independent auditors’ report in accordance with … · depreciation 1.484 1.283 amortization 235...
TRANSCRIPT
INDEPENDENT AUDITORS’ REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF 27 JANUARY 2010 To the sole shareholder of Building Energy SpA Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of the Building Energy Group, which comprise the statement of financial position as of 31 December 2016, the statement of comprehensive income, statement of changes in shareholders’ equity and statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the consolidated financial statements The directors of Building Energy SpA are responsible for the preparation of consolidated financial statements that give a true and fair view in compliance with International Financial Reporting Standards as adopted by the European Union. Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA Italia) drawn up pursuant to article 11 of Legislative Decree No. 39 of 27 January 2010. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The audit procedures selected depend on the auditor’s professional judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.
2 of 2
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Building Energy Group as of 31 December 2016 and of the result of its operations and cash flows for the year then ended in compliance with International Financial Reporting Standards as adopted by the European Union. Report on compliance with other laws and regulations Opinion on the consistency of the report on operations with the consolidated financial statements We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to express an opinion, as required by law, on the consistency of the report on operations, , which is the responsibility of the directors of Building Energy SpA, with the consolidated financial statements of the Building Energy Group as of 31 December 2016. In our opinion, the report on operations is consistent with the consolidated financial statements of the Building Energy Group as of 31 December 2016. Milan, 28 June 2017 PricewaterhouseCoopers SpA Signed by Giulio Grandi (Partner) This report has been translated into English from the Italian original solely for the convenience of international readers
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
BUILDING ENERGY GROUP
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31st, 2016
Registered Office VIA TORTONA 15, 20100 MILAN (MI). Share capital € 12,000,000.00 fully paid-in
Companies Registration Office No.: 09230261001 Economic and Administrative Register No. 1937961
www.buildingenergy.it
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
2
Consolidated Balance Sheet ............................................................................................................................... 4
Consolidated Comprehensive Income Statement ............................................................................................... 5
Consolidated Cash Flow Statement .................................................................................................................... 6
Statement of changes in Consolidated Shareholders’ Equity .............................................................................. 7
Explanatory Notes .............................................................................................................................................. 8
General information................................................................................................................................... 8
Summary of accounting principles ............................................................................................................. 8
Accounting standards approved by the European Union, but not yet applied and adopted in advance by
the Group ................................................................................................................................................. 22
Accounting standards not yet approved by the European Union ............................................................ 24
Accounting standards approved by the European Union although applicable in subsequent years. ...... 25
Risks and uncertainties .................................................................................................................................... 27
Financial risk management ...................................................................................................................... 27
Classification of financial assets and liabilities ......................................................................................... 30
Notes to the Consolidated Balance Sheet ......................................................................................................... 31
Assets ........................................................................................................................................................... 31
1. Property, plant and equipment ........................................................................................................ 31
2. Intangible assets .............................................................................................................................. 33
3. Goodwill ........................................................................................................................................... 34
4. Investments measured under the equity method ........................................................................... 34
5. Deferred tax assets .......................................................................................................................... 39
6. Other non-current assets ................................................................................................................. 40
7. Inventories ....................................................................................................................................... 40
8. Trade receivables ............................................................................................................................. 41
9. Other current receivables ................................................................................................................ 41
10. Cash and cash equivalents ........................................................................................................... 42
11. Non-current assets for sale .......................................................................................................... 42
12. Shareholders` Equity .................................................................................................................... 43
Liabilities ...................................................................................................................................................... 44
13. Bank and other lenders ................................................................................................................ 44
14. Other payables and non-current liabilities ................................................................................... 47
15. Trade payables, taxes and other non-current liabilities ............................................................... 48
Income Statement ....................................................................................................................................... 49
16. Revenues ...................................................................................................................................... 49
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
3
17. Operating costs ............................................................................................................................ 50
18. Net financial income/(charges) .................................................................................................... 52
19. Income taxes ................................................................................................................................ 53
20. Other comprehensive income items ............................................................................................ 54
Other information ............................................................................................................................................ 55
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
4
Consolidated Balance Sheet
(Euro/thousand) notes 31st Dec 2016 31st Dec 2015
Property, plants and equipment 1 98.099 36.420
Intangible as s ets 2 26.827 21.759
Goodwi l l 3 400 400
Inves tments valued by the equity method 4 13.239 14.112
Inves tments in subs idiaries (0) 1
Deferred taxes 5 2.129 1.951
Other non-current ass ets 6 7.648 9.020
Total non-current assets 148.342 83.663
Wip
Inventories 7 35 80
Trade and other receivables 8 2.639 5.553
Current financi a l ass ets 9 310 51
Derivatives - -
Other current as s ets 9 1.505 2.050
Accrua ls and prepayments 9 2.645 579
Tax receivabl es 9 2.728 2.189
Cas h and cas h equivalents 10 3.783 9.894
Total current assets 13.646 20.396
Non current as set avai lable for s a le 11 1.493 1.493
Non current asset available for sale 1.493 1.493
TOTAL ASSETS 163.481 105.553
Share capita l 12 12.000 12.000
Share premium reserves 12 17.020 17.020
Res erves and retai ned earnings 12 (3.934) 8.457
Profi t/(los s ) of the period 12 (6.589) (9.748)
TOTAL GROUP SHAREHOLDERS’S EQUITY 18.498 27.728
Equity of non-control l ing interes t 12 7.086 2.018
Profi t/(los s ) of non-control l ing interes t 12 383 237
TOTAL EQUITY 25.966 29.983
Debt towards banks and other lenders > 1y 13 57.331 49.627
Deferred tax 14 1.617 197
Sta ff related funds 14 612 601
Provi s ions for ri s ks 14 386 190
Other non current l iabi l i ties 1 -
Total non-current liabilities 59.947 50.615
Debi ts towards banks and other lenders < 1y 13 38.655 5.979
Trade and other payables 15 27.544 12.626
Tax l iabi l i ties 15 3.316 1.824
Accrua ls and deferrals 15 391 299
Advances 15 3.269 11
Other current l iabi l i ties 15 4.393 4.215
Total current liabilities 77.567 24.954
TOTAL LIABILITIES 137.515 75.569
TOTAL LIBILITIES AND EQUITY 163.481 105.553
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
5
Consolidated Comprehensive Income Statement
(Euro/thousand) notes 31st Dec 2016 31st Dec 2015
Revenues 16 5.473 8.374
Cha nges in work in progress 16 - 0
Other opera ting income 16 1.756 1.344
Increase in a ssets for internal work 16 10.596 8.635
Ra w materia l s , semi -finished and finished products 17 (123) (86)
Costs of services 17 (12.282) (10.714)
Personnel 17 (7.188) (7.330)
Other opera ting costs 17 (637) (1.046)
Deprciation, amorti sation and provi s ions 17 (2.731) (5.730)
Operating result (5.135) (6.554)
Capita l ga ins/losses 18 (127) 0
Financia l income a nd charges 18 1.359 (3.554)
Sha re of resul t from pa rtecipa ting interests valued by the equity method 18 (788) 749
Result before tax (4.691) (9.358)
Tax 19 (1.514) (153)
Result of the year (6.206) (9.511)
Result attributable to the Group (6.589) (9.748)
Result attributable to Thi rd Parts 383 237
Other components of comprehens ive income s ta tement
Conversion reserve 20 (872) 569
Sha re of other comprehens ive income components of investments accounted by the equi ty method - 93
Total of other comprehensive income (872) 662
Net result of the year (7.078) (8.849)
Net result of the year a ttributa ble to the Group (7.461) (9.086)
Net result of the year a ttributa ble to minorities 383 237
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
6
Consolidated Cash Flow Statement
(Euro/thousand) 31st Dec 2016 31st Dec 2015
Profit (loss) before income taxes, interest, dividends and gains/loss on disposal) (1.528) (8.112)
Profit (loss ) (6.206) (9.511)
Current income taxes 209 581
Deferred taxes 1.305 (428)
Interest (income)/charges 3.163 1.258
(Dividend) -
(Capi ta l Ga in)/capita l los s from as set di spos a l (12)
Cash flow before changes in net working capital 7.674 7.721
Provis ion 78 45
Staff related provis ion 247 432
Impairment 1.108
Depreciation 1.484 1.283
Amorti zation 235 4.403
Other adjustments for non-cas h i tems - (749)
Convers ion adjus tment 4.522 2.308
Cash flow after changes in net working capital 17.368 980
Decrease/(increas e) in inventories 45 16
Decrease/(increas e) in receivables 2.914 (6.870)
Increas e/(decrease) in trade payables 10.396 5.981
Decrease/(increas e) in prepayments (2.067) 457
Increas e/(decrease) in prepayments 92 1.615
Other changes in net working capita l 5.987 (219)
Cash flow after other adjustments (1.286) 2.962
Other adjustments 2.189 2.367
Cas hed interest income/(charges) (3.407) (267)
Cas hed dividend 862
Ris k provis ion di spos a l (69)
A) Cash flows from operating profit (indirect method) 22.227 3.552
cash flows from investing activities
Fixed assets (63.163) (18.126)
(Inves tment) (63.163) (18.126)
Dispos a l
Intangible asset (6.412) (12.056)
(Inves tment) (6.412) (12.056)
Dispos a l
Financial asset 874 (1.760)
(Inves tment) 874 (267)
(Inves tment in as set for s a le) (1.493)
Dispos a l -
Current Financial asset (259) (129)
(Inves tment) (259) (129)
Dispos a l
Acquisition or disposal of subsidiaries or other business units net of cash and cash equivalents -
B) Cash flows from investing activities (68.960) (32.071)
C. Cash flows from financing activities
third part sources 40.623 34.859
Increas e current l iabi l i ties to banks 7.948 1.499
New funds 34.706 33.842
Refunds (2.031) (482)
Group sources - -
Capi tal increase -
Dispos a l (purchase) of Treas ury s hares -
Dividends (and advance payments on dividends) pa id -
C) Cash flows from financing activities 40.623 34.859
0
Increase (decrease) in cash (6.110) 6.339
0
Cas h ava i lable at beginning of the year 9.894 3.555
Cas h ava i lable at the end of the year 3.783 9.894
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
7
Statement of changes in Consolidated Shareholders’ Equity
(Euro Thousand)Equity
Share premium
reserve
Translation
reserv eHedging reserv e Retained earnings O ther reserv es Result of the year Third part Equity
Dec ember, 31st 2014 12.000 17 .020 3 40 7 .888 922 (2 .344) 35.528 1.175 36.704
Share capital increase - - - -
Tota l transaction with shareho lders - - - - - - - - - -
Result of the year (9.748) (9.748) 237 (9.512)
Allocation of previous year result (2.344) 2.344 - -
Translation reserve 582 582 145 727
Result of investment evaluated for using the equity method -
Tota l resu lt o f the year - - 581,57 - (2 .344 ,05) - (7 .404) (9 .167) 382 (8 .785)
Change in consolidation scope 10 10 508 518
Other variatuion of Reisa' reserves 308 308 308
Altre variazioni riserve 241 808 1.049 190 1.240
Total o ther changes - - 308 251 808 - 1 .367 698 2 .065
Dec ember, 31st 2015 12.000 17 .020 584 348 5 .795 1.730 (9 .748) 27.728 2.255 29.983
Share capital increase - - - -
Total o f dea l with shareho lders - - - - - - - - - -
Result of the year (6.589) (6.589) 383 (6.206)
Allocation of previous year result (9.748) 9.748 - -
Translation reserve (872) (872) 21 (852)
Result of investment evaluated for using the equity method -
Tota l resu lt o f the year - - (872 ,29) - (9 .748 ,47) - 3 .160 (7 .461) 404 (7 .057)
Change in third part equity for sale of shares 4.823 4.823
Cahnge in consolidation area (1.834) (1.834) (1.834)
Other changes (0) (479) 543 66 13- 52
Total o ther changes - - - (0 ) (479) (1 .290) - (1 .768) 4 .810 3 .042
Dec ember, 31st 2016 12.000 17 .020 (288) 347 (4 .433) 439 (6 .589) 18.499 7.469 25.966
Group
Shareholders'
Equity
Total Equity
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
8
Explanatory Notes
General information
Building Energy S.p.A. (hereafter “BE” or “Be S.p.A.) and
its subsidiaries (the Group) are engaged in Italy and
Overseas in the development, construction,
management and maintenance of renewable power
generation plant, drawing on specialised know-how
throughout all phases of renewable energy creation:
from initial development to engineering and project
design and from financial structuring to construction
and management, principally on its own behalf. The
Group has operated in Italy since the end of 2010 (and
since 2011 on the international market) through an
investment and partnership programme with leading
institutional investors involved in the construction of
renewable energy power plant; in the last three-year
period, the group stepped up its investment on
international markets with the setting up of new
subsidiaries (sub-holdings and special purpose vehicles
– “SPV’s”) on almost all continents. The Group’s
financial position and overall operating performance,
significant events after year-end, transactions with
related parties, Group activities, in addition to the
outlook, are illustrated in the Directors’ Report.
The Directors’ Report outlines the actions taken by
management to overcome the liquidity problems
existing at 31/12/2016. These particularly include the
drafting of strategic agreements to guarantee the
funding necessary for the development of operations in
North America and in South Africa and the proposed
issue of a convertible bond loan of Euro 100 million,
currently in an advanced state of preparation.
BE is a company subject to the laws of the Italian
Republic. The share capital, subscribed and paid-in,
amounts to Euro 12,000,000 and comprises 12,000,000
ordinary shares with a nominal value of Euro 1.00 each.
The sole shareholder is Building Energy Holding S.p.A.,
which holds 100% of the shares subscribed. The
registered office of the company is in Milan, via Tortona
No. 15.
Summary of accounting principles
The main accounting principles adopted in the
preparation of the Group consolidated financial
statements are reported below. These principles were
applied consistently for all the periods presented in this
document.
Basis of preparation
European Regulation (EU) No. 1606/2002 of July 19,
2002 introduced the obligation, from the year 2005, to
apply International Financial Reporting Standards
(“IFRS”) issued by the International Accounting
Standards Board (“IASB”) and adopted by the European
Union (“EU IFRS” or “International Accounting
Standards”) for the preparation of the consolidated
financial statements of companies listed on regulated
European markets. Following the above-mentioned
European Regulation, Legislative Decree No. 38 was
enacted on February 28, 2005 which governs the option
to apply IFRS for the preparation of the consolidated
financial statements of non-listed companies. BE
decided to apply this option for the preparation of the
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
9
consolidated financial statements commencing for the
year ended December 31, 2013. The present
consolidated financial statements were prepared in
accordance with EU IFRS in force at their approval date.
The term EU IFRS includes all of the International
Financial Reporting Standards, all of the International
Accounting Standards and all of the interpretations of
the International Financial Reporting Interpretations
Committee (“IFRIC”), previously called the Standing
Interpretations Committee (“SIC”), approved and
adopted by the European Union. The EU IFRS were
applied consistently for all the periods presented in this
document. The consolidated financial statements were
prepared on the basis of the best information on the EU
IFRS and taking into account best practice; any further
orientations and interpretative updates will be reflected
in subsequent years, in accordance with the provisions
of the accounting standards. The consolidated financial
statements were prepared in accordance with the
historical cost convention, except for the measurement
of financial assets and liabilities where the obligatory
application of the fair value criterion is required
(payment for which an asset may be exchanged or a
liability settled, among knowledgeable and available
parties, in a transaction between third parties)
according to the going concern principle. These
consolidated financial statements were approved by the
Board of Directors of the company on June 20, 2017.
Form and content of the financial statements
In relation to the presentation of the consolidated
financial statements, the Group has chosen the
following options:
- the current and non-current assets and current
and non-current liabilities are presented as
separate classifications in the Balance Sheet;
- the Consolidated Statement of Comprehensive
Income classifies costs and revenues by nature;
- the Consolidated Cash Flow Statement is
presented based on the indirect method.
The Group chose to prepare the statement of
comprehensive income which includes, in addition to
the result for the period, also the changes to equity
relating to income items which, in accordance with
International Accounting Standards, are recognised
under equity items. The financial statements utilised, as
outlined above, are those which best represent the
result, equity and financial position of the Group. The
present financial statements are prepared in Euro (the
operational currency of the Group). All the amounts
reported in the financial statements and in the tables
within the explanatory notes are expressed in thousands
of Euro, unless otherwise indicated. These financial
statements were audited by PricewaterhouseCoopers
S.p.A., auditor of the Company and of the Group.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
10
Consolidation scope and changes in the year
The present consolidated financial statements include
the financial statements for the year ended December
31, 2016 of the Parent Company Building Energy S.p.A.,
prepared by the Board of Directors, and the financial
statements of the subsidiaries prepared by the
respective Board of Directors or where available, the
financial statements approved by the respective
Shareholders’ Meetings. These financial statements
were adjusted, where necessary, in accordance with EU
IFRS. The companies included in the consolidation scope
at December 31, 2016, including details of the share
capital, holding and consolidation method utilised for
the preparation of the Group consolidated financial
statements, are reported in Attachment 1 to the present
document. At the end of the above-mentioned
attachment we report the investments not consolidated
as their inclusion would be insignificant in relation to the
result, equity and financial position of the Group, as the
majority of these companies are non-operative.
Basis of Consolidation
The main criteria adopted by the Group for the definition of the consolidation scope and the relative consolidation
principles are illustrated below.
Subsidiaries
Subsidiaries are those companies in which the Group
has the power to determine, directly or indirectly, the
financial and operating policies and to obtain the
relative benefits. Control is exercised either through
directly or indirectly holding a majority of voting rights
or based on contractual or legal agreements, without
reference to the holding in the company. The existence
of potential exercisable voting rights at the reporting
date is considered in order to determine control.
Control is generally presumed when the Group holds,
directly or indirectly, more than half of the voting rights.
Subsidiaries are consolidated under the line-by-line
method from the date control is effectively transferred
to the Group, and cease to be consolidated from the
date on which control is transferred outside the Group.
The criteria adopted for line-by-line consolidation were
as follows:
- the assets and liabilities and the charges and
income of the companies fully consolidated are
recorded line-by-line, attributing to the
minority shareholders, where applicable, the
share of the net equity and net result for the
period pertaining to them. Minority interests
are reported separately under consolidated
equity and in the consolidated income
statement;
- the significant gains and losses, with the
relative fiscal effect, deriving from operations
between fully consolidated companies and not
yet realised with third parties, are eliminated,
except for losses which are not eliminated
where the transaction indicates a reduction in
the value of the asset transferred. The effects
deriving from reciprocal payables and
receivables, costs and revenues, as well as
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
11
financial income and charges are also
eliminated if significant.
Associated companies
Associated companies are companies over which the
Group has significant influence, which is presumed to
exist when between 20% and 50% of voting rights are
held. The investments in associated companies are
valued under the equity method and are initially
recorded at cost. The equity method is as described
below:
- the book value of these investments are in line
with the net equity adjusted, where necessary,
to reflect the application of IFRS and includes
the recording of the higher value attributed to
the assets and liabilities and to any goodwill,
identified on acquisition;
- the profits and losses pertaining to the Group
are recognised when the significant influence
begins and until the significant influence
ceases to exist. In the case where, due to
losses, the company valued under this method
indicates a negative net equity, the carrying
value of the investment is written down and
any excess pertaining to the Group, where this
latter is committed to comply with legal or
implicit obligations of the investee, or in any
case to cover the losses, is recorded in a
specific provision; the equity changes of the
companies valued under the equity method,
not recorded through the income statement,
are recorded directly as an adjustment to
equity reserves;
- the unrealised gains, generated on
transactions between the Parent Company and
the investee valued under the equity method,
are eliminated based on the share pertaining to
the Group in the investee; the unrealised losses
are eliminated, except when they represent a
reduction in value.
