newcoenergy S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Capital Solar S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Investimenti Infrastrutture S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

MeetSolar S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Festina S.r.l. Terni - Via Garibaldi n.43 100% - 100%

Energia Basilicata S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Energia Lucana S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Energia Nuova S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Verde Energia S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Rinnova S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Soc. Agric. Fotosolara Cheremule S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

Soc. Agric. FotosolaraBonannaro S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

Soc. Agricola Fotosolara Oristano S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

Soc. Agricola Fotosolara Ittireddu S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

T.e.c.i. costruzioni & ingegneria S.r.l. Gioia del Colle – Via Giosuè Carducci n. 122 100% - 100%

Meet Green Italia S.r.l. Nardò- Via Don Milani, n.4 100% - 100%

Lucos Alternative Energies S.p.A. Narni - Via dello Stabilimento, 1 100% - 100%

LyteEnergy S.r.l. Narni - Via dello Stabilimento, 1 - 70% 70%

Soc. Agricola Padria S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

TerniEnergia. Hellas M.EPE. Atene – 52, Akadimiasstreet 100% - 100%

TerniEnergia Polska Zoo Varsavia - Sw. Krolewska 16, 00-103 100% - 100%

Tevasa L.t.d. Cape Town, 1 Waterhouse Place, Century City,

7441 100% - 100%

D.T. S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

IGreen Patrol S.r.l Narni - Via dello Stabilimento, 1 100% - 100%

Alchimia Energy 3 S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

TerniEnergia Romania Srl Str. Popa Petre 5 - Bucarest 100% - 100%

TerniEnergia Solar South Africa L.t.d. Woodstok, De Boulevard searle street 80%

80%

TerniEnergia Project L.t.d. Woodstok, De Boulevard searle street 80%

80%

GreenAsm S.r.l. Narni - Via dello Stabilimento, 1 50% - 50%

Energia Alternativa S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

SolarEnergy S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

Solter S.r.l. Narni - Via dello Stabilimento, 1 100% - 100%

Infocaciucci S.r.l. Narni - Via dello Stabilimento, 1 69,5% - 69,5%

List of consolidated companies using the equity method:

Company Location % of Possession % of Possession

Direct Direct Group

Saim Energy 2 S.r.l. Narni - Via dello Stabilimento, 1 50% - 50%

Girasole S.r.l. Narni - Via dello Stabilimento, 1 50% - 50%

SolTarenti S.r.l. Narni - Via dello Stabilimento, 1 50% - 50%

Guglionesi S.r.l. Narni - Via dello Stabilimento, 1 50% - 50%

26

3.3 COMMENTS ON THE MAIN BALANCE SHEET ITEMS

NON CURRENT ASSETS

3.3.1 INTANGIBLE ASSETS

The tables below report the breakdown of changes in the “Initial cost” (Table 1), “Cumulated

ammortisation” (Table 2) and “Net values” (Table 3), respectively, relating to intangible assets as at March

31, 2014, at December 31, 2013 and the relative changes.

(table 1)

Intangible assets Original Cost

Values as at

31.12.2013 Increase

Decrease for Write Downs/ Values as at

31.03.2014 Disposals Reclassification

Software 578,384

578,384

Others 829,309

829,309

Building lease 331,452

331,452

Authorisations 1,133,334

1,133,334

Goodwill 2,335,176

2,335,176

Patents 116,450

116,450

Total 5,324,106 5,324,106

(table 2)

Intangible

assets

Values as at

31.12.2013

Amortisation

and

depreciation

Write Downs/ Values as at

31.03.2014 (in Euro) Reclassification

Software 458,672 13,943

472,615

Patents 115,564 221

115,786

Others 411,910 28,823

440,733

Total 986,146 42,988 1,029,134

27

(table 3)

Intangible assets

Net Values

Original Cost Cumulative

Net Values Original Cost Cumulative

Net Values (in Euro) Amortisation Amortisation

Software 578,384 (458,672) 119,712 578,384 (472,615) 105,769

Others 829,309 (411,910) 417,399 829,309 (440,733) 388,576

Building lease 331,452 331,452 331,452 331,452

Authorisations 1,133,334 1,133,334 1,133,334 1,133,334

Goodwill 2,335,176 2,335,176 2,335,176 2,335,176

Patents 116,450 (115,564) 886 116,450 (115,786) 664

Total 5,324,106 (986,146) 4,337,960 5,324,106 (1,029,134) 4,294,972

Intangible assets include the "Permissions" which refers to costs associated with administrative rights

already obtained or still in progress for the implementation of photovoltaic systems, acquired through

subsidiaries.

The amount of Euro 1,133 thousand relates to authorizations held by the group that the date of these

interim consolidated financial statements were waiting to be used and therefore not depreciated. The

residual value of permits will be acquired recovered through the future implementation of photovoltaic

system, so on the basis of business plan of the group’s parent, it is believed that the figure is fully

recoverable, are therefore not emerged indicators of impairment which required a reduction in the

carrying value in budget.

The surface rights relate to certain acquired rights and for the construction of photovoltaic systems.

The goodwill detected in the previous year and amounted to Euro 2,335 thousand, relates entirely to the

acquisition of control in Lucos Alternatives Energies SpA, a company engaged in the business of energy

efficiency. This is an indefinite life asset, so is not amortized but subject to verification at least annually

(impairment test). As at March 31,2014 there are no indicators to be assumed possible impairment of

goodwill.

28

3.3.2 TANGIBLE FIXED ASSETS

The following tables are listed, respectively, the analysis of variations of the "Original cost" (Table 1), the

"Fund Depreciation and Amortization" (Table 2) and "net values" (Table 3) relating to intangible assets as at

March 31, 2014, at December 31, 2013 and the relative changes:

(table 1)

Property, plant and

equipment

Original Cost

Values as at

31.12.2013 Increase

Decrease for Reclassification

Values as at

31.03.2014 (in Euro) Disposals

Land and buildings 4,823,548 1,955 4,825,503

Plant and machinery 165,460,308 7,487 165,467,795

Industrial equipment 779,226 8,533 787,759

Other assets 1,013,241 3,353

1,016,593

Construction in progress 15,314,243 843,666

16,157,909

Total 187,390,565 864,994 188,255,559

(table 2)

Property, plant and

equipment

Amortization Found and WriteDowns

Values as at

31.12.2013 Amortization Values as at

31.03.2014 (in Euro)

Land and buildings 210,385 47,135

257,520

Plant and machinery 25,406,034 1,606,550

27,012,584

Industrial equipment 572,485 25,281

597,767

Other assets 627,259 36,360

663,620

Total 26,816,164 1,715,326 28,531,490

29

(table 3)

Property, plant and

equipment

Net Values

As At December, 31 2013 As At March, 31 2014

(in Euro) Original Cost

Amortization and

Depreciation

Fund

Net Values Original Cost Amortization and

Depreciation Fund Net Values

Land and buildings 4,823,548 (210,385) 4,613,163 4,825,503 (257,520) 4,567,983

Plant and machinery 165,460,308 (25,406,034) 140,054,274 165,467,795 (27,012,584) 138,455,211

Industrial equipment 779,226 (572,485) 206,741 787,759 (597,767) 189,992

Other assets 1,013,241 (627,259) 385,981 1,016,593 (663,620) 352,974

Construction in progress 15,314,243 15,314,243 16,157,909 16,157,909

Total 187,390,565 (26,816,164) 160,574,401 188,255,559 (28,531,490) 159,724,069

Investments in land and buildings amounted to Euro 4,568 thousand and mainly the value of the properties

owned by the Group acquired following the merger with TerniGreen SpA. These properties are represented

by two industrial buildings present within the plant in Nera Montoro and conferred TerniGreen from the

Nuova Terni Industrie Chimiche SpA and Nuova TIC S.r.l. (Now Italeaf SpA) in previous years, as well as the

value of land always TerniGreen conferred by the GR Ambiente Srl and for the construction of a composting

plant in the province of Lecce. These buildings and land are all in the service of the Group's business.

Finally, during 2013, the Parent Company Ternienergia has acquired two industrial buildings owned by the

Italeaf Spa for a value of Euro 1,235 thousand, which are present in the plant in Nera Montoro, which will

be used in the service of the Group's industrial activities.

"Plant and Machinery" at March 31, 2014 includes the value of 34 photovoltaic systems with a total

capacity of 34.3 MW, as well as the value of the end of life tyres plants , of the biodigester plant and of

water treatment plants acquired by Italeaf SpA at the end of the previous year, they all present inside the

plant in Nera Montoro.

