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© 2014 Grant Thornton | CBD Energy Limited (Administrators appointed) - Report pursuant to Section 439A | 10 December 2014

CBD Energy Limited ACN 010 966 793

Westinghouse Solar Pty Ltd ACN 163 078 699

CBD Solar Labs Pty Ltd ACN 153 656 716

KI Solar Pty Ltd ACN 127 375 740

(All Administrators Appointed)

(Collectively "the Companies")

Administrators' Section 439A Report

Second Report to Creditors

10 December 2014

Key Contacts

Jeff MarsdenManagerT +61 2 8297 2584E [email protected]

© 2014 Grant Thornton | CBD Energy Limited (Administrators appointed) - Report pursuant to Section 439A | 10 December 2014 2

Contents

Section Page

1. Executive summary 4

2. Introduction 10

3. Companies' History and Reasons for Failure 15

4. Actions Undertaken to Date 22

5. SCBPAF 24

6. Key Assets 33

7. Sale Process 38

8. Historical Performance 40

9. Investigations 48

10. Employees and Employee Entitlements 70

11. Deed of Company Arrangement Proposal(s) 75

12. Estimated Outcome Statement 84

13. Administrators' Recommendation 87

14. Remuneration and Second Meeting 89

Appendices

A. Notice of Second Meeting of Creditors

B. DIRRI

C. Administrators' Remuneration Report

D. Grant Thornton Charge Out Rates at 1 July 2014

E. Formal Proofs of Debt

F. Proxy Forms

G. Detailed Estimated Outcome Statement


Glossarythe Act The Corporations Act 2001

ASIC Australian Securities & Investment Commission

ASX Australian Stock Exchange

c. circa

CBDE CBD Energy Limited

CBD SL CBD Solar Labs Pty Ltd

The Companies CBD Energy Limited, CBD Solar Labs Pty Ltd, KI Solar Pty Ltd,

Westinghouse Solar Pty Ltd

CIEL Chatham Island Electricity Limited

CIWL Chatham Island Wind Limited

Directors Statutory Directors of Company and or Parent

DOCA Deed of Company Arrangement

EOI Expression of Interest

FEG Fair Entitlements Guarantee

FMA Facility Management Agreement

FY11/12/13/14 Financial Years ended 30 June 2011/2012/2013/2014

GED Green Earth Developers LLC

Grant Thornton Grant Thornton Australia Limited

The Group CBD Energy Limited and all of its subsidiaries

GST Goods and Services Tax

HVAC Heating, ventilating, and air conditioning

Hydro

Tasmania/HT

Hydro-Electric Corporation

IM Information Memorandum

JV Joint Venture

KI Solar KI Solar Pty Ltd

KW Kilowatt

Management The senior management team of CBD Energy Limited

MW Megawatt

NASDAQ National Association of Securities Dealers Automated Quotations

NDA Non-disclosure Agreement

Parmac Parmac Air-Conditioning and Mechanical Services Pty Ltd

PMA Project Management Agreement

PPA Power purchase agreement

PPSR Personal Properties Securities Register

PV Photovoltaic

PwC PricewaterhouseCoopers

SCBPAF Statement about Company's business, property, affairs and

financial circumstances

SEB Secured Energy Bonds Plc

STC Small-scale Technology Certificates

UK United Kingdom

US United States of America

WFF Wind Farm Financing Pty Ltd

WH&S Workplace Health & Safety

WHS Westinghouse Solar Pty Ltd

WHSP Washington H. Soul Pattison and Company Limited

WIP Work In Progress


Section 1 Executive summary

01. Executive summary

02. Introduction

03. Companies' History and Reasons for Failure

04. Actions Undertaken to Date

05. SCBPAF

06. Key Assets

07. Sale Process

08. Historical Performance

09. Investigations

10. Employees and Employee Entitlements

11. Deed of Company Arrangement Proposal(s)

12. Estimated Outcome Statement

13. Administrators' Recommendation

14. Remuneration and Second Meeting


Overview

Executive summary

Introduction

Refer to Section 2.

� Trevor Pogroske and Said Jahani were appointed Joint and Several Administrators of the Companies on 14 November 2014, pursuant to Section 436A of the Act.

� The first meeting of creditors was held on Wednesday, 26 November 2014.

� The second meetings of creditors will be held on Friday, 19 December 2014 at 10:00am at the offices of Grant Thornton, Level 17, 383 Kent Street.

Principal Activity

Refer to Section 3.

� The Companies' registered office was Suite 2 Level 2, 53 Cross Street, Double Bay, NSW Australia.

� CBD Energy Limited is a NASDAQ listed public company that holds an interest in a number of assets, including:

− A global licence agreement to operate the Westinghouse Solar brand exclusively. The Group currently has solar operations in Australia, the US and the UK;

− A minority equity interest in the Taralga Wind Farm project (which is scheduled for practical completion in June 2015);

− A 100% equity interest in the Chatham Island Wind Farm; and

− A 100% equity interest in Parmac Air-Conditioning and Mechanical Services Pty Ltd, a Melbourne based HVAC business.

� CBDE’s securities were suspended from trading by the NASDAQ on 13 November 2014, immediately prior to the Administrators' Appointment. The NASDAQ subsequently issued CBDE with a notice of intention to delist the company's securities. The Administrators have appealed the delisting and a hearing is scheduled for 8 January 2015.

� WHS is a wholly owned subsidiary of CBDE and operates the Australian solar business. It has operations in Sydney and Brisbaneand a forward order book of c. $1.3 million at 14 November 2014.

� CBD SL is a wholly owned subsidiary of CBDE, which was established to set up and run a solar panel manufacturing plant. The equipment was purchased, however, the plant was never commissioned.

� KI Solar is a wholly owned subsidiary of CBDE. The entity was established to facilitate a JV arrangement with Hydro Tasmania to set up a solar project on King Island. The JV is no longer operating and a settlement has been agreed with Hydro Tasmania (referto Section 4).


Overview

Executive summary

Company History and Reasons for Failure

Refer to Section 3.

� The Directors have listed the following reasons for the failure of the Companies:

− Significant sustained operating losses being incurred by the parent company and some subsidiaries; and

− Inability to raise additional capital as a result of:

− Irregularities identified in the FY14 audit which prevented PwC providing an audit opinion;

− The withdrawal of the FY12 and FY13 audit opinions by PwC; and

− Mr McGowan's inability to adequately respond to audit committee queries.

� Based on our preliminary review of the Companies affairs, we concur with the Directors' reasons for the Companies' insolvencyhowever in our opinion the following factors also contributed to the failure of the Companies:

− Ongoing trading losses of a number of subsidiaries, including the Australian solar business;

− The high overhead cost base that was not adjusted down as revenues declined;

− Alleged misappropriation of funds by the former executive director;

− Investment in projects that failed to deliver the forecast returns (e.g. Bowen JV, Emerald JV, Solar Manufacturing Plant, King Island Solar Project);

− Substantial warranty claims in the Eco-kinetics business that were funded by the Companies;

− Significant costs associated with obtaining NASDAQ listing and management time required to execute the listing;

− High cost of establishing operations in the US;

− The Companies failing to respond appropriately to the changing energy market conditions in Australia;

− Diminishing cash position driven by loss making entities within the Group;

− Poor management structure; and

− A lack of adherence to corporate governance principals.


Overview

Executive summary

Actions undertaken to date

Refer to Section 4.

� Following their appointment, the Administrators closed the Perth office and terminated a portion of the workforce.

� The Administrators have continued to trade the Australia Solar business in a limited capacity.

� On 26 November 2014, the Voluntary Administrators advertised in the Australian Financial Review inviting expressions of interest for the sale of the assets or recapitalisation of the Companies. A number of EOIs were received and the sale process is discussed further in Section 7.

Investigations

Refer to Section 9.

� Investigations to date have included a review of the trading history of the Companies, the application of shareholders funds andthe reasons for the Companies being placed into Administration. The investigations have also focused on issues such as identifying potential voidable transactions and insolvent trading. Our key findings are detailed below:

− Payments totalling $1,280,475 and $133,992, which possess the characteristics of potential unfair preference payments, have been identified for CBDE and WHS respectively, as being made during the relation back period. As CBD SL and KI Solar did not trade during the relation back period we have not identified any unfair preference payments having been made by these entities.

− At the date of this report we have not become aware of any uncommercial transactions entered into by the Companies.

− To date, at a high level, we have not identified any material concerns with the books and records provided.

− We have identified a number of director related transactions that we believe warrant further investigation, specifically: (1) Discretionary bonuses that were paid to Mr McGowan; (2) Various uncontracted per diem allowances and expenses paid to Mr McGowan; and (3) Mr McGowan's involvement in two transactions involving a company called Sligo Investments Limited.

− On the basis of the cashflow test, a review of the current net asset position, and a review of the aged creditors listing, CBDE was experiencing difficulties in paying its creditors within terms from at least June 2013. However, between June 2013 and June 2014, there are a number of factors that may mitigate a claim of trading whilst insolent by CBDE's directors. There is no doubt however that as at 18 June 2014, when CBDE failed to secure the total funding it needed via the initial public offering (shortfall of AU$6 million), it was insolvent.

− On the basis of the cashflow test, balance sheet test, and a review of the aged creditors listing, WHS was experiencing difficulties in paying its creditors within terms from at least March 2014, if not earlier. However, WHS had historically been provided with financial support from CBDE and it could reasonably be assumed that this support would continue going forward.When CBDE was insolvent and no longer able to support WHS, it became insolvent. This was 18 June 2014, but could have been as early as March 2014 in respect of its own stand alone financial position.

− Both KI Solar and CBD SL became insolvent as at the date of the appointment of the Voluntary Administrators, 14 November 2014, as a result of various inter-company loans becoming immediately due and payable.


Overview

Executive summary

DOCA Proposals and Estimated Outcome Statement

Refer to Sections 11 and 12.

� The Administrators received three DOCA proposals from BlueNRGY, EEG and Arowana respectively, for CBDE and WHS.

� Each of the DOCA proposals are still in an early form and continue to be developed. It is likely that a further update will need to be provided at the commencement of the second meeting on 19 December 2014 with respect to any further modifications to the DOCA proposals received.

� The Arowana DOCA proposal does not provide sufficient funds to discharge the secured creditor's debt and therefore does not allow for any return to priority or unsecured creditors.

� The BlueNRGY and EEG DOCA proposals offer varying cash contributions and share capital in the restructured business to unsecured creditors. The value of the share capital is subject to the valuation of the restructured business, which the Administrators have not assessed or verified. BlueNRGY and EEG are relying on their own valuations to value the shares being offered to unsecured creditors.

� It is a key condition of both DOCA proposals that the NASDAQ public listing is maintained by CBDE. There is a risk that if the NASDAQ is successful in delisting CBDE, the DOCA proposals will fail. In the event that the proponents waive this requirementand proceed with the DOCA, there is a risk to unsecured creditors that it will be difficult for creditors to monetise the shares in an unlisted CBDE.

� It is important to note that the secured creditor, WFF, has indicated their support for the BlueNRGY DOCA, absent a superior offer.

Estimated Outcome Statement

Refer to Section 12.

� Under the BlueNRGY DOCA, it is estimated that unsecured creditors will receive a dividend (combination of nominal cash and mostly shares) totalling between 6.23 and 6.91 cents in the dollar for CBDE and 6.23 and 7.57 cents in the dollar for WHS.

� Under the EEG DOCA, it is estimated that unsecured creditors will receive a dividend (combination of cash and predominantly shares) totalling between 10.34 and 10.69 cents in the dollar for CBDE and 10.34 cents in the dollar for WHS. However, it shouldbe noted that EEG's valuation of shares is based on a simplistic and flawed valuation model. EEG has advised it is applying adifferent valuation model to secure funding from its Thai investors to that used for the creditors of CBDE and WHS. If the same valuation metric is used, it will imply a 50% reduction in the value of the shares being offered to unsecured creditors (i.e. 5.17 cents in the dollar).

� In a liquidation scenario, there is not likely to be any return to unsecured creditors (with the exception of KI Solar which is estimated to provide a dividend of between 9.22 and 10.54 cents in the dollar), however, there are certain actions available to the liquidator that could potentially a return to creditors. It should be noted that these actions will require the liquidator to be funded and there is no guarantee of success.

� Therefore, it is the Administrators' recommendation creditors of CBDE and WHS resolve to execute the BlueNRGY DOCA.


Overview

Executive summary

Administrators recommendation

Refer to Section 13.

� Section 439A(4)(b) of the Act requires the Administrators of the Companies to prepare a statement setting out their opinion on the outcome of the Administration of the Companies.

� In this report we have recommended to creditors that the creditors of CBDE and WHS resolve to execute the BlueNRGY DOCA in respect of CBDE and WHS and the creditors of KI Solar and CBD SL resolve to wind up these these entities.

– The DOCA proposal for CBDE and WHS is estimated to provide a full return to priority creditors and a more certain and timely return for unsecured creditors.

– The Company is insolvent and returning control of the Company to the Director would not be an appropriate resolution to the matter; and

– No DOCA proposal has been received in respect of KI Solar and CBD SL and we therefore recommend that these entities are wound up.


Section 2 Introduction


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Appointment and meeting details

Introduction

Appointment and first meetings of creditors

� Trevor Pogroske and Said Jahani were appointed Joint and Several Administrators of the Companies on 14 November 2014 pursuant to Section 436A of the Act.

� Pursuant to Section 436E of the Act, the first meeting of creditors of the Companies was held on 26 November 2014. A quorum was present for each company. A copy of the minutes of the first meeting of creditors is available on the ASIC and Grant Thornton websites.

� No resolution for a committee of creditors was passed for the Companies and the Administrators' appointment was ratified by creditors.

Second meetings of creditors

� The second meetings of creditors will be held at 10:00am on Friday, 19 December 2014 at the office of Grant Thornton, Level 17, 383 Kent Street, Sydney. The notices of meetings are attached as Appendix A. Teleconference facilities for the meeting will be available. Please contact Kristen Street on (02) 8297 2643 or [email protected] to obtain dial in details.

� The purpose of the second meeting is to consider the Administrators' report on the Companies' business, property, affairs and financial circumstances and to consider the Administrators’ statement of opinion in respect of each of the options available to creditors.

� At the meetings, creditors will be required to determine the future of each of the Companies and to resolve one of the following resolutions for each of the companies:

− That the Administration end;

− That the Companies executes a DOCA; or

− That the Companies be wound up.

� The Administrators recommend that creditors of CBDE and WHS resolve to execute the BlueNRGY DOCA proposal in the absence of a superior proposal.

� The Administrators recommend that creditors of CBD SL and KI Solar resolve to wind the companies up.


Report to creditors

Introduction

Report to creditors

� Creditors should note that in preparing this report we have relied on information that has been obtained from the following sources:

− Discussions with the Directors;

− Discussions with employees of the Companies including management;

− Advice obtained from our legal advisors;

− Information available from ASIC and the NASDAQ;

− Discussions with various stakeholders including creditors; and

− The Companies' books and records.

� Whilst we have no reason to doubt the accuracy of any information contained in this report, we have not performed an audit and we reserve the right to alter our conclusions should the underlying data prove to be inaccurate or change materially from the date of this report.

� In the event that any of the Companies proceed into Liquidation, this report will form the basis of further investigations. Provided that funding is available, the investigations will be more extensive than that undertaken to date, particularly due to the time constraints of the Voluntary Administration process.

� Further investigations may be supported by public examinations of the Directors, officers and others who may be able to provide information about the Companies' examinable affairs (as that expression is defined in the Act).

� It is the Administrators' view that this report provides sufficient information to creditors to allow them to make an informed decision as to the Companies' future, and allows the Voluntary Administrators to make a reasoned and fair recommendation based on their opinions and the options available to creditors.


Compliance and Independence

Introduction

− The Administrators do not assume or accept any responsibility for any liability or loss sustained by any creditor or any other party as a result of the circulation, publication, reproduction or any use beyond that permitted above;

− The statements and opinions given in this report are given in good faith and in the belief that such statements are not false or misleading. Except where otherwise stated, the Administrators reserve the right to alter any conclusions reached on the basis of any changed or additional information which may be provided to them between the date of this report and the date of the second meetings;

− Neither the Administrators, nor any member or employee thereof are responsible in any way whatsoever to any person in respect of any errors in this report arising from incorrect information; and

− Creditors should seek their own independent legal advice as to their rights and the options available to them at the second meetings of creditors.

Compliance with Best Practice

� We confirm that this report complies with the statements of best practice issued by ARITA with regard to content of Administrators’ reports and the Code of Professional Practice with regard to remuneration (effective 1 January 2014).

Independence

� As disclosed in the circular to creditors dated 14 November 2014, the Administrators undertook a proper assessment of the risks in relation to their independence prior to accepting the appointments. No real or potential risks to the Administrators' independence were identified.

� We confirm that there have been no changes to the DIRRI since it was issued to creditors in the initial Notice to Creditors dated 14 November 2014.

Disclaimer

� In reviewing this report, creditors should note the following:

− Creditors will only be entitled to vote on the outcome of the company that they are a creditor of;

− This report is based on information sourced from the books, records and other information provided by the Directors and former staff. Whilst the Administrators have reviewed the information there has been no independent verification of the information;

− In considering the options available to creditors and formulating their recommendations, the Administrators have necessarily made forecasts of asset realisations and total creditors. These forecasts and estimates may change. Whilst the forecasts and estimates are the result of the Administrators’ best assessments in the circumstances, creditors should note that the outcome for creditors may differ from the information provided in this report;

− This report is not for general circulation, publication, reproduction or any use other than to assist creditors in evaluating their position as creditors and must not be disclosed without the prior approval of the Administrators;


Key events in the Administration

Introduction

Preliminary investigations undertaken by the Administrators in relation to voidable transactions and potential insolvent trading.

14 November 2014

First creditors' meetings.

Date of appointment of Voluntary Administrators.

� The timeline below details the key milestones during the Administration.

� Since the date of appointment, the Administrators have conducted investigations into the reasons for the Companies' failure. The reasons for the Companies' failure and outcome of these investigations are discussed in Section 3 and Section 9.

� The Administrators also undertook a compressed expression of interest campaign to seek buyers/investors for the business. Further detail is provided in Section 7.

19 December 2014

26 November 2014

Final binding offers due for the sale/ recapitalisation of CBDEExpressions of

Interest campaign commenced for the sale/ recapitalisation of the Companies.

Second meetings of creditors when creditors will decide on the outcome of the each of the Companies, which will determine whether:

1. The Administration ends; 2. The Companies executes a DOCA; 3. The Companies are wound up; or4. Adjourn for up to 45 business days.

5 December 2014 12 December 2014

Deadline for the submission of non-binding offers for the sale/ recapitalisation of CBD.

The Administrators have undertaken the following key actions:• Preparation of the s.439A report;• Pursued a sale/recapitalisation plan of the Companies;• Secured the Companies' assets;• Undertaken a preliminary review of creditor and employee claims; and• Undertaken investigations into the Companies' affairs.

10 December 2014

The Administrators issued their s.439A report to creditors.


Section 3 Companies' History and Reasons for Failure


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







CBD Energy Limited

Name Position Start Date

Carlo Botto Director 4/02/2013

William Morro Director 20/02/2014

Gerard McGowan

(Duties and powers were suspended 23 October 2014)

Director 5/04/2004

Richard Pillinger Secretary 25/05/2010

CBD Solar Labs Pty Ltd, KI Solar Pty Ltd & Westinghouse Solar Pty Ltd

Name Position Start Date

Carlo Botto Director 10/11/2014

William Morro Director 10/11/2014

Richard Pillinger (Westinghouse Solar Pty Ltd only) Secretary 28/03/2013

Richard Pillinger (KI Solar Pty Ltd only) Secretary 16/12/2010

Change in registered officeholders

Name Company Start Date End Date

Luisa Ingargiola CBD Energy Limited 5/08/2014 23/10/2014

Todd Barlow CBD Energy Limited 11/02/2011 18/07/2014

Gerard McGowan CBD Solar Labs Pty ltd 10/10/2010 10/11/2014

Gerard McGowan KI Solar Pty Ltd 4/09/2007 10/11/2014

Gerard McGowan Westinghouse Solar Pty Ltd 28/03/2013 10/11/2014

Background

Companies' History and Reasons for Failure

Sources: 1. ASIC Register as at 14 November 2014

Registered Office and Principle Place of Business

� The ASIC search dated 14 November 2014 indicated that the Companies' registered office and principal place of business was Suite 2, Level 2, 53 Cross Street, Double Bay, NSW Australia.

Company Shareholding

� At the date of our appointment the shareholding of the Companies was as follows:

− CBDE comprised of:

− 2,100 cumulative redeemable preference shares with a total par value of $2,100;

− 6,080,632 fully paid up ordinary shares with a total par value of $127,661,087.07; and

− 200 fully paid up preference shares with a total par value of $2,000,000.

− CBD SL comprised of 100 fully paid up ordinary shares owned by CBDE with a total par value of $100.

− KI Solar comprised of 100 fully paid up ordinary shares owned by CBDE with a total par value of $100.

− WHS comprised of 1 fully paid up ordinary share owned by CBDE with a total par value of $1.

� CBDE is the ultimate holding company of the Group.

� Given the expected shortfall to unsecured creditors based on the information available, it is unlikely that there will be a return available to ordinary shareholders if the Companies are placed into Liquidation.

Company Office Holders

� A search of the ASIC database confirmed the current directors and secretary of the companies are as follows in the adjacent tables:

� According to the ASIC database, there have been a number of changes to the registered office holders in the past 18 months, summarised below. We note Mr McGowan was removed from office due to the ongoing investigation discussed in Section 9.

Sources: 1. ASIC Register as at 14 November 2014 Note: CBD Solar Labs did not have a Company Secretary appointed at the date of our appointment.

Sources: 1. ASIC Register as at 14 November 2014


Leased Premises

Lease Party/Agent Details Entity Administrator's Action

Laing & Simons Double BaySuite 3 Level 1, 53 Cross Street,

Double Bay NSWCBD Energy Disclaim Lease

Laing & Simons Double BaySuite 2 Level 2, 53 Cross Street,

Double Bay NSWCBD Energy Continued Lease

Blembrook QLDUnit 6, 6 Quinns Hill Road East,

Stapylton QLDWestinghouse Solar Continued Lease

Ray White Burswood WA20-26 Claude Street,

Burswood WAWestinghouse Solar Disclaim Lease

Cash upon appointment

� At the date of the Administrators' appointment, the following accounts were held with Westpac and are now under the control of the Administrators.

Secured Creditors

The Companies have the following registered charges noted on the PPSR. We note WFF is a related party to WHSP.

Leased Assets

The Companies' leased assets at the date of the Administrators' appointment are outlined in the below table. Pursuant to Section 443B of the Act, the Administrators elected not to exercise their rights in relation to certain leased assets, as it was determined there was no equity available in the assets. Some assets were retained as they are essential assets to the ongoing trading of the business.

Auditor

� The Companies' previous auditors, PwC, resigned as auditors on 10November 2014 as a result of independence concerns (discussed further in section 3)

� There has been no new auditor appointed and we remain in a dialogue with PwC regarding their previous role.