Joint Arrangements
Joint arrangements are agreements based on rights and
obligations deriving from a contract. They are broken
down between joint ventures and joint operations. Joint
ventures are companies based on joint control
agreements in which the participants have a right to a
share of the net assets or the result deriving from the
agreement. Joint ventures are measured under the
equity method. Joint operations are agreements in
which the parties share joint control of the agreement
and have rights to the assets and liabilities arising from
the contract. The joint operations are consolidated
based on the assets, liabilities, revenues and costs
arising from the rights and obligations of the contract.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
12
Business combinations
Business combinations are recognised according to the
acquisition method. According to this method:
- the amount transferred to a business
combination is valued at fair value, calculated
as the sum of the fair value of the assets
transferred and the liabilities assumed by the
Group at the acquisition date and of the equity
instruments issued in exchange for control of
the company acquired. Accessory charges to
the transaction are recorded to the income
statement when they are incurred;
- at the acquisition date, the identifiable assets
acquired and the liabilities assumed are
recorded at fair value at the acquisition date;
exceptions to this are the deferred tax assets
and liabilities, employee benefit assets and
liabilities, liabilities or equity instruments
relating to share-based payments of the entity
acquired or share-based payments relating to
the Group issued in replacement of the
contracts of the entity acquired, and the assets
(or group of assets and liabilities) held-for-sale,
which are instead valued according to the
applicable standard;
- goodwill is calculated as the excess of the
amounts transferred to the business
combination, of the value of minority interests’
net equity and the fair value of any holding
previously held in the acquired company
compared to the fair value of the net assets
acquired and liabilities assumed at the
acquisition date. If the value of the net assets
acquired and the liabilities assumed at the
acquisition date exceeds the sum of amounts
transferred, of any minority interest and the
fair value of any holding previously held in the
acquired company, this excess is immediately
recorded to the income statement as income
deriving from the transaction concluded;
- any amount subject to conditions established
by the business combination contract are
valued at fair value at the acquisition date and
included in the value of the amounts
transferred to the business combination for
the determination of goodwill.
In the case of business combinations undertaken in a
series of phases, the holding previously held in the
acquired entity is revalued at fair value at the acquisition
of control date and any profit or loss is recorded to the
income statement. If the initial values of a business
combination are incomplete at the period-end in which
the business combination took place, the Group reports
in its consolidated financial statements the provisional
values of the items for which the final calculations could
not be made. These provisional values are adjusted in
the measurement period to take account of the new
information obtained on the facts and circumstances
existing at the acquisition date which, if known, would
have had effects on the value of assets and liabilities
recognised at this date.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
13
Translation of foreign companies' financial statements
The financial statements of subsidiaries are prepared in
the primary currency in which they operate. The rules
for the translation of financial statements of companies
which operate in a currency other than the Euro are as
follows:
- the assets and the liabilities were translated
using the exchange rate at the reporting date;
- the costs and revenues are translated at the
average exchange rate for the period;
- the “translation reserve” recorded within the
Statement of Comprehensive Income, includes
both the currency differences generated from the
translation of foreign currency transactions at a
different rate from that at the reporting date and
those generated from the translation of the
opening shareholders’ equity at a different rate
from that at the reporting date.
The subsidiaries with operational currency other than
the Euro included in the consolidation scope at
December 31, 2016 are listed in the Directors’ Report.
The exchange rates utilised for the conversion of these
financial statements are shown in the table below:
Foreign currency transactions
Transactions in currencies other than the Euro are
recognised at the exchange rate at the date of the
transaction. Assets and liabilities denominated in
currencies other than the Euro are subsequently
adjusted to the exchange rate at the reporting date.
Exchange differences are recognised to the income
Currency 2016 2015
Rand (ZAR) 16,26 14,17
U.S. Dollar (USD) 1,11 1,11
Japanese Yen (JPY) 120,20 134,31
Serbian Dinar (RSD) 123,11 120,69
Zambian Kwacha (ZMW) 11,40 9,56
Balboa (PAB) 1,11 1,11
Chilean Peso (CLP) 748,48 726,41
Croatian kuna (HRK) 7,53 7,61
Ugandan Shill ing (UGX) 3782,52 3.601,17
at December 31st at December 31st
Currency 2016 2015
Rand (ZAR) 14,46 16,95
U.S. Dollar (USD) 1,05 1,09
Japanese Yen (JPY) 123,40 131,07
Serbian Dinar (RSD) 123,40 121,45
Zambian Kwacha (ZMW) 10,43 11,94
Balboa (PAB) 1,05 1,09
Chilean Peso (CLP) 704,95 772,71
Croatian kuna (HRK) 7,56 7,64
Ugandan Shill ing (UGX) 3798,57 3.679,68
Average value of the period
currency amount for 1 Euro
Value as of the date of the consolidated financial statement
currency amount for 1 Euro
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
14
statement. Non-monetary assets and liabilities
denominated in currencies other than the Euro are
recorded at historical cost, utilising the exchange rate on
the initial recording of the transaction.
Financial year of the consolidated financial statements
The financial year of the consolidated financial
statements (concluding December 31, 2016) coincides
with the financial year of the parent company and all of
the companies included in the consolidated financial
statements. For the following companies, classified as
joint ventures, the financial year-end is as follows:
WBHO/Building Energy LTD (Pty): June 30; Renewable
Energy Solution (LTD): October 31, they were measured
under the equity method through the preparation of
accounts at the date of the consolidated financial
statements.
Accounting policies
Property, plant and equipment
Property, plant and equipment are measured at
purchase or production cost, net of accumulated
depreciation and any loss in value. The cost includes
charges directly incurred for bringing the asset to a
condition for use, as well as dismantling and removal
charges which will be incurred under contractual
obligations which require the asset to be returned to its
original condition. Borrowing costs that are directly
attributable to the acquisition, construction or
production of a qualifying asset pursuant to IAS 23 and
IAS 16 are capitalised as part of the cost of that asset.
The expenses incurred for the maintenance and repairs
of an ordinary and/or cyclical nature are directly
charged to the income statement when they are
incurred. The capitalisation of costs relative to the
expansion, modernisation or improvement of the
structural elements whether owned or leased, is solely
made within the limits established to be separately
classified as assets or part of an asset. The property,
plant and equipment held through finance lease
contracts, where the majority of the risks and rewards
related to the ownership of an asset have been
transferred to the Group, are recognised as assets of the
Group at their fair value or, if lower, at the present value
of the minimum lease payments, including any
redemption amounts to be paid. The corresponding
liability due to the lessor is recorded in the financial
statements under financial payables. The assets are
depreciated applying the same criteria and rates as
indicated below for the other tangible assets, except
where the duration of the lease contract is lower than
the useful life and there is not a reasonable certainty of
the transfer of ownership of the asset at the normal
expiry date of the contract; in this case, the depreciation
is over the duration of the lease contract. The leased
assets where the lessor bears the majority of the risks
and rewards related to an asset are recorded as
operating leases. Costs related to operating leases are
recognised on a straight-line basis over the duration of
the lease. Depreciation is charged on a straight-line
basis, which depreciates the asset over its useful life.
The useful life of property, plant and equipment and
their residual value are reviewed and updated, where
necessary, on the preparation of the financial
statements. The useful life estimated by the Group for
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
15
the various categories of property, plant and equipment
are as follows:
Goodwill
Goodwill is calculated as the excess of the amounts
transferred to the business combination, of the value of
minority interests’ net equity and the fair value of any
holding previously held in the acquired company
compared to the fair value of the net assets acquired
and liabilities assumed at the acquisition date. If the
value of the net assets acquired and the liabilities
assumed at the acquisition date exceeds the sum of
amounts transferred, of any minority interest and the
fair value of any holding previously held in the acquired
company, this excess is immediately recorded to the
income statement as income. Goodwill is not amortised,
but is subject to an impairment test at least annually.
This test is made with reference to the “cash generating
unit” or “CGU” to which the goodwill is attributed. A
reduction in the value of the goodwill is recorded when
the recoverable value of the goodwill is lower than the
carrying value. The recoverable value is the higher
between the fair value of the CGU, less costs to sell, and
its value in use. Goodwill may not be restated in
subsequent years. When the reduction in value deriving
from the test is higher than the value of the goodwill
allocated to the CGU the residual amount is allocated to
the assets included in the CGU, in proportion to their
carrying value. The test is carried out at least annually,
or whenever there is an indication of loss in value.
Other intangible assets
An intangible asset is a non-monetary asset, identifiable
and without physical substance, controllable and
capable of generating future economic benefits. These
assets are recorded at purchase and/or production cost,
including the costs of bringing the asset to its current
use, net of accumulated amortisation, and any loss in
value. The costs strictly associated to the development
and design for the construction of renewable energy
plant are capitalised under intangible assets in progress
where all the conditions required for their capitalisation
are satisfied; in addition, financial charges incurred
during development as per IAS 23 are capitalised. When
the plant commences operation these costs are
reclassified to increase the value of the plant and are
depreciated over the useful life of the plant. In the case
of the impossibility to complete construction or where a
significant amount of time has passed since their
expenditure, these costs are expensed to the income
Rate %
Photovoltaic plants from 4% to 5%
Other fixed assets from 6% to 20%
Improvements on third party assets lesser of the remaining term of the contract
and the useful l ife of the asset
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
16
statement. Amortisation begins when the asset is
available for use and is recognised on a straight-line
basis in relation to the residual possibility of use and
thus over the estimated useful life of the asset. The
estimated useful life for the Group of the various
categories of intangible fixed assets is as follows:
Impairment of property, plant and equipment and intangible assets
At each reporting date, property, plant and equipment
and intangible assets not fully depreciated or amortised
are analysed in order to identify any indications of a
reduction in value. Where such indicators exist, an
estimate of the recoverable value of these assets is
made, recording any write-down compared to the book
value to the income statement. The recoverable value
of an asset is the higher between the fair value, less
costs to sell, and its value in use, where this latter is the
fair value of the estimated future cash flows for this
asset. For an asset that does not generate sufficient
independent cash flows, the realisable value is
determined in relation to the cash-generating unit to
which the asset belongs. In defining the value in use, the
expected future cash flows are discounted utilising a
discount rate that reflects the current market
assessment of the time value of money, and the specific
risks of the activity. A reduction in value is recognised to
the income statement when the carrying value of the
asset is higher than the recoverable amount. When the
reasons for the write-down no longer exist, the book
value of the asset is restated through the income
statement, up to the value at which the asset would be
recorded if no write-down had taken place and
amortisation had been recorded.
Financial assets
Rate %
Patent, trade marks 5,56%
Software 33,33%
Other long term costs 20,00%
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
17
a) Classification
The Group classifies financial assets in the following
categories: “loans and receivables” and “assets
available-for-sale”. Classification depends on the
purpose for which the financial asset was acquired.
Classification of financial assets is made on their initial
recognition.
Loans and receivables are non-derivative financial assets
with fixed or determinable payments, which are not
listed on an active market. These financial assets are
classified under current assets if they mature within 12
months, otherwise they are classified under non-current
assets. Loans and receivables of the Group include the
accounts “trade receivables”, “other receivables and
current and non-current assets” and “cash and cash
equivalents”.
Assets held-for-sale are non-derivative financial assets,
specifically designated to this category by the Group and
which do not fall under any other financial asset
category according to International Accounting
Standards. They are included under non-current
financial assets unless the financial asset has matured or
management intends to dispose of them within 12
months from the reporting date.
b) Recognition and measurement
Financial assets are initially recognised at fair value,
including any accessory costs, with the exception of
financial assets measured at fair value recorded through
P&L where the accessory costs are recorded to the P&L
on initial recognition.
Subsequent to initial recognition, loans and receivables
are measured at amortised cost using the effective
interest rate method and subject to verifications for
reductions in value.
Subsequent to initial recognition, assets available-for-
sale are recognised at fair value. Gains and losses on
financial assets available-for-sale are recognised in the
statement of comprehensive income.
The accounting elimination of a financial asset from the
balance sheet is generally permitted where:
- the cash flows from the financial asset have
been transferred or have ceased; and
- all of the risks and rewards of ownership of the
financial asset have been transferred.
c) Impairments
The Group assesses at each reporting date whether a
financial asset or a group of financial assets have
incurred a loss in value. A financial asset or group of
financial assets has incurred a loss in value and must be
written-down only if there is an clear indication of a loss
in value as a result of one or more events occurring after
the initial booking of the asset and which has had an
impact, reliably estimated, on the future cash flows
generated. The loss in value of the assets may result
from the following circumstances:
- significant financial difficulties of the debtor;
- breach of contracts or failure to pay interest or
capital;
- the creditor, due to economic or legal reasons
relating to the financial difficulties of the
debitor, extends to the debtor a concession
which would not otherwise have been granted;
- it is probable that the debtor will be declared
bankrupt or subject to administrative
procedures; or
- elimination of an active market for the financial
assets.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
18
With reference to the financial assets classified under
“loans and receivables”, the amount of the loss is equal
to the difference between the book value of the asset
and the present value of the expected future cash flows
utilising the original effective interest rate of the
instrument. The book value of the asset is reduced
directly or through the creation of a write-down
provision. The amount of the loss is recognised in the
income statement.
In the case of “assets available-for-sale”, where there is
a significant and prolonged loss in the value of the asset,
the accumulated loss, initially recognised under other
items of the statement of comprehensive income, must
be reversed from the other items of the statement of
comprehensive income and recognised through the
income statement. The amount of the loss is the
difference between the cost and the fair value of the
financial instrument.
Inventories
Inventories are recorded at the lower of purchase or
production cost and realisable value represented by the
amount that the Group expects to obtain from their sale
in the normal course of operations. The cost of
inventories is calculated applying the specific cost
method.
Cash and cash equivalents
Cash and cash equivalents includes cash, bank current
accounts and deposits on demand and other highly
liquid short-term financial investments, readily
convertible into cash, that is transferable into cash
within 90 days from the original acquisition date, and
that do not have a significant risk of a change in value.
Shareholders’ Equity
Share capital This represents the value of capital
contributions by the shareholders.
Share premium reserve This comprises the amounts
received by the company for the issue of shares above
their nominal value.
Other reserves This refers to common reserves which
may be allocated on a general or specific basis. Normally
they are not different from the previous years.
Retained earnings|accumulated losses reserve The
reserve includes the results of previous years, not
distributed or not allocated to other reserves or losses
not covered.
Trade and other payables, bank payables and other lenders
Financial liabilities (with the exclusion of derivative
financial instruments) relate to trade and other payables
and are initially recorded at fair value, net of directly
allocated accessory costs, and subsequently recorded at
amortised cost, using the effective interest rate. When
there is a change in the expected cash flows, the value
of the liabilities are recalculated to reflect this change,
based on the new present value of the expected cash
flows and on the internal yield initially determined.
Financial liabilities are classified under current liabilities,
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
19
except when the Group has an unconditional right to
defer their payment for at least 12 months after the
reporting date. Financial liabilities are derecognised
from the balance sheet when they are settled and the
Group has transferred all the risks and rewards relating
to the instrument.
Employee provisions
Employee provisions paid on or subsequent to the
employment period principally refer to post-
employment benefit provisions (TFR), in accordance
with Article 2120 of the Civil Code. TFR represents a
defined benefit plan, or rather a programme for benefits
subsequent to the employment period which
constitutes a future obligation and for which the Group
is responsible for the actuarial risks and relative
investments. In accordance with IAS 19, the Group
utilises the Projected Unit Credit Method to determine
the present value of its obligations and related current
service cost; this method requires the utilisation of
objective and compatible actuarial assumptions on
demographic (mortality rate, staff turnover rate) and
financial (discount rate, future salary increases)
variables. The actuarial gains and losses are recognised
under equity.
Following the pension law reform, from January 1, 2007,
the TFR maturing is allocated to pension funds or to the
INPS treasury fund or, in the case of companies with less
than 50 employees, remains in the company similar to
the treatment prior to the pension law reform.
Employees had the right to choose their preference for
the allocation of their employee leaving indemnity up to
June 30, 2007. Following the allocation of the TFR
maturing to the pension funds or the INPS fund, part of
the TFR maturing is classified as a defined contribution
plan as the obligation of the company is exclusively
represented by the payment of the contributions to the
pension fund or to the INPS fund. The liability relating to
the prior benefits matured continue to represent a
defined benefit plan measured based on actuarial
assumptions.
Provisions for risks and charges
Provisions for risks and charges are recorded to cover
known or likely losses or liabilities, the timing and extent
of which are not known with certainty at the reporting
date. They are recorded only where a present obligation
exists (legal or implicit) for a future payment resulting
from past events and it is probable that the obligation
will be settled. This amount represents the best
estimate of the costs required to settle the obligation.
The rate used in the determination of the present value
of the liability reflects the current market values and the
specific risk associated to each liability. If the financial
effect of the period is significant and the payment dates
of the obligations can be reliably estimated, the
provisions are valued at the present value of the
expected payment, utilising a rate which reflects market
conditions, the change in the cost of money in the
period and the specific risk related to the obligation. The
increase in the value of the provision from changes in
the cost of money in the period is recognised as a
financial expense. Possible risks that may result in a
liability are disclosed in the notes on potential liabilities
without any provision.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Revenue recognition
Sales revenues are recognised on the transfer to the
client of the risks and benefits concerning the products,
normally coinciding with the delivery or shipment of the
goods to the client; service revenues are recognised in
the period in which they are provided.
With reference to the construction of plant for the
generation of renewable energy, the construction
margin is recognised on the completion of the plant or
under the percentage completion criterion based on the
capacity of the buyer to influence the design of these
plant, in accordance with the specific contractual
provisions.
Revenues are recognised at the fair value of the amount
paid. They are calculated following the deduction of
VAT, expected returns, rebates and discounts.
Recognition of costs
Costs are recognised on the acquisition of the goods or service.
Financial income and charges
Interest is recognised in accordance with the effective interest rate method utilising therefore the interest rate which is
financially equivalent to all the cash inflows and outflows which comprise an operation.