"Assets under construction", amounting to Euro 16,158 thousand, includes the investments in progress and

not yet in the year ended at March 31, 2014. Such investments refer to:

- The installation of anaerobic biodigester and composting plant at the town of Calimera (Lecce province);

- The plant with cogeneration of energy through the pirogasification of virgin wood to produce electricity

and heat, near the town of Borgosesia (Vercelli); the plant has been connected to the electricity grid in

December 2012, and got the feed-in tariff of 0.28 Euro / kWh;

30

- A second end of life tyres plant.

Finally, among the assets under construction are capitalized costs incurred in prior years for the

development of the wind farm from 18 MWp located in the town of Stroncone. The Parent Company is

considering whether to develop the facility on their own or, if opportunity presents interesting, to sell the

project to a third party.

3.3.3 EQUITY INVESTMENTS

Below the value of investments in joint ventures and its enhancement with the equity method related to

each company as at March 31, 2014, at December 31, 2013 and the relative changes:


(in Euro) 2014 2013 %

Investments in JV

175,332 167,135 8,197 n.a

Other investments

1,001,005 1,001,005

n.a

Total Investments 1,176,337 1,168,140 8,197 4,9%

The joint ventures are active in the identification, development, financing, design, construction and the

putting into operation of photovoltaic plants in Italy, as well as in the sale of electricity produced by the

same.

Below is a detail of the movement regarding the value of investments in joint ventures as at March 31,

2014 with evidence of the effects of accounting in accordance with the equity method:

Partecipation As At March, 31

2014

Equity investments Net Deferred

Saim Energy 2 S.r.l. 114,328 114,328

Girasole S.r.l.. (2,704) (2,704)

Soltarenti S.r.l. 47,414 47,414

Guglionesi S.r.l. 13,589 13,589

Totale 172,627 175,332 (2,704)

31

It is stated that the application of equity method has resulted in previous years the elimination of

significant margin in relation to the volume of work undertaken on behalf of joint ventures, with the

consequent reduction in the value of the investment until the zeroing of itself. After resetting the value of

the investment, the further reduction is recognized as a liability. This liability called “Margin Deferred” , is

recognized under other liabilities (current and not current), because it is not representative of a legal or

constructive obligation to cover the losses of the investee, but a reduction in the value of the investment in

joint venture consequent elision of margins in future years will find that deferred recognition in the

consolidated income statement, according to the amortization of the transferred plants.

Below is a detail of the movement occurred in the first quarter of 2014 regarding the value of investments

in joint ventures (defined as net value of the value of investments in shares and the value of the margin

deferred) with evidence of the effects of accounting in accordance with the equity method:

32

JV Partecipation 2014 2013

(in Euro)

January, 1 149.486 (9.735.633)

In share capital / Additions

Reimbursement Payment (884.676)

Other changes 8.051.566

Elimination of intercompany transactions, margin

share's result 23.142 2.718.229

Reserve for cash flow hedges, net of tax

March, 31 172.628 149.486

- Of which investments in shares 175.332 167.134

- Of which Margin deferred (2.704) (17.649)

Total 172.628 149.486

Investment in Joint Venture is classified in the balance sheet for Euro 175 thousand in the item equity

investments and Euro 2,704 in the item Deferred margin, among other current liabilities.

In order to present more complete information in the following table shows the aggregate net debt of

major joint venture as at March 31, 2014.

33

Saim Energy 2 Girasole Sol Tarenti Guglionesi Total

Cash

Bank accounts 56,566 7,897 15,775 110,202 190,441

Liquidity (A) 56,566 7,897 15,775 110,202 190,441

Current financial payables

Current bank debt

Mortgages

- sale and leaseback (144,712) (267,652) (414,701) (95,863) (922,928)

- to other (500,000) (150,000) (650,000)

- to TerniEnergia (1,766) (500,000) (150,000) (651,766)

Non-current financial payables

Mortgages

- project financing

- sale and leaseback (2,440,523) (5,092,549) (8,384,780) (2,274,603) (18,192,455)

- to other (609,891) (1,030,926) (252,261) (1,893,078)

- to TerniEnergia (617,826) (1,031,202) (238,983) (1,888,011)

Financial Debt (B) (2,587,001) (7,587,918) (10,861,608) (3,161,710) (24,198,237)

Financial Net Debt (A+B) (2,530,434) (7,580,021) (10,845,833) (3,051,508) (24,007,796)

Please note that the values of net debt shown in the table above refer to the 50% to Group TerniEnergia,

equal shares of ownership held by the Group in Joint Venture.

The Joint Venture generally finance investments in solar power systems through funding granted by the

shareholders or by medium long-term loans from financial institutions and leasing companies. The term

borrowings are primarily secured by mortgages on the photovoltaic joint venture, by pledges on receivables

and cash equivalents of joint ventures and guarantees given by the shareholders. The Parent Company has

provided to Joint Ventures agreements to take over Euro 12,6 million as at March 31, 2014 (for details, see

Note 3.4.10 and 3.6 commitments and guarantees given to related parties).

Some loans require both shareholders and joint venture with respect to certain corporate and financial

parameters. In particular, the parameters corporate provision for the lending institutions to require early

repayment of loans extended in the event of changes in shareholder of reference of the joint venture, while

the financial parameters include:

• the requirement for joint venture to meet certain ratios - usually 15% / 85% - of equity / debt;

• the ability for financial institutions to require early repayment in the event of:

34

i) a debt service cover ratio generally less than 1.05 (debt service cover ratio is the ratio between

a) the cash flows expected from the project funded in a given year and b) interest, including

payments related to derivatives, and the principal amount of debt coming due for the same year);

ii) a loan life coverage ratio below 1, 10 (that is the present value of expected cash flows from the

project compared to the amount of sums paid but not yet reimbursed);

The possibilities for joint venture to distribute dividends is i) subject to satisfaction of a debt service cover

ratio less than typically 1, 15 and the loan life coverage ratio equal to or generally rates above 1, 20 and ii)

limited to amount of cash free as defined by the contract.

As at March 31, 2014, all covenants are complied. Please remember that the cash flows to service

indebtedness of the Joint Venture derive from incentive rates of GSE and sale of electricity produced by

photovoltaic systems owned by the same Joint Venture.

3.3.4 DEFERRED TAX

The following table provides a breakdown of tax assets at March 31, 2014, to December 31, 2013 and its

changes:


(in Euro) 2014 2013 %

Deferred tax assets 11,195,716 7,823,865 3,371,850 43.1%

Total Deferred Taxes 11,195,716 7,823,865 3,371,850 43.1%

The deferred tax assets relate primarily to the Parent Company TerniEnergia and the companies Energia

Alternativa and TERNI Solarenergy. The change compared to December 31,2013 is mainly due to the

reclassification of an amount of approximately Euro 2 million, representing the amounts due in respect of

Terni Research SpA (consolidating company), and for the ratio of tax to be consolidated until the year 2013.

Taken in consideration of the termination of tax consolidation, following the spin-off partial inverse that

has affected the company Terni Research SpA and now Italeaf SpA, the above amount, consisting of tax

losses in previous years has been reclassified to deferred tax assets.

35

3.3.5 NON CURRENT FINANCIAL RECEIVABLES

The following table provides a breakdown of non-current financial receivables at March 31, 2014 at

December 31, 2013 and its changes:


(in Euro) 2014 2013 %

Soltarenti S.r.l. 1,021,565 1,061,562 (39,997) (3.8)%

Girasole S.r.l. 617,869 617,869 0.0%

Guglionesi S.r.l. 237,005 237,005 0.0%

Financial asset 5,321,246 5,397,111 (75,864) (1.4)%

Security deposits

1,187,466 1,187,650 (183) (0.0)%

Total non-current loans receivable 8,385,152 8,501,196 (116,045) (1.4)%

This caption includes Euro 5,321 thousand of loans receivable accounted for due to the application of IFRIC

12 and IFRIC 4 to contracts for energy efficiency and interest-bearing loans granted to the Joint Venture

that are renewed automatically from year to year unless canceled.

This item consists mainly of deposits the amounts deposited by the company owning PV systems to

guarantee the lease contracts for the financing of the same plants.

As at March 31, 2014 part of the financial credits earned toward the Joint Venture have been classified as

current assets; This amount represents the amount to be reimbursed in the short term, given the liquidity

in the subsidiary and any financial covenants. See the note in the notes 3.3.9.

As mentioned above, under "financial assets energy efficiency" are registered financial claims arising in

respect of contracts for energy efficiency. These credits represent the fair value of the expected cash flows

from 'energy efficiency activities carried out on a number of municipalities and industrial plants. These

contracts are intended to improve the energy efficiency of public lighting systems. The performances

consist of the planning, design and maintenance of interventions aimed at efficiency.

36

CURRENT ASSETS

3.3.6 INVENTORIES

Follow the details as at March 31, 2014, December 31, 2013 and changes:


(in Euro) 2014 2013 %

Commodities 1,827,890 1,643,885 184,005 11.2%

Semifinished 12,600 (12,600) (100.0)%

Finished Products 722,642 737,004 (14,362) (1.9)%

Products in process 6,061,049 5,815,397 245,652 4.2%

Total inventories 8,611,581 8,208,886 402,694 4.9%

As at March 31, 2014, the products being processed mainly include costs for PV system in different states

of completion.