PPSA registrations

Chargeholder Company Charge

Capital Finance Australia Limited CBD Energy Limited Telephone System

Wind Farm Financing Pty Ltd ("WFF") CBD Energy Limited All present and aquired property

St George Finance Limited CBD Energy Limited Motor Vehicle

Washington H. Soul Pattison and Company Limited

("WHSP")CBD Energy Limited

All present and aquired property

(with exceptions)

NTP fleet management Pty Ltd CBD Solar Labs Motor Vehicle

Hydro-Tasmania KI Solar Pty Ltd All present and squired property

Leased AssetsLease Party Details Entity Administrator's Action

St George Finance Ltd Motor Vehicle CBD Energy Retained asset

Canon Finance Australia Photocopier CBD Energy Retained asset

Canon Finance Australia Photocopier CBD Energy Retained asset

Cash Balance at 14 November 2014

Company

Cash Balance

($)

CBD Energy Limited -

CBD Solar Labs Pty Ltd -

KI Solar Pty Ltd 3,509

Westinghouse Pty Ltd 2,789

Background


Sources: 1. Company books and records at 14 November 2014. 2. PPSR Register

Sources: 1. Company bank statements at 14 November 2014.

Leased Premises

� At the date of our appointment, the Companies operated from four leased premises in NSW, QLD and WA.

� Following an urgent assessment, we exited the WA premises and one of the Double Bay offices as they were considered surplus to the Companies' requirements during the administration. These leases were disclaimed by the Administrators.

Sources: 1. Company books and records at 14 November 2014. 2. PPSR Register


Principal Activity


Overview – CBD Energy Limited

� CBDE primarily operated as a public listed holding company for the Group's interests including:

− A 10% equity interest in the Taralga Wind Farm project (which is scheduled for practical completion in June 2015). CBDE employs a project management team and provides management services to the project in accordance with the PMA. CBDE is also in the process of commencing providing facility management services in accordance with the FMA.

− A 100% equity interest in Chatham Island Wind Farm Ltd. CIWF has a long term project agreement with CIEL to provide power to the island. We are currently in negotiations with CIEL to resolve an existing contractual dispute.

− A 100% equity interest in Parmac Air-Conditioning. Parmac is a Melbourne based HVAC business operating in the commercial and industrial sector.

� Separately, CBDE holds a global licence agreement to operate the Westinghouse Solar brand exclusively. The Group currently has solar operations in Australia, the US and the UK where this brand is utilised via subsidiary entities. It had separately reached an in principal agreement with a party, EEG, to sub-licence the use of the Westinghouse brand for use in Thailand.

� The Westinghouse Solar licence agreement commenced in September 2013 for an initial period of ten years. There are options under the licence agreement to extend for a further 20 years.

Overview – Westinghouse Solar Pty Ltd

� WHS is a wholly owned subsidiary of CBDE and operates the Australian solar business. It has offices in Sydney and Brisbane and a commercial forward order book of c. $1.3 million.

� The solar business has a database of c. 17,000 customers and tenders both residential and commercial projects.

Overview – CBD Solar Labs Pty Ltd

� CBD SL is a wholly owned subsidiary of CBDE, which was established to operate a solar panel manufacturing plant. The equipment was purchased, however, the plant was never commissioned. The grant agreement which was entered into with the QLD government for $576,793 to fund the establishment of the plant in 2010 was terminated in 2013. The QLD government exercised the bank guarantee with Westpac in August 2013 for repayment of the grant of $337.868.

� The equipment will be realised for the benefit of creditors, however, we note that there is a limited market in Australia for solar manufacturing equipment.

Overview – KI Solar Pty Ltd

� KI Solar is a wholly owned subsidiary of CBDE. The entity was established to facilitate a joint venture arrangement with a government utility provider, Hydro Tasmania, to set up a solar project on King Island. The JV is no longer operating.

� The project incorporates a solar tracker system which was installed in 2008 and KI Solar provided power to the distribution network owned by Hydro Tasmania.

� The project was shut down in 2013 due to ongoing operational problems with culminated in safety concerns and maintenance issues which were cost prohibitive.

� A settlement with Hydro Tasmania has been reached and is discussed further in Section 4.


The Companies' History


Companies' History

A brief timeline of the Companies' history is detailed below:

2010:

CBD Solar Labs – Acquired components for solar PV assembly

plant and entered into QLD

government grant agreement.

Overview

� CBDE was first listed on the ASX in 1989 and subsequently had three name changes before becoming CBD Energy Limited in 2002.

� During 1989 to 2014, the Company acquired multiple subsidiaries including Capacitor Technologies Pty Ltd (2003), Parmac (2004) and the Eco-kinetics Group of Companies (2010).

� In 2010, the government reduced incentives for residential solar customers in Australia which had a significant negative impact on the Companies' solar business (Revenue in FY11:$124 million ]/Revenue in FY12:$29.5 million).

� The Companies expanded overseas from 2011 when an 8MW solar plant was constructed in Thailand. USA operations commenced in August 2012, and a 5MW solar plant in Italy was constructed and sold in December 2012.

� In June 2012, the Company raised $8.65m via the issue of convertible notes.

� CBDE completed acquisition of Eco-kinetics business for c.$12m in 2010. The solar business was subsequently rolled into WHS.

� KI Solar entered into a JV agreement in 2008 with Hydro-Tasmania. The solar trackers were disconnected for safety reasons in 2013 and a settlement has recently been agreed with Hydro Tasmania.

� Westinghouse Solar Pty Ltd was established in 2013 to trade under licence from Westinghouse Solar. The agreement commenced in September 2013.

� PwC were the auditors of the Companies, however they resigned as auditor immediately prior to our appointment.

� PwC advised ASIC of potential insolvent trading in August 2014.

� The Taralga project was commenced in 2012, with CBDE providing project management services to the project. It is scheduled for practical completion in June 2015.

� On 14 November 2014, Said Jahani and Trevor Pogroske were appointed as Joint and Several Administrators of the Companies.

2008:

KI Solar – Commenced solar project on King Island and entered

PPA agreement with Hydro-

Tasmania.

2013:

KI Solar – Solar project

disconnected for

safety reasons

2013:

Westinghouse Solar – Company established and begins trading

under licence from Westinghouse

Solar Inc.

1989:

CBDE – Company Incorporated as London

Securities Limited and began

trading on ASX.

2002:

CBDE –Changed name to CBD Energy

Limited.

2010:

CBDE – Completed construction of Chatham Island wind project and

commenced PPA.

31 January

2014:

CBDE – De-listed from

ASX

18 June 2014:

CBDE – Listed on NASDAQ and raised US

$7.2 million in gross

proceeds through and initial public offering.

2010:

Acquired the established Eco-

kinetics solar business.

2011:

CBDE – Substantial reduction in government incentives for residential

solar in Australia.

June 2012:

CBDE – Raised US $8.65m through

issue of convertible

notes.

September

2012:

CBDE – Taralga project financial

close achieved.

December 2014:

Taralga commencement of electrification

August 2014:

CBDE raised US$1.5m via private placement

pf preferred

convertible note.

2004:

CBDE – Parmac business acquired


Intercompany Balances

($)

CBD Energy

Limited

CBD Solar Labs

Pty Ltd

KI Solar

Pty Ltd

Westinghouse

Solar Pty Ltd

Total inter-

company loans

CBD Energy Limited (178,574) (414,294) (1,835,518) (2,428,385)

CBD Solar Labs Pty Ltd 178,574 4,550 183,124

KI Solar Pty Ltd 414,294 (236,000) 178,294

Westinghouse Solar Pty Ltd 1,835,287 (4,550) 236,000 2,066,737

Total inter-company loans 2,428,154 (183,124) (178,294) (2,066,968) -

Organisation Structure


Organisation Structure

Sources: 1. Management 2. ASIC register

100%


CBD Energy Limited

Gerard McGowan

(Suspended director)

William Morro

Director

Carlo Botto

Director

Organisational Structure

� CBDE is the ultimate holding company and is publicly listed on the NASDAQ. WHS, CBD SL and KI Solar are 100% owned subsidiaries of CBDE.

� There are a significant inter-company loan accounts, between the Companies. The Group transferred funds between entities based on availability and funding requirements. The intercompany balances between the four entities are summarised below. The key point to note is that CBDE is owed $2.43 million from the other three subsidiaries, including $1.84 million owing from WHS.

� CBD's organisational structure includes a number of subsidiaries in Australia and overseas. A large number of these subsidiaries are dormant. The adjacent chart only depicts the entities covered by the Voluntary Administration.

� Staff subject to the appointment were employed through two entities, CBDE and WHS. The staff employed by CBD were head office support staff and Taralga project management staff. The WHS staff worked within the Australian solar business across multiple states.

� Gerard McGowan was an Executive director of CBD and previous sole director of CBD SL, KI Solar and WHS. Mr McGowan's director duties and powers were suspended on 21 October 2014 whilst his conduct was investigated by the Audit Committee (refer to Section 9). Following our appointment, Mr McGowan's consulting agreement with CBDE was terminated, effective immediately.

� Mr McGowan was replaced as director of CBD SL, WHS and KI Solar on 10 November 2014 by William Morro and Carlo Botto given the concerns regarding his conduct and the pending voluntary administration appointments.

William Morro

Director

Carlo Botto

Director

CBD Solar Labs Pty Ltd KI Solar Pty Ltd

100% 100%


Reasons for Failure


Directors' reasons for failure

� A questionnaire was sent to the Directors of the Companies following the appointment of the Administrators on 14 November 2014.

� The Directors returned the completed questionnaire on 8 December 2014, together with the SCBPAF (discussed further in Section 5). The Directors have listed the following reasons for the failure of the Companies:

− Significant sustained operating losses being incurred by the parent company and some subsidiaries; and

− Inability to raise additional capital as a result of:

− Irregularities identified in the FY14 audit which prevented PwC providing an audit opinion;

− The withdrawal of the FY12 and FY13 audit opinions by PwC; and

− Mr McGowan's inability to adequately respond to audit committee queries.

Auditor's Review

� During the 2014 audit field work, PwC raised a number of concerns and issues with regards to the financial position of the Companies.

� PwC issued a report to the CBDE audit committee on 3 September 2014 which outlined the following concerns:

− Poor corporate governance including a single signatory on the Companies' bank accounts (the executive chairman Mr McGowan);

− Poor segregation of duties relating to payments form bank accounts;

− Poor record keeping;

− Transactions incurred and approved by the Executive Chairman through his private director related entity, without substantiating documentation;

− Unclear director remuneration expenses; and

− No budgets and forecasts prepared.

� In this report, PwC also highlighted a number of concerns in relation to related party transactions. These transactions are discussed further in Section 9.

� In our opinion, it is likely that these issues contributed to the failure of the Companies.

Administrators' Comments

� We concur with the reasons expressed by the Directors, however from investigations undertaken to date and discussions with key stakeholders, we believe the following factors may also have contributed to the Companies' failure:

− Ongoing trading losses of a number of subsidiaries, including the Australian solar business;

− The high overhead cost base that was not adjusted down as revenues declined;

− Alleged misappropriation of funds by the former executive director;

− Investment in projects that failed to deliver the forecast returns (e.g. Bowen JV, Emerald JV, Solar Manufacturing Plant, King Island Solar Project);

− Substantial warranty claims in the Eco-kinetics business that were funded by the Companies;

− Significant costs associated with obtaining NASDAQ listing and management time required to execute the listing;

− High cost of establishing operations in the US;

− The Companies failing to respond appropriately to the changing energy market conditions in Australia;

− Diminishing cash position driven by loss making entities within the Group;

− Poor management structure; and

− A lack of corporate governance principals.

� Further investigation into the reasons for failure of the Companies will be undertaken by the Liquidators should the Companies be placed into Liquidation.


Section 4 Actions Undertaken to Date


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Actions undertaken to date

Actions Undertaken to Date

� We set out below a summary of the actions undertaken during the Administration period:

Rationale for closing WA office and partial termination of workforce

� Immediately following our appointment, we undertook an urgent assessment of the Companies' ability to continue trading whilst an urgent sale/recapitalisation campaign was commenced.

� After discussions with key management and the Directors and due to the need to preserve the limited cash available, the Administrators closed the Perth office and terminated a portion of the workforce of CBDE and WHS.

� The remainder of the workforce was retained to continue to trade the business to maximise the potential return to creditors.

NASDAQ

� On 21 October 2014, CBDE announced to the market that its auditor, PwC, had withdrawn their audit opinions for FY12 and FY13.

� As a result, two law firms, Tripp Levy and Faruqi and Faruq LLP commenced investigations into CBDE on behalf of the investors.

� On 13 November 2014, CBDE announced that it had received a notice of failure to timely file its annual report.

� Following this filing, the NASDAQ halted trading of CBDE's shares. This was immediately followed by an announcement by CBD that it had appointed Said Jahani and Trevor Pogroske as voluntary administrators.

� Following our appointment, we engaged US legal representation and had various correspondence with the NASDAQ in order to preserve the listing status.

� On 25 November 2014, we received a notice of NASDAQ's intention to delist CBDE's securities from the NASDAQ. The Administrators have appealed the decision and a hearing is scheduled for 8 January 2015.

Other actions

� Other actions undertaken by the Administrators since our appointment include:

− Notified all known creditors of the Administration;

− Advertised and held the first meetings of creditors;

− Attended to all statutory lodgements;

− Attended the trading premises of the Companies' and undertook an urgent assessment as to the future viability of the Companies whilst a sale/recapitalisation campaign was undertaken;

− Undertook a compressed, expedited sale process (refer Section 7);

− Closed the WA premises due to restricted cash flow;

− Made a portion of the workforce redundant;

− Addressed employee queries concerning their entitlements and the Administration process;

− Calculated outstanding employee entitlements;

− Communicated with the landlords and lessor;

− Obtained a valuation of all plant and equipment;

− Undertook a valuation of the Companies' key assets and interests;

− Correspondence with key stakeholders including JV partners, equity partners and sub-contractors;

− Prepared detailed report to creditors;

− Liaised with the secured creditor;

− Negotiated and completed a settlement in respect of the King Island project;

− Established procedures and controls to allow trading to continue;

− Reviewed legal agreements in relation to key assets and interests of the Companies;

− Liaised with former auditors, PwC;

− Liaised with NASDAQ;

− Secured the Companies' books and records, including its electronic files;

− Attended to enquiries from the media;

− Secured pre-appointment cash at bank;

− Attended to creditor and shareholder enquiries via telephone and email; and

− Liaised with the tax office and essential services providers.


Section 5 SCBPAF


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







SCBPAF summary of CBD Solar Labs Pty Ltd

Description Note Book value ($)

Directors' Estimated

Realisable Value ($)

Assets not specifically charged

Plant & Equiptment 1 438,782 Not Disclosed

Net assets not subject to specific charge 438,782 Not Disclosed

Total Assets 438,782 Not Disclosed

Surplus / (Deficit) in assets before the claims of unsecured

creditors438,782 Not Disclosed

Amount owing to Unsecured creditors 2 (1,058,104) Not Disclosed

Surplus / (Deficit) before Realisation and Administration costs 3 1,496,886 Not Disclosed

SCBPAF summary of CBD Energy Limited





Sundry Debtors 1 22,346,161 2,574,975

Work in Progress 2 75,000 Not disclosed

Plant & Equiptment 3 2,288,962 Not disclosed

Other Assets 4 31,049,066 10,861,946

Net assets not subject to specific charge 55,759,189 Not disclosed

Total Assets 55,759,189 Not disclosed

Less: Amount payable in advance of secured creditor 5 (12,808,089) (12,808,089)

Amount owing to Secured creditor - -

Amount owing to Priority creditors 6 (313,925) (313,925)

Amount owing to partly secured creditosrs - -


creditors42,637,175 Not disclosed

Amount owing to Unsecured creditors 7 (17,221,640) (17,221,640)

Surplus / (Deficit) before Realisation and Administration costs 8 25,415,535 Not disclosed

Statement about the Companies' Business, Property, Affairs and Financial

Circumstances

SCBPAF

Directors' SCBPAF

� Pursuant to Section 438B(2) of the Act, the Directors of the Companies were required to submit a Statement about the Companies Business, Property, Affairs and Financial Circumstances ("SCBPAF") for each of the Companies.

� The SCBPAF is a snapshot of the assets and liabilities of the Companies at the date the Administrators were appointed, which discloses book values and the estimated realisable values for assets.

� On 14 November 2014, a written request was issued to the Directors to complete the SCBPAF for each of the companies.

� The SCBPAFs for Mr Morro and Mr Botto were received on 8 December 2014 and a summary of each SCBPAF is shown opposite. We note that the statements were not properly prepared with a number of estimated realisable values not disclosed by the directors. We comment on each asset and liability in greater detail in the following pages of this report.

� Mr McGowan failed to submit SCBPAFs for the Companies.

� The SCBPAF's will be available for inspection by creditors at the second meetings should they wish to review them.


SCBPAF summary of Westinghouse Solar Pty Ltd





Sundry Debtors 1 1,044,282 156,732

Cash at Bank 2 3,057 3,057

Work in Progress 3 23,040 23,040

Plant & Equiptment 4 5,226 -

Other Assets 5 19,800 19,800

Net assets not subject to specific charge 1,095,405 202,629

Total Assets 1,095,405 202,629

Less: Amount payable in advance of secured creditor 6 (108,058) (108,058)


creditors987,347 94,571

Amount owing to Unsecured creditors 7 (3,278,255) (3,278,255)

Surplus / (Deficit) before Realisation and Administration costs 8 (2,290,908) (3,183,684)

SCBPAF summary of KI Solar Pty Ltd





Sundry Debtors 1 578,006 Not Disclosed

Cash at Bank 2 3,509 Not Disclosed

Plant & Equiptment 3 490,600 Not Disclosed

Net assets not subject to specific charge 1,072,115 Not Disclosed

Total Assets 1,072,115 Not Disclosed


creditors1,072,115 Not Disclosed

Amount owing to Unsecured creditors 4 (1,137,650) Not Disclosed

Surplus / (Deficit) before Realisation and Administration costs 5 (65,535) Not Disclosed


Circumstances

SCBPAF



Circumstances

SCBPAF

Note Assets Commentary

1 Sundry Debtors � Sundry debtors includes intercompany loans totalling $19.7 million, the majority of which is owing from dormant entities ($13.0 million). Accordingly, these debtors are unlikely to be collectible.

� Additionally, an amount of $2.5 million is recorded as a receivable from the sale of Larkden Pty Ltd (discussed in further detail in Section 6). The sale contract was entered into by a subsidiary of CBDE, CBD Labs Pty Ltd and the debtor is therefore payable to this entity. However, based on information available to us, CBD Labs Pty Ltd does not have any creditors and the amount is likely to flow back to CBDE as sole shareholder.

2 Work in Progress � At the date of the our appointment, $75,000 was recorded as work in progress for the payment to Wind Farm Developments Pty Ltd for an exclusivity fee paid for work performed on the Woolsthorpe wind farm project.

� We do not believe this is a realisable asset for CBDE.

3 Plant & Equipment � Plant and equipment includes fixtures and fittings, IT equipment and office fit-out that is likely to have a nominal value in a liquidation scenario. The largest item of plant and equipment is the two wind turbines on Chatham Island Wind Farm. Despite the PPA being entered into CIWL, the assets are carried on the balance sheet of CBDE as their purchase and installation was funded by CBDE.

4 Other Assets � Other assets include a term deposit of $62,000 held by Westpac as cash security for the rental guarantee in respect of the Double Bay offices. These funds will only be released upon the return of the bank guarantee which is considered unlikely.

� Investments in subsidiaries total $19.5 million, with the majority of this balance ($17.6 million) relating to an investment in the eco-Kinetics business (which is dormant and therefore worthless). Financial assets of $11.5 million consist of the equity holding in Taralga Wind Farm (which is subject to ongoing negotiations in relation to the potential realisation) and investments in companies and JVs that we do not believe have any value.

CBD Energy Limited



Circumstances

SCBPAF

Note Liabilities Commentary

5 Amounts payable in advance of secured creditors

� This value has been incorrectly allocated by the directors as it relates to the amount owing to secured creditor, WFF, not anamount payable in advance of secured creditor.

� WFF has submitted a proof of debt in relation to CBDE in the amount $15.0 million. At this stage, we have not verified the claimor the variance between the company records and WFF's proof of debt.

6 Priority Creditors � Accrued employee leave entitlements at the date of our appointment totalled $313,000. The Administrators' calculations of employee entitlements is set out in Section 10.

� Each employee's calculated entitlements will be circulated to the individuals and employees will have an opportunity to review and note any discrepancies in their claim.

7 Unsecured Creditors � The amount disclosed as owning to unsecured creditors consists of $4.62 million of trade creditors, $10.8 million of intercompany creditors (including an amount of $8.39 million owing to SEB) and $1.7 million in accruals and sundry creditors.

8 Deficit before realisation and Administration expenses

� Whilst the directors did not disclose the estimated surplus/deficit, based on the book value of the assets and liabilities there is a surplus of c. $25.4 million. However, noting that the investments in subsidiaries and other financial assets are not likely to be realisable, we estimate there will be a substantial deficit.

CBD Energy Limited



Circumstances

SCBPAF


1 Plant & Equipment � The plant and equipment relates to the solar manufacturing plant that was acquired but never commissioned. The equipment will be realised for the benefit of creditors, however, we note that there is a limited market in Australia for solar manufacturing equipment.

CBD Solar Labs Pty Ltd


2 Unsecured Creditors � The Director's SCBPAF indicates that there are $100,000 of unsecured trade creditors (relating to the solar manufacturing project) and $957,000 of intercompany loan creditors.


� The director's have not disclosed any estimated realisable value for the plant and equipment. We have obtained a valuation of the assets and we are currently in commercial negotiations to realise these assets.

� Notwithstanding that the directors have not disclosed an estimated realisable value, we estimate that there will be a substantial deficit to unsecured creditors.



Circumstances

SCBPAF

KI Solar Pty Ltd


1 Sundry Debtors � Sundry debtors relates to intercompany loan accounts owing from a number of entities within the Group. These amounts are unlikely to be collectable.

2 Cash at Bank � At the date of the Administrators' appointment, there was $3,509 in KI Solar's bank account. These funds have been secured bythe Administrators.

3 Plant & Equipment � The plant and equipment held by KI Solar is a solar tracker system installed on King Island. A settlement has recently been agreed with Hydro Tasmania to realise the plant and equipment.


4 Unsecured Creditors � The Director's SCBPAF lists trade creditors totalling $317 and $1.14 million of intercompany loan creditors relating to the funding of the solar project.


� The director's have not disclosed any estimated realisable value for the plant and equipment. However, based on the settlement agreement with Hydro Tasmania, there is likely to be a deficit to unsecured creditors.



Circumstances

SCBPAF


1 Sundry Debtors � Sundry debtors includes $6,700 of trade debtors relating to solar installations and $150,000 of prepayments, including sponsorship, royalties and insurance. It is unlikely that the prepayments are able to be monetised.

� $887,000 of intercompany loan debtors owing from dormant group entities are unable to be realised.

2 Cash at Bank � At the date of the Administrators' appointment there was $3,057 in WHS' bank account. These funds have been secured by the Administrators.

3 Work in Progress � The WIP balance reflects the outstanding STCs at the date of our appointment. STCs are a tradable commodity that are received by the end customer when the installation of the solar system is completed. In accordance with the terms of WHS' contracts, the STCs are assigned to WHS and are then transferred to the manufacturers/suppliers to offset future purchases ofsolar panels.

� The Administrators have received the benefit of these STCs and as further installations are completed, further STCs are credited to WHS.