Income taxes
Current income taxes are calculated based on the
assessable income for the year, applying the current tax
rates at the balance sheet date. Deferred taxes are
calculated on all differences between the tax value of an
asset or liability and the relative book value. The
deferred tax assets, including those relating to losses
carried forward, for the portion not offset by deferred
tax liabilities, are recognised only for those amounts for
which it is probable there will be future assessable
income to recover the amounts. The deferred taxes are
calculated utilising the tax rates which are expected to
be applied in the years when the temporary differences
will be realised or settled, based on the tax rates in force
or substantially in force at the reporting date. Current
and deferred income taxes are recorded in the income
statement, except those relating to accounts directly
credited or debited to equity, in which case the fiscal
effect is recognised directly to equity. Taxes are offset
when the income tax is applied by the same fiscal
authority and when there is a legal right of
compensation. The tax charge of the company and its
accounting treatment takes into account the effects
deriving from the national Tax Consolidation
implemented by the companies of the Group resident in
Italy.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Estimates and assumptions
The preparation of the financial statements require the
Directors to apply accounting principles and methods
that, in some circumstances, are founded on valuations
and estimates based on historical experience and
assumptions which are from time to time considered
reasonable and realistic under the relative
circumstances. The application of these estimates and
assumptions impact upon the amounts reported in the
financial statements and on the disclosures. The final
outcome of the accounts in the financial statements
which use the above-mentioned estimates and
assumptions may differ from those reported in the
financial statements due to the uncertainty which
characterises the assumptions and the conditions upon
which the estimates are based. The accounting
principles utilised by the Group which require greater
subjectivity by the Directors in the preparation of the
estimates and for which a change in the underlying
conditions or the assumptions may have a significant
impact on the financial results of the Group are briefly
described below. Impairment test: goodwill is subject to
an impairment test on an annual basis. The reduction in
value is recorded as a write-down when the net book
value of the cash-generating unit to which the asset is
allocated is higher than the recoverable value (defined
as the higher value between the value in use and the fair
value of the asset). The verification of the value requires
the directors to make valuations based on the
information available within the Group and from the
market, as well as historical experience. In addition,
when it is determined that there may be a potential
reduction in value, the Group determines this through
using the most appropriate technical valuation methods
available. The same verifications of value and the same
valuation techniques are applied on the intangible and
tangible assets with a finite useful life when there are
indications of the difficulty for the recovery of the
relative net book value through its use. The correct
identification of the indicators of the existence of a
potential reduction in value as well as the estimates for
their determination depends on factors which may vary
over time impacting upon the valuations and estimates
made by the Directors. Doubtful debts provision: the
doubtful debt provision reflects the directors estimate
on losses on the client portfolio. This estimate is based
on the expected losses by the Group, based on past
experience for similar receivables, current and historic
amounts overdue, careful monitoring of the credit
quality and projections on economic and market
conditions. Deferred tax assets: the accounting of the
deferred tax assets is made on the basis of the
expectations of future assessable income to recover the
asset value. The evaluation of the expected assessable
income in order to record the deferred tax asset
depends upon factors which may change over time and
result in significant effects on the recovery of the asset.
Determination of the correct inventory levels and any
obsolescence provision: the Group, as distributor of
photovoltaic models, generally holds finished products
in warehouses in order to quickly satisfy the demands of
its clients. The level of inventory held is constantly
monitored by company management based on sales
forecasts and expected demand from Group clients. The
directors, in evaluating forecast sales, take into
consideration a number of factors which may change
over time and which may significantly impact the level
of Group inventories. Where these estimates are not
accurate, due to rapid technological obsolescence of the
photovoltaic components, it may be necessary to write-
down the inventories to align the book value with
realisable value. Development costs capitalised: the
costs strictly associated to the development and design
of new initiatives for the construction of renewable
energy plant are capitalised where all the conditions
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
22
required for their capitalisation are satisfied. The
Directors take into consideration a series of factors
which may change over time and impact decisions upon
the continuance of particular initiatives and
consequently result in the write-down in the income
statement of development costs previously capitalised.
The Group continuously monitors the existence of
conditions to maintain the capitalisation of such costs:
where one or more of these requirements are absent,
the Group carries out revaluations and where necessary
writes down the cost where their capitalisation may no
longer be justified.
Accounting standards approved by the European Union, but not yet applied and adopted in advance by the Group
The new documents issued by the IASB, approved by the
EU, to be adopted obligatorily from financial statements
beginning January 1, 2016, were the following:
- IFRS 11 “Joint arrangements”: issued by the
IASB on May 6, 2014, the amendment to the standard
provides guidelines on the accounting treatment to be
adopted in the case of the acquisition of holdings in joint
arrangements, whose operations may be defined as a
“business” as per IFRS 3 “Business combinations”;
- IAS 1 “Presentation of financial statements”:
issued by the IASB on December 18, 2014 and applicable
from January 1, 2016, the amendment to the standard
explicitly clarifies that non-significant disclosure is not
required even if expressly required by a specific IFRS.
With regards to the Explanatory Notes to the financial
statements, a specific order is not required and
therefore the company may also decide to present the
notes by individual account, commenting upon the
content and the changes in the period together with a
description of the accounting standard applied for the
relative account. The amendment to the standard in
addition clarifies the aggregation or disaggregation of
financial statement accounts where their amount is
relevant or “material”. In particular, the amendment to
the standard requires that financial statement items
with differing characteristics are not aggregated and are
not are not disaggregated when such would create
difficulties for disclosure and understanding of the
financial statements. In addition, with regards to the
presentation of the financial position of an entity, the
amendment clarifies the need to disaggregate certain
accounts cited under paragraphs 54 (Financial Position)
and 82 (Income statement) of IAS 1. There are no
impacts for the company, as the disclosure in the
financial statements at December 31, 2016 was
compliant with the amendments introduced by this
standard;
- IAS 16 “Property, plant and equipment” and IAS
38 “Intangible assets”: this amendment to the two
standards, issued by the IASB on May 12, 2014, clarifies
that the depreciation process based on revenues may
not be applied with reference to property, plant and
equipment, in that this method is based on factors, for
example volumes and sales prices, which do not
represent the effective consumption of the economic
benefits of the underlying asset. The above-stated
prohibition was included also in IAS 38, according to
which intangible assets may be amortised on the basis
of revenues only if it is demonstrated that the revenues
and the consumption of the economic benefits of the
intangible assets are highly related. No impacts are
noted as the company has never applied this
methodology;
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
23
- IAS 16 “Property, plant and equipment” and IAS
41 “Agriculture”: with the amendments to these
standards, the IASB established that fruit-bearing plants,
used exclusively for the cultivation of agricultural
products over a number of periods, should be subject to
the same accounting treatment as property, plant and
equipment in accordance with IAS 16 “Property, plant
and equipment” as their “functioning” is similar to that
of manufacturing. The amendments are applicable from
January 1, 2016. No impacts are noted as the company
has never applied this methodology;
- IFRS 10 “Consolidated financial statements”:
the amendment to this standard issued on December
18, 2014 concerns the exemption from the presentation
of consolidated financial statements where the parent
company has holdings in “investment entities” who
measure their subsidiaries at fair value. The
amendment to the standard is applicable with
retroactive effect from January 1, 2016. There are no
impacts as these circumstances do not exist for the
company;
- IAS 28 “Investments in associates and joint
ventures”: on December 18, 2014, this standard was
amended with regards to investments in associates or
joint ventures which are “investment entities”: these
investments may be measured at fair value or using the
net equity method. This amendment is applicable from
January 1, 2016; There are no impacts as these
circumstances do not exist for the company. Annual
amendments to IFRS 2012-2014: on September 25,
2014, the IASB published a series of amendments to a
number of international accounting standards,
applicable from January 1, 2016. The amendments
concern: (i) IFRS 5 “Non-current assets held-for-sale and
discontinued operations”: (ii) IFRS 7 “Financial
instruments: disclosures”; (iii) IAS 19 “Employee
benefits”; (iv) IAS 34 “Interim Financial reporting”. With
regards to the first point, the amendment clarifies that
the financial statements do not need to be restated
where an asset or a group of assets available for sale are
reclassified as “held for distribution” or vice versa.
There are no impacts as these circumstances do not
exist for the company. With reference to IFRS 7, the
amendment establishes that where an entity transfers a
financial asset at conditions which permit the
“derecognition” of the asset, disclosure regarding the
residual involvement of the entity in the asset
transferred is required, where a services contract has
been agreed which stipulates an interest of the entity in
the future performance of the financial assets
transferred. There are no impacts as these
circumstances do not exist for the company. The
proposed amendment to IAS 19 clarifies that the
discount rate used for post-employment benefit
obligations is calculated on the basis of the market yields
of leading corporate bonds, and in countries in which
there is no “central market” for such bonds, the market
yields of government securities is used. No impacts are
indicated as the company has already applied this
accounting treatment. The amendment proposed to IAS
34 requires the indication of cross references between
the figures reported in the interim financial statements
and the related disclosure. There are no impacts as
these circumstances do not exist for the company.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
24
Accounting standards not yet approved by the European Union
The following standards and amendments to pre-
existing standards are still in the approval phase by the
European Union and therefore are not applicable by the
company. The dates indicated reflect the date of
expected efficacy as stated in the standards; this date is
however subject to effective approval by the competent
bodies of the European Union:
- on September 11, 2014, the IASB published the
amendment to IFRS 10 “Consolidated financial
statements” and IAS 28 “Investments in associates and
joint ventures”, in order to resolve the conflict between
IAS 28 and IFRS 10. According to IAS 28, the profit or loss
from the sale or conferment of a non-monetary asset to
a joint venture or associate in exchange for a share of
the capital of this latter is limited to the share held in the
joint venture or associate by external investors to the
transaction. On the other hand, IFRS 10 provides for the
recognition of the entire profit or loss in the case of loss
of control of a subsidiary, also if the entity continues to
hold a non-controlling holding, including also upon the
sale or conferment of a subsidiary to a joint venture or
associate. The amendments introduced establish that
for the disposal or conferment of an asset or of a
subsidiary to a joint venture or associated company, the
amount of profit or loss to be recognized to the financial
statements of the disposing company (conferring
company) depends on whether the asset or the
subsidiary disposed of (conferred) constitutes a
business, in the definition established by IFRS 3. In the
case in which the assets or the subsidiary disposed
represents a business, the entity should recognize the
profit or the loss on the entire share previously held;
while, in the contrary case, the share of the profit or loss
concerning the stake still held by the entity should be
eliminated. For these amendments, a date of first
application has not yet been established;
- IFRS 14 “Regulatory deferral accounts”: the
transitory standard, issued by the IASB on January 30,
2014, enables entities adopting for the first time
IAS/IFRS international accounting standards to continue
to apply the previous GAAP accounting policies for the
valuation (including impairment) and elimination of
regulatory deferral accounts. This standard, still
awaiting approval, will be applicable with retroactive
effect from January 1, 2016:
- Amendment to IFRS 15 “Revenue from
contracts with customers”: the amendment, issued on
April 12, 2016 and applicable from January 1, 2018,
clarifies the guidelines for identifying an obligation to
sell an asset or provide one or more services, and in
addition provides clarifications upon the accounting of
intellectual property licenses;
- IFRS 16 “Leasing”: this standard, issued by the
IASB on January 13, 2016, replaces IAS 17 and sets
criteria for the recognition, measurement and
presentation of leasing contracts. IFRS 16 is applicable
from January 1, 2019, although early adoption is
permitted for entities applying also IFRS 15;
- IFRS 7 “Financial instruments disclosures”: the
amendment to the standard, applicable from January 1,
2017, was issued by the IASB on January 29, 2016 and
requires an entity to provide disclosure which permits
users of the financial statements to assess the changes
to liabilities arising from financial activities;
- IAS 12 “Income taxes”: on January 19, 2016,
the IASB published a number of amendments which
clarify the accounting of deferred tax assets relating to
debt instruments measured at fair value. The
amendments are applicable from January 1, 2017;
- IFRS 4 “Insurance contracts”: the amendment
issued by the IASB on September 12, 2016 covers the
effects from application of the standard together with
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
25
those related to the adoption of IFRS 9 “Financial
instruments” in the financial statements of companies
issuing insurance contracts. This amendment is
applicable from January 1, 2018;
- On December 8, 2016, the IASB issued a
number of amendments to the standards approved in
the 2014-2016 three-year period, in particular IFRS 1
“First time application of international accounting
standards”, IFRS 12 “Disclosure of interests in other
entities” and IAS 28 “Investments in associates”: (i) with
regard to IFRS 1, a number of exemptions established by
specific paragraphs of the standard were eliminated; (ii)
the amendment to IAS 18 establishes that, in the case in
which the parent company is a venture capital company,
it has the option to value its investments in associates
and joint ventures at fair value with the recognition of
changes to the Income Statement; (iii) the amendment
to IFRS 12 establishes that the disclosure requirements
are applied also in cases in which the investments in
subsidiaries, associates and joint ventures are classified
to the account “Non-current assets held-for-sale” in
accordance with IFRS 5;
- On December 8, 2016, the IASB issued an
amendment to IAS 40 “Investment property” which
clarifies when an entity should transfer the ownership
of property (including that under construction). It is in
addition established that the intention alone of
management to modify the use of a building does not
constitute evidence of a change in use of investment
property. The amendment to the standard, although
early adoption is permitted, is applicable retrospectively
from January 1, 2018;
- IFRIC 22 “Foreign currency transactions and
advance consideration”: this interpretation was issued
by the IASB on December 8, 2016 and clarifies the
accounting of operations which include the payment or
receipt of advances in currencies other than the Euro.
In particular, the present interpretation governs the
exchange rates to be adopted for transactions in foreign
currencies in which non-monetary assets and liabilities
arise related to the receipt or payment of accounts,
before recognition of the relative assets, costs or
revenues. This interpretation is applicable from January
1, 2018.
Accounting standards approved by the European Union although applicable in subsequent years.
The following standards have been approved by the
European Union but shall be applied from 2018:
therefore, they are not considered by the company in
the preparation of the financial statements at December
31, 2016:
- IFRS 9 “Financial instruments”: this standard,
approved by the European Union on November 29,
2016, entirely replaces IAS 39 “Financial instruments:
recognition and measurement” and introduces new
criteria for the classification and valuation of financial
assets and liabilities. The principal new issues
introduced by IFRS 9 may be summarised as: financial
assets may be classified in only two categories – at “fair
value” or at “amortised cost”. The “loans and
receivables”, the AFS financial assets and the “held to
maturity” financial assets categories no longer exist. The
classification to the two categories is based on the
business model of the entity and in relation to the
characteristics of the cash flows generated by the
activities. A financial asset is valued at amortised cost
where both the following requirements are met: the
business model of the entity establishes that the
financial asset is held for collection of the relative cash
flows (therefore, in substance, not for trading profits)
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
26
and the characteristics of the cash flows of the asset
correspond only to the payment of capital and interest.
In the opposite case, the financial asset should be
measured at fair value. The rules for the recognition of
embedded derivatives were simplified: the separate
recognition of the embedded derivative and the
financial asset which “hosts” it is no longer required. All
equity instruments – both listed and non listed – must
be valued at fair value. (IAS 39 established however that,
if the fair value may not be determined in a reliable
manner, the non listed equity instruments are valued at
cost). The entity has the option to record in
shareholders' equity the fair value changes of the equity
instruments which are not held for trading. This
allocation is made on initial recognition, may be made
by individual security and is irrevocable. Where this
option is chosen, the changes to the fair value of these
instruments may never be reclassified from
Shareholders’ equity to the Income statement. The
dividends however continue to be recognised to the
Income Statement;
- IFRS 15 “Revenues from contracts with
customers”: the standard, issued by the IASB on May 28,
2014 and approved by the European Union on October
29, 2016, is the result of convergence by the IASB and
FASB (“Financial Accounting Standard Board”, the body
charged with issuing new accounting standards in the
United States), in order to develop a single model for the
recognition of revenues applicable both within the
scope of IFRS and US GAAP. The new standard will be
applicable to all contracts with customers, including
works in progress on orders, and will however substitute
the current IAS 18 - Revenues and IAS 11 - Construction
contracts and all relative interpretations. The key
element of IFRS 15 is the recognition of revenues at an
amount which reflects the consideration which the
Group would expect to have the right to receive against
the transfer of the assets and/or services. The standard
is applied where the following criteria are
contemporaneously met: (i) the parties have approved
the contract and have committed to execute the
respective obligations; (ii) the rights of each of the
parties concerning the assets and the services to be
transferred, in addition to the payment terms, have
been identified; (iii) the contract signed has commercial
substance (the risks, the timings and the amount of
future cash flows of the entity may alter as a result of
the contract); (iv) the probability to receive and pay the
amounts related to execution of the contract exists.
IFRS 15 includes also significantly extended disclosure
obligations compared to the existing standard with
regards to the nature, amount, timing and uncertainty
of revenues and cash flows deriving from contracts with
customers.
(Currency/thousand)
ZAR USD JPY RSD ZMW PAB CLP EGP HRK
trade credit 6.599 471 - 302 - - 376 - -
other current asset - 56 - - - - - - -
prepayments 4.698 3.184 - 88 - - - - 8
tax credit 1.982 - - 1.861 - - 13.888 - 16
cash and cash equivalent 4.621 3.290 161 1.520 60 2 7.070 - 29
cash and cash equivalent 17.901 7.002 161 3.771 60 2 21.333 - 52
equivalent to €/000 1.238 6.642 1 31 6 2 30 - 7
trade payable 4.352 19.482 454 45.386 40 - 84.501 - -
other current payable 1.590 645 - 7 - - 293 - -
prepayments - 400 - - - - - - -
tax debt - 376 70 800 - - - - -
current debts towards banks 1.877 36.008 - 161 - - - - -
Total current liabilities 7.819 56.911 524 46.355 40 - 84.793 - -
equivalent to €/000 541 53.990 4 376 4 - 120 - -
Balance 10.082 (49.909) (363) (42.584) 20 2 (63.460) - 52
equivalent to €/000 697 (47.348) (3) (345) 2 2 (90) - 7
Amounts expressed in foreign currency in the financial statements of consolidated companies at December 31st, 2016
Currency riskc analysis
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
27
Risks and uncertainties
Pursuant to Article 2428, paragraph 2, point 6-bis of the
Civil Code, information relating to the use of financial
instruments is detailed below, as such is relevant for an
assessment of the company’s equity and financial
position and to highlight the objectives of company
management and the policies and criteria used to
measure, monitor and control the risks and
uncertainties, including also significant quantitative
information and to provide indications on the extent of
the risks undertaken by the Group.
Financial risk management
The principal business risks identified, monitored and, as
illustrated below, actively managed by the Group are as
follows:
- currency risk, deriving from fluctuations in
exchange rates between the Euro and the
other currencies in which the Group operates
and the interest rate;
- credit risk, deriving from the possibility of
default by a counterparty;
- interest rate risk;
- liquidity risk, deriving from insufficient financial
resources to meet financial commitments.
The following section provides qualitative and
quantitative information on the uncertainly of these
risks.
Currency risk
Operating on international markets and with companies
located in different geographic regions, the Group is
exposed to currency risk. Fluctuations in exchange rates
impact the Group results in various manners. A
significant impact concerns the translation effect arising
from the conversion of the financial statements of
foreign subsidiaries into Euro. In addition, as part of the
revenues and costs of the Group are denominated in
currencies other than the Euro, movements in the Euro
against these currencies could impact the consolidated
financial statements of the Building Energy Group.
However, as within each country the revenues and
relative costs are normally denominated in the same
currency, the Group largely benefits from an automatic
hedging effect. The principal exchange rates to which
the Group is exposed are the Euro/RAND and
Euro/Dollar, in relation to the multitude of activities
undertaken for the construction of photovoltaic plant in
South Africa and in the United States and in Uganda (the
financial statements of Tororo Solar North are prepared
in US Dollars).
A sensitivity analysis is illustrated below which shows
the effects on the net equity and net result deriving
from an increase/decrease in the exchange rates of 5%
compared to the exchange rate at December 31, 2016.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Credit risk
The credit risk represents the exposure of the Group to
potential losses deriving from the non-compliance of
obligations by commercial and financial counterparties.
The financial assets of the Group are considered of good
credit quality. The Group does not have significant credit
risk concentration, although procedures are in place to
ensure the sale of products and services to reliable
customers, taking into account their financial position,
historical experience and other factors. Doubtful
receivables are covered by the doubtful debt provision.
The maximum exposure to the credit risk for the Group
at December 31, 2016 and 2015 is represented by the
book value of the financial assets recorded in the
accounts, as illustrated in the table below.