As at March 31, 2014 the finished products mainly relate to the matter-before the second arising from the

recovery of End of Life Tyres, as well as to the equipment "TR gridless" (apparatus for providing power to

low voltage using a stand-alone photovoltaic energy and batteries) and "TR WOC" (sensor for the detection

of weld defects real-time). For these products, the company is implementing a strategy for marketing

abroad.

3.3.7 TRADE RECEIVABLES

Follow the detail as at March 31, 2014, December 31 2013 and changes:


(in Euro) 2014 2013 %

Loans to customers

32,054,703 28,806,118 3,248,585 11.3%

Receivables from joint venture 283,921 259,728 24,193 9.3%

Receivables from parent

477,851 67,956 409,895 n.a.

Loans to subsidiaries

70,761 203,414 (132,653) (65.2)%

Provision for doubtful

(1,273,261) (1,273,565) 304 (0.0)%

Total trade receivables 31,613,976 28,063,651 3,550,324 12.7%

37

As at March 31, 2014 Trade receivables, mainly from customers, amounted to Euro 32,055 thousand, of

which Euro 7,491 thousand of receivables for invoices to be issued. The change in trade receivables

compared to the same period of the previous year is mainly due to the work conducted in South Africa.

Among the accounts receivable is a receivable, amounting to about Euro 7 million, which is the remaining

part of the consideration, which originally amounted to 40 million, the sale was completed in 2011 by two

photovoltaic plants of total capacity of about 12 megawatts currently in full operation. In relation to this

credit, although in December 2012 had reached an agreement for the payment of the amount due, the

other party did not honor its obligations. Despite repeated attempts to close the issue as extra-judicial, the

company was forced to start in August 2013, the legal action to recover the amount of such claim. In

particular, the parent company, with the assistance of its legal counsel, believes specious reasons to refuse

the payment by the counterparty in the light of the factual and legal elements serious and concrete and,

therefore, the date of the balance sheet, it has reasonable grounds to believe not configurable likely a

liability to the Parent Company. For more details, please refer also to what is reported in Note 3.4.10.

The amount of trade receivables is adjusted by a provision for doubtful debts of Euro 1,273 thousand to

cover the risk of default of certain receivables arising in previous years.

For a breakdown of receivables from joint ventures, please refer to the paragraph 3.6 which lists all the

transactions with the related parties as at March 31, 2014.

As at March 31, 2014 the nominal value of trade receivables approximates their fair value.

38

3.3.8 OTHER CURRENT ASSETS



(in Euro) 2014 2013 %

VAT credit

3,228,989 5,003,167 (1,774,178) (35.5)%

Advances to suppliers

113,585 398,656 (285,071) (71.5)%

Prepayments

1,979,359 2,119,541 (140,182) (6.6)%

Other credits

5,819,979 9,051,989 (3,232,010) (35.7)%

Total other current assets 11,141,912 16,573,353 (5,431,441) (32.8)%

The item "Other receivables" mainly on credit, equal to Euro 1,225 thousand , accrued for the sale of 50%

of the shares of the company Collesanto Srl, whose financial settlement will take place during the year

2014. This item also includes the credit accrued to the Terni Research SpA, amounting to Euro 807

thousand for the tax on the income of the company in relation to the ratio of tax to be consolidated until

the tax year 2013. Such credit is represented in the prevalence of tax losses that will be used by

consolidating Terni Research SpA in the tax return for the year 2013. A portion of the loans outstanding at

December 31, 2013, and related to the ratio of tax consolidation, have been reclassified to deferred tax

assets, taking into account the termination of the fiscal consolidation following operation of partial

inversely proportional split of the company Terni Research SpA (See also note 3.3.4). The remainder of the

balance of other receivables mainly relates to deferred tax receivables and advances from customers.

3.3.9 FINANCIAL RECEIVABLES



(in Euro) 2014 2013 %

Financial receivables from joint venture 665,992 814,379 (148,387) (18.2)%

Financial receivables from MPS 1,000,000 1,000,000

0.0 %

Financial receivables from others 800,638 842,104 (41,466) (4.9)%

Total loans receivable 2,466,630 2,656,483 (189,853) (7.1)%

39

The item "Other financial receivables" includes mainly the financial credit to the company Collesanto Srl

whose investment was sold in December 2013; this credit will be fully collected during the year 2014. The

balance relating to financial receivables from Monte dei Paschi di Siena SpA refers to storage at an escrow

account to guarantee the relationship between the parent and at the same institute.

3.3.10 3.3.10 CASH AND CASH EQUIVALENT

Follow the detail as at March 31,2014 , December 31, 2013 and changes:


(in Euro) 2014 2013 %

Bank accounts

17,669,393 13,038,001 4,631,392 35.5%

Cash

22,140 17,910 4,230 23.6%

Total Cash 17,691,532 13,055,911 4,635,622 35.5%

For an analysis of the change outlined above, please refer to the Statement of Cash Flows.

40

3.4 COMMENTS ON THE PRINCIPAL LIABILITIES

3.4.1 3.4.1 NET ASSETS

As at March 31, 2014 the Company's share capital subscribed and paid amounted to Euro 50,529,680

divided into n. 37,612,000 ordinary shares of no par value.

As at March 31, 2014 other reserves include the decrease of the cash flow hedge amounted to Euro 824

thousand. This reserve reflects the negative fair value, offset by related tax effects, of derivatives recorded

in joint ventures balance sheet as the hedge exposure to variability in cash flows, related to fluctuations in

interest rates of some medium - long term loans. These derivative contracts meet the requirements of IFRS

to be considered of hedge accounting and therefore changes in the fair value of these derivatives are

detected, limited to the 'effective' in a specific equity reserve ("the cash flow hedge "). The changes of this

reserve is indicated in the statement of comprehensive income.The variation of this reserve is indicated in

the statement of comprehensive income. The total value of the cash flow hedge reserve as at March 31,

2014 was a loss of 5,114 thousand.

The equity of minority interests is accounted for mainly by capital and reserves belonging to the minority

shareholders of LyteEnergy Srl and GreeASM S.r.l..

The company as at March 31, 2014 did not possess its own shares.

3.4.2 FUND FOR EMPLOYEE BENEFIT



(in Euro) 2014 2013 %

Provision for employee benefits 710,112 668,789 41,325 6.2%

Total Employee Benefits Fund 710,112 668,789 41,325 6.2%

The change represents the provision for the quarter, net of amounts paid to employees.

41

3.4.3 DEFERRED TAXATION

Follow the detail as at March 31, 2014 , December 31, 2013 and changes:


(in Euro) 2014 2013 %

Provision tax Deferred

1,304,189 1,195,886 108,303 9.1%

Total Deferred taxation 1,304,189 1,195,886 108,303 9.1%

The balance of deferred tax liabilities mainly relates to deferred tax assets recognized on the transition of

the financial statements of certain subsidiaries under Italian accounting principles "Ita GAAP" to IFRS.

3.4.4 FINANCIAL NON CURRENT LIABILITIES

Follow the detail as at March 31, 2014, December 31, 2013 and changes:


(in Euro) 2014 2013 %

Due to financial leasing 67,997,316 68,960,582 (963,266) (1.4)%

Non-current borrowings (other funders) 35,430 35,430 - (0.0)%

Non-current debt (mortgages) 47,598,000 48,015,688 (417,688) (0.9)%

Bond Debt 24,146,753 - 24,146,753 n.a.

Total non-current financial debts 139,777,499 117,011,700 22,765,800 19.5%

Payables for financial leases, amounting to Euro 67,997 thousand, relate to debts incurred to finance the

plant property. In particular it comes to debt "non-recourse" relative to 21 photovoltaic plants of total

capacity of 22.4 MWp through sales and lease back transactions. The debt for lease also includes donations

made by the leasing company in respect of the completion of the treatment plant OFMSW (Organic

Fraction Municipal Solid Waste) in the Establishment of Nera Montoro, as well as the funding leasing of end

of life tyres plant in Nera Montoro. These loans do not include covenants and restrictions to the

distribution of profits generated.

The item "Non-current borrowings (loans)", amounting to Euro 47,598 thousand, mainly includes the non-

current portion of loans related to 12 photovoltaic plants with a total capacity of 11.1 MWp. These loans

were granted in the form of mortgages for those covers 5 PV plants owned by the company Energia

42

Alternativa Srl, while for the other 7 plants owned by the company TERNI SolarEnergy Srl were provided

with the methods of project financing. To ensure this latest funding, signed in 2010, was made up of a

pledge on the shares of the same TERNI SolarEnergy. The remainder of the balance relates to corporate

loans granted to the parent company TerniEnergia, made up mainly by the non-current portion of an

unsecured loan of Euro 10 million for a period of 60 months, repayable in 20 quarterly installments and an

unsecured loan of Euro 5 million duration of 60 months, repayable in one installment at maturity, both

provided by Veneto Banca.