4 Plant & Equipment � There are various items of plant and equipment (office furniture) which are currently being utilised by the company. In a liquidation, if it is cost-effective to do so, these items will be realised.

5 Other Assets � This relates to $19,800 of security deposits which are bonds collected for the level one Double Bay office ($16,600) and the Western Australia office ($3,300). The bond has been returned to the Administrators for the level one, Double Bay office by Westpac upon the Administrators disclaiming the lease and the Company vacating the premises.




Circumstances

SCBPAF


6 Amounts payable in advance of secured creditors

� Accrued employee entitlements at the date of our appointment totalled $108,000. The Administrators' calculation of employee entitlements is set out in Section 10.

� Each employee's calculated entitlements will be circulated to the individuals and employees will have an opportunity to review and note any discrepancies in their claim.

7 Unsecured Creditors � The amount disclosed as owning to unsecured creditors consists of $845,000 of trade creditors, $2.2 million of intercompany creditors (including an amount of $1.84 million owing to CBDE).


� The estimated deficit recorded in the Directors' SCBPAF is c. $3.18 million excludes realisation costs (agents, legal fees etc) and the Administrators' remuneration and disbursements (discussed further in Section 14).



Section 6 Key Assets


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Key Assets of the Companies

Key Assets

Overview

� At the date of our appointment, CBDE held an interest in the following assets:

− Global exclusive licence agreement with Westinghouse to trade as Westinghouse Solar;

− 100% equity interest in CBD Energy USA Ltd, which is a holding vehicle for the Group's USA based solar business;

− 100% equity interest in Westinghouse Solar Ltd, which is the UK based solar business;

− 100% equity interest in the Chatham Island Wind Farm;

− 10% equity interest in the Taralga Wind Farm project;

− 100% equity interest in Parmac; and

− 50% equity interest in the King Island joint venture.

� We provide an overview of each of these key assets in this section.

Westinghouse Solar Licence

� CBDE entered into a global exclusive licence agreement with Westinghouse Electric Corporation that commenced on 1 September 2013 for an initial term of 10 years with options to extend for a further 20 years.

� CBDE established three subsidiaries to operate under the licence in Australia, the UK and USA. The Australian subsidiary was placed into voluntary administration, however, the US and UK entities were not subject to any form of insolvency appointment.

� Prior to operating as WHS, CBDE operated a solar business, eco-Kinetics, via a number of Australian subsidiaries. This business was acquired in 2010 with turnover in excess of $100 million p.a. Australian federal governmental changes which substantially reduced subsidies for residential solar installation programs in 2011 had a significant, adverse impact on the solar business' revenues. This resulted in a reduction in profitability for this business in Australia.

� Accordingly, the directors of CBDE believed that by partnering with Westinghouse (an internationally renowned brand), it could increase its market share by virtue of greater brand recognition. Separately, the directors made a decision to focus on the USA and UK as these countries were believed to have more robust, sustainable Government frameworks for solar projects.

� At the date of our appointment, the Westinghouse Solar business had a forward order book of c. $4 million globally.

Westinghouse Solar – USA and UK

� CBD acquired the shares in Green Earth Developers (“GED”), an established commercial solar installation company in July 2014. The completed acquisition consisted of:

− 375,000 ordinary shares in CBDE having a value of the date of closing of approximately $1.3 million;

− $1 million upfront cash; and

− $500,000 deferred consideration of which $100,000 has been paid.

� In addition, CBDE commenced operations under the Westinghouse licence in 2014, however, since our appointment, the Westinghouse operations have ceased and the directors are focussing on the GED business.

� The UK business is fully operational and is constructing commercial solar installations. Currently seven projects have been completed or are substantially complete.

� In addition to a few large scale solar projects being constructed for another CBDE subsidiary, the UK Solar operation supplies solar systems to a range of commercial customers across the UK.

� At the date of our appointment, the UK business had a pipeline of c. $350,000 including projects for its affiliate company.



Key Assets

Chatham Island Wind Farm

� CBDE negotiated a contract for the construction of a two turbine wind farm (500kW) on Chatham Island, New Zealand. The wind farm was commissioned in July 2010 and a 20 year agreement was entered into via a subsidiary of CBD, Chatham Island Wind Limited ("CIWL").

� Chatham Island is a small island (c. 800km from Christchurch) of c. 600 people and the contract was negotiated to provide cost efficient power to the island which previously had to rely on diesel fuel for electricity generation.

� The contract is a build, own, operate, transfer agreement. This allows CIWL to generate a revenue stream from the supply of power to the island for the duration of the term of the agreement, with the assets transferred to Chatham Island Electricity Ltd ("CIEL") at the expiry of the agreement.

� At the date of our appointment, one of the turbines was not functioning and required repairs. However, the service contractor was unable to complete the repairs due to an outstanding account of c. $50,000.

� As a result of the appointment of Administrators to CBDE, CIEL is in a contractual dispute with CIWL. Accordingly, the Administrators have been in negotiations with CIEL to realise value for the benefit of creditors.

� In order not to prejudice commercial negotiations currently underway with interested parties, we cannot comment on the value of this shareholding owned by CBDE.

Taralga Wind Farm Project

� In 2012, CBDE completed the purchase of the Taralga Wind Farm, in conjunction with the majority stakeholder, Santander. The project is held in a complex trust structure, of which CBDE has a 10% equity interest in.

� The project is a 51 wind turbine farm (107MW) that is scheduled for practical completion in June 2015. Energisation is expected to commence from mid-December 2014.

� Taralga negotiated a 10 year PPA that will commence from the date of practical completion. In the interim, CBDE has provided project management services and back office support to the project.

� The project management agreement provides an ongoing revenue stream to CBD during the construction phase. In addition, CBDE is in the process of commencing the provision of services in accordance with the facility management agreement which will provide a replacement revenue stream from practical completion.

� The project has encountered delays and several sub-contractor disputes.




Key Assets

Parmac

� Parmac is a 100% owned subsidiary of CBDE and is not subject to a voluntary administration appointment.

� The business was formed in 1994 with the specific aim of carrying out high quality air conditioning and mechanical service installations. Parmac predominantly provides and installs air-conditioning systems in the industrial and commercial sectors, with a complementary service division.

� The contract division provides the following services:

− Tendering of air-conditioning and mechanical services works to building companies, consulting engineers and project managers;

− Design and construction of projects with engineering capability and project management; and

− Qualified installations.

� The service division provides the following services:

− Preventative maintenance to all plant and equipment and services testing; and

− Breakdown and repair services including 24/7 call out, all provided by in-house resource.

� At the date of our appointment, Parmac employed c. 50 employees and had a forward order book of c. $2.5 million.


King Island Solar Project

� In 2008, KI Solar installed a solar tracker system on King Island, as part of a joint venture arrangement with Hydro Tasmania. The installation cost was part-funded by a government grant, with the balance funded by CBDE.

� KI entered into a number of agreements with Hydro Tasmania in respect of the project, including:

− Connection Agreement;

− Operations Agreement; and

− Power Purchase Agreement.

� The solar project was commissioned to provide power to the distribution network on King Island, owned and managed by Hydro Tasmania.

� Following commissioning of the solar project, Hydro Tasmania purchased power from KI Solar and undertook to maintain and repair the solar equipment.

� The solar project was shut down in 2013 due to ongoing maintenance issues given the harsh environment on King Island. These issues escalated into concerns over certain components and the WH&S risks that these may have posed. In addition, the solar project required substantial repairs (estimated to cost c. $200,000) to rectify performance and corrosion issues.

� Accordingly, prior to our appointment, KI Solar and Hydro Tasmania negotiated a settlement, summarised as follows:

− Hydro Tasmania to pay $150,000 (including GST) to acquire the solar project assets from KI Solar;

− $200,000 (including GST) settlement payment from Hydro Tasmania to CBDE to exit the various project agreements. This settlement with CBDE was paid as consideration for the funds paid by CBDE to construct roads on King Island as part of the solar project construction phase.

� The Administrators undertook their own assessment of the settlement offer and accepted it on the basis that the value achieved was higher than any alternative scenario.

� The settlement is scheduled to complete shortly and the funds will be received by the Administrators.



Key Assets

Other Assets

� CBD had an interest in a number of other assets and joint ventures. We provide a summary of these below:

− Novo Power Ltd: CBDE entered into a share subscription to acquire shares in an early stage electrical retailer in 2013. After payment of $200,000 for the first two tranches of shares, CBD did not meet its obligations ($900,000) in respect of the final two tranches. The company is no longer operating and we believe has negligible value.

− Emerald JV: CBDE entered into a JV with a related entity of Buildev (a company owned by Nathan Tinkler) to construct a commercial property development on a c. 32 hectare site in Emerald, QLD. CBD invested $2.74 million in the project, however, only two stages were completed and sold and there has been no development since 2011. The land is owned by the JV partner and the property is mortgaged. At this stage, we have not been able to determine if there is any value in this JV.

− Bowen JV: CBDE entered into a JV with a related entity of Buildev to construct a commercial property development in Bowen, QLD. CBD invested $1.95 million. The project land was subsequently disposed of for a loss and there appears to be no possibility of recouping CBD's investment.

− Andalay Solar: CBDE invested $1 million in a listed American solar business. The shares are currently trading at $0.017/share and the Administrators are seeking to realise this asset which would generate c. $28,000 (CBDE holds 1,666,667 shares.

− Investment in SEB: CBDE invested c. $320,000 in Secured Energy Bonds Plc as part of the bond raising undertaken by the Group in 2014. SEB is an entity established by CBDE to raise funds via a retail bond issue. Based on information available, we understand that this investment is likely to be substantially impaired. We discuss SEB further in Section 5.

− Larkden Receivable: In April 2013, a subsidiary of CBDE, CBD Labs Pty Ltd sold its shares in Larkden Pty Ltd. The sale price was $2.75 million, however, $2.5 million of this amount was deferred as follows:

− $1 million payable on 16 April 2015;

− $1 million payable on 16 April 2016; and

− $500,000 payable on 16 April 2017.

− $1 million of the deferred consideration is contingent upon the purchaser installing a 1MW graphite technology system by 16 April 2016. Based on updates provided by the purchaser to date, it is expected that this milestone will be achieved and the contingent consideration will be payable.

− CBD Labs Pty Ltd is not in voluntary administration and a review of its balance sheet reveals no other liabilities.


Section 7 Sale Process


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Sale/recapitalisation of the business

Sale Process

Overview

� On 26 November 2014, the Administrators advertised in the Australian Financial Review inviting expressions of interest for the acquisition and/or recapitalisation of CBDE and its subsidiaries.

� The EOI process was undertaken in a compressed timeframe, within the Administrations' convening period, as summarised below:

Stage Deadline

1. Execute NDA and receive IM On request

2. Non-binding expressions of interest due 5 December 2014

3. Short listed parties invited to move to next round 8 December 2014

4. Further due diligence commenced 8 December 2014

5. Final binding offers due 10 December 2014

6. Finalisation of contractual/DOCA negotiations with preferred bidder.

12 December 2014

The Sale/Recapitalisation Process

� The sale/recapitalisation process sought interest from parties to either acquire the assets of the Companies or propose a DOCA to recapitalise CBDE.

� Given the diversity of the assets and interests, this process provided optionality to interested parties and the Administrators as parties were invited to submit offers for single assets, all assets of the Group or for a recapitalisation.

� Whilst the EOI process was run in a compressed timeframe, interest was sought from the following parties:

− Those with an existing interest in CBDE;

− Existing shareholders (domestically and internationally) of CBDE;

− Introductions by the directors and Management of CBDE; and.

− Responses to the AFR advertisement.

� The EOI process resulted in 25 parties being issued with NDAs and 21 of these parties who signed and returned an NDA being issued with an IM.

� The Administrators received seven non-binding offers and proceeded to short list three parties to move to the next stage. We took requests for additional information to allow those parties to complete further due diligence requirements.

� The EOIs and due diligence requirements from shortlisted parties varied, and the Administrators worked with those parties to ensure their requirements were satisfied to the best ability within the compressed timeframe.

� Throughout the EOI process, parties who expressed interest were recommended to seek legal advice around the form of their proposals and to ensure they considered the compliance and statutory provisions with respect to DOCAs, NASDAQ listing rules and ASIC regulations.

� Binding EOI's closed at 5.00pm AEST on 10 December 2014 (the date of this report).

Current Status

� The Administrators received seven non-binding offers for various assets and interests of the Group.

� Three of these parties proposed a DOCA, however, only one DOCA is considered acceptable. Details of this DOCA proposal are provided in Section 11. In our opinion, a DOCA proposal will provide the best return to creditors.

� The remaining offers and DOCA proposals were for various assets/interests of the Companies. Our negotiations with these parties are continuing in an attempt to improve the offers in the event that the DOCA proposal is not acceptable to creditors.

� It is our intention to progress the DOCA proposal in order to be in a position to table a draft DOCA legal agreement at the second creditors' meeting for consideration of creditors.


Section 8 Historical Performance


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Profit and Loss Summary

Management Management Management Management

FY12 ($) FY13 ($) FY14 ($) YTD FY15 ($)

Revenue 3,265,948 18,765,841 1,307,652 498,474

Cost of Sales (167,884) (3,471,459) (925) -

Gross Profit 3,098,064 15,294,382 1,306,727 498,474

Other Income 207,878 5,392,435 1,722,995 -

Advertising & marketing - (91,443) (273,123) (47,508)

Compliance & Consultants Expenses (7,042,471) (2,431,167) (2,347,348) (729,333)

Employee Expenses (2,694,467) (4,043,935) (3,164,976) (1,355,421)

Equipment (28,330) (8,274) (8,988) (3,813)

Impairment Loss on Assets (2,518,817) (1,372,909) 2,270,956 (16,633)

IT & Communication Expenses (127,568) (114,240) (231,707) (33,414)

Motor Vehicle Expenses (9,337) (49,381) (32,021) (16,526)

Occupancy (328,313) (331,926) (213,374) (74,023)

Share Based Payments Financing - (55,624) (147,827) (368,501)

Travel & Entertainment Expenses (974,490) (519,334) (640,177) (160,058)

US convertible note option (1,288,862) - - -

Unrealised Currency Gain (1,147,997) (488,835) (284,864) 48,847

Other 1,629,576 (323,987) (372,727) (21,298)

Total Expenses (14,531,076) (9,831,054) (5,446,175) (2,777,680)

EBITDA (11,225,134) 10,855,763 (2,416,453) (2,279,206)

Depreciation (342,781) (252,462) (269,198) (102,290)

Interest (1,280,359) (8,167,134) (3,544,516) (615,084)

Net Profit / (Loss) (12,848,273) 2,436,166 (6,230,167) (2,996,580)

CBD Energy Limited

Historical Performance

Sources: 1. Management accounts

Profit and Loss Overview

� A summary of CBD Energy's Profit and Loss statement is presented to the right.

� The historical financial information has been sourced from CBDE's management accounts (FY12, FY13, FY14 and YTD FY15 up to the date of the Administrator's appointment. Please note we have not presented the audited financial statements for FY12 and FY13 as the Group's auditors, PwC, withdrew their audit opinion due to uncertainty about the completeness and accuracy of disclosures with respect to related party transactions.

� We make the following comments in relation to CBDE's profit and loss statement:

− CBDE's revenue is primarily derived through service income from the Taralga Project. Further revenue is derived from Chatham Island management contract fees, licence fees, and energy sale income.

− The Taralga Project revenue includes monthly management fees of c.$100,000 to $150,000 per month including re-imbursement of expenses.

− Revenue increased significantly to $18.77 million in FY13 as a result of the realisation of profit on the sale of 90% of the Taralga Wind Farm Project to Santander for $14.8 million. However, of this revenue, $10.8 million was a non-cash item with the balance of $4m received as cash into CBDE Westpac bank account.

− In FY12, CBDE incurred $7.04 million of advisory and compliance expenses in relation to corporate advisory fees ($1.92 million), legal fees ($1.64 million), Gerry McGowan's consulting fees ($658,000), audit fees ($292,000) and expenses related to a failed Chinese business venture ($899,000). The corporate advisory fees and legal fees were incurred as a result of capital raising costs, preparation for US listing, and a legal dispute relating to the Larkden Pty Ltd patent.

− In FY12, CBDE issued US convertible note options in order to raise capital for the Group. This issue incurred $1.3 million of transaction costs for CBDE.

− CBDE's single largest recurring expense was staff/employee costs. The senior management of the Group and Board were remunerated from CBDE. As disclosed in the annual accounts of CBDE, the top seven executives received $2.2 million of total remuneration in FY13.

− Interest expenses of $8.2 million in FY13 were primarily for the interest payments on funding from the secured creditor ($6.5 million), US convertible notes loan funding of $9.4 million, and bank interest on a loan of $2.4 million. $3.8 million of this expense was a result of non-cash accounting impacts for debt extinguishment and foreign currency movements.


Balance Sheet


As at 30 June

2012 ($)

As at 30 June 2013

($)

As at 30 June 2014

($)

As at 14 Nov 2014

($)

Current Assets

Cash 78,089 83,694 71,008 61,216

Accounts Receivable 1,684,530 2,920,504 2,603,832 2,500,000

Other Current Assets - 74,835 226,059 217,448

Total Current Assets 1,762,619 3,079,033 2,900,899 2,778,663

Non-Current Assets

Fixed Assets 2,543,604 2,526,405 2,391,251 2,288,962

Financial Assets 8,443,202 10,858,127 11,507,170 11,493,171

Investments in Subsidiaries 20,758,325 19,901,934 19,493,950 19,493,950

Intercompany Loan Account 6,585,100 4,152,600 6,414,484 8,880,742

Total Non-Current Assets 38,330,232 37,439,066 39,806,856 42,156,825

Total Assets 40,092,851 40,518,099 42,707,754 44,935,488

Current Liabilities

Payables (3,412,760) (2,915,552) (3,728,504) (4,664,298)

Other Current Liabilities (6,618,679) (20,944,543) (13,288,467) (14,730,818)

Total Current Liabilities (10,031,439) (23,860,095) (17,016,972) (19,395,116)

Non-Current Liabilities

Interest bearing Liabilities (459) (82,698) (68,643) (62,775)

Other Non Current Liabilities (3,161,109) (41,499) (52,061) (62,793)

Total Non-Current Liabilities (3,161,567) (124,198) (120,704) (125,568)

Total Liabilities (13,193,006) (23,984,292) (17,137,676) (19,520,684)

Net Assets 26,899,845 16,533,806 25,570,079 25,414,805

Shareholders' Equity

Contributed Equity 111,178,255 113,607,706 128,874,146 133,434,680

Accumulated losses (84,278,410) (97,073,900) (103,304,067) (108,019,876)

Total Shareholders' Equity 26,899,845 16,533,806 25,570,079 25,414,805

CBD Energy Limited


Balance Sheet Overview - Assets

� The material assets disclosed on the balance sheet are cash, receivables, fixed assets, financial assets, investments in subsidiaries, and the intercompany loan account:

− $62,000 of the cash balance in the CBDE financial statements relates to funds held in a term deposit to provide cash security for the rental bond for the Double Bay premises. $22,000 was released to the Administrators following our exit from the surplus suite at the Double Bay office.

− On 27 August 2014, the ATO garnished CBDE's main bank account as a result of an outstanding tax debt. This resulted in the ATO receiving c. $118,000. As a result of the garnishee order, CBDE requested customers to remit cash to a bank account held by one its subsidiaries, KI Solar (discussed further on page 45).

− The $2.5 million accounts receivable relates to the outstanding, deferred consideration owing from the purchaser of Larkden. The share sale was completed by CBD Labs Pty Ltd (a subsidiary of CBDE), however, the directors required the purchaser to pay into the CBDE bank account. The balance is due in three annual instalments commencing on 16 April 2015 (discussed further on page 37). In our view, this is not a debtor of CBDE and will need to be paid to CBD Labs, however, given CBD Labs does not have any creditors, the instalments will flow back to CBDE as the sole shareholder.

− The fixed assets relate to the two wind turbines on the Chatham Island Wind Farm. Despite the project agreement being entered into by CBDE's subsidiary, CIWL, CBDE records the physical assets on its balance sheet.

− Financial assets consists of CBDE's interests in the Emerald JV, Bowen JV, Novo Power, Andalay Solar and Taralga. These assets are discussed further in Section 6.

− Investments in Subsidiaries consists of CBD's shareholdings in a number of subsidiaries including Parmac ($1.3 million) and the dormant Eco-kinetics businesses ($17.5 million). We believe that the value of the dormant eco-Kinetics investments are over-stated.


CBD Energy Limited


Balance Sheet Overview – Assets (continued)

− The intercompany loan asset is the net position of all intercompany loan accounts. Management of the Group moved funds around the Group depending on availability and funding requirements. The most significant intercompany loan receivables are owing from Eco-Kinetics Group ($8.47 million), RAPS ($3.9 million) and the US Solar business ($3.51 million). It is unlikely that any of these amounts are recoverable.

− The acquisition of GED in July 2014 increased the intercompany loan account as the cash/equity contribution was funded by CBDE.

Balance Sheet Overview – Liabilities

The material liabilities are payables and other current liabilities:

� Payables represent CBDE's trade, statutory and intercompany creditors. Based on the books and records, at the date of our appointment, CBD owed the following amounts:

− ATO: $1.63 million

− Various legal firms: $1.24 million

− Auditors, PwC: $955,000

� These creditors were significantly outside terms and we discuss the creditor position in further detail in Section 9.

� Other current liabilities at the date of our appointment included the secured loan facility provided by WFF totalling $6.1 million, and secured convertible notes issued to WFF totalling $6.7 million. We note this varies to WFF's proof of debt for $15 million and a reconciliation is being undertaken. Other current liabilities primarily include tax, borrowings, accruals, and short term provisions. A $3 million decrease on convertible note liabilities, $1.5 million decrease in accruals from FY13 to FY14 decreased other current liabilities.

� Other non-current liabilities included non-current convertible notes in FY12.

� At the date of our appointment, shareholders' equity had a carrying value of $133 million. Based on the suspended share price at the date of our appointment, the market capitalisation of the Group was c. $6 million.

� We note that the balance sheet movements in accumulated losses do not reconcile to the annual net profits/losses generated by CBDE. Management have been unable to verify the discrepancies.

� The Company had undertaken a number of capital raisings over the last 3 years in order to fund trading. These are discussed in more detail in Section 6.


Balance Sheet

Management Management Management

As at 30 June 2013 ($) As at 30 June 2014 ($) As at 14 Nov 2014 ($)

Current Assets

Cash 47 463 56

Other Current Assets 11,387 (679) (502)

Total Current Assets 11,434 (216) (446)

Non-Current Assets

Fixed Assets 875,408 480,590 438,783

Intercompany Loan Account (463,422) (954,568) (957,294)

Total Non-Current Assets 411,985 (473,978) (518,511)

Total Assets 423,419 (474,194) (518,957)

Current Liabilities

Payables (240,361) (99,336) (100,309)

Other Current Liabilities (639,066) (302) -

Total Liabilities (879,426) (99,639) (100,309)

Net Assets (456,007) (573,833) (619,266)


Contributed Equity 100 100 100

Accumulated losses (456,107) (573,933) (619,366)

Total Shareholders' Equity (456,007) (573,833) (619,266)



FY13 ($) FY14 ($) Nov 2014 ($)

Cost of Sales (7,464) (5,909) -

Gross Profit (7,464) (5,909) -

Other Income 11,007 91,801 -

Compliance & Consultants Expenses (57,699) (2,135) -

Employee Expenses (307,198) (3,961) -

Equiptment (9,586) (10,607) (3,536)

Impairment Loss on Assets (101,103) (1,031) -

Occupancy (164,172) (83,361) -

Other (5,712) (2,338) (90)

Total Expenses (645,469) (103,433) (3,626)

EBITDA (641,926) (17,541) (3,626)

Depreciation Expense (31,459) (87,518) (41,808)

Interest (2,501) (12,767) -

Net Profit / (Loss) (675,886) (117,826) (45,433)

CBD Solar Labs Pty Ltd




� CBD SL commenced operations in FY13, established to construct and commission a solar panel manufacturing plant. The plant was acquired and substantial costs were incurred, however, the plant was never commissioned and the company ceased to operate in FY14.