Other current and non-current receivables include
advance payments of Tororo North on construction
works currently in an advanced state and receivables
from the associate REISA, of which a portion (Euro 4,156
thousand) due beyond 5 years. This loan will be repaid
in 20 years. Trade receivables include i) receivables from
the GSE and the US entities Nyserda/Cornell University
for the supply of electricity respectively for Euro 1,127
thousand and Euro 434 thousand, for which there are
no particular insolvency risks, and ii) receivables for
deferred revenues at year-end.
(Currency/thousand)
ZAR USD JPY RSD ZMW PAB CLP HRK totale
2016 balance 10.082 (49.909) (363) (42.584) 20 2 (63.460) 52
Rate exchange to € 14,457 1,054 123,400 123,403 10,433 1,054 704,945 7,560
5% 0,723 0,053 6,170 6,170 0,522 0,053 35,247 0,378
Financial impact in € 664 (45.093) (3) (329) 2 2 (86) 7 (44.842)
Economic impact in € (33) 2.255 0 16 (0) (0) 4 7 2.242
-5% (0,723) (0,053) (6,170) (6,170) (0,522) (0,053) (35,247) (0,378)
Financial impact in € 734 (49.840) (3) (363) 2 2 (95) 7 (49.109)
Economic impact in € 37 (2.492) (0) (18) 0 0 (5) 7 (2.455)
December 31st, 2016
Variance +/- 5% €/value change to 12/31/2016: estimated capital and economic effects
at Dec ember 31st at Dec ember 31st
(Euro thousand) 2016 2015
Other non current assets 7.648 9.020
Trade credits 2.654 5.568
Prepayments and accrued income 2.645 579
Tax credit 2.728 2.189
Other current assets 1.917 2.050
Gross total 17 .592 19.406
Provision (116) (15)
Total 17 .476 19.391
Credit risk
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Interest rate risk
The exposure of the Group to interest rate risk
principally relates to long-term loans. The Group policy
is to, as far as possible, contain debt cost, but
particularly its variability. The majority of debt is in fact
at a fixed rate. Fixed rate loans expose the Group to a
fair value risk. Variable rate loans expose the Group to a
risk from interest rate volatility (“cash flow” risk).
Relating to the risk originating from these contracts, the
Group does not have specific hedging policies. Interest
rate exposure relates to medium/long-term debt
positions with financial institutions concerning the
project financing obtained at a fixed rate, without
therefore an appreciable market interest rate
fluctuation risk: the main sources of interest-bearing
Group funding is at a fixed interest rate, with the
exception of: i) a credit line for Rand 125,000 thousand;
ii) a finance lease for the construction of a photovoltaic
plant in Italy for Euro 3,057 thousand; iii) a corporate
loan of an original USD 1,000 thousand obtained by the
subsidiary Behus; iv) a corporate line of Euro 2,000
thousand obtained by Building Energy S.p.A.; v) a project
finance line obtained by Tororo Solar North in
November 2016, following a sensitivity analysis on the
effects in terms of a greater or lesser repayment on the
basis of a 1% interest rate variation on 2016.
Liquidity risk
The liquidity risk is associated with the capacity to meet
commitments. Prudent management of the liquidity risk
from normal operations implies the holding of an
adequate level of liquidity, short-term securities an
adequate funding from credit lines. The liquidity risk is
centrally managed by the Group based on the guidelines
defined by the Parent Company. Head office
administration periodically monitors the Group financial
position through updated and forecast cash flow
reports. In this manner, the Group aims to ensure
adequate coverage of its financial needs, closely
monitoring loans, open credit lines and relative
utilisations in order to ensure optimum management of
the resources and any temporary excess liquidity. The
Group objective is to ensure a financial structure which,
in line with business objectives, guarantees an adequate
level of liquidity, minimising the relative opportunity
cost by maintaining equilibrium in terms of duration and
type of debt. The following table analyses the financial
liabilities (including trade payables and other current
payables) based on maturity. The loans were included
based on the contractual maturities of repayments.
(Eu ro thousand)
Company Biotwin 2 Srl Zevoblox Ltd Building Energy SpA Tororo Solar North Ltd Building Energy Holding US LLC Total Total varaiation
Bank MPS Rand Merchant Bank Banca Intesa San Paolo Dutch Development Bank MPS banch US
Rate Euribor 1y 1,57%+ 4,51% Jibar 3m + 8% spread Euribor 3m + 3,45% Libor 6 mesi + 4,75% Libor 1w + 4,50%
Economic impact (69) (1.183) (32) (16) (47) (1.347)
+1% impact (69) (1 .1 95) (33) (17 ) (47) (1 .361) 14
-1% impact (68) (1 .1 71) (32) (16 ) (46) (1 .333) (14)
December 2016, 31st
Variance +/- 1% v ariable interest rate
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
30
Classification of financial assets and liabilities
The following table provides a breakdown of the financial assets and liabilities by category at December 31, 2016 and
2015.
(Euro thousand) <1 2-5 >5 Total
Debt towards banks and other lenders 38.655 16.312 41.020 95.987
Other non current assets 2.004 612 2.616
Trade payable 27.544 27.544
Tax debts 3.316 3.316
Prepayments 3.269 3.269
Accruals and deferrals 391 391
Other debts and current l iabi l ities 4.393 4.393
Total financial liabilities 77.567 18.316 41.632 137.516
Financial liabilities breakdown by years to maturity at December 31st, 2016
(Euro thousand)
Assets and financial
liabilities measured at fair
value with changes in
charged to income
statement Loans and receivables
Available for sale finacial
assets
Financial liabilities at
amortised cost
Financial liabilities
available for sale Total
Other assets and current assets 7.223 7.223
Trade credit 2.639 2.639
Other assets and non current assets 7.648 1.493 9.141
Total - 17.510 1.493 - - 19.004
Trade payable 27.544 27.544
Debts toward banks and leasing companies 95.986 95.986
Other payables and current liabilities 11.369 11.369
Other payables and non current liabilities 2.616 - 2.616
Total - - - 137.515 - 137.515
(Euro thousand)
Assets and financial
liabilities measured at fair
value with changes in
charged to income
statement Loans and receivables
Available for sale finacial
assets
Financial liabilities at
amortised cost
Financial liabilities
available for sale Total
Other assets and current assets 51 2.050 2.101
Trade credit 5.553 5.553
Other assets and non current assets 8.789 1.493 10.282
Total 51 16.392 1.493 - - 17.936
Trade payable 12.626 12.626
Debts toward banks and leasing companies 55.606 55.606
Other payables and current liabilities 6.530 6.530
Other payables and non current liabilities 988 988
Total - - - 75.750 - 75.750
At December 31st, 2016
At December 31st, 2015
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
31
Notes to the Consolidated Balance Sheet
Assets
1. Property, plant and equipment
The changes in property, plant and equipment and depreciation for the current year are illustrated below:
During 2016, further to the land already owned by the
Group in the municipality of Krusevac (Serbia), the
purchase of land in the region of Coquimbo in Chile
(+Euro 401 thousand) was added, on which the
Punitaqui (9 MW) plant will be constructed. The
increase in the Plant in use account relates principally to
entry into use in the first part of the year (and the
simultaneous equal reduction in “fixed assets in
progress”) of the second plant developed on the land at
Cornell University (State of New York - USA “Geneva”),
thanks to which the carrying amount of photovoltaic
parks increased approx. Euro 6,700 thousand. The
Geneva plant extended by 2.8 MW the capacity of the
plant already operating in the Municipalities of Asola
(Mantua), Ostellato (Ferrara), Voghera (Padua) and
Ascoli Piceno, and the first plant constructed at Cornell
University (Snyder Road). The Italian assets were
recognised on the basis of lease back contracts of 18-
year duration, all concluding in the 2030/2031 two-year
period (a year more than the previous conclusion thanks
to the refinancing of the contracts in 2016). At year-
end, as in the previous two years, the Group carried out
impairment tests on the CGU’s representing the Italian
photovoltaic plant to verify the robustness of the
relative carrying amount, following the negative impacts
from the “Incentive Decree” (Ministerial Decree of
16/10/2014 enacting the “Approval of the processes for
the issue of incentivised tariffs under Article 26,
paragraph 2 of Legislative Decree 24/06/2014”,
converted with amendments by Law No. 116 of
11/08/2014). On June 24, 2015, the Lazio Regional
Administration Court judgement was published (No.
08669/2015 Reg. Prov. Reg. No. 15359/2014 Circ. Reg.),
which established that the Constitutional Court should
definitively consider the unconstitutionality of the
“Incentive Decree” and specifically the legitimacy of its
retroactive application. On December 7, 2016, the Court
declared that the Legislative Decree (No. 91/2014) does
at December 31st at December 31st
(Euro thousand) 2016 2015
Fixed assets 98.099 36.420 61.679
98.099 36.420 61.679
Fixed assets
Variance
at December 31st at December 31st
(Euro thousand) 2015 2016
Land and buildings 484 14 - 401 - - 899
Plants in operation 21.895 6.333 - 21 (114) - 28.136
(Accomulated depreciation) (3.535) (39) - - - (1.220) (4.794)
Other plants and machinery 435 (2) - 2 - - 435
(Accomulated depreciation) (74) (7) - - - (106) (187)
Other fixed asset 443 (22) 17 52 (8) - 482
(Accomulated depreciation) (200) 22 - - 5 (78) (251)
Leasehold improvements 624 (198) - 156 - - 582
(Accomulated depreciation) (330) 44 - - - (79) (366)
Construction in progress 16.678 (2.588) 1.246 57.826 - - 73.162
36.420 3.557 1.263 58.458 (117) - (1.484) 98.099
Fixed assets
Other movements
(incl. Exch. Diff.)
Reclass from
Intangible Assets Increase Decrease Transfers Depreciation
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
32
not violate the Constitution in any way, and
subsequently issued its grounds for this decision with
the publication of judgment No. 16/2017 on January 24,
2017. The decree was therefore fully applicable and
effective from January 1, 2015. During the year, as a
result of and in order to tackle that indicated above, the
Group successfully renegotiated the leasing contracts
upon the plant of Ascoli Piceno, Ostellato, Voghera and
Asola with the Institution Mediocredito. The refinancing
of contracts, with effect from July 2016, enabled each of
the above-mentioned plant to:
i) extend the duration of the loan by one year until
conclusion of the benefit from the incentivised tariff;
ii) release the cash reserve provisioned at each in
service of the debt (reducing it therefore for an equal
amount);
iii) reduce the interest rate for the entire residual
repayment period of the loan. In executing the
impairment test therefore, the value in use of the Italian
plant was measured according to the “discounted cash
flow” (DCF) method, discounting the leveraged free
cash flow to equity at January 1, 2017, on a half-yearly
basis, for a horizon equal to the residual useful life of the
plant, estimated at 25 years (without application of the
Terminal Value, but considering the cash flows until
conclusion of the benefit from the incentivised tariff).
The discount rate utilised reflects market valuations of
the cost of money or the specific sector and regional
risks; or rather the discount rate utilised was based on
the cost of equity (“ke”) estimated on the basis of the
risk free rate supplemented by the market Levered Beta
plus the equity risk premium for each individual plant,
on the basis of the specific financial structure and taking
account of the renegotiation obtained. The discounted
cash flows were compared with the total capital value
invested by the Group for construction of the Italian
solar parks (valuation at 31/12/2016). At the reporting
date, their value is use, calculated as indicated above,
exceeded the carrying amount of the Group investment
and therefore no adjustment to book value was made.
The significant increase in Assets in progress in the
year was substantially due to a combined effect of
the increased investment in plant under
construction and positive currency differences
(approx. Euro 3,190 thousand), and specifically:
- the conclusion of construction of the wind park
in the State of Iowa (30 MW), initiated in 2015
and which, at the reporting date, had seen all
ten project turbines erected, eight of which
already connected to the network and with an
increase in the year in the investment’s value
of Euro 39,550 thousand;
- the construction of two additional photovoltaic
plant on the Cornell University site (State of
New York - Harford 2.8 MW and Musgrave 6.6
MW), substantially began and concluded
within the twelve months of 2016. The two
photovoltaic parks, which were under
development at the end of 2015 (for Euro
1,246 thousand), at December 31, 2016 were
overall worth Euro 18,084 thousand;
- the construction of the Ugandan photovoltaic
plant of Tororo North (10 MW) initiated at the
end of 2016 (+Euro 4,358 thousand).
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
33
2. Intangible assets
The changes in intangible assets and amortisation for the current year and the previous year are illustrated below.
The increase in Intangible assets (of Euro 5,068
thousand) principally concerns the increase in Assets in
progress, and positive currency differences, only in part
offset by the decrease due to the reclassification to the
corresponding property, plant and equipment account
of the amounts concerning the Harford and Musgrave
US projects (currently under construction), and the
impairments (-Euro 1,854 thousand) described in Note
16 (“Operating costs”). During the year, the Group
furthered the policy - adopted in the prior two-year
period - to focus investment on regions considered
more strategic by management, such as South Africa,
the United States, Latin America and Europe; as a result,
compared to the previous year, development activities
increased which, net of write-downs, decreases and
exchange differences were as follows:
- South Africa carried out developments for a
value of 39% of the increased Group annual
investment (+Euro 2,604 thousand), absorbed
mainly by the NNTP (Near Notice to Proceed)
projects at year-end, including Klaver,
Kruisvallei, Roggeveld and Sikasso;
- the Group invested 31% of total annual
development in Europe, principally in the
Serbian biomass project in the municipality of
Krusevac (+Euro 1,498 thousand) and
residually in two hydro projects (Simo and
Idrolap) in Italy (+Euro 586 thousand);
- in the United States, investment activities in
the year (increasing Euro 1,319 thousand)
principally concentrated on the Annapolis
photovoltaic project (16.8 MW) in an advanced
stage of development;
- the Chilean Punitaqui project accounted for
the highest percentage of Latin American
development activity, which overall
represented 10% of the increased value
generated by the Group in 2016.
In the year under analysis, the CSCADA (Central
Supervisory Control and Data Acquisition), a
software developed in 2015 by the Group, entered
at December 31st at December 31st
(Euro thousand) 2016 2015 Variance
Intangible assets 26.827 21.759 5.068
26.827 21.759 5.068
Intangible assets
at December 31st at December 31st
(Euro thousand) 2015 2016
Patent 338 (1) - 96 - 248 - 681
(Accumulated depreciation) (111) - - - - - (217) (329)
Concessions, l icenses and tademarks 2 2 - 36 - - - 40
(Accumulated depreciation) (0) (1) - (5) - - (17) (23)
Other 7 (0) - 1 - 12 - 20
(Accumulated depreciation) (1) (0) - - - - (2) (3)
Intangible assets in progress 21.523 1.745 (1.263) 6.650 (1.953) (261) 26.441
21.759 1.744 (1.263) 6.777 (1.953) - (236) 26.827
Intangibles Assets
Exchange rate
differences
Reclass to
Fixed AssetsIncrease Decrease Transfert Depreciation
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
34
into use (value of Euro 248 thousand), ensuring the
management of data from monitored plant (both
owned and third party), their normalisation for
quantitative analysis, in addition to ticketing and
remote alarm activities for ordinary and
extraordinary maintenance management.
3. Goodwill
The balance represents the consolidation difference
arising on the first consolidation of the investee Biotwin
S.r.l. (100% subsidiary and owner of the photovoltaic
plant at Asola, total power of 4 MWp). The Parent
Company carried out an impairment test on this
goodwill, without any substantial difference compared
to the values in the previous year. The impairment test
is undertaken comparing the book value of the goodwill
and of the net assets independently capable of
producing revenue streams (cash generating unit),
which are reasonably allocated, with the value in use of
the cash generating unit. The cash generating unit was
identified as the company which owns the asset. The
cash flows were identified taking into consideration the
long-term performance assumptions of the main
variables contributing to cash flows, the average
residual useful life of the assets and the duration of the
incentivised tariff. For further details on the test
methodology, reference should be made to Note 1.
The tests illustrated that the estimated recoverable
value of the cash generating units exceeded the relative
book value.
4. Investments measured under the equity method
During the year there were no amendments (acquisitions or disposals) to the consolidation scope of the associates and
joint ventures.
at December 31st at December 31st
(Euro thousand) 2016 2016 Variance
Goodwill 400 400 -
400 400 -
Goodwill
at December 31st at December 31st
2016 2015 Variance
Investments accounted for using the equity method 13.236 14.111 (875)
13.236 14.111 (875)
Investments accounted as fou using the equity method
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
35
Investments in associates
Among the associates, the changes in the year principally
concerned the performances of REISA LTD and RES LLC:
i) REISA LTD, the owner of the Kathu (81 MW)
photovoltaic plant, improved its operating performance
on the previous year. The positive effect of plant
management was however at year-end entirely offset
by the very poor performance of financial instruments
held by the vehicle and measured at fair value
(recognised to the income statement). The Group
annually subjects the investment in the South African
vehicle to an impairment test. For 2016, the free cash
flow to equity to be discounted was measured according
to the best information available at the time of the
estimate: future half-yearly distributions were taken
into consideration, updated at the end of 2016, for a
period equal to the residual useful life of the plant,
coinciding with conclusion of the Power Purchase
Agreement (“PPA”) with ESKOM (South African Electric
public utility); in addition, a Terminal value with
revamping and extension of the plant life was
considered. For further details on the test
methodology, reference should be made to Note 1. No
impairments emerged from the valuations. The other
changes of the investment are due to essentially
measurement related considerations established from
the year analysed: the initial recognition value of REISA
Ltd to the consolidated financial statements represents
the share of plant held by the Group measured at fair
value. This latter was therefore subject to amortisation
for a period covering the residual duration of the PPA
with the South African utility.
ii) Renewable Energy Solution LLC (RES LLC) in
2016 accumulated losses which substantially cancelled
the value of shareholders’ equity, with the Group
consequently writing down the value of the
corresponding investment recognised to the financial
statements.