The "Debt Issue", refers to the bond issue by the Parent Company TerniEnergia in February 2014. The bond

issue, called "TernEnergia 2019," amounts to Euro 25 million, five-year fixed rate equal to the gross 6.875%

annual coupon, and is negotiated at ExtraMOT PRO, the professional segment of the bond market

ExtraMOT managed by the Italian Stock Exchange. The debt is shown net of issuance costs. It should be

noted that the bond requires compliance with the following financial covenants: Interest Coverage Ratio:

Equal to or greater than 1.5x; Net Financial Debt / EBITDA: equal to or greater than 8x; Corporate Net

Financial Debt / EBITDA: equal to or greater than 5x. These covenants will apply to the consolidated

financial statements as of December 31, 2014.

3.4.5 DERIVATIVES



(in Euro) 2014 2013 %

Hedging Derivatives 6,320,115 5,446,147 873,968 16.0%

Other derivatives on interest rates 133,602 133,602

0.0%

Total Derivatives 6,453,717 5,579,749 873,968 15.7%

As at March 31, 2014 the Group does not hold any derivative instruments listed. The fair value of OTC

derivatives is measured by reference to financial valuation techniques: in particular, is calculated by

discounting future cash flows according to the parameters of the market.

The caption "Hedging derivatives", amounting to Euro 6,317 thousand, mainly refers to several derivatives

IRS (Interest Rate Swap) to cover any fluctuations in interest rates on long-term contract for the financing

43

of equipment property. These derivative contracts primarily relate to funding of the company Energia

Alternativa Srl and TERNI SolarEnergy S.r.l. and Solter S.r.l.

The item "Other derivatives on interest rates", equal to Euro 137 thousand, refers to a derivative of the

subsidiary DT S.r.l. This derivative is a "cap" that ensures that the company can not pay a Euribor major of

3.5%. In the face of this guarantee, the company pays a premium equal running at a rate of 1.2% per

annum. The assessment of the sustainability of the hedge accounting method showed that the intrinsic

value at March 31, 2014 is null.

3.4.6 TRADE PAYABLE



(in Euro) 2014 2013 %

Payables to suppliers 22,323,201 31,335,263 (9,012,062) (28.8)%

Payables to parent 18,205 10,898 7,308 67.1%

Payables to associated 186,394 70,369 116,025 n.a.

Payables to Joint Venture n.a.

Total trade payables 22,527,800 31,416,529 (8,888,729) (28.3)%

Trade payables amounted to Euro 22,528 thousand as at December 31, 2013, relate to the supply of

materials as well as the acquisition of goods and services. Trade payables include Euro 1,307 thousand of

bills not yet received as at March 31, 2014.

44

3.4.7 DEBT AND OTHER FINANCIAL LIABILITIES



(in Euro) 2014 2013 %

Current bank debt (current account

overdraft) 2,866,901 4,793,838 (1,926,937) (40.2)%

Current bank debt (advance) 6,720,255 11,945,016 (5,224,761) (43.7)%

Financial payables to other lenders 1,377,131 948,034 429,097 45.3%

Current Part of lease 3,779,357 3,734,434 44,923 1.2%

Current financial debt (other lenders) 9,986,382 12,452,165 (2,465,783) (19.8)%

Total debts and other

liabilities 24,979,598 33,873,487 (8,893,889) (26.3)%

Payables and other financial liabilities mainly refer to payables to banks for overdrafts and advances on the

account contracts and invoices, as well as the short-term portion of debt for financing and leasing.

The change in the item "Current bank debt (anticipation)" reflects the significant repayments made by the

Parent Company on short-term credit lines.

The "Debt Issue" includes the balance of interest expense accrued at March 31, 2014 on the bond debt, the

coupon will be paid in February 2015.

It is noted that the current financial payables comprise part of the payments incurred for investments

already made or still under construction and for which at March 31, 2014 had not yet been entered into a

specific contract financing in the medium - long term. In particular, it is the second PFU treatment plant in

progress of a pirogasification plant already connected to the grid in December 2012 and a composting plant

under construction in Puglia.

45

The following table presents the net financial debt at March 31, 2014 and December 31, 2013:


(in Euro) 2014 2013

Cash (22,140) (17,909)

Available bank current accounts (17,669,393) (13,038,001)

Liquidity (17,691,533) (13,055,910)

Bond debt 249,572

Current bank debt (current account overdraft) 2,866,901 4,793,838

Current bank debt (advance) 6,720,255 11,945,016

Financial payables to other lenders 1,377,131 948,034



Current financial receivables (2,466,630) (2,656,483)

Current financial debt 22,512,968 31,217,004

Current net financial position 4,821,435 18,161,094

Bond debt 24,146,753

Non-current financial debt (other lenders) 47,598,000 48,015,688

Financial payables to other lenders 35,430 35,430

Non-current financial debt (Leasing) 67,997,316 68,960,582

Non-current net financial position 139,777,499 117,011,700

Total net financial position 144,598,935 135,172,794

As at March 31, 2014 Current financial receivables include the fixed deposit account with Monte dei Paschi

di Siena SpA, amounting to Euro 1 million as security for bank overdrafts and advances on invoices with the

same. For more details on the net financial position of the Group, please refer to the Report on Operations

under the heading "Balance Sheet".

The increase in the net financial position was due mainly to the bond issue, as well as the current dynamic

in which the reduction is attributable to the repayment of debts to credit institutions by the Parent

TerniEnergia.

Italeaf SpA, the parent company of the parent company, issued bank guarantees in favor of the Parent

Company for a total amount of Euro 47,5 million at the date of approval of these financial statements.

At the date of approval of these consolidated financial statements, the Group has available credit lines with

various banks for Euro 71,6 million (considering the credit lines for credit commitments and the amount

approved by the factoring company).

46

3.4.8 TAX DEBIT ON INCOME

Follow the detail as at March 31, 2014, December 31 ,2013 and changes:


(in Euro) 2014 2013 %

Direct Taxex 1,140,708 563,611 577,096 102.4%

Total current tax liabilities 1,140,708 563,611 577,096 102.4%

The change in this item is attributable mainly to direct taxes accrued on the results of the companies

operating in South Africa and Greece.

3.4.9 FURTHER CURRENT LIABILITIES



(in Euro) 2014 2013 %

Withholding tax

187,429 210,825 (23,396) (11.1)%

Due to personnel

884,388 440,886 443,501 100.6%

Payables to social security institutions and

welfare 350,493 574,989 (224,496) (39.0)%

Net Deferred

2,704 17,650 (14,946) (84.7)%

Due for purchase Investments 2,135,046 2,135,046

0.0%

Other current liabilities

2,288,183 3,386,874 (1,098,691) (32.4)%

Total other current liabilities 5,848,242 6,766,271 (918,029) (13.6)%

This item includes payables to employees and social security institutions and welfare.

The voice Payable for purchase of investments includes, for Euro 1,950 thousand , the debt related to the

fair value of the call option that the parent company will exercise to purchase the remaining 30% of the

Lucos Alternative Energies SpA, in June 2014.

The item Other current liabilities also includes the debt of Euro 605 thousand recorded in the year

following the accession to a report of findings of the Revenue received by the parent company in August

2013. Given that in the prevalence of claims for taxes already paid in the tax year following the year

audited, among other claims has been detected in a compensation claim for the same amount.

47

3.4.10 COMMITMENTS AND GUARANTEES GIVEN

Guarantees

In some cases, customers of the Parent Company have funded the purchase of the photovoltaic system

through lease agreements with leasing companies. For some of these customers, the Parent has signed

with the leasing company for a takeover agreement to the customer in the lease in the event of, and

subordinate to, the failure by its customers. Customers are also involved in this case, to transfer to

TerniEnergia the lease agreement and any debt outstanding at the date of transfer, if generated by power

plant under contract.

TerniEnergia administrators believe that the probability of occurrence of transfer is extremely remote,

since, in practice and with the exception of the initial maxi tranche of leasing contract. Whereas the

existence of a maxi initial paid by the customer to the leasing company, the values in effect at time of a

takeover, based on current development plans for the cash flows of photovoltaic systems affected, would

see a future excess flows generated by energy production compared to outflows for royalties due.

As at March 31, 2014, the residual customers’ payables to leasing companies for which the above

mentioned agreements were taken over total Euro 67,7 million, of which Euro 45,9 million for companies

managed or owned by related parties,( 22,5 million for 100%controlled companies), Euro 12,6 million for

joint ventures, Euro 4,7 million for Terni Research S.p.A, and Euro 6,1 million for other related parties ; the

rest of the balance, equal to 21, 7 million, relates to other third-party customers.