� Whilst working to commence operations, the entity incurred c. $310,000 of employee wages and c. $247,000 of occupancy costs.

� As the plant was never commissioned, CBD SL never generated any income. The costs were funded by CBDE and a grant from the QLD government.

Balance Sheet Overview

� The only asset held by CBD SL is the solar panel manufacturing equipment (book value of $419,000 at the date of our appointment). We understand that there is a limited market for these assets, however, we cannot comment on the value at this stage, so as to not prejudice negotiations with interested parties.

� Expenses incurred in establishing the solar manufacturing plant were funded by CBDE and the eco-Kinetics group and are reflected as intercompany loans payable.

� Accounts payable primarily relates to two creditors, EEG (a proposed JV partner for a Thailand operation) and Mechpart Pty Ltd (a private financier).




FY12 ($) FY13 ($) FY14 ($) Nov 2014 ($)

Revenue 26,592 24,855 920 -

Gross Profit 26,592 24,855 920 -

Bank Charges (9) (4) (44)

Bad and Doubtful Debts - (2,092) -

Compliance & Consulting Expenses (289) (230) (236) (317)

Unrealised Currency Gain - - (4,461)

Other (183,533)

Total Expenses (183,822) (239) (2,332) (4,822)

EBITDA (157,229) 24,617 (1,412) (4,822)

Depreciation Expense (36,000) (36,000) (36,000) (13,400)

Interest - - - 104

Net Profit / (Loss) (193,229) (11,383) (37,412) (18,118)

Balance Sheet


As at 30 June 2012

($)

As at 30 June 2013

($)

As at 30 June 2014

($)

As at 14 Nov 2014

($)

Current Assets

Cash 8,621 1,840 830 3,509

Accounts Receivable 4,289 2,341 - -

Total Current Assets 12,910 4,181 830 3,509

Non-Current Assets

Fixed Assets 576,000 540,000 504,000 490,600

Intercompany Loan Account (584,106) (554,010) (552,246) (559,326)

Other non-current assts 167,400 - - -

Total Non-Current Assets 159,294 (14,010) (48,246) (68,726)

Total Assets 172,204 (9,828) (47,416) (65,217)

Current Liabilities

Other Current Liabilities (421) (176) - (317)

Total Liabilities (421) (176) - (317)

Net Assets 171,783 (10,004) (47,416) (65,534)


Contributed Equity 100 100 100 100

Accumulated losses 171,683 (10,104) (47,516) (65,634)

Total Shareholders' Equity 171,783 (10,004) (47,416) (65,534)

KI Solar Pty LtdHistorical Performance



� The King Island project was completed in 2008 and generated income from the sale of electricity to the distribution network until the project was shut down in 2013 amid ongoing operational problems.

� KI Solar had minimal expenses while the solar trackers were operational as the JV partner, Hydro Tasmania was responsible for repairs and maintenance to the solar trackers.

� As a result, KI Solar contributed a small EBITDA to the Group until the shut down of the project.


� A settlement for the sale of the fixed asset (book value of $490,000) to Hydro-Tasmania has been agreed.

� A $167,400 future income tax benefit has been included as other non-current assets in FY12.

Sources: Management accounts.


� The only asset of KI Solar is the solar trackers installed on King Island. The trackers have a book value of c. $490,000, however, based on available information, require repairs estimated to cost in excess of $200,000. In addition, the cost of de-commissioning and transporting these assets would be significant.

� Accordingly, we have accepted a settlement offer of $350,000 from Hydro Tasmania (discussed further in Section 6).

� The intercompany loans payable arose as a result of the acquisition and commissioning of the solar project being funded predominantly by Group entities including CBDE ($414,000) and RAPS ($720,000).




FY13 ($) FY14 ($) Nov 2014 ($)

Revenue 171,286 1,662,880 705,434

Cost of Sales (128,204) (1,323,024) (576,988)

Gross Profit 43,082 339,856 128,446

Other Income 2,835 29,119 4,908

Advertising & marketing (402,081) (925,917) (251,703)

Compliance & Consultants Expenses (27,990) (41,766) (13,793)

Employee Expenses (9,139) (175,734) (683,976)

Equiptment - (1,482) (245)

Impairment Loss on Assets - (1,564) (2,311)

IT & Communication Expenses - (9,508) (5,801)

Motor Vehicle Expenses - (2,111) (239)

Occupancy - (52,016) (45,423)

Travel & Entertainment Expenses (264) (13,135) (3,799)

Unrealised Currency Gain - 4,946 (1,561)

Other (651) (114,302) (55,209)

Total Expenses (440,125) (1,332,590) (1,064,061)

EBITDA (394,208) (963,614) (930,707)

Depreciation - (172) (227)

Interest - (299) (1,676)

Net Profit / (Loss) (394,208) (964,085) (932,609)





� WHS commenced operations in September 2013 operating under the Westinghouse Electric licence agreement.

� WHS operates predominantly operates as a sales function, with the manufacture of solar panels completed by a supplier and installation completed by sub-contractors. Revenue is generated from the sale of residential and commercial solar systems.

� Income includes both a cash component and STC component. The STCs are a tradable commodity funded by the government which are received by the customer upon installation. The customer contract with WHS requires the STCs to be transferred back to WHS on completion of installation and they are then used as credit with suppliers to reduce the cash outlay.

� As highlighted in Section 3, the Australian solar business (which formerly traded as eco-Kinetics) was significantly impacted by the removal of government subsidies for residential customers.

� WHS invested heavily in advertising and marketing expenses in an attempt to drive revenue growth in the early stages of the business. In FY14, advertising expenses represented c. 56% of total revenue.

� The gross profit generated was not sufficient to cover the sufficient overheads and the Australian solar business incurred EBITDA losses totalling $2.29 million from FY13 to YTD FY15. These losses were funded by entities within the Group via intercompany loans.

� Employees of the Australian solar business were transferred to Westinghouse Solar on 1 July 2014 (previously they were employed by eco-Kinetics). If the wage costs were included in the FY14 result, the EBITDA loss for FY14 would have increased to c. $2.5 million.

� It is evident that the Australian Solar business failed to recover from the change of government subsidies in 2011 and was only able to continue operating at a loss as a result of funding from other CBD Group entities.


Balance Sheet


As at 30 June 2013 ($) As at 30 June 2014 ($) As at 14 Nov 2014 ($)

Current Assets

Cash 8,610 4,223 3,057

Accounts Receivable 19,449 7,282 (5,296)

Other Current Assets 50,794 227,362 196,837

Total Current Assets 78,854 238,867 194,599

Non-Current Assets

Property, Plant & Equipment - 5,453 5,226

Financial Assets - 16,500 19,800

Intercompany Loan Account (204,204) (911,765) (1,320,244)

Total Non-Current Assets (204,204) (889,812) (1,295,218)

Total Assets (125,351) (650,945) (1,100,619)

Current Liabilities

Payables (153,664) (568,736) (845,781)

Other Current Liabilities (115,192) (138,461) (308,419)

Total Current Liabilities (268,856) (707,197) (1,154,199)

Non-Current Liabilities

Other Non Current Liabilities - (154) (36,088)

Total Non-Current Liabilities - (154) (36,088)

Total Liabilities (268,856) (707,351) (1,190,288)

Net Assets (394,207) (1,358,296) (2,290,907)


Contributed Equity 1 1 1

Accumulated losses (394,208) (1,358,297) (2,290,908)

Total Shareholders' Equity (394,207) (1,358,296) (2,290,907)




� The balance sheet of WHS reflects the company's focus on operating as a sales focussed business, with no inventory and minimal accounts receivable.

� The payment terms for both residential and commercial customers requires partial payment upfront with the balance to be paid prior to installation. Accordingly, WHS does not have any material accounts receivable.

� Other current assets includes prepayments of $150,000 primarily for insurance and the Westinghouse royalty , and STCs totalling $23,000.

� The Intercompany loan account payable arose as a result of group entities (CBDE - $1.84 million, KI Solar - $236,000) funding WHS' start up costs and ongoing losses.

� The aged payables consist of amounts owing to the ATO ($96,000) and trade creditors ($750,000).

� Other current liabilities are comprised of payroll liabilities ($72,000) and accruals including an overdue WHS royalty payment ($53,000).



Section 9 Investigations


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Initial investigations overview

Investigations

Unfair Preferences

Refer to page 52.

• Payments totalling $1,280,475 and $133,992, which possess the characteristics of potential unfair preference payments, have been identified for CBDE and WHS respectively, as being made during the relation back period. As CBD SL and KI Solar did not trade during the relation back period we have not identified any unfair preference payments having been made by these entities.

• We bring to creditors attention that these payments require further investigations and will need to be cross checked to invoices and correspondence from/to the relevant creditor.

Uncommercial transactions

Refer to page 53.

• At the date of this report we have not become aware of any uncommercial transactions entered into by the Companies.

• Further investigations however will be undertaken by the Administrators should the Companies be placed into Liquidation.

Books and Records

Refer to page 58.

• To date, at a high level, we have not identified any material concerns with the books and records provided.

• We note however that the Companies have previously been unable to provide the auditor, PwC, with substantial documentary evidence to support certain transaction and we are reviewing these allegations as part of our overall investigations.

Directors transactions

Refer to page 53.

• We have identified a number of director related transactions that we believe warrant further investigation, specifically:

1. Discretionary bonuses that were paid to Mr McGowan;

2. Various per diem allowances and expenses paid to Mr McGowan; and

3. Mr McGowan's involvement in two transactions involving a company called Sligo Investments Limited.

• Excluding any other actions that may be brought against Mr McGowan (Solon SE transaction, breach of directors duties and potential transactions with TRW) we estimate that Mr McGowan or his related parties has potentially benefited to the value of atleast c.$813,000 in relation to the above director related transactions in breach of his director duties.

Insolvent Trading

Refer to page 56.

• On the basis of the cashflow test, a review of the current net asset position, and a review of the aged creditors listing, CBDE was experiencing difficulties in paying its creditors within terms from at least June 2013. However, between June 2013 to June 2014, there are a number of factors that may mitigate a claim of trading whilst insolent by CBDE's directors. There is no doubt however that as at 18 June 2014, when CBDE failed to secure the total funding it needed via the initial public offering (shortfall of AU$6 million), it was insolvent.

• On the basis of the cashflow test, balance sheet test, and a review of the aged creditors listing, WHS was experiencing difficulties in paying its creditors within terms from at least March 2014, if not earlier. However, WHS had historically been provided with financial support from CBDE and it could reasonably be assumed that this support would continue going forward.When CBDE was insolvent and no longer able to support WHS, it became insolvent. This was 18 June 2014, but could have been as early as March 2014 in respect of its own stand alone financial position.

• Both KI Solar and CBD SL became insolvent as at the date of the appointment of the Voluntary Administrators, 14 November 2014, as a result of various inter-company loans becoming immediately due and payable.


Initial investigations overview

Investigations

Other actions

Refer to page 68.

• We have identified a number of potential actions that may be brought by a Liquidator and/or other parties against the Companies in relation to:

1. The damage caused to CBDE's market capitalisation on the NASDAQ as a result of the announcement to the market that the FY12 and FY13 accounts could not be relied upon;

2. A breach of director's duties by Mr McGowan in relation to transactions with Solon SE and Sligo Investments Limited; and

3. A claim against the auditors, PwC, for their failure to identify various issues with the Group accounts during their FY12 and FY13 audit.


Investigations Overview

Investigations

� The prospect of recovery of any antecedent transactions will depend on two key issues:

− Availability of funding to allow the cost of further investigation and litigation to be met. At this stage, we are unable to quantify the funds estimated to pursue such actions and a cost benefit analysis would be conducted prior to instigation of actions as well as consultation with the creditors and/or a Committee of Creditors; and

− The ability of the party (potential defendant) to be able to meet and pay any successful judgement against it in favour of the liquidators. A cost benefit analysis will need to be conducted on each case to determine if there is merit and a net recovery to creditors in pursuing action.

Unfair preference payments

� The payments referred to are generally recoverable under Section 588FA of the Act if the payments were made during a period of six months prior to the commencement of the winding up date, or the date the Voluntary Administrators were appointed (otherwise known as the “relation back date”), which in this case would be the period 14 May 2014 to 13 November 2014.

� To constitute an unfair preference payment, it must be proven that the company to the transaction was insolvent at the time of the payment and that the creditor had a suspicion or ought to have had a suspicion that the company was insolvent. As a general guide, the following factors can be demonstrative of that suspicion:

The Company

− having failed repayment arrangements;

− making payment(s) to suppliers outside of normal trading terms; and/or

− seeking additional finance or cash injection.

Antecedent transactions recoverable by a Liquidator

� In accordance with Regulation 5.3.A.02, the administrator of a company, in setting out his or her opinions in a statement mentioned in paragraph 439A (4)(b) of the Act, must specify whether there are any transactions that appear to the administrator to be voidable transactions in respect of which money, property or other benefits may be recoverable by a liquidator under Part 5.7B of the Act.

� The administration process set down in Part 5.3A of the Act, provides a very short time within which to conduct investigations into potential recoveries from voidable transactions. At this stage, due to the short time frame allowed, it is difficult to definitively identify the likely courses of actions and / or recoveries that may be available to a liquidator. Such conclusions would usually be made after more detailed investigations have been undertaken. Such investigations would normally include:

− Detailed review of documentation produced by relevant parties upon enquiry by a Liquidator / Administrator; and

− The public examination under oath, of relevant parties regarding the transactions concerned.

� Accordingly, whilst we have conducted the necessary enquiries required of an Administrator, the conclusions drawn herein with respect to our investigations into the Companies' affairs should be viewed as preliminary and may be confirmed, or otherwise, by way of other sources of investigation should any of the Companies proceed to liquidation.

� The transactions generally fall into two categories, being insolvent trading and voidable transactions (comprising unfair preferences, uncommercial transactions and unfair loans).


Unfair Preference Payments findings

� We have identified payments totalling $1,280,475 and $133,992 for CBDE and WHS respectively, which posses the characteristics of potential unfair preference payments during the relation back period. These payments exclude any potential preference payments that may have been made to the ATO.

� We bring to creditors attention that these payments will still require further investigations and sourced back to invoices and correspondence from/to creditors.

� As CBD SL and KI Solar did not trade during the relation back period we have not identified any unfair preference payments having been made.

� We note that we are yet to receive a response from the ATO to our Freedom of Information request to confirm if statutory payments may also be classed as an unfair preference payment. However, we note that:

− from our review of the books and records and from discussions with management we are aware that the Companies were significantly late in making payments to the ATO;

− various correspondence had been exchanged in relation to the outstanding debt;

− The ATO issued a garnishee notice to the Companies bank, Westpac, on 21 August 2014 regarding the outstanding debt; and

− Over the relation back period a total of $498,578 was paid to the ATO (CBDE: $399,238 and WHS: $99,340).

� Further investigations into potential unfair preference payments being made to the ATO will be undertaken in due course once the Freedom of Information request has been received, and creditors should note that this may significantly increase the amount of unfair preference payments detailed in the table opposite.

� Whilst preference payments have been identified, the recovery of these are subject to CBDE being insolvent at the time the unfair preference payment was made. A detailed analysis of CBDE's insolvency is provided on pages 56 to 67.

� Should the Voluntary Administrators be appointed as Liquidators, a more detailed investigation into unfair preference payments will be undertaken.

� It should be noted that pursuing preference recoveries can be costly, lengthy and not necessary a successful exercise. We also stress that any party subject to an unfair preference payment claim may have valid defences preventing a claw back by a Liquidator.

Overview of unfair preference payments

Entity Potential unfair preference payments ($)

CBDE 1,280,475

WHS 133,992

KL Solar -

CBD Solar -

Total 1,414,467

Voidable Transactions – Unfair Preference Payments

Investigations

Unfair preference payments (continued)

Creditors

− resorting to legal actions to recover the debts;

− receiving post-dated cheques following the commencement of legal proceedings;

− entering into Cash On Delivery payment arrangements with suppliers;

− making demands for clearance of the debt unrelated to a promise to recommence supply; and/or

− seeking additional security to secure the debt.

� We have undertaken the following procedures in determining whether unfair preferences occurred:

− Analysis of ageing of suppliers as at the appointment date and over the relation back period;

− Review of the Companies books and records;

− Identification of suppliers at risk of unfair preferences; and

− Review of bank statements produced during the relation back period identifying large, round sum or regular payments.


Voidable Transactions

Investigations

Uncommercial transactions

� Section 588FB(1) of the Act defines an uncommercial transaction as “a transaction of the company if, and only if, it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction, having regard to:

− The benefits (if any) to the company of entering into the transaction;

− The detriment to the company of entering into the transaction; and

− The respective benefits to other parties to the transaction.”

� Section 588FC of the Act defines an insolvent transaction as one which is an uncommercial transaction and entered into when the company was insolvent at the time of the transaction, or would become insolvent as a result of entering into the transaction.

� At the date of this report we have not become aware of any uncommercial transactions entered into by the Companies.

Directors’ Personal Liability for Employee Entitlements

� A director may be ordered to pay compensation if agreements or transactions were entered into with the intention of avoiding payment of employee entitlements or reducing the amount of entitlements that can be recovered.

� No transactions or agreements of this nature or intention were discovered during our investigations.

Director Related Transactions - Overview

� Payments, the issue of securities, conveyances or other dispositions of property by the company in favour of a director, a relative or de facto spouse of a director may constitute an unreasonable director related transaction in accordance with section 588FD.

� Pursuant to Section 588FD a Liquidator is able to recover from directors any unfair loans which are extortionate or have become extortionate.

Director Related Transactions – Findings

Directors Remuneration and Expenses

� The table below shows the remuneration and expenses paid to the directors from 1 July 2012 to 31 October 2014.

� The remuneration table excludes any remuneration and/or expenses paid to individuals prior to their appointment as director.

� We note the following in relation to directors remuneration and expenses:

− For the period FY13, FY14 and FY15, Mr McGowan's appears to have received remuneration pursuant to his agreement with CBDE, noting that $46,667 of his FY13 remuneration was paid by way of shares in CBDE.

− For the period FY14 and FY15, Mr McGowan has received a per diem of $1,000 per day whilst overseas totalling $140,400 and $115,000 respectively. The per diem was paid by CBDE as a cash advance on Mr McGowan's credit card. We have found no evidence to date to support the approval of the per diem by the board or of a contractual right of Mr McGowan to receive these payments.

1. FY14 ex pesnes includes pay ments made to Mr McGow an directly from Secured Energy plc and Energy Bonds plc, UK subsidiaries

Overview of Directors remuneration and expenses

Gerry McGowan

(AU$)

Carlo Botto

(AU$)

William Morro

(AU$)

Todd Barlow

(AU$)

FY13

Salary (inc car allowance) 650,273 135,417 - 70,000

Expenses 64,710 - - -

Per Diem - - - -

FY13 total 714,983 135,417 - 70,000

FY14

Salary (inc car allowance) 582,421 214,167 17,500 64,167

Expenses 1 532,834 - - -

Per Diem 140,400 - - -

FY14 total 1,255,655 214,167 17,500 64,167

YTD15

Salary (inc car allowance) 97,070 25,000 - -

Expenses 1,958 - - -

Per Diem 115,000 - - -

YTD15 total 214,028 25,000 - -

Total FY13 to YTD15 2,184,666 374,583 17,500 134,167


Voidable Transactions – Director Related Transactions

Investigations

− The majority of Mr McGowan's expenses (hotels and meals) appear to have been paid by CBDE whilst he was overseas, negating the need for a per diem. However, the level of expenses claimed by Mr McGowan had reduced since June 2014, but we note that CBDE was also separately paying for an apartment in New York that had been occupied by Mr McGowan. In addition to the remuneration and expenses paid to Mr McGowan from CBDE, we have found evidence to suggest that Mr McGowan was approving his own expenses and making payments directly from other subsidiary company bank accounts, to which he was the sole signatory.

− Carlo Botto appears to have received remuneration pursuant to his agreement with CBDE, noting that his base salary was decreased during FY14 to $150,000 p.a and that $64,167 of his FY14 remuneration was paid by way of shares in CBDE.

− William Morro appears to have received remuneration pursuant to his agreement with CBDE and we note that his remuneration for FY14 was paid by way of shares in CBDE.

− Todd Barlow appears to have received remuneration pursuant to his agreement with CBDE and we note that $46,667 of his remuneration for FY13 and his full remuneration for FY14 was paid by way of shares in CBDE;

− Luisa Ingargiola was not paid any remuneration during the 2 months she was a director, before she resigned in October 2014.

Director bonuses

� A review of the financial statements disclose the following bonuses as having been paid to the director during FY11 to FY14:

− FY11: Mr McGowan - $300,000. We note in the remuneration report to the FY11 financial accounts that under the terms of Mr McGowan's contract he was entitled to a performance bonus of an amount equal to 100% of the Base Fee if CBD achieved EBIT of $10 million for FY11. The bonus should not have been paid based upon the FY11 results. A further review of CBDE's books and records will have to be undertaken to establish the basis for the $300,000 bonus awarded in FY11, however management have advised that it related to a discretionary bonus for the FY10 period.

− FY12: Mr McGowan - $136,364. The remuneration report to the FY12 financial accounts states that the bonus was in relation to the FY11 period. As discussed above, the remuneration report for FY11 stated that under the terms of Mr McGowan's contract he was entitled to a performance bonus of an amount equal to 100% of the Base Fee if CBD achieved EBIT of $10 million for FY11 and that the bonus was not achieved based upon the FY11 results. A further review of CBDE's books and records will have to be undertaken to establish the basis for the $136,364 bonus in relation to the FY11 period. However, management have advised that it was a discretionary bonus that was agreed and paid after the finalisation of the FY11 accounts.

− FY13: No bonus payments were made.

− FY14: We note that despite there being no contractual right to receive a bonus payment, the remuneration committee sent out a memo to executive management proposing the below bonuses to be paid in relation to FY14. At the date of the Voluntary Administrators' appointment the bonuses had not been paid or approved by the board to:

1. Mr McGowan: $175,000;

2. Richard Pillinger: $125,000; and

3. James Greer: $75,000.

Director related company - TRW

� We note that there have been significant transactions between CBDE and TRW, a related service company of Mr McGowan, including loans and the purchase/sale of goods.

� To date we have not had sufficient time to identify any material transactions between CBDE and TRW that require further investigation. However, given the potential issues in relation to Solon SE and Sligo Investments Ltd (discussed later in the report), and TRW's involvement in making and receiving payments on behalf of these entities, we would undertake further investigations into the reasonableness of key transactions between CBDE and TRW, if appointed Liquidator.