The financial highlights of the main associates (valued at 100%) are presented below
at December 31st Acquisitions/ Others at December 31st
(Euro thousand) 2015 % Nationality (Dismissioni) Dividends
(inc. Exc.
differences) 2016
Investment in associated companies
REISA LTD 13.086 10% Sud Africa - (84) (48) - (1.215) 11.739
Building Energy Development Latino America SA - 60% Panama - 3 - - 3
Renewable Energy Solution LLC 78 49% Stati Uniti - (126) - - 48 -
Investment in joint ventures
WBHO_BE LTD 938 30% Sud Africa - 635 - - (131) 1.442
Guma BE 8 51% Sud Africa - 36 - - 7 52
14.111 464 (48) - (1.290) 13.236
Investments accounted for using the equity method
Result at
Income Statement
Other components
at OCI
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
36
The table below illustrates the reconciliation between the net equity value of the main associated companies and the
corresponding book value of the investments:
at December 3 1st at Dec ember 31 st at December 3 1st at Dec ember 31 st
(Euro thousand) 2 016 20 15 2 01 6 20 15
Non current asset 189.040 169.950 - -
Financial non current asset 3.947 8.502 - -
Total non c urrent asset 19 2.98 8 1 78 .4 52 - -
Trade receivables 11.724 - 228 3.909
Other credit and current asset - 9.759 - 226
Cash and cash equivalent 38.144 40.877 464 724
Total current asset 4 9.869 50 .6 35 69 2 4 .8 58
TOTAL ASSET 24 2.85 7 2 29 .0 88 69 2 4 .8 58
Equity 3.965 4 .5 99 5 8 6 50
Debt towards banks and other lenders 209.733 194.623 - -
Other non current liabilities 6.001 4.960 - -
Total non c urrent l iab i l i ties 21 5.73 4 1 99 .5 83 - -
Trade payables 5.917 6.468 634 3.192
Other current liabilities 17.240 18.438 - 1.016
Total current l iabi l i ties 2 3.157 24 .9 05 63 4 4 .2 08
TOTAL LIABILITIES 24 2.85 7 2 29 .0 88 69 2 4 .8 58
(Euro thousand) 2 016 20 15 2 01 6 20 15
Revenues 41.351 45.123 2.025 4.749
Operating Costs (5.314) (6.036) (2.597) (4.549)
Depreciation and provision (9.492) (10.634) - -
EBITDA 2 6.546 28 .4 53 (572) 200
Financial Income 2.238 2.266 - -
Fair value adj (4.550) 8.290 - -
Financial charges (24.921) (29.306) - -
EBIT 2 4.234 9 .7 03 (572) 200
Taxes (153) (3.229) - -
Resu lt of the year 2 4.081 6 .4 74 (572) 200
Other components of comprehensive income statement - - - -
Net Resu lt of the year 2 4.081 6 .4 74 (572) 200
REISA (Pty) Ltd RES LLC
REISA (Pty) Ltd RES LLC
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
37
Investments in joint ventures
The jv’s include:
i) WBHO Building Energy LTD (WBHO_BE):
South African joint venture (group share of 30%, WBHO
LTD share of 70%) incorporated in 2012 for the
construction of the Kathu photovoltaic plant reported
for the year an operating profit, which slightly reduced
on 2015 due to the substantial conclusion of plant
operations;
ii) GUMA BUILDING ENERGY PTY (GUMA_BE) in
2016 carried out maintenance activities on the Kathu
plant, with results in line with the previous year;
iii) Tororo Solar North Ltd, a Ugandan joint
venture incorporated in 2014, non-operative at
December 31, 2015, which in 2016 became a Group
96.60% holding and a subsidiary as per IFRS 10 and was
therefore fully consolidated at the reporting date. The
key financial highlights (valued at 100%) of the main
investments in joint ventures are presented below.
REISA (Pty) Ltd RES LLC
at December 31st at December 31st
(Euro thousand) 2016 2016
Equity as at 1 January 2015 4.599 650
Result of the year (840) (572)
Other component s of comprehensive income statement
Other (12)
Exchange differences 689 (7)
Equity as at 31 December 2015 4.448 58
Ownership 10% 49%
Group's Equity 445 29
Other 23 (240)
Consolidated adjustments (1.254) 212
Fair value carrying value 12.525 -
11.739 0
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
38
The table below illustrates the reconciliation between the net equity value of the main joint ventures and the
corresponding book value of the investments.
at December 3 1st at Dec ember 31 st at December 3 1st at Dec ember 31 st
(Euro thousand) 2 016 20 15 2 01 6 20 15
Non current asset - 272 296
Financial non current asset 335 532 - -
Total non c urrent asset 335 5 32 27 2 2 96
Trade receivables - - - 517
Other credit and current asset 1.037 467 550 -
Cash and cash equivalent 7.079 6.404 604 176
Total current asset 8.116 6 .8 70 1.15 4 6 92
TOTAL ASSET 8.452 7 .4 02 1.42 5 9 88
Equity 4.806 3 .1 65 10 3 15
Debt towards banks and other lenders - - 36
Other non current liabilities 3.645 2.700 - -
Total non c urrent l iab i l i ties 3.645 2 .7 00 - 36
Trade payables 1.537 1.323 888
Other current liabilities - - 49
Total current l iabi l i ties - 1 .5 37 1.32 3 9 38
TOTAL LIABILITIES 8.452 7 .4 02 1.42 5 9 88
(Euro thousand) 2016 2015 2016 2015
Revenues 940 1.762 3.638 3.721
Operating Costs (90) (28) (3.447) (3.594)
Depreciation and provision - - (91) (92)
EBITDA 850 1.734 100 35
Financial income - 616 - -
Fair value adj - - - -
Financial charges - (2) (9) (6)
EBIT 850 2.349 91 29
Taxes (378) (800) (21) (12)
Result of the year 472 1.549 70 16
Other components of comprehensive income statement - - - -
Net Result of the year 472 1.549 70 16
WBHO_BE (Pyt) Ltd Guma BE (Pty) Ltd
WBHO _BE (P yt) Ltd Guma BE (Pty) Ltd
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
39
5. Deferred tax assets
Deferred tax assets at December 31, 2016 amounted to
Euro 2,129 thousand, increasing Euro 178 thousand on
the previous year. The account consists of:
- Euro 773 thousand in 2016 concerns deferred
tax assets on tax losses carried forward of BESA Ltd
(South African subsidiary), unchanged on the previous
year, although increasing in the financial statements
due to a positive currency effect of Euro 113
thousand;
- the remaining income tax changes were
generated in the consolidated financial statements
due to a series of inter-company margin reversals
and temporary differences in treatment between
local GAAP, used to prepare the financial statements
of the companies included in the consolidation
scope for local purposes, and IAS/IFRS used for the
preparation of these financial statements.
WBHOBE (Pty) Ltd Guma BE (Pty) Ltd
at December 31st at December 31st
(Euro thousand) 2016 2016
Equity as at 1 January 2015 3.165 15
Result of the year 472 70
Other component s of comprehensive income statement
Other
Exchange differences 606 17
Equity as at 31 December 2015 4.243 102
Ownership 30% 51%
Group's Equity 1.273 52
Other (12) -
Consolidated adjustments 12
Fair value carrying value -
1.273 52
at December 31st at December 31st
(Euro thousand) 2016 2015 Variance
Deferred/prepaid tax 2.129 1.951 178
2.129 1.951 178
Deferred tax
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
6. Other non-current assets
The movement in “Non-current assets” principally
relates to:
- the liquidation of securities which the parent
company had in portfolio;
- the payment of Euro 500 thousand on account
for investments in companies holding the preliminary
licenses for construction of two hydro plant (Simo and
Idrolap) currently under development by the Group;
- the release of the cash collateral held by the
parent company for an amount (-Euro 1,875 thousand)
deposited in 2015 in guarantee of a performance bond
issued by GUMA_BE (the bank guarantee was replaced
with an insurance guarantee);
- the release of the restricted cash held by the
vehicle companies owning the Italian photovoltaic
plant (BE Solar 2, BE Solar 4, BE Ascoli and Biotwin)
following the renegotiation of the leasing contracts
with Mediocredito. The released cash (-Euro 778
thousand) was used for early settlement of the
payable.
Under other receivables, the financial receivable from
the associate REISA PYT(Ltd) of the subsidiary Zevoblox
Lld remains substantially unchanged on 2015, although
increasing due to the positive currency difference
generated by the movement of the Euro against the
Rand (positive amount at year-end of Euro 4,156
thousand). For further details, reference should be
made to Notes 1 and 12.
7. Inventories
Inventories consist of panels required for the plant of
the Italian subsidiaries and stored at the warehouses of
the company Gondrand S.r.l. in Vignate (MI).
at December 31st at December 31st
(Euro thousand) 2016 2015 Variance
Other non current_securities 232 (232)
Other non current assets_other receivables 7.648 8.789 (1.141)
7.648 9.020 (1.372)
Other non current assets
at December 31st at December 31st
(Euro thousand) 2015 Increase Decrease 2016
Finished goods 80 (45) 35
80 - (45) 35
Inventory
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
The change in the year is due to the sale of panels: the
final value, appropriately adjusted by the obsolescence
provision, represents the realisable value at the
reporting date.
8. Trade receivables
Trade receivables in 2016 reduced (-Euro 2,914
thousand) compared to 2015, a year in which success
fees of Euro 3,600 thousand were invoiced to REISA LTD
following completion of the Kathu plant (collected in
February 2016). This slightly distorted the historic trend
of the item, which therefore net of the success fees was
in line with preceding years. More specifically, in
December 2016, trade receivables from energy sales
(amounting to Euro 1,127 thousand, of which Euro 693
thousand due in Italy and Euro 434 thousand in the State
of New York - USA) increased by approx. Euro 460
thousand on 2015, following the entry into use of the
Geneva (Cornell University) plant during the year; all
trade receivables from IPP operations featured very low
average collection times. Receivables concerning
maintenance activities and consultancy services,
principally O&M on plant, amount to Euro 848 thousand
at the reporting date (Euro 406 thousand due in Italy,
Euro 442 thousand in South Africa). For further details,
reference should be made to the Credit risk paragraph.
9. Other current receivables
Other current receivables increased in 2016, essentially
due to increased tax receivables and payments on
account. The increase in tax receivables principally
concerns the parent company following the payment of
withholding taxes by its Ugandan branch involved in the
construction of the Tororo plant (for Euro 238
thousand), and at the South African subsidiary BESA Ltd
for the overpayment of income taxes for 2015,
at December 31st at December 31st(Euro thousand) 2016 2015 Variance
Trade credits 2.654 5.568 (2.914)
Bad debt provision (15) (15) 0
2.639 5.553 (2.914)
Trade credits
at December, 31st at December, 31st
(Euro thousand) 2016 2015 Variance
Tax receivables 2.728 2.189 538
Financial current assets 310 51 (51)
Other current assets 1.503 2.050 (2.050)
Prepayments and accrued income 2.645 579 (579)
7.186 4.869 (2.141)
Other current assets
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
42
calculated on a provisional basis; this credit of Euro 116
thousand will be utilisable in the coming years. In
addition, tax receivables for indirect taxes increased due
to the choice by a number of Italian companies to
request the repayment of VAT accumulated in 2015,
differing from that undertaken in previous years in
which the matured receivable was generally utilised to
offset other Tax agency debt positions. The VAT
receivable normally matured in the period is added to
this amount. These effects are offset, in other
receivables, from the almost entire receipt in 2016 of
the receivable recorded in the 2015 financial statements
of Zevoblox Ltd from REISA Ltd. The payment was
approx. Euro 893 thousand at the year-end exchange
rate.
Prepayments, finally, reported an increase in payments
on account following the advance recognised by Tororo
Solar North Ltd for the construction of its plant for Euro
2,487 thousand.
10. Cash and cash equivalents
The account only includes immediately available current
accounts and bank deposits, with the exception of a
restricted cash account held by BEHUS LLC for an
amount of Euro 1,871 thousand, as guarantee on the
construction activities at the IOWA plant. On conclusion
of the process (April 2017), the amount was almost
totally released. For further details, reference should be
made to the cash flow statement.
11. Non-current assets for sale
Assets are classified as available for sale where their
carrying amount will be recovered principally through
sale; in particular, the amounts indicated refer to the
total value of the investments in 2 Egyptian companies
for which management expects to finalise preparatory
sales agreements.
at December 31st at December 31st
(Euro thousand) 2016 2015 Variance
Cash and cash equivalent 3.783 9.894 (6.111)
3.783 9.894 (6.111)
Cash and cash equivalent
at December, 31st at December, 31st
(Euro thousand) 2016 2015 Variance
Non current asset available for sale 1.493 1.493 -
1.493 1.493 -
Non current asset available for sale
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
43
Shareholders` Equity
12. Shareholders` Equity
The share capital comprises 12,000,000 shares of a par
value of Euro 1.00; the entire share capital is held by the
company Building Energy Holding S.p.A..
The translation and hedging reserve movements refer to
the changes in the year (see also the section “Other
items of comprehensive income”).
The change in the minority interest share on the
previous year relates entirely to the United States,
where during the year the following operations were
executed:
- following the share capital increase
contributed by Nationwide as Tax Equity
Investors (financial partner with which the
Group has constructed all functioning plant
and those under construction at the Cornell
University site) to the companies owning the
Geneva, Harford and Musgrave plant;
- investment in the share capital of the new
company set up to manage the US plant in
operation (HOLD.CO) by Alliance Fund for an
amount, at the reporting date, of Euro 756
thousand. For further details on the corporate
operation above, reference should be made to
the Significant events paragraph in the
Directors’ Report.
The translation reserve includes the effects of the
conversion of the financial statements of the
subsidiaries with differing local currencies from the
functional currency. The reserve is negative at
December 31, 2016, decreasing on 2015, due to the
net appreciation of the functional currency against
the overseas currencies of the subsidiaries.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Liabilities
13. Bank and other lenders
Liabilities increased Euro 61,946 thousand in the year, with 66% relating to the increase in payables to banks and other
lenders.
The bank undertook in the year new loans, essentially to
support the construction of projects in an advanced
stage of development. In fact, during the year
construction loans particularly rose, in addition to
payables specifically concerning plant under
construction or completed during 2016. The following
table breaks down payables for the funding of projects
at 31/12/2016:
In particular:
1) BEWI LLC, owner of the 30 MW wind plant in
Iowa, signed a construction loan specifically to support
construction activities for Euro 33,800 thousand
(nominal value) at the reporting date with Hannon
Armstrong Inc. (HA). Under the agreement, BEWI
extended in the initial months of 2017 the loan amount
at December 31st at December 31st
(Euro thousand) 2016 2014 Variance
Debts 137.515 75.569 61.946
137.515 75.569 61.946
Payables
at December 31st at December 31st
(Euro thousand) 2016 <1y >1y 2015 <1y >1y
Corporate financing 42.294 1.852 40.442 40.948 4.764 36.183
of which credit facilities 2.824 1.449 1.375 4.296 3.102 1.195
of which debenture 30.807 292 30.516 28.967 - 28.967
of which loan-facility 8.663 111 8.552 7.684 1.663 6.021
Project Financing 50.545 33.749 16.796 14.659 1.215 13.444
of which project financing 17.705 910 16.796 13.658 517 13.141
of which back construction loan 32.839 32.839 - 769 467 303
Other financing 3.147 3.054 93 232 232 -
95.986 38.655 57.331 55.606 5.979 49.627
Debts to banks and other lenders
at December 31st
(Euro thousand) 2016 <1y 2-5y >5y Currency Rate type Rate
Project financing 17.705 910 6.293 10.503
Biotwin 2 Srl (Medole) 2.034 108 502 1.425 Euro (EUR) varibile
Euribor 1y 1,57%+
4,51%
Biotwin Srl (Asola) 6.131 254 1.222 4.655 Euro (EUR) fisso 7,21%
Be Solar 2 Srl (Ostel lato) 1.440 62 291 1.087 Euro (EUR) fisso 6,08%
Be Solar 4 Srl (Voghera) 1.442 61 288 1.092 Euro (EUR) fisso 6,32%
Be Ascol i Srl (Ascol i Piceno) 1.489 63 296 1.131 Euro (EUR) fisso 6,43%
Odyssey Solar 2 Llc (Geneva) 2.133 361 659 1.113 Dollaro (USD) fisso 5,00%
Tororo Solar North Ltd (Tororo) 3.036 - 3.036 - Dollaro (USD) fisso Libor 6 mesi + 4,75%
Construction Loan 32.839 32.839 - -
Building Energy Wind Iowa (Iowa) 32.839 32.839 - - Dollaro (USD) fisso 5,00%
50.545 33.749 6.293 10.503
Project financing
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
45
to a nominal Euro 42,615 thousand, reaching the
maximum limit agreed with HA. On March 30, 2017,
thanks to the undertaking of a stake in the plant as a Tax
Equity Investor by Capital One NA – a leading US bank -
the loan was repaid in a single settlement for an amount
of approx. Euro 31,400 thousand, while the remaining
part, of approx. Euro 11,215 thousand was converted
into a permanent loan of ten-year duration;
2) Odyssey Solar 2 LLC agreed a loan with
National Cooperative Bank NA(NCB). According to the
agreement, dated June 16, 2016, the bank financed the
vehicle for a nominal Euro 2,301 thousand, to be repaid
in fifteen years, thanks to which the company has
substantially paid the payables contracted during the
construction phase in the previous year;
3) Tororo Solar North Ltd signed a project
finance loan agreement for a total USD 14,665 thousand
with FMO (Dutch Development Bank - an institution
supporting emerging and developing market private
sector growth), of which at the reporting date USD
3,199 thousand had been effectively received
(corresponding to Euro 3,036 thousand). The loan will
be fully received on completion of project construction,
scheduled for the end of 2017. The duration of the loan
coincides with the useful life of the plant under
construction and therefore will be fully repaid in
September 2033;
4) the renegotiation with Mediocredito
Centrale (Banca Intesa Group) of the terms and
conditions of the finance lease signed in relation to the
construction of the Italian plant (BE Solar 2, BE Solar 4,
BE Ascoli and Biortwin) was completed in the year,
following which the average cost of the underlying loans
decreased from 9.10% in 2015 to 6.51% in 2016.
Simultaneously, the duration of the contracts was
increased by one year, to coincide with the duration of
the benefits from the incentivised tariff, with the
combination of that above reducing the fees incurred by
the four vehicle companies from July 2016;
5) the back-leverage loan granted by Hannon
Armstrong to the subsidiary Building Energy Asset
Management (BEAM) for the Cornell - Snyder Road
project was fully repaid at year-end. The following table
outlines interest rate payments on corporate financing
according to maturity.
at December 31st
(Euro thousand) 2016 <1y 2-5y >5y
Project financing 9.078 1.126 3.305 4.647
Biotwin 2 Srl (Medole) 1.960 121 414 1.425
Biotwin Srl (Asola) 3.715 434 1.532 1.749
Be Solar 2 Srl (Ostellato) 744 86 302 356
Be Solar 4 Srl (Voghera) 777 89 315 373
Be Ascoli Srl (Ascoli Piceno) 819 94 332 393
Odyssey Solar 2 Llc (Geneva) 770 105 313 351
Tororo Solar North Ltd (Tororo) 294 196 98 -
Construction Loan 414 414 - -
Building Energy Wind Iowa (Iowa) 414 414 - -
9.491 1.539 3.305 4.647
Interest on project financing
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
As part of the corporate debt, no new credit lines were
subscribed by the parent company which during the
year repaid the credit lines in place at December 2015
for a total of Euro 1,906 thousand with Banco Tre
Venezie and Banca Popolare di Sondrio, while a loan
contract with Banca Intesa San Paolo was subscribed for
a nominal Euro 2,000 thousand of five year duration.
The New York branch of Monte dei Paschi di Siena,
following the Committed Credit Facility Agreement
dated May 2014, guaranteed also for 2016 the USD
1,000 thousand credit facility line, corresponding to
Euro 949 thousand at the reporting date, to the US
Group subholding BEHUS Llc.
The outstanding payable on the bond concerns that
subscribed by the Three Hills Capital Partners fund in
July 2015 for a nominal value of Euro 30 million. The
bond is a financial instrument listed on the ExtraMOT
PRO market in Italy; the bond’s duration is five years,
with a single repayment in July 2020. The interest rate
totalling 9% annually requires payment of 4% annually,
with the remaining 5% paid on maturity together with
the capital amount. The bond stipulates financial
covenants requiring the company to fulfil both financial
and operating requirements which protect creditors in
the case of violation. In general, these contractual
clauses cover three types of covenants:
- general: operational type limitations which
require approval by signees, principally
concerning transactions with related parties,
the carrying out of corporate operations, the
sale or transfer of assets, the distribution of
dividends, pledges on Company shares,
according to that set out under the bond
regulation;
- financial: maintenance of a set LTV 1 ratio
indicator (“Loan to Value”, ratio between the
amount of bond capital including interest
matured) and the NAV (“Net Asset Value”,
therefore the present value - established
according to the “Free Cash Flow to Equity”
method - of operating plant, of projects close
to completion and of other assets/liabilities,
reduced by the Group net debt), as detailed in
the bond regulation;
- disclosure: the mandatory publication on the
company website of the consolidated
quarterly, half-year and annual accounts
according to the established timeframes. The
measurement of the financial covenants and
the other contractual commitments is
monitored on an ongoing basis by the
Company. At December 31, 2016, all
parameters had been complied with. The non-
compliance with covenants and other
contractual commitments applied to the
above-mentioned bond, where not
appropriately remedied within agreed
at December 31st
(Euro thousand) 2016 <1y 2-5y >5y Currency Rate type Rate
Credit /Loan facilities 2.824 1.449 1.375 -
Building Energy SpA 1.875 500 1.375 - Euro (EUR) indicizzato Euribor 3m + 3,45%
Building Energy Holding US LLC 949 949 - - Dollaro (USD) variabile Libor 1w + 4,50%
Debenture 30.807 292 30.516 -
Building Energy SpA 30.807 292 30.516 - Euro (EUR) fixed 4% + 5% PIK
Loan-facility 8.663 111 4.909 3.643
Zevoblox 8.663 111 4.909 3.643 Rand (ZAR) floating Jibar 3m + 8% spread
42.294 1.852 36.800 3.643
Corporate financing
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
47
timeframes, may require the advance
repayment of the outstanding payable.