For the same reasons outlined above, the directors also believe that the taking over of the lease

agreements by the Parent Company would not adversely affect the economic situation of TerniEnergia. See

also note 3.7 Related parties.

As at March 31, 2014, primary credit institutions issued guarantees on the contractual obligations

undertaken by the Parent Company TerniEnergia to third-party customers, equal to Euro 8,5 million.

48

Contingent liabilities

Litigation, investigations and judicial proceedings in progress

As at March 31, 2014 there were no legal proceedings or litigation pending against the TerniEnergia or

other Group companies, except as outlined below.

Litigation Milis Energy SpA

The dispute concerns the divestment made by Milis Energy SpA against TerniEnergia on a photovoltaic

system on greenhouses constructed in Sardinia in the Municipality of Milis. The Milis Energy S.p.A. denies

alleged breach of TerniEnergia in order for this system and for that reason it has suspended payment of

Euro 7 million, claiming that it would require intervention replacement of bolts ( allegedly impaired ), the

amount of work is about Euro 50 thousand.

By virtue of this Milis Energy S.p.A. he then proceeded to oust Terni Energia by the yard, with bare act of

07/17/2013.

The TerniEnergia brought an action before the Court of Oristano, getting the order of February 4, 2014,

which declared illegal and ordered the counting performed at Milis Energy SpA to reinstate immediately

the Terni Energia in possession of the works covered by the contract.

TerniEnergia, in relation to a loan owed by the customer, sought and obtained an injunction against the

Energy SpA Milis which by the same amount due Milis for the contract referred to in the preceding

paragraph.

The Milan Court upheld the appeal and issued the injunction that has been duly served.

The party has appealed and the first hearing is scheduled for May 27, 2014.

The company, also based on advice of its legal counsel, believes that in light of what has already been

stated in the previous point, there are ample chances of success.

Litigation Mada Srl

We show that the contractual maturity date scheduled for the sale of a photovoltaic system power of 997

kWp the customer has not paid anything by way of compensation for the work performed by the Company.

Accordingly, the Parent Company, only after repeated requests for payment :

• has taken steps to remove the solar panels and other removable materials from the site ( in perfect

conformity to what was decided in the previous private writings between the parties) ;

49

• proposed subpoena to appear before the Court of Terni, in order to ascertain the gross misconduct of the

customer, to fulfill the contracts and therefore, to obtain the termination of such contract pursuant to Art.

1453 cc, resulting in condemnation of the customer to pay all damages suffered and the amount of €

1,046,890.00 ( the amount identified in the loss of earnings, classified in 30 % of the contract price which

the total amount was equal to the total € 3,489,640.00 ) or in greater or smaller amount that will be

determined in the course of the proceedings. The case was registered with the role R.G. 2005/11. In the

course of the proceedings referred to in the previous point, it was notified TerniEnergia an instrument of

appointment of arbitrator and request for arbitration, on 7 December 2011. It ' been appealed to

arbitration by serving a deed December 27, 2011 and, in any case, identifying its arbitrator in the unlikely

event that it was not deemed competent Judge Ordinary. At the date of preparation of this report was

issued on the arbitration award dismissing the claim of Mada. With regard to the proceedings before the

Court of Terni, the judge adjourned to 14 April 2014 in order to gain the award, also in order to avoid a

conflict between judged.

Therefore, it stops the natural randomness that characterizes each type of case and based on the

assessments already shown by our lawyers, the company believes that there are reasonable grounds for

considering the high probability of success in the civil case above. Based on the above analysis brief survey

of the facts, translated in the civil case that the company has promoted and considered a possible

reconciliation with the customer resulting in the conclusion of the supply, it is not considered appropriate

to provide to affix any residual impairment costs (approximately euro 0.4 million ) is not representative of

the material removed (panels, inverters, etc. ) between the products of work in progress at March 31, 2014.

Litigation Regni

We give evidence that the company is involved in two disputes with the Heirs Kingdoms, which arose

as a result of the failure by the latter to grant a right of easement necessary for the passage of the conduit

of a photovoltaic system owned by the Group. The first dispute is pending before the Council of State, on

appeal concerns the trial and appeal of the order for demolition and restoration of part of the conduit

realized in the absence of the security authorization of enslavement of the land on which it insists, issued

by the City of Perugia. The second dispute was promoted by TerniEnergia against the Heirs Kingdoms

before the Court of Perugia in order to obtain the grant of easement of, by reason of the commitments

made by the same contract Kingdoms, at the time when TerniEnergia ceded to the design of photovoltaic

and the surface rights relating to the land on which to make it happen.

In reference to the first was granted the suspension of the decision of the TAR authorizing the demolition

and restoration and expects the hearing on the merits. In reference to the second was arranged a referral

50

for negotiations. In fact, pending lawsuits, the heirs of the two kingdoms have made proposals to the

transaction. The negotiations are still ongoing. Meanwhile, the judge accepted the request for technical

advice in order to ascertain that the original plan - drafted by Eng. Kingdoms - was lacking and wrong. The

next hearing is scheduled for June 5, 2014 for the appointment of CTU.

The Company, with the assistance of its legal counsel, has reasonable grounds to believe can not be

assigned a probable liability to be borne by the Company, nor, at present, there were elements such as to

configure a loss in value of the investment in the subsidiary proprietor of ' photovoltaic system in

question.

51

3.5 COMMENTS ON THE MAIN INCOME ITEMS

3.5.1 REVENUES

The following table provides details of the item in question for the semester ended March 31, 2014 and

2013:

As At March, 31

2014

As At March, 31

2013 Change Change %

(in Euro)

Revenues installation of photovoltaic

4,923,855 5,125,247 (201,392) (3.9)%

Revenue from operating Photovoltaic

3,042,177 786,283 2,255,894 n.a.

Revenues from maintenance

340,362 539,357 (198,995) (36.9)%

Revenues from Gain

n.a.

Revenues from "Environment"

1,553,806 1,393,685 160,121 11.5%

Revenues from Energy Saving

43,614 418,190 (374,576) (89.6)%

Revenues from development / Other services 480,275 404,439 75,836 18.8%

Total 10,384,088 8,667,200 1,716,888 19.8%

As at March 31, 2014, the Group recorded consolidated revenues from sales and services of Euro 10,384

thousand, an increase of 19.8% compared to the same period of 2013.

Revenues from installation of photovoltaic systems, equal to Euro 4,924 thousand, are mainly related to

work performed in South Africa, commissioned by a leading European utility.

"Revenues from operating Photovoltaic Systems", amounting to Euro 3,042 thousand including revenues

from the production and sale of electricity from solar energy produced by photovoltaic systems owned by

the Group. The change from the previous year is due to the fact that the 7 plants owned by the company

TERNI SolarEnergy (5.7 MWp) have contributed to the operating results of the Group for only part of 2013,

taking into account that the acquisition of 50% of shares of the company took place on June 28, 2013.

Moreover, the 12 plants owned by the company Energia Alternativa (13.9 MWp) have contributed to the

Group's operating results only from the end of the month of March 2013, taking into account that the

acquisition of 50% of the shares took place on March 28, 2013.

"Revenues for maintenance", equal to Euro 340 thousand, refer to maintenance services carried out by the

Parent TerniEnergia, based on long-term contracts, the photovoltaic system is made on behalf of its clients.

The decrease is attributable to intercompany eliminations of maintenance carried out on behalf of the

52

company and Energia Alternativa and TERNI SolarEnergy, that in the first quarter of 2013 were still

consolidated using the equity method.

"Revenues Environment", amounting to Euro 1,554 thousand, mainly relate to revenues from the

biodigester and composting plant in Nera Montoro (these revenues are made up not only of the

consideration received for removal of waste – OFMSW - Organic Fraction of Municipal Solid Waste - but

also from the sale of the energy produced by the recovery of biogas resulting from the anaerobic

biodigester process ), the activity of treatment PFU (End of Life Tyres) and the management of the water

treatment plant in Nera Montoro.

3.5.2 CHANGES IN INVENTORIES OF SEMI-FINISHED PRODUCTS

The following table provides details of the item in question for the quarter ended on March 31, 2014 and

2013:

As At March, 31

2014

As At March, 31


(in Euro)

Finished Products

80,552 63,568 16,984 26.7%

Semifinished

114,880 (114,880) (100.0)%

Products in process

141,059 (345,477) 486,536 (140.8)%

Total 221,611 (167,029) 388,640 n.a.

The products work in progress mainly include the costs incurred for various activities related to the

implementation of photovoltaic systems and their parts.

53

3.5.3 COSTS OF RAW MATERIALS, SUPPLIES AND GOODS


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Purchase of materials

1,681,858 286,537 1,395,321 n.a.