Voidable Transactions – Director Related Transactions

Investigations

Report Pursuant to Section 438D

� Under Section 438D of the Act, an Administrator is required to lodge a report to ASIC if he/she becomes aware that:

− A past or present officer, employee or member of a company has been guilty of an offence in relation to the company; or

− A person who has taken part in the formation, promotion, administration, management or winding up of the company has:

(i) Misapplied or retained, or may have become liable or accountable for money, or property (in Australia or elsewhere) of the company; or

(ii) Been guilty of negligence, default, breach of duty or breach of trust in relation to the company.

� It is our intention to lodge a report to ASIC pursuant to Section 438D in due course, once our investigations are finalised. However, due to the confidential nature of this report, no further information can be provided to creditors at this time.

� To date, we have met with ASIC and provided them with a confidential briefing on the progress of the administration to date.

Potential director related company – Sligo Investments Pty Ltd

� In 2012, CBDE sought to raise funds via the issuing of $6.5 million of convertible notes to which Sligo Investments Limited ("Sligo") subscribed to the value of $1 million. Sligo's country of incorporation is unknown and it purports to be an arms length party to CBDE.

� In 2013 the convertible note was restructured (additional funds were borrowed) and in 2014 the amount outstanding to Sligo under the terms of the convertible note were converted to equity as part of the initial public offering.

� Shortly after the NASDAQ listing Sligo undertook to sell down its interest in CBDE. The sale of the shares were subsequently suspended by CBDE due to related party concerns.

� In a separate transaction in October 2013, CBDE entered into a loan agreement with Sligo for $1 million, however the books and records of CBDE show that only $900,000 was received by CBDE.

� In December 2013, CBDE made full repayment of the loan ($1 million) together with interest (c.$78,000), totalling $1.078 million. This resulted in an overpayment being made on the loan of c.$69,000. At the request of Mr McGowan repayment of the loan was made to TRW, a related company of Mr McGowan, on the basis that TRW had met CBDE's obligation under the loan agreement as repayment to Sligo had not occurred on the due date by CBDE.

� During FY14/15, concerns were raised regarding the Sligo loan of $1 million and Mr McGowan's involvement with Sligo (Mr McGowan maintains that Sligo is not a related entity) specifically in relation to:

1. The $100,000 shortfall of the payment of the original advance to CBDE;

2. The overpayment by CBDE of c.$69,000 in repaying the loan to Sligo via TRW;

3. Mr McGowan's involvement in the sale of the Sligo shares in CBDE after the NASDAQ listing; and

4. Non-disclosure in the accounts of CBDE regarding a potential relationship between Mr McGowan and Sligo.

� Since these concerns were raised, prior to our appointment:

− Sligo made repayment of the $69,000 overpayment to CBD in two transaction, being $55,000 to the CBD Australia Westpac account and $14,000 to CBD USA account. We note that the transfer receipt for the payment to the CBD Australia account stated that the funds came from Utility Strategic Solution; and

− It has been alleged that $70,000 of the $100,000 shortfall of the $1 million loan related to an arrangement fee. However, we note that to date we have been unable to locate a signed copy of the loan agreement to confirm this assertion. As such this still leaves an unexplained variance of $30,000 between what was paid to CBDE and what was due under the terms of the loan.

� Investigations into the various transactions with Sligo are on-going, specifically looking at the potential relationship between Mr McGowan and Sligo and a breach of Mr McGowan's directors duties.


Insolvent Trading

Investigations

Insolvent Trading Overview

� Section 588G of the Act states that a director has a duty to prevent insolvent trading and that they will be guilty of an offence if they allow a company to incur a debt when they are aware that there were grounds for suspecting that the company was insolvent at the time of entering into the transaction.

Personal Financial Position of Director

� In order to justify an insolvent trading action, the Administrators must be satisfied that the director/(s) will be able to pay any judgement obtained against them.

� For the purposes of the report we have not reviewed the financial position of the directors in detail, as it would be costly to do so given a number of the directors may have financial interests overseas. However, we have undertaken real property searches in Australia which have identified that two of the directors hold interests in Australian property.

� We are still trying to obtain a full copy of the Directors' D&O policy however we note that it is normal for a D&O policy to contain an insolvent trading exclusiontherefore any action for insolvent trading may only be on the basis that the director/(s) will be able to pay any judgement obtained against them.

Key indicators of the Companies insolvency

� Our review identified the following key considerations of insolvency for the Companies:

− Significant and recurring losses across the Companies since 2012;

− A declining net asset position across all Companies since 2012 with the exception of CBDE during the FY13/FY14 period as a result of additional capital being generated and CBDE being successful in negotiating a debt for equity swap with creditors;

− A general lack of liquidity to pay creditors (on average cash at back accounted for only 4% of the total outstanding trade creditor balance of CBDE in the last 12 month period);

− Significant inter-company loan transactions between the Group companies to meet short and long term cash flow issues;

− CBDE's use of subsidiary company funds, specifically Secured Energy Bonds Plc, in contravention of the purpose for which these funds were raised, to meet the Companies' cashflow shortfalls during FY14.

− An increase in the ageing of creditors and creditor balances; and

− PwC noting as early as 2012 that they had concerns over CBDE/the Group continuing as a going concern.

Defences

� There are four distinct statutory defences where a contravention of 588G has occurred. The defences are designed at protecting a director where one of the following has occurred:

− The director had reasonable grounds to expect solvency (588H(2));

− The director had reasonable grounds to expect solvency based on information supplied by a subordinate (588H(3));

− Illness or other good reason, prevented the director from being involved in management activity (588H(4)); and

− The director took all reasonable steps to prevent the company/Group from incurring the debt (588H(5)).

� Our review identified the following key factors which may mitigate the indicators of insolvency mentioned above:

− In June 2014, CBDE had been successful in obtaining a listing on the NASDAQ though an initial public offering in which c.AU$6.9m was raised, via ordinary shares;

− CBDE had previously been successful in negotiating a debt for equity swap with numerous creditors;

− Up until the date of the Voluntary Administrators appointment the secured creditor, WHSP, was still providing funding to the Companies;


Insolvent Trading

Investigations

− CBDE was able to secure US$1.5 million in funding from Alpha Capital in August 2014 and was in negotiations with other third parties regarding funding up until the appointment of the Voluntary Administrators; and

− The size and structure of the Group allowed the parent company, CBDE to divest of the Group's interest in various assets and investments to meet cashflow issues of CBDE and its subsidiaries.

� A more detailed analysis of our findings on each individual Company is shown, below, opposite and on the next page.

CBDE

� On the basis of the cashflow test, a review of the current net asset position, and a review of the aged creditors listing, CBDE was experiencing difficulties in paying its creditors within terms from at least June 2013, if not earlier.

� However, since June 2013, there are a number of factors that may mitigate CBDE trading whilst insolent, primarily CBDE:

− had the ability to generate additional funding via the secured lender and listings on the various stock markets (ASX and NASDAQ);

− was able to dispose of its interests in various subsidiaries and assets in order to generate additional funding to meet its liabilities; and

− had historically been successful in arranging debt for equity swaps with its various lenders (convertible notes etc).

� There is no doubt however that at the point in time when CBDE failed to secure the total funding it needed via the initial public offering, it was insolvent as:

− CBDE had failed in its attempt to secure the total funding it required to meet its outstanding liabilities/working capital (the total funding shortfall was AU$6 million);

− CBDE had no liquid assets which it could readably sell to meet its short term liabilities; and

− CBDE and its subsidiaries were not profitable and therefore had no way to obtain and maintain additional borrowings in order to meet current liabilities as and when they fell due.

� It is the Voluntary Administrators' opinion therefore that CBDE was insolvent as at 18 June 2014, but could have been insolvent as early as June 2013.

WHS

� On the basis of the cashflow test, balance sheet test, and a review of the aged creditors listing, WHS was experiencing difficulties in paying its creditors within terms from at least March 2014, if not earlier.

� However, WHS had historically been provided with financial support from CBDE and it could reasonably be assumed that this support would continue going forward.

• When CBDE was insolvent and no longer able to support WHS, it became insolvent. This was 18 June 2014, but could have been as early as March 2014 in respect of its own stand alone financial position.

KI Solar

� KI Solar ceased to trade in 2013 and was effectively a dormant trading entity as at the date of the Voluntary Administrators' appointment.

� As at 31 October 2014, KI Solar had a net asset deficiency of c.$68,000 which primarily consisted of PPE of $492,000, cash at bank of c.$62,000, and an overall inter-company liability of c.$621,000.

� The overall inter-company loan balance comprised of a debt due from WHS in the amount of c.$238,000.

� As a result of WHS and CBDE entering Voluntary Administration on 14 November 2014:

− the recoverability of the loan from WHS in the amount of $238,000 became questionable; and

− KI Solar's ability to generate funding from CBDE and/or its subsidiaries by way of an inter-company loan was no longer possible.

� As a result of the above, it is the Administrators' opinion that KI Solar became insolvent on 14 November 2014, the date of the Voluntary Administration of WHS and CBDE.


Insolvent Trading

Investigations

CBD SL

� CBD SL ceased to trade in March 2013 and was effectively a dormant trading entity as at the date of the Voluntary Administrators appointment.

� As at 30 September 2014, CBD SL had a net asset deficiency of c.$500,000 which primarily consisted of PPE of $432,000 and an inter-company loan liability of c.$957,000.

� As a result of CBDE entering Voluntary Administration on 14 November 2014 the outstanding loan due to CBDE from CBD SL (c.$414,000) became immediately due and payable and the recoverability of the loan due to CBD SL from WHS (c.$230,000) became questionable.

� As a result of the above, it is the Administrators opinion that CBD SL became insolvent on 14 November 2014, the date of the Voluntary Administration of WHS and CBDE.

Books and records

� Sections 588E(3) and 588E(4) of the Act provides a presumption of insolvency for a period of 12 months from the relation back date if it is proved that a company failed to keep proper financial records in accordance with Section 286 of the Act.

� A Liquidator would investigate whether a company maintained adequate books and records that provided reliable reports to the Director relating to the monthly financial position of the company.

� A Liquidator would further investigate whether the Companies maintained adequate books and records in accordance with Section 286 of the Act.

� Accordingly, in the event that a Liquidator was successful in establishing that the books and records were indeed deficient, this would assist in considering whether any action might be taken against the Director in accordance with the Act.

� The records collected from the Companies included:

− Bank statements;

− Management accounts;

− Audited financial statements;

− Accounting system back ups;

− Statutory and ASIC filings;

− Shared IT drive system back up and copies of key personnel email accounts;

− Files containing financial information including invoices; and

− Employee records.

� During the limited time available to us to undertake investigations, the Companies' books and records appear to be adequately maintained. However, we note that:

− there has been instances were the Companies have failed to provide the auditor, PwC, with sufficient documentary evidence to support certain transaction (journals, transfers, payments etc);

− The board minutes appear to be basic and do not provide sufficient detail as to the discussions that took place;

− There appears to be a lack of documentation (minutes) relating to audit committee meetings in recent months following the report from PwC on 30 June 2014; and

− We have reviewed emails which suggest that documentary evidence to support certain transaction were only created post the event.

� We will be reviewing the adequacy of the Companies books and records further as part of our on-going investigations into the Companies affairs.


0

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1,000

1,500

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2,500

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3,500

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4,500

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Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14

$'00

0

Trade Creditors

Cash at Bank

Indicators of Insolvency

Indicator Cash Flow Test

Overview � The test for solvency and consequently insolvency is prescribed by Section 95A of the Act which states that:

"(1) a company is solvent if, and only if, the company is able to pay all the company's debts, as and when they become due and

payable; and

(2) a company who is not solvent is insolvent."

� This translates into the "cashflow test", however analysis of the balance sheet is also important in forming a view as to solvency.

Administrators findings

� The chart below on the left reports the movement in the cash balance between June 2013 and October 2014 on a monthly basis compared to the aged creditor balance (including statutory creditors) as at that date. The chart below on the right shows the cash balance between June 2013 and October 2014.

� Over the period of review, the cash balance has remained relatively stable with a recorded balance of c.$150,000 in each month, with the exception of spikes in March 2014 and July 2014 as a result of a $1 million loan from WFF in March 2014 and funds received from the initial public offering in July 2014.

� Aged creditors have gradually increased (20% overall) since December 2013, with the exception of February 2014 and June 2014 as a result of additional creditor payments being made from funding generated in these/prior months (discussed above).

� On average CBDE held a cash balance of c.$150,000 compared to an average aged creditor balance of c.$4 million. In each month CBDE had insufficient cash to discharge its current aged creditors with the cash balance being less than 4% of the total aged creditor balance at any point in time, with the exception of March 2014 (17%) and July 2014 (10%).

� CBDE has had insufficient cash balances to discharge its liabilities within ordinary trading terms since June 2013.

0

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Insolvent Trading - CBDE

Investigations

Sources: 1. Management Accounts; 2. Bank Statements; 3. Aged Creditor reports


CBDE

Jun-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14

Current Ratio (Working Capital Ratio) 0.129 0.126 0.143 0.149 0.168 0.144 0.120 0.170 0.186 0.171 0.171 0.154

Quick Ratio (Acid Test) 0.129 0.124 0.140 0.146 0.165 0.141 0.118 0.166 0.181 0.166 0.166 0.150

Cash - Trade Creditors (2,908,197) (3,919,292) (3,842,695) (3,450,176) (2,973,133) (3,850,238) (3,889,306) (3,658,861) (3,562,787) (3,979,666) (3,979,666) (4,550,966)

Net Working Capital (20,857,369) (22,679,260) (21,583,317) (20,696,511) (21,949,351) (22,946,811) (24,322,664) (14,116,073) (14,243,466) (14,712,844) (14,712,844) (16,181,354)

Net Assets 16,457,499 15,301,112 14,292,763 14,229,268 13,948,224 13,311,525 12,728,946 25,570,079 26,031,592 28,289,293 28,289,293 25,543,577

Net Assets (Less Inter-Company and Investments) (17,851,944) (20,273,545) (19,199,580) (18,294,210) (19,612,766) (20,630,918) (22,029,373) (11,845,526) (11,997,568) (12,490,959) (12,490,959) (14,007,884)


Indicator Balance Sheet Test

Overview � The balance sheet test considers whether a company may be insolvent if the total liabilities exceed the value of the assets and there are insufficient assets to discharge the liabilities.


� We have undertaken a series of liquidity ratios, such as: Current Ratio, Quick Ratio (Acid Test) and also analysed the Net Asset and Working Capital position from CBDE's Management Accounts, as shown in the table below.

� We highlight our key findings:

− In each of the periods shown above, CBDE held a current and quick ratio of less than 1, which evidences that they held insufficient current assets to discharge their current liabilities. Liquidity ratios of less than 1 are a common feature of insolvent companies (ASIC v Plymin [2003] VSC 123).

− CBDE's net working capital position has improved (41%) over the previous 10 months, from a net working capital deficiency as at 31 December 2013 of c.$22 million, to a net working capital deficiency of only c.$16 million as at 30 October 2014. However, we note that the primary reason for the improvement in CBDE's net working capital position was its ability to convert debt (convertible notes) to equity which accounted for c.$4.5 million and part repayment of a loan due to WHSP from funds raised as part of the initial public offering.

− The net asset position of CBDE has improved by c.$10 million since December 2013, primarily as a result of an increase in equity funding (ordinary and preference shares) and a reduction in debt via an equity swap (convertible notes).

− In summary, the balance sheet of CBDE shows that:

− CBDE reported a net asset position of c.$25 million as at 31 October 2014. However, after excluding inter-company loans and investments in subsidiaries, CBDE had a net asset deficiency of c.$14 million. The significant variance relates primarily to the carrying value of Taralaga ($10.8 million) and Eco-Kinetics ($17.5 million) in the Balance Sheet.

− On an assessment of the current net asset position, CBDE has had insufficient current assets to discharge its current liabilities since at least June 2013.


Investigations

Sources: 1. Management Accounts


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$'00

090 days plus

60-90 days

30-60 days

Current


Indicator Other tests/investigations

Aged Creditors - CBDE � The following graph represents aged creditor balances of CBDE between June 2013 and October 2014. The graph excludes amounts due in relation to unpaid employee entitlements.

� Aged creditor balances for the period June 2013 to October 2014 have increased by 53% from c.$3 million to c.$4.6 million.

� In the past 12 months the ageing of creditors over 90 days has increased from c.35% to c.67% of the total aged creditors, which indicates that creditors were not all being paid within their terms.

� Overall in the past 15 months the ageing of creditors has significantly deteriorated with 83% of creditors being classed as 60 days plus (c.$3.9 million) as at 30 October 2014.

� In summary, the graph above show that CBDE was not meeting its liabilities as and when they fell due, which is consistent with our findings of legal demands having been issued against CBDE by a number of creditors.


Investigations

Sources: 1. Management Accounts; 2. Aged creditor reports


Capital raising costs2% ATO

7%

Part repayment of WHSP loan

23%

GED15%

Repayment of TRW loan (related party of

Mr McGowan)7%

Parmac funding7%

Salaries and superannuation

9%

Operating costs6%

Reed Smith8%

PWC7%

Other creditor payments

9%


Source and Application of Funds

� The chart and table below highlight the source and application of CBDE's cash funds from the initial public offering, as disclosed in the bank statements and management accounts, between the period June 2014 to July 2014.

� The majority (59%) of the funds raised were used to repay outstanding liabilities due as at the date of the fund raising (ATO, WHSP, PwC, Reed Smith and TRW (a related company of Mr McGowan)).

� WHSP received to a partial repayment of a secured convertible loan that was due for repayment and classified as current in the Balance Sheet as at the date of the NASDAQ listing (balance owing as at 31 May 2014: c.$9.475 million).

� GED relates to part payment for the acquisition by CBD Acquisition Holdings Inc, a subsidiary of CBDE, of 100% of the shares in Global Earth Developers LLC, a solar company based in the US.

� TRW relates to repayment of a short-term loan provided by TRW, a related company of Mr McGowan, via a Westpac facility.

� Funds paid to Parmac, a subsidiary company of CBDE, were used to make various outstanding creditor payments.

� Reed Smith and PwC relates to professional services (legal and financial) provided as part of the initial public offering/NASDAQ listing and were paid as part of an agreement, with the fees calculated based upon the amount raised.

� Salaries and superannuation, and other creditor payments related not only to CBDE liabilities but also liabilities of other Group subsidiaries, including the US entities.

� In summary, the majority of the funds generated via the initial public offering were utilised to fund legacy issues rather than the strategic growth or restructure of CBDE/the Group.

Source and application of initial public offering funds

AU $

NASDAQ proceeds 6,982,372

Capital raising costs (114,550)

ATO (CBDE and WHS) (125,511)

ATO (on behalf of other Group entities) (382,923)

WHSP (1,596,490)

GED (1,069,519)

TRW - loan repayment (500,000)

Parmac funding (500,000)

Salaries and superannuation (652,194)

Operating costs (418,089)

Reed Smith - solicitors (534,759)

PWC (481,246)

Other creditor payments (611,550)

Balance (4,458)

Insolvent Trading - Source and application of the initial public offering funds

Investigations



Investigations



Ability to generate additional capital/funds

� As a result of being listed on the NASDAQ, CBDE had the ability to generate additional funding through the issuing of equity instruments. However, we note that the success of CBDE in being able to continue to raise funding by this mean would be highly dependant upon CBDE's financial standing (historic and forecast). Of significance is that CBDE had previously failed to achieve its required target of a AU$12.9 million initial public offering.

Relationship with financier

� We note that the secured lender was still providing funding in the months prior to the Voluntary Administration. However, it is our understanding that the secured creditor was actively looking to reduce its exposure to CBDE.

Outstanding/ overdue Commonwealth and State taxes

� We have been unable to undertake a detailed investigation into CBDE's tax affairs as we have yet to receive the Freedom of Information request from the ATO.

� CBDE's books and records indicate that it had not been remitting commonwealth and state taxes as and when they were due and thatthere was a significant balance outstanding to the ATO over the 12 month period prior to the Voluntary Administrators appointment.

Winding up applications � Based upon a review of the ASIC database there were no winding up applications filed against CBDE in the 12 months prior to the appointment of the Voluntary Administrators. However, there has been 4 winding up applications filed against CBDE to date, being in December 1998, April 2003, January 2011 and September 2013.

Legal proceedings and agreements with trade creditors

� During our investigations we have reviewed correspondence from trade creditors and/or their solicitors threatening legal action against CBDE for unpaid debts.

� As part of our review we have become aware of one statutory demand having been issued against CBDE in the 12 months prior to theVoluntary Administrators appointment.

Board Minutes � As part of our investigations we have reviewed the board minutes of CBDE/the Group.

� It is noted during 2014 that CBDE and the Group were experiencing cash flow difficulties and that cash was being moved around the Group to met individual company liabilities in order of priority/urgency. We found no direct reference being made by the directors that they had concerns that CBDE/the Group were trading insolvency.

Audit Reports � On 2 November 2012 as part of their independence report for the FY12 audited financial statements, PwC, without qualifying the audited financial statements, drew attention to a material uncertainty within the accounts which in turn cast significant doubt on CBD/the Group's ability to continue as a going concern. A similar opinion was also expressed by PwC in the FY13 audited financial statements.

� On 22 August 2014, PwC wrote to ASIC pursuant to section 311 of the Act, notifying them that they had reasonable grounds to suspect that CBDE had breached section 588G of the Act (insolvent trading).

Secured Energy Bonds � During FY14 CBDE used funds of a subsidiary company, Secured Energy Bonds Plc, in contravention of the purpose of these funds, to meet CBDE/the Group's cashflow shortfalls/working capital requirements.


June 2011:

Substantial reduction in government incentives for residential solar in

Australia.

Insolvent Trading – CBDE Timeline

Investigations

CBDE

Key Findings

� Despite CBDE incurring losses from as early as FY12, it was able to dispose of certain assets to generate additional funding to meet its current liabilities. Examples include:

− The sale of a solar plant in the US during November 2012 which generated AU$3.2 million; and

− The sale of a subsidiary, Capacitor Technologies Pty Ltd for AU$1.78 million in August 2013.

� During the period 2012 to 2014, CBDE was also successful in negotiating debt for equity swaps with various creditors which allowed it to reduce its overall liabilities.

� During 2014, CBDE utilised funds of Secured Energy Bonds Plc, a UK subsidiary, which were segregated and should have only been used for the purposes outlined in the bond raising prospectus which precluded working capital funding of CBDE. However, due to CBDE's cashflow difficulties $8.4 million was transferred to CBDE over time, via various inter-company loans to fund outstanding creditor payments and working capital requirements.

Negative

impact

Positive

impact

June 2012:

Raised US $8.65 million through

issue of convertible

notes.

18 June 2014:

Listed on Nasdaq and raised AU$6.9 million through an

initial public offering.

September 2013:

Winding up application filed

FY12 to FY13:

PwC express going concern issues in the financial statements

August 2014:

PwC wrote to ASIC pursuant to Section

311 of the Act

February 2011:

Loan from WHSP for US $10 million

FY13:

Recorded AU$2.4 million

profit

April 2013:

Disposed of Larkden Pty Ltd

for AU$2.75

million, of which only AU$250,000

cash was received and the remainder

deferred to

2015/2017.

August 2013:

Disposed of Capacitor

Technologies Pty

Ltd for AU$1.78 million

November

2012:

Sold 1.4MW Solar plant in

US for AU$3.2

million

June 2013:

Failed to meet part-repayment deadline of US$3.85m on the secured convertible notes.