The subordinated loan relates to the outstanding
amount of the payable granted, also in July 2015 by
Rand Merchant Bank to Zevoblox Ltd - original
amount of R 125,000 thousand - subordinated to
the senior loan project finance on the Kathu
project. The 16 year repayment plan is based on
cash flows from an estimate of dividends which will
be distributed by REISA Ltd until May 2031. The
following table indicates the amount of interest
payments on corporate loans according to
maturity.
14. Other payables and non-current liabilities
Other payables and non-current liabilities increased Euro 1,627 thousand, principally due to higher deferred tax
liabilities of Euro 1,420 thousand.
Deferred tax liabilities increased in the year Euro 1,081
following the recognition to the consolidated financial
statements of the tax effect from the capitalisation of
financial charges from development and construction
activities, as per IAS 23. The remaining increase, net of
currency effects of Euro 17 thousand, relates to the
increase in deferred tax of Euro 253 thousand
concerning BEHUS LLC, based on the consolidated tax
result of the companies operating in the United States.
The post-employment benefit provision reflects the
Group's liability to all employees at December 31, 2016,
net of advance payments made. The increase in the risks
provisions relates for Euro 77 thousand to the accrual
for two legal disputes which at December 31 were still
in progress. The remainder of the increase concerns the
asset retirement obligation (ARO) accrual concerning
at December 31st
(Euro thousand) 2016 <1y 2-5y >5y
Credit /Loan facilities 170 105 66 -
Building Energy SpA 119 54 66 -
Building Energy Holding US LLC 51 51 - -
Debenture 4.198 1.200 2.998 -
Building Energy SpA 4.198 1.200 2.998 -
Loan-facility 15.572 1.068 5.115 9.389
Zevoblox 15.572 1.068 5.115 9.389
19.941 2.373 8.179 9.389
Interest on corporate financing
at December 31st at December 31st
(Euro thousand) 2015 Increase Decrease 2016
Post-employment benefit provision 601 137 (126) 612
Other risks provisions 190 224 (29) 386
Deferred taxes 197 1.420 1.617
988 1.782 (155) 2.615
Other non current liabilities
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
48
the US photovoltaic plant at Snyder Road, Geneva,
Hartford and Musgrave.
15. Trade payables, taxes and other non-current liabilities
The increase in trade payables of Euro 14,919 thousand
is substantially due to the construction activities at
Hartford and Musgrave (for an amount of Euro 13,172
thousand). These payables were settled for a total of
Euro 11,856 thousand in the initial months of 2017,
following an additional capital contribution from the Tax
Equity Investor partner to the two photovoltaic vehicle
companies for Euro 4,450 thousand and due to the
agreement of a loan with National Cooperative Bank for
Euro 9,008 thousand.
The change in payments on account relates for Euro
2,400 thousand to the advance recognised to the
Group’s Ugandan branch by Tororo Solar North Ltd on
construction activities at the plant of the same name.
The remainder of the movement concerns the advance
received from BEHUS LLC, which received from Alliance
Fund USD 600 thousand on the sale of investments in
the vehicle companies holding the plant at Iowa and at
Hartford and Musgrave. The operation was successfully
concluded in the initial months of 2017, contributing
cash to the US subholding of USD 10,250 thousand.
Tax payables include:
- at the parent company payables for overdue
taxes of Euro 169 thousand, payables for
withholding taxes on employees and contractors
for Euro 2,514 thousand and payables for tax
agency withholding taxes for Euro 149 thousand;
- in Tororo Solar North Ltd Euro 356 thousand
related to withholding taxes of 6% on EPC
activities (advances and milestone) for which
invoices have been received at the reporting
date. The withholding taxes were paid in January
2017.
at December 31st at December 31st
(Euro thousand) 2016 2015 Variance
Trade payables 27.545 12.626 14.919
Current tax payables 3.316 1.824 1.492
Advances 3.269 11 3.257
Accrual and deferrals 390 299 91
Other current liabi lities 4.395 4.215 180
Total current liabilities 38.914 18.975 19.939
Passività correnti
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Income Statement
16. Revenues
The Group as a renewables market operator, as in the
previous year, through its operations generated
revenues from development activities, from plant
construction, from renewable energy production and
from energy trading.
Revenues from sales and services relate for Euro 3,754
thousand to energy sales, for Euro 394 thousand to
energy trading and for Euro 1,585 thousand to
maintenance and consultancy services, principally
O&M. Energy sales increased Euro 528 thousand
following the entry into use of the 2.8 MW photovoltaic
plant in Geneva; in fact, the Italian plant produced
energy for an amount of Euro 2,379 thousand, in line
with 2015, while in the United States the value
increased from Euro 706 thousand in 2015 to Euro 1,375
thousand in 2016. Revenues from operation and
maintenance (O&M) activities amount to Euro 1,585
thousand (+Euro 370 thousand on 2015), of which Euro
799 thousand concerning the subsidiary Homes S.r.l. for
third party plant, increasing (Euro 269 thousand) on the
previous year, due to greater extraordinary works on
third party plant; the remainder mostly concerns
management fees due to the Group for O&M activities
on the Kathu plant. The total decrease in this account in
2016, as outlined in Note 8, relates to the non-recurring
invoicing in the previous year of success fees for Euro
3,600 thousand to REISA LTD, arising on completion of
the Kathu plant. Revenues from sales and services are
broken down by region as follows.
The increase of fixed assets on the previous year
principally relates to EPC contractor activities by the
parent company branch for the Ugandan plant under
construction (+Euro 3,490 thousand); net of this
increase, the account decreased (-Euro 1,529 thousand)
following the reduction in the year of development
activities which satisfy the capitalisation requirements
of IAS 38. The Group during the year in fact mainly
(Euro thousand) 2016 2015 Variance
Revenues 5.473 8.374 (2.901)
Increase in fixed assets for internal work 10.596 8.635 1.961
Other operating revenues 1.756 1.344 413
17.825 18.352 (527)
Revenues
Breakdown by geographical area
(Euro thousand) Revenues from sales and services
Europe & Asia 3.295
Africa & Middle East 682
North America 1.496
5.473
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
50
focused on the execution of developments substantially
completed in previous periods (Tororo, Hartford,
Musgrave, Iowa) and the selection of new opportunities
to be developed which - as still in an initial scouting
phase - do not meet the requirements for their
capitalisation. For further details, reference should be
made to the D&C section of the Directors’ Report and
Note 14 of this document.
Other revenues and income principally comprise the
reversal of bonuses for personnel accrued in 2015 but
not paid for Euro 533 thousand, the reversal of a trade
payable to a South African supplier for Euro 214
thousand and the recognition of liquidated damages
obtained by Argos LLC from the EPC contractor
responsible for the construction of its Geneva plant of
Euro 251 thousand, following the failure to achieve a
number of milestones, as set out in the relative EPC
Agreement.
17. Operating costs
The change in operating costs, overall reducing on 2015, substantially concerns the increase in costs for services, offset
by a reduction in impairments in the year.
The increase in costs for services relates to technical
expenses, due to the entry into use of a new plant
(Cornell Geneva) and, as stated in Note 16, the focus on
the search for new development opportunities which
are still in the initial scouting phase and therefore the
relative costs, which may not be capitalised, with a
greater impact on the income statement. Technical
expenses increased 16% compared to 2015.
.
(Euro thousand) 2016 2015 Variance
Raw materials, semi-finished goods and finished products 123 86 37
Cost of services 12.282 10.714 1.568
Personnel 7.188 7.330 (142)
Other operating costs 637 1.046 (409)
Depreciation, impairment and provision 2.731 5.730 (3.000)
22.960 24.906 (1.946)
Operating costs
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
Labour costs reduced, although the headcount
increased during the year. This is due to a number of
factors, principally the non-recognition of the bonuses
in the year in comparison to the previous year, which
amount to Euro 533 thousand, while salary increases
due to the expansion of the organisation and currency
changes had an opposing effect.
Amortisation and depreciation, principally in line with
the previous year, increased with the entry into use of
the plant held by Argos LLC (Cornell – Geneva) for an
amount of Euro 188 thousand compared to 2015 and of
SCADA software (+Euro 108 thousand). Write-downs
entirely relate to projects which were no longer
considered feasible during the year.
Cost of services
(Euro thousand) 2016
O&M for operating pv plants 1.303
Techical and professional fees 4.243
Travels 1.454
Board of Direction 1.040
Board of statutory 38
Facil ities 719
Insurance 225
Car expenses 469
IT, phones and mobile expenses 381
Legal fees 303
Tax consulting 172
Administrative consulting 270
Payroll 33
Audit 330
Training 47
Bank charges 143
Marketing 291
Miscellaneous 823
Total 12.282
(Euro thousand) 2016 2015 Variance
Executives 11 11 -
Employees 85 77 8
96 88 8
Head count
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
52
18. Net financial income/(charges)
Financial interest increased on the previous year, as in
2016 financial charges on the bond loan and on the
payable to the Rand Merchant Bank contributed for all
12 months of the year, whereas in the previous year only
contributing for a half-year period. These costs are in
addition to those on the payable to NCB contracted by
Odyssey Solar 2. For further details, reference should be
made to Note 12.
Currency gains and losses relates to the adjustments on
amounts in foreign currencies; the balance is the
difference between currency gains and losses
(respectively + Euro 5,518 thousand and - Euro 1,199
thousand), with the currency contributing greatest to
the overall currency gains being the South African Rand.
The Share of investments measured at equity includes
the results of the companies within the Group
consolidation measured under the equity method. For
further details, reference should be made to Note 4.
Depreciation, impairment and
provision
(Euro thousand) 2016
Amortization & Depriciation 1.720
Impairment 1.089
Provision (78)
2.731
(Euro thousand) 2016 2015 Variance
Other financial income (672) 12 (684)
Interest (2.415) (1.258) (1.157)
Exchange rate gain or loss 4.319 (2.308) 6.626
1.232 (3.554) 4.785
Financial income and charges
(Euro thousand) 2016 2015 Variance
Revenues from partecipating interests valued bu equity method 671 897 (226)
WBHO_BE 635 422 213
GUMA_BE 36 9 27
BEDLA 3 3
Charges from partecipating interests valued bu equity method (126) (147) 21
REISA (1.336) 466 (1.802)
RENEWABLE ENERGY SOLUTION (126) (147) 21
(913) 749 (1.663)
Share of result from partecipating interests valued bu equity
method
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
53
19. Income taxes
The deferred tax assets are calculated based on the
global allocation criteria, taking into account the
cumulative amount of all of the temporary differences,
based on the average expected rates in force when
these temporary differences reverse. Direct taxes derive
exclusively from the tax income of the Italian registered
companies owning plant and suppliers of O&M services;
the Parent Company tax charge however concerns the
write-down of the tax receivable arising in previous
years which is no longer recoverable. Deferred taxes
principally concern the recognition of tax losses which
are expected to be recovered through future tax profits
(principally in South Africa), in addition to income taxes
generated under the consolidation from the recognition
of capitalised financial interest. For further details,
reference should be made to Note 14.
The table below shows the reconciliation between the theoretical tax rate and the actual tax rate of the Parent Company
for the year 2016:
No deferred tax assets were recorded on the temporary
differences and prior year and current year tax losses of
(Euro thousand) 2016 2015 Variance
Current taxes (209) (581) 372
Deferred taxes (1.305) 428 (1.733)
(1.514) (153) (1.361)
Income taxes
(Euro thousand) Value Tax
Result before tax (5.179)
Theorethical tax rate 27,50% (1.424)
Taxable temporary differences in subsequent years (1.246) (343)
Deductible temporary differences in subsequent years 3.247 893
Turning to temporary differences from previous years (89) (25)
Differences that will not be reserved in subsequent years (770) (212)
Taxable IRES profit (4 .0 37 )
(Euro thousand) Value Tax
Difference between value and cost of production (2.822)
Interests (2.084) (116)
Theorethical tax rate 5,57% (157)
Deductible temporary differences in subsequent years - -
Taxable IRAP profit (4 .9 06 ) (2 7 3)
IRES rec onc i l iation
IRAP rec onc i l iation
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
54
the Parent Company, as in accordance with the
prudence principle it is not possible to currently make a
reliable estimate on the timing of the recovery.
20. Other comprehensive income items
The account refers principally to the changes in the translation reserve. For further details, reference should be made to
Note 12.
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
55
Other information
The Group has undertaken a number of commitments
and issued guarantees to third parties with regards to
commitments undertaken by the parent company and
the subsidiaries. The contractual commitments
undertaken by the Group with third parties at December
31, 2016 with regards to the acquisition of investments
in vehicle companies, not yet reflected in the financial
statements, total Euro 22,500 thousand. These
contracts, undertaken by the Group through South
African subsidiaries, related to the wind projects of
Roggeveld, Karreebosh, Wiberg, Banna Ba Pifhu and
Wolseley, and provide for: the recognition of a set fee
for the acquisition of the investment in the vehicle
company which owns the relative initiative, subject to
certain conditions and to be paid in a number of
tranches on reaching Preferred Bidder status and
subsequently Financial Close. At December 31, 2016,
the commitments concerning these payments totalled
Euro 9,400 thousand; the recognition of a fee for
support services provided by vendors during the
development phase (Development Service Fees) to be
paid on reaching Financial Close. At December 31, 2016,
commitments for Development Service Fees totalled
Euro 13,100 thousand. In this regard, the conditions
indicated in the agreements relate to established steps
which bring projects closer to realisation and therefore
an increasing commercial value which comfortably
justify the investment. The non-occurrence of the
required conditions render the related financial
commitment void. The amounts indicated may be
subject to adjustment, depending on the percentage
holding which the Group will have in the vehicle
company on financial close. The Group also has in place
with various third party companies non-binding
agreements concerning potential developments which
may translate into financial commitments only on
satisfying set conditions, not yet verified at December
31, 2016: therefore these agreements do not generate
any type of contractual commitment to third parties.
The table below outlines the guarantees given:
(Euro thousand)
Guarantor Guaranteed Beneficiary Amount Maturity date
Building Energy SpA Homes Germana 210 automatic renewal
Bui lding Energy South Africa Pty Ltd Kruisval lei DOE RSA 65 31/12/2025
Bui lding Energy South Africa Pty Ltd Roggeveld DOE RSA 1.937 31/12/2025
Boesmanland Solar Farm Pty Ltd Aggeneis DOE RSA 519 31/12/2025
Lokian Trading and Investments Pty Ltd Kathu II DOE RSA 173 31/12/2025
Bui lding Energy South Africa Pty Ltd Witberg DOE RSA 457 31/12/2025
Bui lding Energy South Africa Pty Ltd Banna ba Pifhu DOE RSA 212 31/12/2025
Bui lding Energy South Africa Pty Ltd Klawer DOE RSA 5 31/12/2025
Navosync Pty Ltd Mkuze DOE RSA 228 31/12/2025
Bui lding Energy South Africa Pty Ltd Masen ALFANAR 2.656 29/03/2017
Tororo Solar North Limited Tororo solar north ERA 14 28/02/2017
Tororo Solar North Limited Tororo solar north ERA 7 30/09/2017
Bui lding Energy SpA Kathu1 REISA 3.747 31/08/2017
Bui lding Energy SpA Ethiopia EEP 21 10/11/2017
Bui lding Energy SpA Tororo solar north Tororo Solar North 157 01/07/2017
Bui lding Energy SpA Tororo solar north Tororo Solar North 157 01/07/2017
Bui lding Energy SpA Namibia Nampower 28 31/03/2017
Bui lding Energy South Africa Pty Ltd Gauteng GAUTENG DEP OF INF DEV 7 28/07/2017
Bui lding Energy South Africa Pty Ltd Gauteng GAUTENG DEP OF INF DEV 7 28/07/2017
Bui lding Energy South Africa Pty Ltd Gauteng GAUTENG DEP OF INF DEV 7 28/07/2017
Scuitdrift Solar Pty Ltd Scuitdrift DOE RSA 5 01/02/2018
KHOI-SUN Development Pty Ltd Scuitdrift 2 DOE RSA 5 01/02/2018
Bui lding Energy SpA Ciprea 50 31/12/2022
Bui lding Energy SpA Ciprea 25 30/09/2023
10.697
Guarantees given
Building Energy Group – Explanatory Notes to the Consolidated Financial Statements at December 31st, 2016
The parent company is also a guarantor for its US
subsidiaries and for US beneficiaries for a total amount
of Euro 53,417 thousand, however stated in the
financial statements at December 31, 2016 as
commercial financial payables. At the preparation date
of these notes, many of these guarantees (for a total of
Euro 34,162 thousand) were no longer in place.
With regards to disclosure on transactions with related
parties and upon fees paid to the independent auditors,
the Board of Directors and the control boards, reference
should be made to the Directors’ Report.
Gian Luca Bandini
Chairman of the Board of Directors
Gruppo Building Energy Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
BUILDING ENERGY GROUP
DIRECTORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31st, 2016
Registered Office in VIATORTONA 15 20100 MILAN (MI). Share capital € 12,000,000.00 fully paid-in
Companies Registration Office No.: 09230261001; Economic and Administrative Register No. 1937961
www.buildingenergy.it
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
2
Introduction ....................................................................................................................................................... 4
Group structure at December 31, 2016: The Americas ....................................................................................... 6
Group structure at December 31, 2016: Europe and Asia ................................................................................... 7
Group structure at December 31, 2016: Africa and Middle East ......................................................................... 8
Market overview ................................................................................................................................................ 9
Europe and Asia ........................................................................................................................................... 10
Africa and the Middle East........................................................................................................................... 10
North America ............................................................................................................................................. 10
Latin America ............................................................................................................................................... 11
Regulatory framework .......................................................................................................................................12
Operating performance .....................................................................................................................................15
Introduction ................................................................................................................................................. 15
Plant in use .................................................................................................................................................. 16
Plant under construction ............................................................................................................................. 16
Projects under development ....................................................................................................................... 16
Significant Events in the year .............................................................................................................................18
Financial Statements .........................................................................................................................................21
Balance Sheet .............................................................................................................................................. 21
Income Statement ....................................................................................................................................... 22
Cash Flow Statement ................................................................................................................................... 24
IPP ................................................................................................................................................................ 26
O&M ............................................................................................................................................................ 28
D&C ............................................................................................................................................................. 29
Reclassified Financial Statements ......................................................................................................................30
Reclassified balance sheet .................................................................................................................................30
Reclassified income statement ..........................................................................................................................30
Key Financial Indicators .....................................................................................................................................32
Transactions with group companies and related parties ....................................................................................35
Treasury shares and shares of holding companies .............................................................................................36
Tax consolidation and tax transparency .............................................................................................................37
Subsequent events ............................................................................................................................................38
Outlook .............................................................................................................................................................39
Adoption of the Organisational Model as per Legislative Decree 231/2001 .......................................................40
Workplace safety as per Legislative Decree 81/2009 .........................................................................................41
Management system certification .....................................................................................................................42
Human resources ..............................................................................................................................................43
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
3
Privacy ...............................................................................................................................................................44
Corporate Boards ..............................................................................................................................................46
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
4
Introduction
Dear Shareholders,
the financial statements which we present
for your approval, whose changes compared to the
previous year are illustrated in the Explanatory Notes,
present a true and fair view of your Group at December
31, 2016.