Materials consumption

161,144 99,272 61,872 62.3%

Fuels and lubricants

84,996 91,349 (6,353) (7.0)%

Change in inventories of raw materials,

consumables (45,040)

275,065 (320,105) (116.4)%

Total 1,882,958 752,223 1,130,735 n.a.

3.5.4 COSTS FOR SERVICES


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Outwork

153,341 2,249,653 (2,096,312) (93.2)%

Consultancy and external collaborators

367,712 396,140 (28,428) (7.2)%

Rental and hire

157,799 202,353 (44,554) (22.0)%

parent services

483,386 487,137 (3,751) (0.8)%

Leases

11,182 10,540 642 6.1%

Transportation

53,030 175,688 (122,658) (69.8)%

Maintenance and repairs and assistance

197,324 227,607 (30,283) (13.3)%

Supervision and Insurance

220,582 511,820 (291,238) (56.9)%

Other Costs for services

749,107 593,969 155,138 26.1%

Total 2,393,465 4,854,906 (2,461,442) (50.7)%

This item includes primarily costs for external work, consulting and collaboration, supervision and

transportation insurance and other benefits. The "parent Services" includes the consideration paid by the

Group in respect of services provided by the parent TERNI Research SpA (Italeaf SpA since February 13,

2014), for more details see also refer to Note 3.6. The decrease in "work" is mainly due to the different type

of activities carried out by the EPC business line, characterized by a design activity with higher added value.

54

3.5.5 STAFF’COSTS


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Wages and salaries

743,087 889,741 (146,654) (16.5)%

social security contributions

250,526 325,622 (75,096) (23.1)%

remuneration of directors

113,500 113,500

0.0%


45,406 40,646 4,760 11.7%

temporary staff

202,749 153,396 49,353 32.2%

Total 1,355,267 1,522,905 (167,638) (11.0)%

3.5.6 FURTHER OPERATING COSTS


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Taxes other than income

193,986 33,435 160,551 n.a.

Fines and penalties

3,174 10,328 (7,154) (69.3)%

Other operating costs

215,598 195,453 20,145 10.3%

Total 412,758 239,216 173,542 72.5%

55

3.5.7 DEPRECIATION,IMPAIRMENT AND PROVISIONS


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Amortization of intangible assets

42,658 73,172 (30,514) (41.7)%

Depreciation of tangible fixed assets

1,715,335 899,346 815,989 90.7%

Provisions for doubtful accounts

n.a.

Write-down of non-current assets

n.a.

Total 1,757,993 972,518 785,475 80.8%

The change in the item "Depreciation of tangible fixed assets" compared to the previous year is attributable

to the increase in the number of PV plants in operation owned by the Group.

3.5.8 FINANANCIAL INCOME AND CHARGE


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Interest expense on debt

(2,081,105) (1,050,100) (1,031,005) 98.2%

banking Commission

(391,730) (211,994) (179,736) 84.8%

#N/D

(271,325)

(271,325) n.a.

Total finance costs

(2,744,160) (1,262,094) (1,482,066) 117.4%

Interest earned on bank accounts

110,703 75 110,628 n.a.

Interest income / joint venture

23,002 91,410 (68,408) (74.8)%

Other financial income

292,883 2,805,185 (2,512,302) (89.6)%

Total financial income

426,588 2,896,670 (2,470,082) (85.3)%

Total (2,317,572) 1,634,576 (3,952,148) n.a.

The increase in financial expenses is mainly due to the incidence of interest expenses of the subsidiaries

Energia Alternativa and Terni SolarEnergy, whose results on March 31, 2013 were detected even with the

56

equity method rather than using the integral method, as well as to the recognition of interest expense

accrued at March 31, 2014 on bonds issued in February 2014.

The item "Other financial income", as at March 31, 2013, had enrolled the proceeds, amounting to Euro

2,760 thousand , resulting from the revaluation of 50% of the shares already held in the company Energia

Alternativa Srl, in which the Parent Company acquired the remaining 50% on March 28, 2013.

3.5.9 JOINT VENTURE INCOME


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Terni Solar Energy S.r.l.

(84,899) 84,899 (100.0)%

Energia Alternativa S.r.l.

(124,144) 124,144 (100.0)%

Energie S.r.l.

n.a.

Fotosolare Settima S.r.l.

(65,340) 65,340 (100.0)%

Solaren S.r.l.

12,535 (12,535) (100.0)%

Collesanto S.r.l.

9,639 (9,639) (100.0)%

Saim Energy 2 S.r.l. 1,598 19,877 (18,279) (92.0)%

Infocaciucci S.r.l.

11,634 (11,634) (100.0)%

Girasole S.r.l.. 14,945 35,693 (20,748) (58.1)%

D.T. S.r.l

n.a.

Soltarenti S.r.l. 12,336 32,992 (20,656) (62.6)%

Guglionesi S.r.l. (5,737) 5,293 (11,029) n.a.

Green Asm

0.0%

Total 23,142 (146,721) 169,863 (115.8)%

The "share result of the Joint Venture" includes both the results for the period according to IFRS on equity

investments in joint ventures, to the extent attributable to the Group, and the positive effect resulting from

the recovery of margins eliminated as a result of accounting with the equity method. See also provided in

note 3.3.3.

The change compared with the corresponding figure for the previous year is due to the lower number of

joint ventures in the Company.

57

3.5.10 TAX


2013:

As At March, 31

2014

As At March, 31


(in Euro)

Current taxes

656,810 74,429 582,381 n.a.

Deferred tax assets

(819,343) (18,096) (801,247) n.a.

Deferred

10,907 (36,083) 46,990 (130.2)%

Revenues from taxes consolidation

(27,724) 27,724 (100.0)%

Total (151,627) (7,474) (144,153) n.a.

Deferred tax assets primarily relate to deferred tax assets on tax loss accrued during the first quarter of

2014 by the Parent company TerniEnergia.

3.6 RELATIONS WITH RELATED PARTIES

Below The financial statements with evidence of related party transactions pursuant to CONSOB. 15519 of

27/7/06.

58

CONSOLIDATED FINANCIAL STATEMENT FOR THE PURPOSES OF CONSOB n. 15519 of 27/7/06

As At March, Related

As At

December, Related

(in Euro) 31 2014 Parties 31 2013 Parties

ASSETS

Intangible assets 4,294,972 4,337,960

Property, plant and equipment 159,724,069 160,574,401 1,235,000

Equity investments 1,176,337 1,168,140

Deferred tax assets 11,195,716 7,823,865

Non-current financial receivables 8,385,152 1878209 8,501,196 1,918,206

Total non-current assets 184,776,246 1,878,209 182,405,562 3,153,206

Inventories 8,611,581 8,208,886

Trade receivables 31,613,976 1,050,170 28,063,651 737,072

Other current assets 11,141,912 1,428,633 16,573,353 3,738,741

Financial receivables 2,466,630 665,992 2,656,483 814,379

Cash and cash equivalents 17,691,532 13,055,910

Total current assets 71,525,631 3,144,795 68,558,283 5,290,192

TOTAL ASSETS 256,301,877 5,023,004 250,963,845 8,443,398

LIABILITIES AND SHAREHOLDERS’ EQUITY

Share capital 50,529,680 50,529,680

Reserves 1,918,506

(3,638,119)

Result for the period 503,607 6,708,295

Total Group equity 52,951,793 53,599,856

Equity attributable to minority 451,372 155,218

Profit for the period of the third 156,848

132,749

Total equity 53,560,013 53,887,823

Provision for employee benefits 710,112 668,789

Deferred tax liabilities 1,304,189 1,195,886

Non-current financial payables 139,777,499 117,011,700

Other non-current liabilities

Derivatives 6,453,717 5,579,749

Total non-current liabilities 148,245,517 124,456,124

Trade payables 22,527,800 296868 31,416,529 173,536

Payables and other financial liabilities 24,979,597 33,873,487

Taxes payable 1,140,708 563,611

Other current liabilities 5,848,242 20,719 6,766,271 20,719

Total current liabilities 54,496,347 317,587 72,619,898 194,255

TOTAL LIABILITIES 202,741,864 317,587 197,076,022 194,255

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUTY 256,301,877 317,587 250,963,845 194,255

59

CONSOLIDATED INCOME STATEMENT FOR THE PURPOSES OF CONSOB n. 15519 of 27/07/06

As at March, 31 Related As at March, 31 Related

(in Euro) 2014 Parties 2013 Parties

Revenues 9,997,180 7,858,994

Other operating income 386,908 808,206 171,801

Change in inventories of semi-finished and finished

products 221,611 (167,029)

Costs for raw materials, consumables and goods for

resale (1,882,958) (150,000) (752,223)

Costs for services (2,393,465) (537,019) (4,854,906) (578,824)