Also in default on unsecured convertible

notes of US$2.75 million

FY12:

Recorded AU $1.4 million loss

FY14:

Recorded AU$6.2 million loss

June to October 2014

Various discrepancies with the financial accounts identified

I

N

S

O

L

V

E

N

T

� In June 2014, CBDE listed on the NASDAQ as a result of being able to secure additional equity funding of AU$6.9 million in an initial public offering. However, we note from a review of internal documentation that management had anticipated raising at least c.AU$12.9 million which it required for working capital purposes going forward, resulting in a shortfall of AU$6 million.

� At the point in time when CBDE failed to secure the total funding it needed via the initial public offering, we believe CBDE was insolvent as:

− CBDE had failed in its attempt to secure the entirety of much needed funding to meet its historical liabilities; and

− CBDE and its subsidiaries were not profitable and therefore had no way to obtain and maintain additional borrowings in order to meet current and future liabilities as and when they fell due.

� It is the Voluntary Administrators' opinion therefore that CBDE was insolvent as at 18 June 2014, if not earlier.

January

2014:

Delisted from ASX



Indicator Cash Flow Test


� The chart below on the left reports the movement in the cash balance between June 2013 and October 2014 on a monthly basis compared to the aged creditor balance as at that date. The chart below on the right shows the cash balance between June 2013 and October 2014.

� Over the period of review, the cash balance has fluctuated in a narrow range of c.$20,000. It is our understanding that cash was transferred around the Group as and when required.

� Aged creditors have increased by 446% or $690,000 over the 16 month period from June 2013.

� WHS held on average a cash balance of c.$11,000 compared to an average aged creditor balance of $430,000. In each month WHS had insufficient cash to discharge its current aged creditors with the cash balance being less than 4% of the total aged creditor balance from March 2014 onwards.

� WHS has had insufficient cash balances to discharge its liabilities within ordinary trading terms since June 2013.

0

100

200

300

400

500

600

700

800

900


$'00

0

TradeCreditors

Cash at Bank

0

5,000

10,000

15,000

20,000

25,000

30,000

Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14$

Cash at Bank

Insolvent Trading - WHS

Investigations

Sources: 1. Management Accounts; 2. Bank Statements; 3. Aged Creditor reports


Westinghouse Solar

Jun-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14

Current Ratio (Working Capital Ratio) 0.293 0.869 1.347 1.122 0.689 0.432 0.323 0.338 0.219 0.223 0.244 0.806

Quick Ratio (Acid Test) 0.293 0.866 1.347 1.122 0.689 0.432 0.323 0.338 0.219 0.223 0.244 0.806

Cash - Trade Creditors (145,054) (275,675) (224,384) (206,514) (402,422) (541,750) (603,323) (564,513) (695,397) (665,125) (705,951) (838,403)

Net Working Capital (190,002) (48,700) 99,538 34,706 (151,979) (343,943) (500,951) (468,484) (790,014) (787,238) (773,414) (894,567)

Net Assets (394,207) (514,809) (581,624) (747,791) (896,885) (1,031,563) (1,339,121) (1,358,296) (1,625,335) (1,885,132) (1,894,398) (2,204,731)


Indicator Balance Sheet Test

Overview � The balance sheet test considers whether a company may be insolvent if the total liabilities exceed the value of the assets and there are insufficient assets to discharge the liabilities.


� We have undertaken a series of liquidity ratios, such as: Current Ratio; Quick Ratio (Acid Test) and also analysed the Net Asset position from WHS’s Management Accounts.

� We highlight our key findings:

− In each of the months shown above, with the exception of January 2014 and February 2014, WHS held a current and quick ratio of less than 1, which indicates that they held insufficient current assets to discharge their current liabilities. The increase in the current and quick ratio in January 2014 and February 2014 was a result of a pre-payment being recorded in the current assets.

− In the past 10 months WHS, on average, had a cash shortfall of c.$493,000 if it was to meet its aged creditor payments in full from the available cash at bank.

− WHS's net working capital position has steadily deteriorated since January 2014, with a net working capital deficiency of c.$894,000 as at 31 October 2014, primarily as a result of an increase in aged creditors.

− The net asset position of WHS has also deteriorated since January 2014, similarly as a result of trading losses partially funded by an increase in aged creditors, but also due to a decrease in other assets, comprising of various inter-company loans.

− In summary, the balance sheet of WHS shows that:

− WHS has reported a net asset deficiency since June 2013, which casts doubt over its ability to meet its liabilities from its assets.

− on an assessment of the current net asset position, WHS has had insufficient current assets to discharge its current liabilities, since at least March 2014, if not earlier.


Investigations




Aged Creditors - WHS � The following graph represents aged creditor balances of WHS between June 2013 and October 2014

� The graph above shows a significant deterioration in WHS's aged creditor position over the last 16 months with the aged creditorbalances for the period June 2013 to October 2014 having increased by 460% from c.$150,000 to c.$840,000.

� In the past 12 months the ageing of creditors over 90 days has increased from c.15% to c.55%, which indicates that creditors were not all being paid within their terms.

� In summary, the graph above show that WHS was not meeting its liabilities as and when they fell due, which is consistent with our findings of legal demands having been issued against WHS.

Ability to generate additional capital/funds

� WHS had insufficient assets to provide as collateral for any debt finance. Any ability to generate additional capital/funds was solely dependant upon the parent company, CBDE, providing additional funding via inter-company loans.

Outstanding/ overdue Commonwealth and State taxes

� We have been unable to undertake a detailed investigation into the WHS' tax affairs as we have yet to receive the Freedom of Information request from the ATO, however the books and records of WHS indicate that WHS had significant outstanding taxes due to the ATO.

Winding up applications � Based upon a review of the ASIC database there have been no winding up applications filed against WHS.

Legal proceedings and agreements with trade creditors

� During our investigations we have reviewed correspondence from trade creditors and/or their solicitors threatening legal action against WHS for unpaid debts.

(100)

0

100

200

300

400

500

600

700

800

900


$'00

090 days plus

60-90 days

30-60 days

Current


Investigations

Sources: 1. Management Accounts; 2. Aged creditor reports


Other Actions

Investigations

Class Action – CBDE

� On 24 October 2014, CBDE announced via a filing with the SEC that it had determined through its audit committee and PwC that its audited financial statement for FY12 and FY13, and its unaudited interim financial statements for the 6 months ended 31 December 2013 could not be relied upon and as such revisions were required.

� The issue with the FY12 and FY13 audited financial statements related to the uncertainty and completeness of related party disclosure in the accounts, whilst the interim financial statements for the 6 months to 31 December 2014 related to related party disclosures and (i) the recoverability of a deposit of $680,000 to Solon SE (discussed opposite); (ii) the capitalisation of borrowing costs in relation to the NASDAQ listing; (iii) impairment of goodwill; and (iv) the categorisation of certain expenses.

� Although the added disclosures to the accounts and potential amendments for the transactions listed above may not have materially affected the financial results, the announcement to the market caused the share price of CBDE to drop by US$0.76 per share from $2.01 to $1.25 per share.

� Subsequently, a class action was filed in the US against CBDE, certain executives, directors and underwriters of CBDE's initial public offering. No monetary value was assigned to the class action, however we believe the decrease in the overall NASDAQ market capitalisation was c.$6.7 million following the announcement.

� The class action is currently being undertaken by Faruqi and Faruqi LLP, a US legal firm, and a filing deadline of 26 December 2014 has been set.

Solon Payment

� In their report to the audit committee dated 30 June 2014, PwC raised concerns over a payment made by a subsidiary company of CBDE which resulted in the Group accounts being incorrectly stated.

� The transaction involved a payment of £373,929 (approx.$680,000) from a subsidiary's bank account to Solon SE on 30 December 2013.

� Initial investigations into this transaction show that Mr McGowan initiated the transaction and he has stated that it was in relation to a deposit for solar panels (as such a pre-payment/deposit was shown in the Group accounts).

� On 3 January 2014, Mr McGowan filed a significant shareholder notice for TRW's (a related company of Mr McGowan) acquisition of shares in CBDE. The total value of the shares purchased by TRW was $682,505.

� PwC in their report to the audit committee questioned the connection between the transactions. Mr McGowan has denied that there is any connection between the payment on 30 December 2013 to Solon SE and the payment by TRW for the purchase of shares on 3 January 2014.

� In October 2014, as a result of the questions raised by PwC, CBDE entered into an agreement with EEG to sell its right to the deposit for the Solar panels for £334,000. An agreement was drafted, however we have not been able to locate an executed copy of the agreement but confirm that we have sighted the receipt of the consideration that was paid into the KI Solar bank account (15 October 2014: $500,000; and 28 October 2014: $180,000).

� Mr McGowan was requested to provide evidence to support both of these transactions and at the date of the Voluntary Administrators appointment had failed to adequately do so.

� As part of the Voluntary Administrators initial investigations, we have reviewed the Group's books and records for details of these transactions. Our investigations to date suggest that Mr McGowan may have breached his directors duties.

� As part of our further investigations into these transactions, we have written to Solon SE and sent a request to the relevant banks to confirm where payment was sent/received to and from.

� As the Voluntary Administrators are not appointed over the entity to which the Solon SE payment was made from, our interest in this transaction at this time is as the ultimate parent company of the entity to the transaction and Mr McGowan's breach of director duties, having been a director of the Companies.


Corporate Governance

Listing Rule Corporate Governance requirement Description Potential breach

5250 (d) Distribution of Annual and Interim Reports Must distribute annual and interim reports to

shareholders.

N

5605 (b) Independent Directors Majority of the board must be independent. N

5605 (c) Audit Committee Solely independent members.

3 members minimum.

Y

5605 (d) Compensation of Executive Officers Solely independent members.

2 members minimum.

N

5605 (e) Nomination of Directors Independent directors must select or

recommend directors.

N

5610 Code of Conduct Must adopt a code of conduct applicable to all

directors and employees

Y

5620 (a) Annual Meetings Requirement to hold AGM no later than 1 year

after end of fiscal year.

N

5620 (b) Solicitation of Proxies Requirement to solicit proxies for all

shareholders meetings.

N

5620 (c) Quorum Quorum of 33.3% required for meetings. N

Lack of Corporate Governance

� Companies on the NASDAQ are required to meet high standards of corporate governance as set forth in the Listing Rule 5600 Series.

� A list of potential breaches of the corporate governance requirements is shown in the table below.

� The potential breaches relate to: 1. The audit committee only having 2 members; and 2. Our opinion that Mr McGowan has breached the code of conduct, specifically in relation to the Solon SE and Sligo transactions.

� Despite our concerns regarding Mr McGowan's compensation payments, we note that there is not a breach of the corporate governance code as the code only relates to the composition of the remuneration committee and the approval of remuneration.

� The potential breaches will be considered further as part of the Voluntary Administrators and/or Liquidators overall investigations into the conduct of the board.

Other Actions

Investigations

PwC

� As discussed on the previous page, as a result of the announcement on the NASDAQ that the audited accounts prepared by PwC could not be relied upon for FY12 and FY13, there was a decrease in the overall NASDAQ market capitalisation of c.$6.7 million.

� As part of our further investigations, if the Companies enter liquidation, we will be reviewing PwC's failure to identify the related party transactions/disclosures during their FY12 and FY13 audit to determine whether a claim exists against the auditors.

Breach of Directors duties

� As a result of the various transactions that have been discussed in this section of the report, one or more of the directors of the Companies may be in breach of their directors duties and as such a civil or criminal action may be undertaken on behalf of the Companies for any detriment that has been caused to the Companies.

� A list of the potential breaches is shown in the table below.

� The potential breaches will be considered further as part of the Voluntary Administrators and/or Liquidators investigations and any appropriate action undertaken including submitting the necessary reports to ASIC.

Directors Duties

Section Misconduct/breach of Potential breach

588G(3) Insolvent Trading Y

590 Offences by officers or employees Y

180 Care and diligence Y

181 Good faith - directors' and officers' duties Y

182 Use of position - Directors' and employees' duties Y

183 Use of information - Directors' and employees' duties Y

184 Good faith, use of position and use of information Y

286/344 Failure to keep adequate books and records N

191 Material Interest Y


Section 10 Employees and Employee Entitlements


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Outstanding Employee Entitlements

Westinghouse Solar

($)

CBD Energy Limited

($)

Total Outstanding

($)

Estimated FEG Payout

($)

Unpaid Wages 18,610.77 7,692.31 26,303.08 26,303.08

Unpaid Superannuation 74,193.85 87,742.74 161,936.59 -

Annual Leave 62,043.12 129,697.45 191,740.57 151,993.52

Long Service Leave - 30,004.20 30,004.20 27,231.52

Payment in Lieu of Notice 27,820.00 25,961.54 53,781.54 46,384.00

Redundancy 69,923.85 68,269.23 138,193.08 118,610.85

s560 Advance 90,000.00 150,000.00 240,000.00 240,000.00

Total 342,591.59 499,367.47 841,959.06 610,522.96

Overview

� Staff were employed through two entities, CBDE and WHS. The staff employed by CBDE were head office support staff and Taralga project management and support staff.

� After discussions with key management and the Directors and due to the need to preserve the limited cash available, the Administrators terminated a portion of the workforce of CBDE and WHS. The remainder of the workforce was retained to continue to trade the business to maximise the potential return to creditors.

� Each employee's entitlements have been calculated by the Administrators.

� Detailed in the table below is a summary of the estimated amounts owing to employees that has been calculated by the Administrators and the Administrators' preliminary calculations on the amount that would be paid to employees under the FEG scheme should the Companies proceed into Liquidation.

� Please note that the summary below is an estimate only and each employee claim will require formal adjudication. Further, if the Companies are placed into Liquidation, the Department of Education, Employment and Workplace Relations ("DEEWR") will have to approve any payment made under the FEG scheme and there is no guarantee that a payment will be made to employees.

� Further information on the FEG scheme can be found on the following page.

Employees

Employees and Employee Entitlements

� The reason for the variance between the total amount outstanding and the estimated payout by FEG, is that the payment under FEG is subject to certain limits, discussed on the following page.

� Our initial assessment of each employee's claim will be provided to them in writing within three months. It is critical that employees review this correspondence and contact the Administrators should any of the details be incorrect.

� Pursuant to the Act, employee entitlements rank as a priority debt in the Administration of the Companies. The assets of a company are split into two categories, non-circulating (i.e. real property, goodwill, IP etc) and circulating charge assets (i.e. cash, stock and debtors).

� Employee claims are given a priority over circulating charged asset realisations, ahead of the secured creditor.

� It should be noted that the secured creditor advanced $240,000 to the Companies immediately prior to our appointment as a s560 advance. This provided sufficient funding for the Administrators to meet the November and part of the December wages of continuing employees.

FY15 Bonuses

� Three employees were earmarked for bonus payments from CBDE totalling $375,000 following the successful listing on the NASDAQ. However, our investigations reveal appropriate approval processes were not followed and there is doubt regarding CBDE's contractual obligation to meet these payments. Furthermore, all three employees may be classified as Excluded Employees thereby triggering the above caps on priority entitlement.

� For these reasons, this amount has been excluded from the table opposite, at this stage.


Employees


Excluded Employees

� Pursuant to Section 556(2) of the Act, an employee of one of the Companies who at any time during the previous 12 months has been a director, or is a relative of the Director, is an excluded employee.

� Any claim by the Director(s) or their relatives for outstanding entitlements is capped as follows:

− $1,500 for outstanding leave entitlements; and

− $2,000 for unpaid wages and superannuation

� Any amounts claimed which fall outside these amounts will rank as an unsecured claim in the Administration/Liquidation.


Employee Entitlements


Fair Entitlements Guarantee overview

� Should the Companies be placed into Liquidation following the second meeting of creditors, we will refer priority claims to FEG as it is likely that there will be insufficient funds to pay all employee entitlements in full. If FEG makes a contribution the scheme covers outstanding employee entitlements for eligible employees (excluding superannuation). Further information in respect of FEG can be found at: http://deewr.gov.au/fair-entitlements-guarantee-feg

� Under FEG, where employees have a legal entitlement derived from legislation, an award, a statutory agreement or a written contract of employment, they are eligible to receive the following (based on earnings capped at $127,452):

− Unpaid wages (for up to 13 weeks);

− All long service leave;

− All annual leave;

− Payments in lieu of notice (up to a maximum of 5 weeks); and

− Up to four (4) weeks redundancy pay per completed year of service.

� If the Companies are placed in Liquidation, we would immediately notify FEG to ensure prompt processing of employee claims. Employees would be advised to submit their FEG claim forms via the DEEWR website. Throughout the Liquidation we would continue to liaise with FEG in order to assist in the provision of outstanding entitlements to employees.

� Please note that should a payment to employees be made by FEG, these funds are recoverable from the Companies, by FEG pursuant to Section 560 of the Act. FEG will take over the employee’s priority position as a creditor of the Companies to the extent of amounts paid by FEG as discussed on the previous page.

� Accordingly, the payment of employee entitlements by FEG does not improve the quantum of potential recoveries available for distribution to ordinary unsecured creditors.

If you were an employee of the Companies and believe you are owed outstanding entitlements please:

• Ensure you have lodged a proof of debt with our office, including your estimate of outstanding entitlements. Please provide as much supporting documentation as possible. If you are unable to provide an estimate, please note your entitlements are "to be advised".

• Dependent on the outcome of the second meeting of creditors, the Liquidators will be in contact to verify the amounts outstanding and will liaise with FEG to facilitate the FEG claim process.

• Please contact Tom Whitmarsh of the Grant Thornton Sydney office on (02) 8297 2560 should you have any employee related questions.


Sale/recapitalisation of the business

Sale Process

Overview

� On 26 November 2014, the Administrators advertised in the Australian Financial Review inviting expressions of interest for the acquisition and/or recapitalisation of CBDE and its subsidiaries.

� The EOI process was undertaken in a compressed timeframe, within the Administrations' convening period, as summarised below:

Stage Deadline

1. Execute NDA and receive IM On request

2. Non-binding expressions of interest due 5 December 2014

3. Short listed parties invited to move to next round 8 December 2014

4. Further due diligence commenced 8 December 2014

5. Final binding offers due 10 December 2014

6. Finalisation of contractual/DOCA negotiations with preferred bidder.

12 December 2014

The Sale/Recapitalisation Process

� The sale/recapitalisation process sought interest from parties to either acquire the assets of the Companies or propose a DOCA to recapitalise CBDE.

� Given the diversity of the assets and interests, this process provided optionality to interested parties and the Administrators as parties were invited to submit offers for single assets, all assets of the Group or for a recapitalisation.

� Whilst the EOI process was run in a compressed timeframe, interest was sought from the following parties:

− Those with an existing interest in CBDE;

− Existing shareholders (domestically and internationally) of CBDE;

− Introductions by the directors and Management of CBDE; and.

− Responses to the AFR advertisement.

� The EOI process resulted in 25 parties being issued with NDAs and 21 of these parties who signed and returned an NDA being issued with an IM.

� The Administrators received seven non-binding offers and proceeded to short list three parties to move to the next stage. We took requests for additional information to allow those parties to complete further due diligence requirements.

� The EOIs and due diligence requirements from shortlisted parties varied, and the Administrators worked with those parties to ensure their requirements were satisfied to the best ability within the compressed timeframe.

� Throughout the EOI process, parties who expressed interest were recommended to seek insolvency legal advice around the form of their proposals and to ensure they considered the compliance and statutory provisions with respect to DOCAs, NASDAQ listing rules and ASIC regulations.

� Binding EOI's closed at 5.00pm AEST on 10 December 2014 (the date of this report).

Current Status

� The Administrators received seven non-binding offers for various assets and interests of the Group.

� Three of these parties proposed a DOCA, however, only one DOCA is considered acceptable. Details of the DOCA proposals are provided in Section 11. In our opinion, the BlueNRGY DOCA proposal will provide the best return to creditors.

� The remaining offers and DOCA proposals were for various assets/interests of the Companies. Our negotiations with these parties are continuing in an attempt to improve the offers in the event that the DOCA proposal is not acceptable to creditors.

� It is our intention to progress the BlueNRGY DOCA proposal in order to be in a position to table a draft DOCA legal agreement at the second creditors' meeting.


Section 11 Deed of Company Arrangement Proposal(s)


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







CBDE WHS

DOCA 1 - BlueNRGY

Cash Dividend $0.0011 - $0.0079 $0.0011 - $0.0145

Shares (subject to valuation) 0.0612 0.0612

Total $0.0623 - $0.0691 $0.0623 - $0.0757

DOCA 2 - EEG

Cash Dividend $0.00 - $0.0036 -

Shares (subject to valuation) 0.1034 0.1034

Total $0.1034 - $0.1069 0.1034

DOCA 3 - Arowana

Cash Dividend - -

Shares (subject to valuation) - -

Total - -

DOCA Overview

Deed of Company Arrangement Proposal(s)

� For the reasons discussed on pages 79 to 83 and summarised below, it is the Administrators' opinion that creditors should vote to execute the BlueNRGY DOCA:

− BlueNRGY is providing the highest amount of cash upfront in a DOCA contribution of US$610,000 and US$390,000 for CBDE and WHS respectively. Based on our analysis, this will provide a return to unsecured creditors of between 0.11 and 0.79 of a single cent in the dollar.

− In addition, unsecured creditors of both CBDE and WHS will be provided shares (totalling 9%) in the restructured business, which will include the WHS global business as well BlueNRGY's business which will be sold into the restructured CBDE business. The issue of shares to unsecured creditors is subject to shareholder approval at an EGM of shareholders.

− A minimum amount of US$4 million will also be injected into the restructured business by new investors sourced by BlueNRGY to appropriately fund future working capital requirements and costs to preserve the NASDAQ listing. In exchange, these investors will be issued with commensurate equity (33%) which will be subject to shareholder approval.

− It is the intention of BlueNRGY to retain the majority of the CBDE and WHS existing workforce which will limit further entitlement claims from crystallising.

− Based on the valuation analysis of BlueNRGY, the combined, restructured business will have a post-money valuation of c. $15 million. We cannot comment on the reasonableness of this valuation. However, we note:

− BlueNRGY have advised the valuation is supported by an external raising for which they have commitments of US$5 million; and

− WFF will receive 19% of shares with an implied valuation of US$2.8 million. WFF has agreed to reduce their secured debt by at least this amount.

− The BlueNRGY DOCA proposal is the only DOCA proposal that will provide for all employee entitlements to be repaid in full including the s560 advance previously provided by WFF of $240,000.

− A liquidation is likely to result in a shortfall to the secured creditor, no dividend to unsecured creditors and no return to existing shareholders.

− The BlueNRGY DOCA proposal has the indicative support of the secured creditor which is critical to ensure that unsecured creditors receive a return.

Overview

� The Administrators received three DOCA proposals for only CBDE and WHS at the date of this report. Each of the DOCA proposals are still in an early form and continue to be developed. It is likely that a further update will need to be provided at the commencement of the second meeting on 19 December 2014 with respect to any further modifications to the DOCA proposals received.

� We have asked two of the three DOCA proponents to submit by 19 December 2014 a substantially completed DOCA agreement which is capable of execution which will be available for creditors to inspect prior to and at the second meeting of creditors.

� The Administrators received the following three DOCA proposals:

− BlueNRGY: US based private company;

− EEG: former vendors of Eco-kinetics business; and

− Arowana: ASX listed investment vehicle.

� An estimated outcome statement detailing the return to creditors under each DOCA proposal and compared to a liquidation scenario is provided in Section 12.