This report illustrates a reliable, fair and exhaustive
overview of the Building Energy Group (hereafter also
the “Group”) and the operating performance for the
year, drawing your attention to the main aspects
pursuant to Article 2428 of the Civil Code, as amended
by Article 1, paragraph 1, of Legislative Decree No.
32/2007. The amounts are expressed in thousands of
Euro, unless otherwise indicated.
The Group has operated in Italy since 2010 (and since
2011 on the international market) through an
investment and partnership programme with leading
institutional investors involved in the renewable plant
construction and energy production sector; in the four-
year period 2013/2016, the Group significantly stepped
up its investment on international markets with the
setting up of new subsidiaries (sub-holdings and special
purpose vehicles – “SPV’s”) on 4 continents.
In 2016, we finally began to see tangible results from the
development activities initiated in the preceding years:
a number of plant construction operations were
consolidated in the year (the IOWA wind plant was
almost completed by December 2016, in addition to 2
photovoltaic plant at Hartford and Musgrave), while
another has begun (the photovoltaic plant construction
in Uganda).
In terms of new initiative development and investment,
the Group continued to seize opportunities assessed as
promising by management, beginning as soon as
possible the financing and construction phases.
Also from a strategic standpoint and with a view to
establishing a diversified energy market portfolio, the
Group has proven itself to be forward looking and highly
attentive to new sector developments: while
maintaining its “historic” focus as an EPC contractor,
Developer, IPP operator and O&M service provider, the
Group has laid the foundations to extend its scope -
while remaining committed to renewable energies - and
completing therefore its industrial profile as a supplier
of new products and services, targeting not just
industrial clients (principally in terms of energy trading),
but end-users (with company electric car fleet leasing
and related energy sales through recharging pods);
these new activities will become fully operative during
the current year, also through the establishment of new
corporate entities.
In order to deliver upon the industrial plan and support
growth both through “historic” operations and those
introduced more recently, the Group in 2016 and
throughout the first half year of 2017 successfully
accelerated the sourcing of financing required to
achieve the objectives established both in terms of the
delivery of in portfolio projects and with regards to the
continued research for new developments and
initiatives - which are the true creators of Group value.
In particular:
- through agreements with leading investment
institutions and funds in the USA and South
Africa, between December 2016 and Q1 2017
industrial and financial partnership
agreements were signed which guarantee the
completion of projects already under
development and/or authorised, in the
absence of which the dilution of share capital
in the subholdings would compromise the
parent company’s control;
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
5
- through the issue of a new financial instrument
(outlined in greater detail in the subsequent
events section, to which reference should be
made), in the completion phase at the
preparation date of this report, which the
Group expects to provide the basis to
consolidate and support its growth on the
domestic and international market.
Also from a more strictly accounting viewpoint, the
Group has consolidated its growth through the setting
up of an IT system for the entire consolidation process
(SAP BPC). The upcoming installation of a centralised
treasury management system, the issue of the Group
accounting manual and the future integration of the
various accounting systems into a single platform will
also further improve the internal control process.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
6
Group structure at December 31, 2016: The Americas
BUILDING ENERGY SPA
BUILDING
ENERGY
HOLDING US LLC
BUILDING
ENERGY
DEVELOPMENT
US LLC
MICHELANGELO
WIND 1 LLC
MICHELANGELO
WIND 4 LLC
OPTIMUM
WIND 7 LLC
RENEWENERGY
SOLUTION LLC
VENUS WIND 3
LLC
BE PANAMA S.A.
BE DEVELOPMENT L.A.
PANAMA SOLAR
ENERGY
PROVIDERS S.A.
(PSEP)
EMPRESA DE
PRODUCTION DE
ENERGIA LIMPIA S.A.
(EPEL)
BE ASSET
MANAGEMENT
LLC
ODYSSEY
SOLAR 1 LLC
PENELOPE
SOLAR LLC
ULYSSE
SOLAR 1 LLC
MICHELANGELO
WIND 3 LLC
OPTIMUM
WIND 3 LLC
OPTIMUM
WIND 5 LLC
OPTIMUM
WIND 6 LLC
OPTIMUM
WIND 4 LLC
ODYSSEY
SOLAR 2 LLC
TELEMACHUS
SOLAR LLC
ARGOS
SOLAR LLC
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
49%
1%
1%
51%
51%
95%
95%
49%
35%
43%
SOLAR
PIEMONTE SPA .
90%
BE WIND IOWA LLC
100%
SOLAR
PIEMONTE UNO
SPA.
100%
ODYSSEY
SOLAR 3 LLC
LAERTE
SOLAR LLC
GREEN
CYCLONES LLC
95%
100%
APOLLO
SOLAR LLC
DAPNHE
SOLAR LLC
ARTEMIS
SOLAR LLC
100%
51%
1%
100%
SCILLA SOLAR
LLC
1%
49%
LEONARDO 1
LLC
100%
BUILDING
ENERGY
HOLDCO I° LLC
HOLDING
SUBHOLDING
SPV
JV
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
7
Group structure at December 31, 2016: Europe and Asia
BUILDING ENERGY SPA
BE SOLAR 4
SRL
BE SOLAR 2
SRL
BIOTWIN 2
SRL
BE ASCOLI
SRL
BIOTWIN SRL
HOMES SRL
BUILDING ENERGY
JAPAN GODO
KAISHA
BE KRUSEVAC
DOO
BE BALKAN DOO100%
100%
100%
100%
100%
100%
100%
80%
BUILDING ENERGY
CROATIA DOO
51%100%
SIE SOLAR SRL
51%
BUILDING ENERGY
SLAVONIJA 1 DOO
100%
BE HYDRO
VERBANO SRL
50%
HOLDING
SUBHOLDING
SPV
JV
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
8
Group structure at December 31, 2016: Africa and Middle East
0
BUILDING ENERGY SPA
BEDA SRL BEDA 2 SRLBEDA 3 SRL BEDA 4 SRL
BEDA 5 SRL
ZEVOBLOX
(PTY) LTD
BLU SKY
SOLAR (PTY)
LTD
LOKIAN (PTY) LTD
LETIFLASH
(PTY) LTD
ALVIPROX (PTY) LTD
GREEN SKY
SOLAR (PTY)
LTD
RED SKY
SOLAR (PTY)
LTD
PAULPUST (PTY) LTD
ALVIFORCE
(PTY) LTD
SCUITDRIFT (PTY) LTD
KHOI SUN (PTY) LTD
BOESMANLAND SOLAR FARM (PTY)
LTD
ZEVOBUZZ (PTY)
LTD
TOKIRITE (PTY) LTD
ROGGEWELD
(PTY) LTD
ZAMBHOLDING
LTD
NICHELENGE
SOLAR LTD
MWENSE
SOLAR LTD
KAWAMBWA
SOLAR LTD
MANSA
SOLAR LTD
EAST AFRICA
SOLAR
ENERGY LTD
BUILDINEG
ENERGY
SOUTH AFRICA
(PTY) LTD
VENDISYS
(PTY) LTD
KIRACODE (PTY)
LTD
KIRAPAX (PTY)
LTD
TORORO SOLAR
NORTH LIMITED
TORORO SOLAR
SOUTH LIMITED
BE SOLAR
ZAMBIA LTD
WBHO-BE
(PTY) LTD
GUMA BUILDING
ENERGY (PTY) LTD
KIRADEX (PTY)
LTD
KIRANIX (PTY)
LTD
GONDONETIX
(PTY) LTD
VENDIRITE
(PTY) LTD
REISA
(PTY) LTD
NAVOSYNC
(PTY) LTD
100%
100%
10%
100%100% 100% 100%
1%
1%
100%
100%
100%
1%
1%
1%
1%
1C
99%
100%
100%
100%
100%
100%
100%
100%
50%
30%
51%
100%
100%
80%
80%
96,66%
50%
99%
99%
99%
99%
100%
BUILDING
ENERGY EGYPT
JSC
ACCESS
BUILDING
ENERGY SOLAR
ONE
55% 30%100%
VENDIWELL
(PTY) LTD
100%
HYPERION (EX
CYRACOM (PTY
LTD
CYRALEX
(PTY) LTD
CYRAGUARD
(PTY) LTD
SOL
INVICTUS
(PTY) LTD
CYRACLOX
(PTY) LTD
CYRAFUSION
(PTY) LTD
CYRACRAFT
(PTY) LTD
100%
100%
100%
100%
ALUPROX
(PTY) LTD100%
100%
100%
100%
100%
BE CONCESSION
LESOTHO
(PTY) LTD
49%
K201521612
1 (PTY) LTD
BE Uganda
(PTY) LTD
99%
NOMISPAN
(PTY) LTD
NOMISPARK
(PTY) LTD
NOMISPOT
(PTY) LTD
100%
100%
100%
100%
EURONOTUS
(PTY) LTD100%
99%
BREZZA
AFRICANA
(PTY) LTD
100%
HOLDING
SUBHOLDING
SPV
JV
100%
100%
100%
100%
100%
100%
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
9
Market overview
The Building Energy Group is involved in the production
of electricity from renewable sources, both in Italy and
internationally and employs an integrated approach for
direct input into all operations typical of the sector.
Upon foundation, through its network of subsidiaries
and associates, the Group worked toward establishing
itself as a photovoltaic plant Constructor (“EPC
contractor”); moving with domestic and international
market developments, over time the Group has been
able to pursue a different path, becoming an
independent power producer (“IPP”). With this goal in
mind, the Group has undertaken an increasingly
important role as a Developer of renewable energy
projects, providing engineering services in support of
project development and plant construction, while
retaining a focus on accessory maintenance and
assistance (“O&M”), in addition to own and third party
plant management (“Asset manager”).
Benefitting from growing international pressure for
renewable energies to combat climate change, the
sector - particularly outside of Italy - is quickly expanding
and offers good opportunities for reactive and flexible
players involved across numerous regions providing a
range of technical solutions for the production of
renewable energy (i.e. solar, wind, biomass and hydro-
electric), and in a position therefore to tap into available
opportunities: the latest example of this unprecedented
international drive was of course the global conference
in Paris (November/December 2015) at which more
than 170 countries agreed to a variable 1.5% to 2%
maximum global warming increase over the coming five
years (agreement thereafter signed in New York in April
2016). The recent step backwards by the US following
the election of the United States president who appears
to fully support fossil fuels is a let down for the signatory
countries; it appears however that this development will
not turn back the clock on what increasingly seems to
be the only option to fight climate change before it
becomes irreversible.
However, the support for “green” initiatives continues
to be disparate - as indeed the turnaround in this sense
by the United States indicates. In fact, alongside nations
significantly incentivising renewable energy production,
assisted also by the long-sightedness of local and
international financial institutions open to financing the
growth of renewables through supporting what are
often foreign industrial initiatives - mainly developing
economies, but also mature economies, although not
yet sufficiently developed in terms of renewables - other
states, such as Italy, following the provision of significant
support to the sector through a range of incentives from
2006 have put the brakes on the sector’s development,
introducing, among other matters, legislation (such as
the so-called “incentive decree”, upon which the
Constitutional Court has yet to pronounce with regards
to its constitutionality, raised by a number of parties due
to its retroactive application) which reduce economic
viability in terms of the return on photovoltaic plant
already constructed and in use, slowing the possible
further development of the sector, also in industrial
terms.
Therefore, the Group has increasingly focused on
overseas markets, where significant opportunities are
available: there were 88 companies in the Group
consolidation scope in 2016, 2 less than the previous
year as the net effect of the incorporation of new
entities and the liquidation of others.
The Regional distribution of Group companies is
presented below:
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
10
The major activities undertaken by the Group in the year by region are outlined below.
Europe and Asia
The main European operations concentrated principally
in the Balkans region and Italy. In particular, the
Krusevac (Serbia, 4MW electric equivalent and 16 MW
thermal) biomass project has almost completed its state
of development, while the development of a similar
project has begun in Croatia, where in 2016 a new SPV
was established after the setting up of the subholding in
the previous year.
The key developments in Italy were as follows:
i) 2 authorisations were obtained for the
construction of 2 hydro plant in the Alto Verbano
(Piedmont) area: the financing and start-up of
construction are scheduled for 2017;
ii) at the end of the year negotiations
began for the acquisition of a company engaged in the
energy trading sector: the preliminary agreement was
finalised in the current year.
Africa and the Middle East
In Africa, development activities continued, although
the financial closes originally scheduled for 2016 were
postponed due to reasons not owing to the Group.
The project for the Tororo (Uganda) photovoltaic plant
was completed, while in December a branch of Building
Energy S.p.A. set up on site to fulfill the contractual
requirements under the EPC contract began
construction.
As shall be outlined at a later point, major efforts were
employed to source on the market the funding
necessary for construction of the wind plant which will
reach financial close: during Q1 2017, an agreement was
signed with Old Mutual, a leading South African financial
institution, who will support the Group as an investor
and as a lender for the creation of the wind portfolio
ahead of construction.
North America
In 2016, the Group consolidated its position in the
United States.
The construction phase of the wind plant in Iowa (the
first Group Wind plant, of a total 30MW capacity) was
almost completed, while two additional photovoltaic
plant in the New York cluster were concluded, in
partnership with Cornell University (connected to the
network in Q1/2017).
In terms of development operations we highlight the
stepped up development of the Annapolis photovoltaic
plant, which is capable of satisfying a considerable
degree of the local city’s energy demand.
Similarly to that outlined for the South Africa Region,
also for the United States a “characteristic”
development activity was flanked at the end of the year
by a more corporate restructuring focussed operation
for the sourcing of the funding required to operate as a
developer. For further details, reference should be
made to the significant events section.
Holding Subholding SPV JV Totalof which not
consolidted
Europe & Asia 1 2 11 0 14 1
Africa & Middle East 0 0 0 0 0
North America 3 24 1 28 12
Latin America 2 4 0 6 1
1 7 39 1 48 14
Shareholding structure
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
11
Latin America
The development of a 45 MW photovoltaic project in
Panama City, Panama continued.
In Chile, the development of local projects began
through the acquisition of a company.
Through the agreement of a Joint-Venture with the
Scotto Group, an Italian company operating in Chile
since 2005 in the mini-hydroelectric sector, Building
Energy in 2016 laid the foundation for the development
of a portfolio of small projects for a total of approx. 20
MW in the Andean country. The portfolio is based on a
mix of solar photovoltaic and mini-hydro projects for
balanced electricity generation on the Chilean domestic
energy market. The development and license
acquisition process, in part directly managed by the
Joint-Venture and partly coordinated by local
businesses, was completed in the first half of 2017. The
first two plant will begin construction by the end of
2017, with connection to the network by Q1/2018. A
non-recourse loan with Chilean financial institutions is
currently being sourced.
In 2016, the decision was taken to increase the nominal
capacity of the “Punitaqui” photovoltaic project,
acquired in 2015, from an installed 3 MW to 9 MW. In
this regard, as required by Law 20.402 - accurate
environmental studies were conducted for the
presentation of an EIS (Environmental Impact
Statement) to the SEA (Environmental Evaluation
Service), officially submitted in June 2017. The project,
located in one of the areas harvesting most sunlight in
the country, will be ready for construction by the first
quarter of 2018.
With regards to the technology employed breakdown,
there are no significant differences compared to the
prior year; the graph below presents MW in
development by technology (source: Internal Project
Dashboard December 2016), compared with
2015/2016:
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
12
Regulatory framework
The regulatory framework of incentives for renewable
electricity production comprises various mechanisms
based on (i) the date of entry into use of plant, (ii) the
type of renewable source utilised and (iii) the power of
the plant.
For the internal market, the types of incentives available
to the Group are reported below.
The Feed-in tariff (Conto Energia) for photovoltaic plant
only (Ministerial Decree 06/08/10).
Conto Energia is the incentive instrument for
photovoltaic plant, originally governed by Ministerial
Decree of February 19, 2007 and subsequent
amendments and supplements (which replaces the
previous Ministerial Decrees of 28/07/05 and
06/02/06). For plant entering into use between January
1, 2008 and December 31, 2010, the Ministerial Decree
establishes an energy production tariff incentive broken
down according to the features of the plant themselves
(integrated, partially integrated, not integrated) and the
nominal power (between 1 and 3 kW; between 3 and 20
kW; greater than 20 kW). The incentive is provided by
the GSE for a period of 20 years.
More in particular, in accordance with Law No. 129 of
August 13, 2010, the tariff incentives under the Conto
Energia, governed by Ministerial Decree of February 19
2007, continue to be applied to photovoltaic plant
entering into use also subsequent to December 31,
2010, on the condition that (i) by December 31, 2010
the installation of photovoltaic plant is completed and
the conclusion of works is communicated to the
relevant authorities and (ii) such plant have entered into
use by June 30, 2011.
Ministerial Decree 06/08/10 fixes also a national
cumulative power installation objective by 2020 of 8
GW, with an incentivised power ceiling of 3 GW for solar
photovoltaic plant, 300 MW for integrated plant with
innovative features and 200 MW for concentration
plant. Ministerial Decree 06/08/10 does not distinguish
any longer between plant in terms of their integration
with existing buildings, but according to “constructed
upon buildings” and “other plant”.
Legislative Decree No. 28 of March 3, 2011, enacting
directive 2009/EC/28 (Legislative Decree), establishes
that the provisions of Ministerial Decree 06/08/10 apply
to plant entering into use by May 31, 2011.
In terms of recent developments, under Legislative
Decree 91/2014 of June 24, 2014, the Government has
laid the foundations for a unilateral restructuring
(lowering) of income from the Conto Energia for the full
range of operators: a number of positions have been
taken against this provision both by sector organisations
and the banking sector (the former against the
significant cut in the incentives announced - with major
impacts on profitability for all sector enterprises, the
former in terms of a regulation which puts the capacity
of enterprises to repay loans undertaken for the
construction of plant in serious jeopardy) and by a
number of legal experts, invoking its lack of
constitutionality due to the retroactive effect of its
provisions.
The Conto Energia in 2014 was significantly cut under
the so-called “Incentives Decree” (Ministry for
Economic Development Decree No. 268 of 18/11/2014),
which resulted in a reduction of approx. 8% in Conto
Energia (Feed-in tariff) income (in this regard, on June
24, 2015, the Lazio Regional Administration Court
judgement was published (No. 08669/2015 Reg. Prov.
Reg. No. 15359/2014 Circ. Reg.) which establishes that
the Constitutional Court should definitively consider the
unconstitutionality of the above-stated decree and as to
the legitimacy of retroactive application).
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
13
We in addition report below the main features of the regulatory frameworks of:
a) South Africa;
b) United States;
c) Panama;
d) Chile;
e) Serbia;
f) Egypt;
a) South Africa.