Personnel costs (1,355,267) (137,000) (1,522,905) (143,511)

Other operating costs (412,758) (239,216)

Amortisation, depreciation, provisions and

writedowns (1,757,993) (972,518)

Operating result 2,803,258 158,403

Financial income 426,588 23,003 2,896,670 54,204

Financial charges (2,744,160) (262,588) (1,262,094) (107,291)

Portion of result attributable to the joint venture 23,142 (146,721)

Net profit before taxes 508,828 1,646,258

Taxes 151,627 7,474

Net profit for the period 660,455 1,653,732

60

CONSOLIDATED CASH FLOW STATEMENT FOR THE PURPOSES OF CONSOB n. 15519 of

27/07/06

As At March, 31

(in Euro) Note 2014 2013

Profit before taxes

508,828 1,646,258

Amortisation and depreciation

1,757,993 972,518

Write-downs of fixed assets


41,323 68,687

Result of joint ventures accounted for at equity and reversal of margin (23,142) 146,721

Gains / Revaluations

Change in inventories

(402,695) 433,960

Change in trade receivables

(3,550,325) 12,514,408

Change in other assets

2,462,288 (4,193,254)

Change in trade payables

(8,888,729) (10,718,738)

Change in other liabilities

(325,985) (2,019,816)

Payment of employee benefits

Net cash flow (used in)/generated by operating activities (8,420,445) (1,149,257)

Investments in property, plant and equipment

(864,673) (1,351,693)

Disposals of property, plant and equipment

Investments in intangible assets

(2,668)

Disposals of intangible assets

Purchase Investments

697,169

Dividends from JV

160,000 640,000

Change in receivables and other financial assets

145,897 920,273

Net cash flow used in investing activities (558,776) 903,080

Change in payables and other financial liabilities

(8,893,890) (1,106,984)

Increase in non-current financial payables

22,503,479 2,381,218

Other Movements of Equity

5,255

Net cash flow generated by financing activities 13,614,844 1,274,234

Comprehensive cash flow for the period

4,635,624 1,028,057

Cash and cash equivalents at the beginning of the period

13,055,910 3,384,398

Cash and cash equivalents at the end of the period

17,691,532 4,412,456

61

Relate parties

Following the list of relate parties:

Name of Company Status

Skill & Trust Holding S.r.l. Controlling companies

T.E.R.N.I. Research S.p.A. Controlling companies

Saim Energy 2 S.r.l. Joint venture

Girasole S.r.l.. Joint venture

Soltarenti S.r.l. Joint venture

Guglionesi S.r.l. Joint venture

Gubela S.p.A. Joint venture

Serramenti del Chiese S.r.l. Company managed by a related party

Ferrero Elettra S.r.l. Company managed by a related party

Ferrero Mangimi S.p.A. Company managed by a related party

Italeaf SpA Company managed by a related party

Lizzanello S.r.l. Company managed by a related party

Camene Srl Company managed by a related party

Royal Club Snc di Lucia e Francesco Urbani Company managed by a related party

Studio Ranalli & Associati Professional Activity administered by a related party

Stefano Neri Member of the Board of Directors of the Company

Fabrizio Venturi Member of the Board of Directors of the Company

Paolo Ricci Attorney of the Company

Domenico De Marinis Member of the Board of Directors of the Company

Paolo Ottone Migliavacca Member of the Board of Directors of the Company

Giovanni Ranalli Member of the Board of Directors of the Company

Mario Marco Molteni Member of the Board of Directors of the Company

Monica Federici Controlling companies

Francesca Ricci Controlling companies

The parent company TerniEnergia is controlled since its establishment by TERNI Research SpA. it is noted

that on February 13, 2014, became effective operation of partial inversely proportional split, which

involved companies TERNI Research SpA, as divided, and Italeaf SpA, for its own benefit. In consequence of

this operation all the shares TerniEnergia held by TERNI Research SpA, part of the financial assets and

liabilities to be demerged, were transferred to Italeaf SpA. It should be noted that prior to the demerger

100% of the share capital of Italeaf SpA was held by T.E.R.N.I. Research S.p.A. and, as a result of the

demerger, the shares representing the capital of Italeaf SpA have been allocated in proportion to the

members of TERNI Research SpA . As a result of the social structure of post-split TERNI Research S.p.A. and

Italeaf SpA is the same. Therefore, with effect from February 13, 2014, Italeaf SpA is the parent of

TerniEnergia S.p.A.

Transactions with related parties are attributable to activities that relate to the ordinary and are based on

normal market conditions, as it is the settlement of interest-bearing loans. As at March 31, 2014, there

62

were no significant transactions with related parties of non-recurring or unusual and / or atypical.

Transactions between the Parent Company, the Parent Company, the Joint Venture and other related

parties mainly refer to:

• business relationships relating to the construction of photovoltaic systems and maintenance

services with joint ventures and companies managed or owned by related parties and companies

participating in joint ventures with TerniEnergia;

• financial ratios relating to loans granted to joint ventures (see also 3.3.5 and 3.3.9 financial

receivables);

• agreements for taking over leasing contracts related to photovoltaic systems in cases of , and

subordinate to, the failure on the part of some companies managed or owned by related parties,

joint ventures and the parent company Terni Research SpA (Italeaf SpA since February 13, 2014,

see also note 3.4.10 commitments and guarantees);

• Transactions involving the provision of services (technical, organizational, leasing of real estate,

legal and administrative) with the parent Terni Research SpA (Italeaf SpA since February 13, 2014);

• guarantees issued by the parent company Italeaf SpA in favor of the lenders who financed

TerniEnergia;

• Professional performance by the adviser Paolo Ricci and Francesca Ricci.

The following table details the economic and financial effects of commercial and financial transactions with

related parties as at March 31, 2014.

63

Business transactions

(in Euro) As At March, 31 2014 As At March, 31 2014

Credits Debts Other credits Costs Revenues

Goods Service Cost Personnel Goods Service Cost

Parents

T.E.R.N.I. Research S.p.A. 477,851 18,205 620,975 150,000 229,193 5,529 41,655

Joint Venture

Saim Energy 2 S.r.l. 73,679

Girasole S.r.l. 165,080 23,220

Sol tarenti S.r.l. 20,862 17,100


Associated companies

Italeaf S.p.A. 70,760 186,394 807,658 229,193 4,450

Other Related Parties

Francesca Ricci 13,632

Lizzanello S.r.l. 42,471 4,000

Studio Ranalli & Associati 18,000

Alta direzione 20,719 131,471

Gianni Ranalli 29,205

Ferrero Elettra S.r.l. 4,552 3,731

Ferrero Mangimi S.p.A. 4,579 3,739

Gubela S.p.A. 93,943 71,123 5,430

Serramenti del Chiese S.r.l. 24,888 3,750

Paolo Ricci 21,147 65,000

Total 1,050,170 317,587 1,428,633 150,000 537,019 137,000 112,075

Balance Sheet Value

31,613,976

22,527,800 11,141,912 1,882,958 2,393,465 1,355,267 9,997,180 386,908

% Effect 3.30% 1.40% 12.80% 8.00% 22.40% 10.10% 0.00% 29.00%

64

Financial transactions

(in Euro) As at March, 31 2014 As at March, 31 2014

Description Credits Guarantees Guarantees

given

Obligations

Take Over Charges Income

Parents

T.E.R.N.I. Research S.p.A. 47,517,707 131,294

Joint Venture

Saim Energy 2 S.r.l. 1,766 2,585,235

Girasole S.r.l. 1,117,826 1,220,000 10,348

Sol tarenti S.r.l. 1,033,856 8,799,481 9,862


Other Related Parties

Camene S.r.l. 3,059,147

Royal Club Snc 3,056,604

Lizzanello S.r.l. 1,770

Total 2,544,201 47,517,707 23,436,581 262,588 23,003

Balance Sheet Value 10,851,782 2,744,160 426,588

% Effect 23.40%

9.60% 5.40%

Below are briefly commented on the transactions entered into between the Group and related parties:

Commercial transactions

The operations of a commercial nature mainly concerned:

• O & M contracts between the Joint Venture company for photovoltaic plants and restoration

activities of the plants due to theft;

• framework agreement between the parent company and the parent company Terni Research SpA

(Italeaf SpA since February 13, 2014) relating to the provision of administrative and logistical

services, including the leasing of the properties located in Narni, strada dello Stabilimento 1, in

Milano, via Borgogna, and Lecce, the management of corporate and legal affairs, as well as the

human resource management and information systems;

65

• claims towards T.E.R.N.I. Research SpA, consolidating company based on the tax consolidation

agreement which the Company has adopted for the period 2011 - 2013;

• remuneration received by executive members of the Board of Directors and the executive in charge

with strategic responsibility for services provided to the Group.