� In summary, the return to creditors (cents in the dollar) will be:

Notes: a. All share valuations are based on analysis provided by either EEG or BlueNRGY. The Administrators cannot provide an opinion on the reasonableness of those valuations.


DOCA Overview


NASDAQ Listing

� A key condition of the DOCA proposals submitted by BlueNRGY and EEG is that the NASDAQ public listing is maintained by CBDE.

� The NASDAQ listing will be critical to providing a liquidity mechanism for unsecured creditors who are provided equity under the DOCA proposals to monetise their shares.

� Creditors should note that both BlueNRGY and EEG are still completing their due diligence in relation to the NASDAQ listing and this position will continue to evolve between the date of this report and meeting of creditors on 19 December 2014.

� Below is a brief summary of the status of the NASDAQ listing:

− On 13 November 2014, immediately prior to the appointment of Administrators, NASDAQ suspended trading of CBDE's shares at the request of CBDE;

− NASDAQ issued a notice of intention to delist CBDE on 22 November 2014;

− The Administrators lodged an appeal against the delisting and a written submission is required to be provided to the NASDAQ by 22 December 2014; and

− A hearing is scheduled for 8 January 2015 where NASDAQ will consider CBDE's appeal of the decision to delist.

� The key issue for the NASDAQ is the failure of CBDE to comply with the NASDAQ listing rule in relation to the timely filing of audited accounts. As PwC withdrew their audit opinions for FY12 and FY13, CBDE is deemed to have not filed audited accounts for these years.

� In order to resolve this issue, we have been in discussions with PwC and they are currently considering their position in relation to whether they are able to provide any assistance moving forward. In the event PwC are unable to complete the audits, we have requested a proposal from HLB Mann Judd to undertake the audits for FY12, FY13 and FY14 who believe they will be able to assist.

� There is a risk for unsecured creditors that if the NASDAQ is successful in delisting CBDE, the DOCA proposal will fail. At this stage we are not able to determine if the NASDAQ listing will be maintained after the hearing of 8 January 2015 mention above. However, even if the NASDAQ listing is lost and the DOCA proponents waive that requirement or still proceed with the restructure and recapitalisation, it will be difficult for unsecured creditors to sell or monetise the shares issued to them.

Westinghouse Global Licence

� All DOCA proposals are conditional on Westinghouse Electric Corporation agreeing to continue to provide the current licence agreement.

� We are currently in communication with Westinghouse to determine their willingness to continue to provide this consent and an update will be provided at the second meeting.

Important information

� Employees should note that if creditors vote to execute a DOCA they will be unable to make a claim to DEEWR under the FEG scheme for their outstanding employee entitlements.

� Employees should refer to Section 10 for further details on the FEG scheme.

� Employees and creditors should also note that actions available to a Liquidator to recover funds in relation to antecedent transactions are not available to a Deed Administrator.

� Employees and creditors should refer to Section 9 for further details on potential antecedent transactions.

� The recapitalisation plan including debt for equity swaps contemplated by the BlueNRGY and EEG DOCA requires existing shareholder approval. This will require convening of an EGM with the requisite notice periods.


Summary of Parties


Parties proposing DOCA

� We provide some background information in respect of the respective parties below, based on information supplied by these parties and publically available information.

� The Administrators have relied on information provided by these parties and have not verified the claims made by these parties in respect of future works and pipeline.

BlueNRGY

� BlueNRGY is a US based private company, founded in 2012 by Emmanuel Cottrel, his family members and a syndicate of private investors.

� The company provides global web-based energy monitoring solutions to improve efficiency and profitability for power plant owners and operators.

� BlueNRGY is an early-stage company, however, the company has signed numerous contracts for installations and has built a strong pipeline of prospects.

� The business has three main divisions:

− Residential: Generates revenue from the sale of monitoring systems attached to solar systems sold through the IKEA retail chain;

− NOC and O&M Services: The Network Operations Centre ("NOC") area of the business remains a concept, however, BlueNRGY recently acquired a small Operations and Maintenance ("O&M") provider to service government installations.

− Installation/Integration: BlueNRGY has the capability to provide complete installation and integration services for their products.

� The restructure plan put forward indicates that BlueNRGY is seeking to utilise the CBDE solar business to provide a holistic solution to its customers. The business plan is to supply customers with renewable energy installations (i.e. CBDE's business) and offer an energy data monitoring solution (i.e. BlueNRGY's business).

� Whilst we have not been provided with information to confirm, BlueNRGY has advised that the business is currently debt free and been funded to date by its members.

EEG

� EEG is a private, renewable energy business, that was established by the original founders of Eco-Kinetics (that was sold to CBDE in 2012).

� The founders of the business have been responsible for installation of c. 15,000 solar systems in Australia.

� EEG is focussed on the Thailand solar market for large scale solar rooftop and ground mount project opportunities.

� EEG Thailand has secured fully financed contracts for 50MW of solar rooftop projects and has a current pipeline in excess of 100MW of solar rooftop projects.

� Current orders scheduled for completion in 2015 have a contract value of c. USD$91 million and an estimated margin of c. USD$16 million.

� EEG has also been shortlisted for contracts totalling 450MW with Tesco and the Thai defence force. Based on a 75% weighting, these projects, if awarded, are forecast to generate revenue of USD$390 million.

� EEG has no experience in acquiring companies in an insolvency situation.

� The contribution to the DOCA fund and working capital for the restructured entity was to be provided by the former MD, Gerry McGowan and a Thai high net worth individual. However, we now understand that Mr McGowan has withdrawn from the EEG team and is formulating a separate DOCA proposal.

Arowana Capital

� Arowana is an ASX listed holding company with a number of operating subsidiaries in Australia and New Zealand.

� Arowana has available funds of c. $97 million and generated a NPAT of $110 million if FY14.

� It does not appear that Arowana has any specific capabilities in the renewable energy sector.

� We are not aware of any experience that Arowana has in acquiring companies in an insolvency situation.


BlueNRGY DOCADeed of Company Arrangement Proposal(s)

BlueNRGY DOCA proposal for CBDE and WHS

� The key terms of the DOCA proposal submitted by BlueNRGY are:

− US$1 million (c. AUD$1.2 million) to be split between CBDE (US$610,000) and WHS (US$390,000) and paid as a Deed Contribution to be distributed to creditors of CBDE and WHS in accordance with the statutory priorities.

− This is estimated to provide a full return to priority creditors (employees not retained as part of the restructure) and a nominal return to unsecured creditors.

− An 11.33% shareholding (c. $1.7 million equity based on BlueNRGY's valuation) in the restructured business split between unsecured creditors and allocated 90/10 to CBDE and WHS respectively.

− To the extent that the current business lines remain intact, the restructured business will include the Westinghouse Solar businesses (Australia, USA including GED and the UK), Chatham Island Wind Farm, Parmac and BlueNRGY's existing energy monitoring business. The proposal also includes the continuation of project management and facility management for the Taralga Wind Farm Project.

− The counter-party to the Chatham Island contract is in a contractual dispute following the VA appointment. Whilst we are in negotiations with them in relation to this issue, that business line may not be available to BlueNRGY.

− WFF to be issued preference shares or provided some form of security in Parmac and Chatham Island Wind Farm to the value of US$3.6 million.

− The minority interest in Taralga Wind Farm to be transferred to WFF at a price to be agreed with the Administrator if a sale to a third party is not completed by the Administrator.

− The sale of CBD Labs Pty Ltd (Larkden receivable) to WFF for AUD$2.5 million.

− The payment by WFF to the Taralga and CBD Labs Pty Ltd interests will be applied against the existing secured debt (i.e. non-cash transaction). On this basis, WFF will not participate in the DOCA fund and will release their security over the assets of CBDE.

− The DOCA fund and post-transaction working capital will be funded by a capital raising by BlueNRGY to the value of US$5 million, of which US$4 million will be used to fund the future working capital and growth of the restructured business. This will be subject to shareholder approval.

− US$500,000 of the US$4 million has been set aside to meet the costs of seeking to maintain the NASDAQ listing which is a requirement of the BlueNRGY offer.

− Existing shareholders will be diluted down to c. 2% of the restructured business. There may be an opportunity for BlueNRGY to issue new shares equating to 1% of the new capital structure to existing shareholders, however, this is still being formulated by BlueNRGY.

Administrators' analysis – BlueNRGY DOCA

� The Administrators make the following observations regarding the DOCA proposed by BlueNRGY:

− The BlueNRGY DOCA will result in all employee entitlements being paid in full. This provides a superior return to the FEG scheme which is only available in liquidation, as the BlueNRGY proposal allows for payment of superannuation which is not covered by FEG.

− The DOCA proposal allows the majority of the workforce to retain their employment which prevents further redundancy entitlements from crystallising.

− If the DOCA is not fully effectuated then the Companies will be placed into Liquidation and employees will be able to apply to FEG for payment of their outstanding employee entitlements (subject to certain statutory limits and excluding superannuation).

− Whilst the cash return to unsecured creditors is not substantial, it is estimated to be a better return than a liquidation scenario.

− In addition, unsecured creditors are being offered equity in the restructured business, which BlueNRGY has valued at c. US$15 million.

− BlueNRGY do not have any experience in acquiring companies in an insolvency scenario and have limited understanding of the Australian insolvency regime. However, we understand that they are engaging a suitably qualified Australian lawyer to assist them with the transaction.


BlueNRGY DOCADeed of Company Arrangement Proposal(s)

Administrators' analysis – BlueNRGY DOCA (continued)

− Obtaining a cash benefit from the equity component of the offer is highly contingent on the valuation of the business, the performance of the restructured business and the liquidity of the share capital which is in part linked to maintaining the NASDAQ listing.

− The BlueNRGY DOCA is subject to approval of shareholders of CBDE to issue new shares to BlueNRGY and also to issue shares to creditors as part of the debt for equity swap proposed.

− We appreciate it may not be possible for all unsecured creditors to accept shares. The process for this mechanism is currently being negotiated between the Administrators and BlueNRGY. In the first instance, the issued shares will need to be held on trust by the Deed Administrator on behalf of the unsecured creditors until all claims are reviewed and approved by the Deed Administrators.

− Those creditors who cannot accept the shares will be offered a mechanism whereby they will be liquidated on market (subject to applicable securities laws and requirements for orderly trading, i.e. no dumping) for a cost (which the deed administrator will facilitate) and the net cash proceeds remitted to the creditor. If for any reason, there is not sufficient liquidity or depth in the market and the shares cannot be disposed of within 12 months and the creditors refuse to accept them, these shares will be placed back into the deed fund pool and a second dividend will be paid to those creditors who were willing to accept the shares creating a differential dividend rate insofar as the issue of shares is concerned amongst unsecured creditors.

� Given that the BlueNRGY DOCA provides a full return to priority creditors and a better return that a liquidation scenario, the Administrators recommend that creditors of CBDE and WHS resolve to execute the BlueNRGY DOCA.

� The secured creditor, WFF, has indicated it is supportive of the BlueNRGY DOCA in the absence of a superior offer.


EEG DOCA

DOCA Proposals

EEG DOCA Proposal

� The key terms of the DOCA proposal submitted by EEG are:

− $775,277 to be split between CBDE and WHS and paid as a Deed Contribution to be distributed to creditors of CBDE and WHS in accordance with the statutory priorities.

− This is estimated to be insufficient to provide a full return to priority creditors (employees not retained as part of the restructure) and no dividend to unsecured creditors.

− A second cash contribution of $312,500 to be paid into the DOCA funds of CBDE and WHS on the successful share recapitalisation pending receipt of any necessary shareholder approvals via an EGM.

− A 7.2% shareholding (c. US$3.5 million equity based on EEG's valuation) in the restructured business split between unsecured creditors of CBDE and WHS. 50% of these shares will be subject to a 12 month escrow period.

− WFF to receive US$8 million (16.5%) of shares in the restructured business. We note WFF does not agree with this basis for the valuation.

− Existing shareholders of CBDE to retain 5.6% (c. US$2.7 million based on EEG's valuation) of the restructured business.

− The restructured business will include the Westinghouse Solar businesses (Australia, USA including GED and the UK) and EEG's existing solar operations in Thailand which will be sold into the restructured company.

− The minority interest in Taralga Wind Farm, 100% interest in Chatham Island Wind Farm and 100% interest in Parmac to be transferred to WFF at a price to be agreed with the Administrator if a sale to a third party is not completed by the Administrator. The figure presented by EEG is $6 million. The payment by WFF for the Taralga, Chatham Island and Parmac will be applied against the existing secured debt (i.e. non-cash transaction). On this basis, EEG propose that the secured creditor does not participate in the DOCA fund, other than for the abovementioned shares.

− The counter-party to the Chatham Island contract is in a contractual dispute following the VA appointment. Whilst we are in negotiations with them in relation to this issue, that business line may not be available to WFF as proposed.

− The DOCA fund and post-transaction working capital will be funded by a Thai investor who we understand from EEG is an existing shareholder in EEG and has provided a commitment to fund up to $5 million subject to EEG successfully completing its due diligence over the next 7 to 10 days

− The cash contributions and share allocations between CBDE and WHS are to be based on achieving a comparative return for both creditor groups.

Administrators' analysis – EEG DOCA

� The Administrators make the following observations regarding the DOCA proposed by EEG:

− The EEG DOCA proposal does not provide sufficient funding to provide a complete return to priority creditors for CBDE in a low scenario and WHS in both a low and high scenario.

− There is insufficient funds to provide for any cash return to unsecured creditors, except for an estimated dividend of up to 0.36 of a cent in the dollar for CBDE unsecured creditors in a high scenario.

− The DOCA proposal allows the majority of the workforce to retain their employment which prevents further redundancy entitlements from crystallising.

− If the DOCA is not fully effectuated then the Companies will be placed into Liquidation and employees will be able to apply to FEG for payment of their outstanding employee entitlements (subject to certain statutory limits and excluding superannuation).

− Unsecured creditors are being offered equity in the restructured business, which EEG has valued at c. US$48 million. We cannot comment on the reasonableness of this valuation. EEG has advised that the valuation is based on a 50% discount of the CBDE share price at the date it was suspended on 13 November 2014, which is an overly simplistic and a flawed assessment of the value of the business.


EEG DOCA

DOCA Proposals

Administrators' analysis – EEG DOCA (continued)

− The $5 million raising from EEG's Thai investors is based on a different valuation to that presented to unsecured creditors. The external investors have been offered to invest at a valuation of c. US$24.2 million or a 50% discount. This suggests that the valuation assertion from EEG in respect of the shares offered to unsecured creditors and WFF is over-inflated.

− We have been provided with evidence that the Thai investor has the financial ability to provide the US$5 million funding incorporated into the EEG DOCA proposal

− EEG does not have any experience in acquiring companies in an insolvency scenario and have limited understanding of the Australian insolvency regime.

− The approval of shareholders of CBDE is required in order to issue new shares in the company.

− Obtaining a cash benefit from the equity component of the offer is highly contingent on the valuation of the business, the performance of the restructured business and the liquidity of the share capital which is in part linked to maintaining the NASDAQ listing.

� The Administrators are unable to recommend that creditors of CBDE and WHS resolve to execute the EEG DOCA as the DOCA contribution is insufficient to provide a full return to priority creditors or any return to unsecured creditors.

� The secured creditor, WFF, is unlikely to be supportive of this DOCA proposal.


Arowana DOCA

DOCA Proposals

Arowana DOCA proposal

� The Arowana DOCA proposal was a simplistic DOCA proposal. The key terms of the proposal are:

− NZD$460,000 for 100% of the share capital of Chatham Island Wind Farm;

− $75,000 plus 2 x assessed annual EBIT of the FMA to acquire the 10% interest in the Taralga Wind Farm and the assignment of the FMA; and

− $80,000 for the Australian solar business.

− The combined total of the offer is c. $580,000 (subject to the assessment of the FMA contract profitability).

− On the basis that the secured creditor participates in the DOCA (which it is assumed they would), there would be no funds available for priority or unsecured creditors.

Administrators' analysis – Arowana DOCA

� The Administrators make the following observations regarding the DOCA proposed by Arowana:

− The proposed DOCA is insufficient to discharge the secured creditor's claim. Accordingly, there would be insufficient funds to allow for a return to priority creditors or unsecured creditors.

− Priority creditors would, in a liquidation scenario, have access to the FEG scheme which would see a payment to priority creditors.

− There are no prospects of a return to unsecured creditors under this DOCA proposal which could be possible in a liquidation scenario.

� Accordingly, the Administrators are unable to recommend that creditors vote to execute the Arowana DOCA.


Section 12 Estimated Outcome Statement


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







CBD Energy Group - Estimated Outcome Statement (DOCA)

Low $ High $ Low $ High $ Low $ High $ Low $ High $ Low $ High $

Assets Available (incl. DOCA contribution) 949,210 1,029,210 480,584 480,584 888,483 968,483 97,076 97,076 788,493 868,493

Priority Costs (526,899) (405,000) (170,000) (115,000) (526,899) (405,000) (170,000) (115,000) (526,899) (405,000)

Net Surplus/(Shortfall) of Assets for Priority Creditors 422,311 624,210 310,584 365,584 361,584 563,483 (72,924) (17,924) - -

Priority Creditors (389,284) (389,284) (306,011) (306,011) (457,234) (457,234) (423,570) (423,570) (499,367) (499,367)

Total Assets Available to Unsecured Creditors 33,027 234,926 4,573 59,573 - 106,248 - - (499,367) (499,367)

Unsecured Creditors (29,744,848) (29,744,848) (4,118,371) (4,118,371) (29,744,848) (29,744,848) (4,118,371) (4,118,371) (29,744,848) (29,744,848)

Net Surplus/(Shortfall) to Unsecured Creditors (29,711,821) (29,509,922) (4,113,798) (4,058,798) (29,744,848) (29,638,599) (4,118,371) (4,118,371) (43,895,791) (43,895,791)

Cash Dividend to Unsecured Creditors (cents) 0.11 0.79 0.11 1.45 - 0.36 - - - -

Share issue (subject to valuation & liquidity) (cents) 6.12 6.12 6.12 6.12 10.34 10.34 10.34 10.34 - -

Total Consideration for Unsecured Creditors (cents) 6.23 6.91 6.23 7.57 10.34 10.69 10.34 10.34 - -

DOCA - EEG (CBDE) DOCA - EEG (WHS) DOCA 3 - Arowana (CBDE)DOCA - BlueNRGY (CBDE) DOCA - BlueNRGY (WHS)

Estimated Outcome Statement – DOCA Proposals



� The above table provides a summary of the estimated return to creditors in the three DOCA scenarios. We have not received any DOCA proposals in relation CBD SL or KI Solar.

� A detailed EOS with explanations are provided as Appendix G.

� The potential recovery from actions available to the liquidator (such as preference recoveries or insolvent trading claims) are not available under a DOCA scenario. Please refer to Section 9 for details of these potential recoveries. Successful recovery of such claims could potentially provide a return to creditors, however, for the liquidators to pursue the claims, funding would be required and there would be no guarantee of success.

� Based on our assessment, the cash return to unsecured creditors under the BlueNRGY DOCA would be in the range of 0.11 to 0.79 of a cent in the dollar for CBDE and 0.11 to 1.45 of a cent in the dollar for WHS.

� As discussed in Section 11, BlueNRGY has offered a 9% shareholding in the combined business of BlueNRGY and CBDE which will be formed as part of the DOCA. Based on BlueNRGY's valuation of US$15 million (which has not been verified by the Administrators), the total potential return to unsecured creditors is 6.23 to 6.91 cents in the dollar for CBDE and 6.23 to 7.57 cents in the dollar for WHS creditors. This is contingent on the valuation of the business and the liquidity of the shares to allow unsecured creditors to monetise their shares.

� Creditors should note that the unsecured creditor claims includes the contingent UK bond holder claims totalling c. $15 million. A formal adjudication of these claims will be undertaken prior to the payment of a dividend.

� Whilst the EEG return to unsecured creditors based on the value of the shares (10.34 cents/$) appears on the face to significantly exceed the BlueNRGY proposal, we draw your attention to our comments regarding the EEG valuation methodology in the previous section.

� In particular, if the same valuation was used by EEG in determining the value of equity offered to unsecured creditors as used for raising external funding from its Thai investors, it would halve the values (10.34c/$) and reduce the amount to below the implied value of shares in the BlueNRGY offer (being 5.17c/$).


CBD Energy Group - Estimated Outcome Statement (Liquidation)

Low $ High $ Low $ High $ Low $ High $ Low $ High $

Non-Circulating Assets 185,818 266,818 - - 136,364 136,364 15,200 19,000

Priority Costs (150,600) (110,750) (45,000) (30,000) (20,000) (12,500) (19,780) (15,350)

Non-Circulating Assets available to secured creditor 35,218 156,068 - - 116,364 123,864 - 3,650

Secured Creditor (15,404,584) (15,404,584)

Net Surplus/(Shortfall) to Secured Creditor (15,369,366) (15,248,516) - - 116,364 123,864 - 3,650

Circulating Assets 1,522,886 2,522,886 2,789 2,789 3,509 3,509 - -

Priority Costs (616,899) (396,899) (135,000) (100,000) (15,000) (7,500) (12,500) (7,500)

Total Circulating Assets Available to Priority Creditors 905,987 2,125,987 - - - - - -

Priority Creditors (499,367) (499,367) (342,592) (342,592) - - - -

Total Circulating Assets Available to Secured Creditor 406,620 1,626,620

Secured Creditor Shortfall (15,369,366) (15,248,516)

Net Surplus/(Shortfall) to Secured Creditors (14,962,746) (13,621,896)

Assets available to unsecured creditors - - - - 104,873 119,873 - -

Unsecured Creditors (29,744,848) (29,744,848) (4,118,371) (4,118,371) (1,137,333) (1,137,333) (1,057,739) (1,057,739)

Net Surplus/(Shortfall) to Unsecured Creditors (29,744,848) (29,744,848) (4,118,371) (4,118,371) (1,032,460) (1,017,460) (1,057,739) (1,057,739)

Cash Dividend to Unsecured Creditors (c/$) - - - - 9.22 10.54 - -

Liquidation - CBDE Liquidation - WHS Liquidation - KI Solar Liquidation - CBD SL

Estimated Outcome Statement – Liquidation



� The above table provides a summary of the estimated return to creditors in a liquidation scenario for each entity.

� A detailed EOS and detailed explanations are provided as Appendix G.

� It is important to note that the value of certain interests and assets have been excluded from the liquidation scenarios in order not to prejudice commercial negotiations currently underway with interested parties. However, it is likely that the realisation of these assets and interests would not be sufficient to discharge the secured creditor's claim. Therefore, the return to unsecured creditors would not change.

� If the Companies are placed into liquidation, certain actions will available to the liquidator (such as preference recoveries or insolvent trading claims). Please refer to Section 9 for details of these potential recoveries. Successful recovery of such claims could potentially provide a return to creditors, however, for the liquidators to pursue the claims, funding would be required and there would be no guarantee of success. For these reasons, these contingent amounts have been excluded from the liquidation analysis at this time.

� Based on our analysis, there will be no return to unsecured creditors of CBDE, WHS and CBD SL in a liquidation scenario. It is estimated that unsecured creditors (intercompany loans) of KI Solar will receive a dividend of 9.2 to 10.5 cents in the dollar.

� Creditors should note that the unsecured creditor claims includes the contingent UK bond holder claims totalling c. $15 million. A formal adjudication of these claims will be undertaken prior to the payment of a dividend.