Financial transactions

The current financial and non-current as well as financial income for the quarter ended March 31, 2014,

refer to the relations of interest-bearing loans with the Joint Venture.

It should be noted that in the date of March 31, 2014 the parent Italeaf SpA, provided,to leading banks,

guarantees on bank loans to TerniEnergia for Euro 47,5 million for which they have applied to subsidiary

commissions on sureties of euro 262 thousand included among financial expenses (of which Euro 131

thousand accrued until February 12 , 2014, and within the jurisdiction of Terni Research SpA).

For some customers who have financed the purchase of the PV system through finance lease agreements

with leasing companies, the Parent Company signed an agreement with the latter taking over the said lease

in the event of, and subject to, the failure by its customers. As at March 31, 2014 the remaining debts of

the leases for which they were hired these commitments amounted to euro 67,7 million, of which euro

45,9 million in respect of related parties and euro 21,7 million in respect of other third-party customers.

3.7 3.7ATYPICAL AND/OR UNUSUAL TRANSACTIONS

Pursuant to CONSOB. DEM/6064293, 28.7.2006 "Disclosure of listed issuers and corporate issuers with

financial instruments widely distributed among the public referred to in Article .116 of TUF - Requests

under ART.114, paragraph 5, of Legislative Decree no. 58/98 "reported that:

• There were no transactions or events whose occurrence is not the applicant or transactions or

events that occur frequently in the ordinary course of business;

• There were no atypical and / or unusual transactions.

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3.8 OTHER INFORMATION

Earnings per share

The calculation of basic earnings per share due to ordinary shareholders by the company is based on the

average number of shares during the reporting period.

(in Euro) As At March, 31 2014 As At March, 31 2013

Net profit for the period - Group

660,455 1,663,728

Average number of shares for the period 37,612,000 37,612,000

Earnings per share – Basic and diluted 0.018 0.044

There were no differences between basic and diluted earnings per share as there are classes of shares with

diluting effect.

Information relating to the opt-out

In compliance with the provisions of Article 70, paragraph 8 of the Regulations for Issuers it is also informs

that the Board of Directors, which met on December 19, 2012, resolved to adhere to the system of "opt-

out" referred to the Articles 70 , paragraph 8, and 71, paragraph 1-bis of the Issuers' Regulations, therefore

making use of the option to derogate from the obligations to publish information documents prescribed at

significant mergers, demergers, capital increase by contribution in kind, acquisitions and disposals.

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Subsequent events

Shareholders’ meeting approves 2013 financial Statements and a distribution of dividends equal to Euro 0.06 per

share

As at April 23, 2014 The Shareholders’ meeting of TerniEnergia, approved unanimously the draft financial

statements and noted the presentation of the consolidated financial statements as at December 31, 2013.

Shareholders’ meeting also approved the distribution of a dividend equal to Euro 0.06 per ordinary share

gross with-holdings set forth by law. The dividend shall be paid on May 22, 2014 and the relevant coupon

no. 5 shall be separated on May 19, 2014. The Shareholders' Meeting has finally approved the confirmation

as a non-executive director of Atty. Francesca Ricci, co-opted to the Board of Directors on October 17, 2013

in observance of the provisions introduced by Law n. 120 July 12, 2011, in matter of gender balance in the

composition of the Board of Directors and the Statutory Auditors.

Signed manifestation of interest for the acquisition of Free Energia S.p.A.

As at April 24, 2014 TerniEnergia SpA and Italeaf, a holding company and majority shareholder of

TerniEnergia, signed a manifestation of interest for the acquisition of 100% of the share capital of Free

Energia S.p.A. with the shareholders of the Company. Free Energia, a company that in 2013 had revenues of

approximately Euro 100 million and that in the first quarter of 2014 and recorded a revenue growth of

+100% compared to the previous financial year, as an innovative energy trader, providing energy to

electricity-consumptive customers and/or consolidated re-seller but, more importantly, carrying out

hedging and trading planning "evolved". Organized in a simple and flexible structure, is able to seize the

opportunities of a market characterized by rapid and complex changes, succeeding the energy needs of its

customers.

Free Energia offers a variety of value-added integrated services for companies producing renewable

energy, which normally provide only the power generation. The distribution system is based on an

integrated package of services conveyed through a platform built in-house.

The strategic priority is the acquisition of customer energy consumers, who want a competitive rate, which

offer a wide range of marketing services (administrative, financial, supply and consulting) through a

network of direct and indirect distributors (re-seller).

The manifestation of interest is subject to:

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• the evaluation of the respective competent corporate bodies and the eventual signing of the definitive

agreement;

• the positive pronouncement of any competent authorities and the persons entitled thereto (including

banks and bondholders ) of the Companies;

• the positive outcome of the legal, employment law, tax and financial due diligence that TerniEnergia will

execute on Free Energia Group;

• the preparation of a consolidated business plan taking into account the integration of the activities of

Free Energia and those of TerniEnergia and its subsidiaries.

The structure of the transaction, if will occur the conditions for a final settlement, will consist of a capital

increase of TerniEnergia, reserved to shareholders of Free Energia, to subscribe through the transfer of

shares to Free Energia. There is no cash outlay. The estimated value of the transaction is approximately 15

million Euros.

Signed a strategic agreement with Khalid Al Hamed Group LLC for the development of renewable energy and

environmental business in the Middle East and the Gulf Countries

As at April 29, 2014 TerniEnergia signed in Abu Dhabi a joint venture agreement for the establishment of a

NewCo with Khalid Al Hamed Group LLC Dubai, represented by the Chairman and CEO Sheikh Khalid Bin

Ahmed Al Hamed. In particular, TerniEnergia has signed a binding and immediately operative agreement

between the parties, that provides for the establishment of a company named TerniEnergia Gulf LLC, based

in Abu Dhabi, which is 51% owned by Khalid Al Hamed Group LLC and 49% by TerniEnergia, which will

operate in the Middle East and the Gulf Cooperation Council (GCC).The business model identified by

TerniEnergia and Al Hamed Group is aimed at developing the engineering, design, construction and

operation of facilities and plants for the production of energy from renewable sources, for energy recovery

from waste and for the value chain of recovery of materials, particularly from end of life tires. In regard to

the latter activity, is expected to start for a first site for the construction of an important initiative in the

Gulf already by 2014.

The strategic partnership between the two Groups, will see Khalid Al Hamed Group LLC engaged primarily

in the management of relationships with government authorities in the area, in facilitating the

authorization processes, in the acquisition of requirements and support in negotiations with financial

partners and with the banking institutions to support the business development, and TerniEnergia with

69

responsibility for management of the operational activities and the industrial sites. Through this

management model, the parties aim to combine and enhance the know-how and technological expertise in

the field of renewable energy and waste management of TerniEnergia with the financial capacity and

business development skills of Al Hamed Group, allowing a TerniEnergia Gulf rapid growth process

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4 CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLE

154-BIS OF LEGISLATIVE DECREE 58/98 AND ARTICLE 81-TER OF CONSOB REGULATION NO.

11971/99, AS AMENDED AND SUPPLEMENTED

1. The undersigned Stefano Neri, in the capacity as Chairman and Chief Executive Officer, and Mr. Paolo

Allegretti, in the capacity of Manager responsible for preparing corporate accounting documents of

TerniEnergia S.p.A. hereby certify, also taking account of provisions under article 154-bis, paragraphs 3 and

4, of Legislative Decree no. 58 of 24 February 1998:

• the adequacy with reference to the characteristics of the enterprise;

• the actual application of the administrative and accounting procedures for the preparation of

the consolidated financial statements as at March 31, 2014.

2. To this regard, no further significant aspects emerged.

3. We further certify that the consolidated financial statements:

a) correspond to the results reported in the books and in the accounting records;

b) are prepared in compliance with the applicable international accounting standards recognized in the

European Community pursuant to Regulation (EC) no. 1606/2002, and, to the best of our knowledge, they

adequately provide a true and correct representation of the equity, economic and financial position of the

issuer and of the group of companies included in the scope of consolidation.

4. Finally, we certify that the report on operations as at March 31, 2014 includes a reliable analysis of the

relevant events that occurred during the first half 2014 and of their impact on the consolidated financial

statement, together with a description of the main risks to which the Group is exposed. The report on

operations as at March 31, 2014 also includes a reliable analysis of the significant information with related

parties.

5. This certification is issued pursuant to and for the purposes of article 154-bis, paragraphs 2 and 5, of

Legislative Decree no. 58 of 1998.

Narni, May 14, 2014

The CEO The Manager responsible for preparing

corporate accounting documents

Documents

FIRST QUARTER 2014 CONSOLIDATED FINANCIAL …€¦ · 2 CORPORATE DETAILS TERNIENERGIA S.P.A. Registered office: Strada dello Stabilimento, 1 05035 Narni (TR) Authorised, issued and