Section 13 Administrators' Recommendation


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Options available to creditors and Administrators recommendation

Administrators' Recommendation

Overview

� Pursuant to Section 439A(4)(d) of the Act, the Administrators are required to express an opinion whether it would be in the best interests of creditors of the Companies to:

− End the Administration; or

− Execute a DOCA; or

− Wind up the Companies.

Execute a DOCA

� The provisions of Part 5.3A of the Act allow the Companies and its creditors to negotiate a proposal to deal with the Companies' affairs and in such circumstances execute a DOCA.

� A DOCA is a flexible arrangement which is available to companies in Voluntary Administration. In order for a DOCA to be considered and put forward to creditors it must provide creditors with a greater return than that of Liquidation.

� We have received three DOCA proposals from BlueNRGY, EEG and Arowana respectively in respect of CBDE and WHS, details of which are provided in Section 11.

� The estimated return from the BlueNRGY DOCA proposal exceeds the return to unsecured creditors in a liquidation scenario.

� There is potential upside for unsecured creditors from the equity holding in the restructured business, offered as part of the DOCA proposal.

� Accordingly, the Administrators recommend that creditors of CBDE and WHS resolve to execute the BlueNRGY DOCA.

End the Administration

� Should creditors resolve to end the Administration, the Companies would be placed in a similar position to that which existed prior to our appointment (i.e. as if the Administration did not occur). Creditors would then have the option of pursuing their usual recovery actions against Companies such as court actions to obtain judgements, warrants of execution or even winding up the Companies.

� As the Companies are insolvent, we do not believe there would be any benefit to creditors in ending the Administration. The return of control of the Companies to the Directors would not be a satisfactory solution for creditors and is therefore not recommended.

The Companies be wound up

� Creditors may resolve to wind up the Companies which would result in Trevor Pogroske and Said Jahani being appointed Joint and Several Liquidators of the Companies.

� A winding-up would allow time for more detailed investigations into the Companies' financial affairs to be conducted and to prepare a report on their affairs and the conduct of the Companies officers to ASIC.

� In a Liquidation, eligible employees would be entitled to apply to FEG for payment of their outstanding employee entitlements (subject to limits and conditions).

� As no DOCA proposal in respect of CBD SL and KI Solar has been received, it is the Administrators' recommendation that creditors resolve for CBD SL and KI Solar to be wound up.

Recommendation

� The Administrators recommend that creditors of CBDE and WHS resolve to execute the BlueNRGY DOCA.

� The Administrators recommend that creditors of CBD SL and KI Solar resolve to wind up these companies.


Section 14 Remuneration and Second Meeting


02. Introduction



05. SCBPAF

06. Key Assets

07. Sale Process


09. Investigations







Company $

CBD Energy Limited 40,000

Westinghouse Solar Pty Ltd 10,000

Total Remuneration 50,000

Voluntary Administrators remuneration for the period 19 December 2014 to

the execution of the DOCA

Company $


CBD Solar Labs Pty Ltd 5,000




Voluntary Administrators remuneration for the period 10 December 2014 to

19 December 2014

Company $






Voluntary Administrators remuneration for the period 14 November 2014 to

9 December 2014

Remuneration

Remuneration and Second Meeting

Administrators’ remuneration

� The Voluntary Administrators remuneration is to be approved by the Companies' creditors.

Costs Approved to Date

� At the date of this report, no remuneration has been approved by creditors. At the forthcoming meetings of creditors we will be requesting creditors to approve the Administrators' remuneration.

� A copy of the IPA Creditor Information Sheet providing information on approval of remuneration can be found at: http://www.ipaa.com.au/user/docs/Information%20Sheets/Approving_fees_guide_for_creditors.pdf

Remuneration to be Approved

� The remuneration has been split into actual time incurred for the period 14 November 2014 to 9 December 2014, and the estimated remuneration for the period 10 December 2014 to 19 December 2014 (the time between issuing of this report and the second meeting of creditors).

� In addition creditors will be requested to approve the Administrators' future remuneration for the period between the second meeting and the execution of a DOCA (on the basis the DOCA proposal is accepted) and the future remuneration of the Liquidators should the Companies proceed into Liquidation.

� At the forthcoming meetings of creditors on 19 December 2014, creditors will be requested to approve our remuneration as follows:

� We note that these amounts exclude GST and disbursements.

� Detailed information on the calculation of remuneration and the Administrators request for remuneration is provided in the attached “Remuneration Report” at Appendix C.


Liquidators estimated future remuneration

Company $






Company $




Deed Administrators' estimated future remuneration

Remuneration


Staffing of Administration

� The Administrators’ staff team is structured such that tasks are completed by staff with the appropriate level of experience. Grant Thornton hourly charge out rates are included in Appendix D.

Remuneration to be Approved – Liquidation

� It will be necessary for creditors to approve the future remuneration of the Liquidators for the Liquidation, should creditors vote that the Companies be placed into Liquidation. The remuneration to be approved will be calculated on a time basis by applying the hours worked by the applicable charge out rate for the person involved. Our estimates are based on the calculations as detailed in Appendix C.

� Should creditors vote to place the Companies into Liquidation we will request creditors approve the following remuneration:

Remuneration to be Approved – DOCA

� It will be necessary for creditors to approve the drawing of remuneration for the Deed of Company Arrangement should creditors vote that CBDE and WHS execute a DOCA. The remuneration to be approved will be calculated on a time basis by applying the hours worked by the applicable charge out rate for the person involved. Our estimates are based on the calculations as detailed in Appendix C.

Administrators remuneration estimate of 14 November 2014

� In our initial report to creditors dated 14 November 2014 we estimated that the total remuneration for the Companies to the completion of the Voluntary Administrations would be in the range of $200,000 to $300,000 (excl. GST and disbursements). Due to factors beyond the Administrators control, we now estimate that the total remuneration to the close of the Voluntary Administration period to be in the range of $400,000 to $450,000 (excl. GST and disbursements).

� The key reason for the variance from that originally budgeted relates to :

− Additional work required to resolve the contractual disputes in relation to Chatham Island Wind Farm;

− Additional number of expressions of interest and information requests associated with the sale of the business;

− Negotiations and communication with NASDAQ, Australian solicitors and US based solicitors in relation to CBDE's current listing status, additional filings required, the notice of intention to de-list and the appeal process;

− Legal action commenced by a US based investor in the New York Courts;

− Thorough review of extensive intercompany loans between Group entities;

− Negotiations with PwC in relation to the audit of the Group and resolving the auditor position to comply with the NASDAQ listing rules;

− Negotiations with multiple parties in relation to DOCA proposals; and

− Review of projects/JV agreements that the Companies had an interest in and that the Administrators were not aware of at the date of appointment.

� Attached as Appendix C is a detailed summary of the work carried out to date and the future work required to finalise the Companies affairs.


Second Meeting of Creditors


Second meetings of creditors

� The second meetings of creditors are to be held at the office of Grant Thornton, Level 17, 383 Kent Street, Sydney NSW 2000 at 10:00am on Friday, 19 December 2014. Please arrive 30 minutes before hand to allow sufficient time for registration.

� The notice in regards to the meeting is enclosed as Appendix A.

� We advise that the Directors' SCBPAF will be available for the creditors to inspect 30 minutes prior to commencement of the creditors meeting.

� The meeting will be open to creditors for questions and general discussion. Should you wish to have us address any issue in detail please advise us prior to the meeting date. This will allow sufficient time to prepare a detailed response to your question.

� Please note that attendance at the meeting is not compulsory.

Telephone Attendance

� Should you not be able to attend the second meeting of creditors in person, creditors are invited to attend via telephone. In order to do so, you will be required to submit a proof of debt and proxy in favour of the party attending via telephone as detailed below.

� Please contact Kristen Street of this office at [email protected] no laterthan 10.00am on the business day prior to the meeting, being Thursday, 18 December 2014 to obtain dial in details.

Lodging of proofs of debt

� Should you not have already lodged a proof of debt, you are required to complete the proof of debt as attached as Appendix E.

Lodging of proxies

� Proxies lodged for the previous meeting are not valid for this meeting and therefore, new proxies need to be lodged to enable to vote at the second meeting. Please ensure that the proxies are signed under seal, where appropriate (if you are a company) and if the proxy is executed by a power of attorney, that a copy of the power of attorney is enclosed with the proxy form. The proxy form is enclosed as Appendix F.

� Proxies for the meeting can be lodged in the following ways:

− Post: to arrive no later than 10.00am on the business day prior to the meeting, being Thursday, 18 December 2014;

− Facsimile: to (02) 9299 4445 no later than 10.00am on the business day prior to the meeting, being Thursday, 18 December 2014;

− In Person: by person with a person attending the meeting; or

− Email: by email to [email protected] no later than 10.00am on the business day prior to the meeting, being Thursday, 18 December 2014.

� If proxies are lodged by facsimile or email, the law requires that the original proxy must be lodged with the Voluntary Administrators within 72 hours of lodging the faxed or emailed copy.

Contact details

� Should you have any queries in relation to any matter raised in this report then please do not hesitate to contact Kristen Street on (02) 8297 2643 or Jeff Marsden on (02) 8297 2584.

Yours faithfully

Trevor Pogroske Said Jahani

Joint and Several Administrator Joint and Several Administrator


Administrators' Section 439A Report - Second Report to Creditors

Appendices

Appendices

A. Notice of second meeting of creditors

B. DIRRI

C. Administrators' Remuneration Report

D. Grant Thornton Charge Out Rates at 1 July 2014

E. Formal Proofs of Debt

F. Proxy Forms



APPENDIX A: Notice of Second Meetings of Creditors


APPENDIX B: DIRRI


APPENDIX C: Administrators' Remuneration Report

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APPENDIX D: Grant Thornton Charge Out Rates at 1 July 2014


APPENDIX E: Formal Proofs of Debt

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APPENDIX G: Detailed Estimated Outcome Statement


CBD Energy Group - Estimated Outcome Statement (DOCA)

Note Low $ High $ Low $ High $ Low $ High $ Low $ High $ Low $ High $

Assets

King Island settlement 1 181,818 181,818 - - 181,818 181,818 - - 181,818 181,818

Intercompany Loans Receivable (KI Solar) 2 - 80,000 - - - 80,000 - - - 80,000

Cash at Bank on appointment 25,675 25,675 2,789 2,789 25,675 25,675 2,789 2,789 25,675 25,675

DOCA Contribution 3 741,717 741,717 477,795 477,795 680,990 680,990 94,287 94,287 581,000 581,000

Total Assets Available 949,210 1,029,210 480,584 480,584 888,483 968,483 97,076 97,076 788,493 868,493

Priority Costs

Estimated Trading Losses 4 (36,899) (36,899) - - (36,899) (36,899) - - (36,899) (36,899)

Voluntary Administrators' Fees & Disbursements 5 (350,000) (300,000) (100,000) (80,000) (350,000) (300,000) (100,000) (80,000) (350,000) (300,000)

Deed Administrators' Fees & Disbursements 6 (100,000) (75,000) (50,000) (25,000) (100,000) (75,000) (50,000) (25,000) (100,000) (75,000)

Estimated Legal Costs 7 (40,000) (30,000) (20,000) (10,000) (40,000) (30,000) (20,000) (10,000) (40,000) (30,000)

Total Priority Costs (526,899) (405,000) (170,000) (115,000) (526,899) (405,000) (170,000) (115,000) (526,899) (405,000)

Net Surplus/(Shortfall) of Assets for Priority Creditors 422,311 624,210 310,584 365,584 361,584 563,483 (72,924) (17,924) - -

Priority Creditors 8 (389,284) (389,284) (306,011) (306,011) (457,234) (457,234) (423,570) (423,570) (499,367) (499,367)

Total Assets Available to Unsecured Creditors 33,027 234,926 4,573 59,573 - 106,248 - - (499,367) (499,367)

Unsecured Creditors 9 (15,593,904) (15,593,904) (4,118,371) (4,118,371) (15,593,904) (15,593,904) (4,118,371) (4,118,371) (15,593,904) (15,593,904)

Contingent Creditor Claims 10 (14,150,943) (14,150,943) - - (14,150,943) (14,150,943) - - (14,150,943) (14,150,943)

Total Unsecured Creditors (29,744,848) (29,744,848) (4,118,371) (4,118,371) (29,744,848) (29,744,848) (4,118,371) (4,118,371) (29,744,848) (29,744,848)

Net Surplus/(Shortfall) to Unsecured Creditors (29,711,821) (29,509,922) (4,113,798) (4,058,798) (29,744,848) (29,638,599) (4,118,371) (4,118,371) (43,895,791) (43,895,791)

Cash Dividend to Unsecured Creditors (cent) 0.11 0.79 0.11 1.45 - 0.36 - - - -

Share issue (subject to valuation & liquidity) (cents) 6.12 6.12 6.12 6.12 10.34 10.34 10.34 10.34 - -

Total Consideration for Unsecured Creditors (cents) 6.23 6.91 6.23 7.57 10.34 10.69 10.34 10.34 - -

DOCA - BlueNRGY (WHS) DOCA - EEG (CBDE)DOCA - BlueNRGY (CBDE) DOCA 3 - Arowana (CBDE)DOCA - EEG (WHS)

G. Detailed Estimated Outcome Statement - DOCA

Appendices


G. Detailed Estimated Outcome Statement - DOCA

Appendices

Estimated Outcome Statement - Notes

Note Commentary

1. King Island Settlement � As discussed in Section 6 of our report, a settlement has been agreed with Hydro Tasmania in respect of the King Island solar project JV. As a result of the settlement, $136,364 will be paid to KI Solar and $181,818 will paid to CBDE.

2. Intercompany loans receivable � Subject to formal adjudication of the secured creditor's claim and CBDE's intercompany loan claim against KI Solar, we envisage that KI Solar will be in a position to declare a dividend to creditors, which could include a dividend to CBDE in respect of its intercompany loan account.

3. DOCA Contribution � Varying cash DOCA contributions have been proposed by the DOCA proponents. Please refer to Section 11 for further information.

4. Estimated Trading Losses � Based on the Administrators' cash flow forecast, CBDE will incur a trading loss of c. $37,000 in the Administration period, subject to there being no adjournment or extension of the Administration period.

5. Voluntary Administrators' Fees and Disbursements

� The Administrators are afforded a priority in respect of their remuneration and disbursements (subject to creditor approval). As discussed in our remuneration report (Appendix C), we estimate that the remuneration of the Administrators for CBDE and WHS will total between $380,000 and $450,000 (excl. GST and disbursements).

6. Deed Administrators' Fees and Disbursements

� In the event that creditors resolve to execute a DOCA, we will be seeking approval for prospective remuneration totalling $150,000.

7. Estimated Legal Costs � The Administrators have engaged Ashurst to provide legal advice and prepare the relevant legal documentation associated with theDOCA.

� We estimate that the total legal costs for general insolvency advice during the Administration and preparing and negotiating a DOCA will be in the range of $40,000 to $60,000.

8. Priority Creditors � The amount of priority creditors under each DOCA scenario varies depending on the indications provided by the DOCA proponents asto the employees retained in the restructured business.

9. Unsecured Creditors � The unsecured creditor balance is based on the books and records of the companies and proofs of debt received to date. It also includes intercompany creditors.

� All creditor claims will be subject to a formal adjudication process in the event that a dividend is paid.

10. Contingent Creditors � The Administrators anticipate receiving claims for the anticipated shortfall of the SEB bond holders under the corporate guarantee provided by CBDE.


CBD Energy Group - Estimated Outcome Statement (Liquidation)

Note Low $ High $ Low $ High $ Low $ High $ Low $ High $

Non-Circulating Assets

Plant and Equipment 1 4,000 5,000 - - - - 15,200 19,000

King Island settlement 2 181,818 181,818 - - 136,364 136,364 - -

Intercompany Loans Receivable (KI Solar) 3 - 80,000 - - - - - -

Interests in Other Assets 4 Withheld Withheld - - - - - -

Total Non-Circulating Assets 185,818 266,818 - - 136,364 136,364 15,200 19,000

Priority Costs

Realisation Costs (600) (750) - - - - (2,280) (2,850)

Voluntary Administrators' Fees & Disbursements 5 (90,000) (75,000) (30,000) (20,000) (10,000) (7,500) (10,000) (7,500)

Liquidators' Fees & Disbursements 6 (50,000) (30,000) (15,000) (10,000) (5,000) (2,500) (7,500) (5,000)

Estimated Legal Costs 8 (10,000) (5,000) - - (5,000) (2,500) - -

Total Priority Costs (150,600) (110,750) (45,000) (30,000) (20,000) (12,500) (19,780) (15,350)

Total Non-Circulating Assets available to secured creditor 35,218 156,068 - - 116,364 123,864 - 3,650

Secured Creditor (15,404,584) (15,404,584)

Net Surplus/(Shortfall) to Secured Creditor (15,369,366) (15,248,516) - - 116,364 123,864 - 3,650

Circulating Assets

Cash at Bank on appointment 22,886 22,886 2,789 2,789 3,509 3,509 - -

Accounts Receivable 9 1,500,000 2,500,000 - - - - - -

Other Potential Recoveries 11 Withheld Withheld Withheld Withheld Withheld Withheld Withheld Withheld

Liquidators' Rights of Action 12 Withheld Withheld Withheld Withheld Withheld Withheld Withheld Withheld

Total Circulating Assets 1,522,886 2,522,886 2,789 2,789 3,509 3,509 - -

Priority Costs

Estimated Trading Losses 13 (36,899) (36,899) - - - - - -

Voluntary Administrators' Fees & Disbursements 5 (260,000) (225,000) (70,000) (60,000) (5,000) (2,500) (5,000) (2,500)

Liquidators' Fees & Disbursements 6 (180,000) (90,000) (45,000) (30,000) (5,000) (2,500) (7,500) (5,000)

Estimated Legal Costs 8 (140,000) (45,000) (20,000) (10,000) (5,000) (2,500) - -

Total Priority Costs (616,899) (396,899) (135,000) (100,000) (15,000) (7,500) (12,500) (7,500)

Total Circulating Assets Available to Priority Creditors 905,987 2,125,987 - - - - - -

Priority Creditors 14 (499,367) (499,367) (342,592) (342,592) - - - -

Total Circulating Assets Available to Secured Creditor 406,620 1,626,620

Secured Creditor Shortfall (15,369,366) (15,248,516)

Net Surplus/(Shortfall) to Secured Creditors (14,962,746) (13,621,896)

Assets available to unsecured creditors - - - - 104,873 119,873 - -

Unsecured Creditors 15 (15,593,904) (15,593,904) (4,118,371) (4,118,371) (1,137,333) (1,137,333) (1,057,739) (1,057,739)

Contingent Creditor Claims 16 (14,150,943) (14,150,943) - - - - - -

Total Unsecured Creditors (29,744,848) (29,744,848) (4,118,371) (4,118,371) (1,137,333) (1,137,333) (1,057,739) (1,057,739)

Net Surplus/(Shortfall) to Unsecured Creditors (29,744,848) (29,744,848) (4,118,371) (4,118,371) (1,137,333) (1,137,333) (1,057,739) (1,057,739)

Cash Dividend to Unsecured Creditors (c/$) - - - - 9.22 10.54 - -

Liquidation - CBDE Liquidation - WHS Liquidation - KI Solar Liquidation - CBD SL

G. Detailed Estimated Outcome Statement - Liquidation

Appendices


G. Detailed Estimated Outcome Statement - Liquidation

Appendices


Note Commentary

1. Plant and Equipment � Value of the equipment is based on the liquidation value of the plant and equipment.

2. King Island Settlement � As discussed in Section 6 of our report, a settlement has been agreed with Hydro Tasmania in respect of the King Island solar project JV. As a result of the settlement, $136,364 will be paid to KI Solar and $181,818 will paid to CBDE.

3. Intercompany loans receivable � Subject to formal adjudication of the secured creditor's claim and CBDE's intercompany loan claim against KI Solar, we envisage that KI Solar will be in a position to declare a dividend to creditors, which could include a dividend to CBDE in respect of its intercompany loan account.

4. Interests in Other Assets � CBDE has a number of interests in subsidiaries and other assets, including:

� 100% equity interest in CBD Energy USA Ltd, which is a holding vehicle for the Group's USA based solar business;

� 100% equity interest in Westinghouse Solar Ltd, which is the UK based solar business;

� 100% equity interest in the Chatham Island Wind Farm;

� 10% equity interest in the Taralga Wind Farm project; and

� 100% equity interest in Parmac.

� In a liquidation scenario, the liquidator would seek to realise these assets and interests for the benefit of creditors. In order not to prejudice commercial negotiations currently underway with interested parties, we cannot comment on the value of these assets owned by CBDE.

5. Voluntary Administrators' Fees and Disbursements

� The Administrators are afforded a priority in respect of their remuneration and disbursements (subject to creditor approval). As discussed in our remuneration report (Appendix C), we estimate that the remuneration of the Administrators in dealing with both circulating and non-circulating assets of the four entities will total between $400,000 and $480,000 (excl. GST and disbursements).

6. Liquidators' Fees and Disbursements � In the event that the companies are placed into liquidation at the second meeting of creditors, we will be seeking approval for prospective remuneration totalling $315,000 across the four entities.

7. Estimated Legal Costs � The Administrators have engaged Ashurst to provide legal advice and prepare the relevant legal documentation associated with theDOCA.

� We estimate that the total legal costs for general insolvency advice during the Administration will be in the range of $40,000 to $60,000.

� Should the companies be placed into liquidation, the level of legal fees will depend on the courses of action pursued by the liquidators and the requirement to commence legal proceedings.



Appendices


Note Commentary

8. Accounts Receivable � The books of CBDE record a debtor of $2.5 million relating to deferred consideration on the sale of Larkden.

� The contract was entered into by a subsidiary of CBDE, CBD Labs Pty Ltd. Accordingly, the debtor will be required to be paid to this entity. However, given that this entity is dormant and does not have any creditors, the funds will likely flow up to CBDE as the sole shareholder.

� $1.5 million of the amount owing is fixed and the remaining balance of $1 million is contingent.

9. Other Potential Recoveries � Our initial investigations have identified a number of potential actions against the directors. At this stage we are not able to quantify the value of the potential claims or the likelihood of success and recovery (refer to Section 9).

10. Liquidators' Rights of Action � A liquidator has a number of rights of action against various parties in relation to antecedent transactions and breaches of theCorporations Act. These actions are only available in a liquidation scenario.

� Our initial investigations indicate that there may be a number of potential antecedent transactions that could be pursued in a liquidation (refer to Section 9). Should we be appointed liquidator, we will assess the merits of the claim and the cost-benefit to creditors.

11. Estimated Trading Losses � Based on the Administrators' cash flow forecast, CBDE will incur a trading loss of c. $37,000 in the Administration period, subject to there being no adjournment or extension of the Administration period.

12. Priority creditors � We estimate that priority claims in a liquidation will total $499,000 for CBDE and $343,000 WHS, subject to formal adjudication. This includes $240,000 advanced by WFF as a s560 advance to pay November and part of December wages.

13. Unsecured Creditors � The unsecured creditor balance is based on the books and records of the companies and proofs of debt received to date. It also includes intercompany creditors.

� All creditor claims will be subject to a formal adjudication process in the event that a dividend is paid.

14. Contingent Creditors � The Administrators anticipate receiving claims for the anticipated shortfall of the SEB bond holders under the corporate guarantee provided by CBDE.

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