South Africa published in August 2011 the Renewable
Energy Independent Power Producers Procurement
Program (REIPPPP), which established an initial
allocation of 3,725 MW through a number of public
tenders, subsequently extended to approx. 5,000 MW,
for all renewable technologies, including photovoltaic,
wind, biomass, hydro and concentrated solar. The
country introduced a policy to increase energy
production, in particular from renewables, for two
underlying reasons: the first has a major social value:
this concerns in fact the bringing of basic services to
communities (particularly rural but also many suburban
areas) which have yet to put them in place; the second
is due to the fact that the high cost and insufficient
availability of energy now act as a bottleneck which
holds back - as has happened in the past during load
shedding periods - the economic growth required for
the country to create jobs. This is accompanied in
addition by the need to reduce the high emission levels
caused by a very high dependence on coal-sourced
energy.
This initial allocation was completed during the fourth
tender held on August 19, 2014. The REIPPPP is part of
the twenty-year Integrated Resource Plan (IRP) on
energy, periodically reviewed and updated, and
therefore it is expected that in the new IRP 2017 fresh
allocations of MW will be provided for among the
various renewable technologies as per the usual tender
mechanism under the REIPPPP.
The South African program is considered a global
success story and particularly by all Sub-Saharan African
Governments, who have published or are readying
themselves to launch renewable programs (e.g. Zambia
and Uganda). In fact, in the five years since South Africa
launched its first program with the 2011 tender, the
production costs of solar and wind energy have
respectively dropped by over 400% and 100%. The
opening of new markets with the adoption of renewable
energy investment programs by the main Sub-Saharan
African Governments provides a major growth
opportunity for the market. Overall Sub-Saharan Africa,
with all of its complexities, is a market of over 600
million persons; according to a McKinsey study only
seven countries - Ivory Coast, Gabon, Ghana, Namibia,
Senegal and South Africa - have electricity access levels
of at least 50%, with the remainder reporting less than
20% and average consumption, with the exception of
South Africa, of lower than 150KWh.
b) USA
The United States has a long history of support for
energy infrastructure. The growth of the market is
supported by regulatory certainty, which incentivises
over the long-term private investment, both through tax
breaks (ITC or PTC) for photovoltaic sector investment
and through a programme of a range of incentives from
the US Treasury at federal and state level, according to
the differing types of renewable technologies.
Wind plant incentives: Production Tax Credit (PTC) or
Investment Tax Credit (ITC)
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
14
Under the American Recovery and Reinvestment Plan
(ARRA) approved on February 17, 2009 by the Obama
administration, a wind programme could choose
between ITC or PTC, although only one of the two.
Where a wind project opted for the ITC incentive it could
receive tax breaks (as previously was the case under the
ARRA) or cash - and however up to 30% of the total
investment. The Cash Grant option was available only
until the end of 2011, thereafter the only option being
tax breaks such as the ITC or PTC.
The Production Tax Credit (PTC) is based on production
in kWh. For 2014, this incentive was fixed at USD
23/MWh for 10 years. The ITC for the wind sector acts
in the same manner as for solar plant but is utilised less
as – as wind has a higher load factor – it is more
advantageous to maximise production and receive the
PTC rather than use the ITC based on an investment tax
discount.
Solar plant incentives: InvestmentTax Credit (ITC)
Solar energy sector incentives are known as Investment
Tax Credits (ITC), tax breaks based on the cost of the
project and not on production in kWh terms.
The ITC reduces the tax charge for individuals or
businesses investing in solar technologies, allowing a
recovery of 30% of the project cost.
Other tax exemptions for solar plant
Additional “solar” tax breaks, including exemptions on
plant ownership and the sale of energy, are provided by
state and local administrations to reduce the costs of
ownership of solar energy plant.
Treasury Program 1603 “Safe Harbour”.
Section 1603 of the “Cash Grant” Program of the US
Treasury has established a major incentive for the
development of renewable energy projects over recent
years, allowing owners of such projects to receive a cash
incentive in place of federal tax credits.
The project was initially introduced until 2010, although
was extended to enable projects entering into service
until the end of 2011 to receive direct cash incentives.
In addition, projects which began construction by the
end of 2011 and entering into service by 2012 (the
majority of which renewable) or 2016 (only for solar)
may use the “Cash” incentive programme, while in all
other cases the ITC or PTC tax incentive, according to
the type of technology, remained an option.
Accelerated depreciation
Similar to many other sectors of the economy, the
United States tax regulations allow enterprises investing
in solar energy to recover some capex costs through tax
deductions and accelerated depreciation.
Solar energy incentive funding policy
The Department of Energy (DoE) through the Loan
Guarantee Programme (LGP) supports the funding of
renewable projects and component and product
production plant for the renewable energy market.
c) Panama
A renewable electricity production incentives system is
not in place in Panama: currently, the only “advantage”
for green energy producers is the priority for supply
over conventional sources and the favourable outlook
of the Government upon the construction of works
suitable to develop the country’s infrastructure.
d) Chile
The Chilean market does not offer renewable energy
production incentives. However, given the abundant
amount of natural resources available, in particular solar
and hydro-electric, renewables have become
competitive with traditional energy sources. Local
distributors have also put in place tenders for the
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
15
awarding of long-term energy contracts.
For plant smaller than 9 MW, the possibility in addition
exists to opt for stabilised tariffs to minimise electricity
market volatility risk.
e) Serbia
The Serbian renewables market received a boost in
recent years, with the publication of an ad hoc decree in
January 2013 by the local government. The decree
requires by 2020 renewable production comprising at
least 27% of total production, guaranteeing investors
(across all technologies) a Feed in tariff (in Euro) for a
duration of 12 years: given the topography of the
country, particularly rich in forests, 55% of the
renewable production quota is expected to come from
biomass plant, in which the Group is heavily investing.
f) Egypt
The Egyptian government has drawn up a renewables
development plan, which paves the way - among other
matters - for reaching production from renewables of
49 TWh/year by 2022, to contribute 20% of total annual
electricity production.
In addition, together with the Egyptian network
manager EETC tenders have been opened to
international investors for 250 MW of wind power, for
200 MW of photovoltaic and for 50 MW of thermal-
dynamic solar by 2017. The first major step was the
launch in November 2014 of a selection process for the
awarding of 40 lots of land for the installation of 2 GW
in the Ben Ban area with a Feed-in-Tariff of USD 14.34
cents per KWh. This process concluded in 2015 with the
announcement of 40 Preferred Bidders to construct
photovoltaic parks and operate them for the coming 25
years. The Egyptian government will undertake all
network connection infrastructural works.
Operating performance
Introduction
The Group has prepared the consolidated financial
statements from the year ending December 31, 2013 in
accordance with IAS (“International Accounting
Standards”) and IFRS (“International Financial Reporting
Standards”). Investments in joint ventures are therefore
consolidated as per IFRS 11 at equity, with the reflection
of economic impacts to the income statement and
balance sheet respectively in income/charges from
investments and as a change in the value of
investments.
Notwithstanding the required accounting treatment to
consolidate joint ventures, the Group considers their
operations as strategic. Therefore, in order to clearly
represent the Group’s business, a management-based
view of the financial statement figures is provided in this
report, through Proportionate Consolidation and the
“deconsolidation” of equity adjustments and the
consolidation of joint ventures line-by-line,
proportionally to the share held. According to
management in fact, the statutory (hereafter “IFRS” or
“line-by-line consolidation”) and management views are
complementary and necessary for a clearer
understanding of the Group’s operating performance.
The proportionate consolidation figures are not
significant for accounting purposes and are therefore
not audited.
In addition, again for a clearer understanding, the 2016
and 2015 income statements are broken down by
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
16
Group segment: IPP (Independent Power Producer),
O&M (Operation & Maintenance), D&C (Development &
Construction) and Corporate (accessory activities):
therefore EBITDA may be broken down by segment in
order to better understand profit generation.
Plant in use
The following table breaks down the operational plant
portfolio at December 31, 2016:
The only increase concerns the Cornell – Geneva (USA) plant, fully entering into use in January 2016.
Plant under construction
The following table breaks down plant under construction at December 31, 2016:
In 2016, the wind plant located in Iowa was still under
construction (although practically completed) and was
connected to the network in Q1/2017; similarly, 2
photovoltaic plant in Hartford and Musgrave were also
almost completed by December 31, 2016.
The construction of the photovoltaic plant owned by the
subsidiary Tororo Solar North is however in the initial
phases (order completion at December 31, 2016: 24%).
This plant was constructed internally by Building Energy
S.p.A. through a local EPC contractor.
Projects under development
The table below breaks down plant under development at December 31, 2016:
(MW) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 Δ
Ascoli (ITA) 0,8 0,8 0,8 0,8 -
Ostellato (ITA) 1,0 1,0 1,0 1,0 -
Voghera (ITA) 0,8 0,8 0,8 0,8 -
Asola (ITA) 4,0 4,0 4,0 4,0 -
Medole (ITA) 0,9 0,9 0,9 0,9 -
Cornell Snyder Road (USA) 2,1 2,1 2,1 2,1 -
Cornell Snyder Geneva (USA) 2,8 2,8 2,8
12,4 9,6 12,4 9,6 -
MW by technology
Total Solar
(MW) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 Δ
Tororo (Uganda) 10 - - - 10,0 - 10,0
Hartord (USA) 3 - - - 3,0 - 3,0
Musgrave (USA) 6 - - - 6,0 - 6,0
Cornell Geneva (USA) - 2,8 - - - 2,8 (2,8)
Iowa (USA) - - 30,0 30,0 30,0 30,0 -
Total 19,0 2,8 30,0 30,0 49,0 32,8 16,2
MW by technology
Solar Wind Total
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
17
Overall, MW in development increased by 100 units
compared to the 2015 pipeline, as a net effect between
the reduction in Hydro sector MW due to the loss of the
bids on the Mozambique projects and the increased
MW in the wind sector, concentrated in South Africa
and the United States.
The table below outlines the projects by state of
advancement in terms of the authorisation process and
the probability of reaching financial close; in particular,
the Group breaks down projects based on the
satisfaction of the following technical and financial
requirements:
- “Projects Backup” projects: valid projects
which have passed the initial screening
concerning forecast returns for the Group and
the funding necessary for development;
- “Backlog” projects: according to whether
concerning public tenders or regulated
markets, backlog projects have at least: (i)
participated in bids and await the outcome
and/or have been “preselected”; (ii) received
network connection approval, at least signed
an option agreement for the use of the land
where the plant will be located and have in
place a financial model which ensures return
on the investment; for backlog projects the
Group estimates a probability of success of at
least 90%.
- “Near Notice to Proceed” projects: in this case
also, according to whether concerning public
tenders or regulated markets, projects defined
as close to initiation have at least: (i) been
selected to proceed with plant construction
(“Preferred bidder status” , in particular with
regard to the South African market and/or
completed the development phase and
received all construction permits and are
therefore close to signing contracts to begin
construction, in particular both debt and
capital funding contracts (financial close). For
Notice To Proceed (hereafter “NTP”) projects,
the Group estimates a probability of success of
between 90 and 100%.
The NTP projects are broken down as follows:
(MW) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015
Europa & Asia 17 17 2 - 67 67 - 86 84 3% 3%
Africa & MENA 17 17 5 105 1.597 1.675 765 485 2.384 2.282 91% 91%
North America - - 25 35 - 25 35 1% 1%
Latin America - - 124 118 - 124 118 5% 5%
Total MW 34 33 7 105 1.813 1.896 765 485 2.619 2.519 100% 100%
MW by technology
Biomass Hydro Solar PV Wind Total MW %
Backup Backlog Near NTP Totale
Europa & Asia 79 7 86
Africa & MENA 1.683 477 223 2.383
Nord America 8 17 25
America Latina 70 9 45 124
Totale 1.840 503 275 2.618
MW per status
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
18
Significant Events in the year
In 2016, the Group sharpened its focus on renewable
energy plant development and management projects,
consolidating its positions, while attracting also outside
investment with the THCP fund becoming a Group
financier; in particular:
Building Energy awarded 50 MW photovoltaic project in
Mali
In February 2016, Building Energy was awarded a
generation license for a photovoltaic plant of over 50
MWp as part of the program promoted by the Mali
Ministry for Energy and Electricity. Completion of
network studies and environmental authorisation is
expected in 2017, in addition to the financial close, with
construction scheduled to begin in 2018.
Photovoltaic project in Tororo reaches financial close
In November 2016, Building Energy completed the
financial close and began construction of the 100 MWp
photovoltaic plant in Tororo, Uganda. The project,
awarded as part of the GET FiT tender managed by KfW,
will be constructed and become operative during 2017.
Building Energy awarded two Small Scale REIPPPP
photovoltaic projects in South Africa for 10 MWp
In December 2016, Building Energy was granted a
license for the generation of two photovoltaic plant in
Northern Cape as part of the REIPPPP Small Scale
program promoted by the South African Government.
Construction is scheduled for completion in 2018.
Building Energy completes proprietary photovoltaic plant
portfolio generating photovoltaic energy acquired by
Cornell University (USA)
The successful construction of the initial photovoltaic
projects on the sites owned at Cornell University in New
York state have enabled Building Energy to continue
with the construction of three further plant in 2016,
reaching a total installed capacity of approx. 14 MW.
Alongside the Snyder Road and Geneva photovoltaic
plant constructed in 2014 and 2015, in 2016 the
Harford, Musgrave East and Musgrave West plants were
added, all located in various localities around the
University Campus.
For the last three plant constructed in 2016 and
entering into use in December, Building Energy
obtained and finalised the “tax equity agreement”,
again with the Nationwide finance partner. The entire
portfolio - which includes in fact five photovoltaic plant
- will satisfy approx. 7% of the University Campuses
entire energy consumption.
Building Energy completes construction works for new
Project Country MW Technology Construction
Idrolap Italy 1 Hidro Q3/2017
Simo Italy 1 Hidro Q3/2017
Klawer South Africa 5 Wind Q4/2017
Kruisvallei South Africa 5 Hidro Q4/2017
Krusevac Serbia 5 Biomass Q4/2017
Mkuze South Africa 17 Biomass Q1/2018
Roggeweld South Africa 147 Wind Q4/2017
Sikasso Mali 50 Solar PV Q4/2018
Tocumen Solar PV 45 Solar PV Q3/20107
Total 275
Projects in Near NTP
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
19
wind plant in North America
On February 4, 2016, the financial close of the first
Building Energy wind project was reached, with the
conclusion of the Loan Agreement (Construction
Loan+Perm Loan) with Hannon Armstrong
Infrastructure Fund (NYSE:HASI), a US infrastructure
fund listed on the NYSE and specialised in renewable
project funding. After closing the Tax Equity with Capital
One Bank at the end of 2015, this additional agreement
completes the entire financing for the project.
The plant, of a value of approx. USD 58 million, were
constructed throughout 2016 and partly entered into
use at the end of 2016, with some entering into use in
the initial months of 2017.
All the energy produced, estimated at approx. 110 GWh,
will be sold to the local utility Alliant Energy on the basis
of a long-term electricity sales contract (PPA) of 10 year
duration, with an additional 10 year renewal option for
BE.
The plant located in four counties in the State of Iowa
will in addition supply renewable energy to many local
communities through the distribution network,
satisfying therefore the needs of approx. 11,000 US
families and reducing CO2 emissions by approx. 100,000
tonnes.
Building Energy completes development of the largest
photovoltaic plant in a landfill in the United States
The Annapolis Solar Park 18MW project which is part of
the Annapolis Renewable Energy Park (AREP) program
promoted by the municipality of Annapolis completed
the development process in 2016.
The plant will be capable of producing approx. 22 GWh
per year - approx. 12% of the entire city of Annapolis’
demand.
Agreements for the sale of energy were in addition
completed on the basis of 20 year contracts with the
City of Annapolis which owns the site on which the
photovoltaic plant will be constructed, in addition to
Anne Arundel County which will purchase a substantial
portion of energy generated by the plant, as will the
department managing the County’s schools, which lastly
will acquire a portion of energy generated by the plant.
Currently, the project is in the funding stage with a
leading US commercial bank, which will operate both as
a Tax Equity partner and a debt structuring bank.
The start-up of on site works is scheduled before the
end of June 2017, with connection to the Utility BGE
network by the first quarter of 2018.
Building Energy completes operation with Goldenset
Capital Partner to fund further North American
development.
Building Energy Holding US completed a USD 12 million
agreement for investment in a Preferred Equity
operation with the Alliance North Sky Capital II Fund.
The agreement stipulates the provision in two tranches
by BEHUS of 43 MW of solar and wind projects operative
at the end of 2016 and at the beginning of 2017 to a
newly established Holdco, while the fund will contribute
USD 12 million for the purchase of newly issued Holdco
preference shares. This Holdco will be fully held by
BEHUS which holds 100% of the class B ordinary shares,
while the fund holds 100% of the class A preference
shares.
The investment was organised and managed by
GoldenSet Capital Partners LLC (a subagent of Alliance
Fund II), while BEHUS was represented by MVP Capital,
one of the leading consultants for renewable energy
businesses and investors, based in San Francisco.
With this operation, BEHUS continues to invest in new
developments to support growth in North America over
the coming years.
Building Energy secures the option to construct 2 hydro
plant in the Alto Verbano area
In November 2016, the GSE published the list of projects
awarded hydro energy incentives: two projects of
companies which will in the future belong to the Group
were selected, and therefore once the preliminary
phase for the acquisition of holdings in the 2 SPV’s is
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
20
completed, Building Energy through its subholding may
begin the financing phase and launch the construction
phase as the EPC contractor of the two plant, which
overall total 1.8 MW.
Building Energy SPA signs EPC contract for USD
15,330,000
In November 2016, Building Energy signed a contract for
the construction of a 10 MW photovoltaic plant for its
subsidiary Tororo Solar North. The plant will be
constructed through a specially established Be S.p.A.
branch in Uganda.
Building Energy directly enters the energy trading market
In December 2016, Building Energy signed a preliminary
purchase contract for the company 4Energia s.r.l.,
operating since 2015 on the Italian electricity trading
market: the aim is to further diversify, adding to the
Group “value chain” also accessory renewable
production services to guarantee the company greater
stability in terms of revenues and cash flows, in a sector
which has not yet reached maturity and which offers
therefore significant room for growth.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
21
Financial Statements
As stated in the introduction, the financial statements
are presented on two separate bases: IFRS and
Proportionate Consolidation.
Proportionate Consolidation, based on the same
statutory result, presents the revenue and cost accounts
inclusive of the proportional results of the joint
ventures.
In particular, the following joint ventures were
consolidated proportionally:
- WBHO/Building Energy Pty (Ltd) (also
WBHO/BE): company (held 30%) operating as
an EPC contractor for the construction of the
Kathu (South Africa) 81 MW photovoltaic
plant.
- Guma/Building Energy Pty (Ltd) (also
Guma/BE): company (held 51%, although not
controlled) acting as an O&M contractor for
the maintenance of the Kathu 81 photovoltaic
plant.
- Renewable Energy Solution LLC: company
(held 49%) acting as an EPC contractor and
O&M service provider for photovoltaic plant in
the United States, both on behalf of the Group
and third parties.
Balance Sheet
Non-current assets increased Euro 64,679 thousand,
principally due to the increase in property, plant and
equipment (+Euro 61,679 thousand) and intangible
assets (+Euro 5,069 thousand), as reflected in the “plant
in use”, “plant under construction” and “projects under
development” categories.
The differences compared to Proportionate
Consolidation were not significant.
Current assets decreased Euro 6,751 thousand, as a
combined effect of the contraction of trade receivables
(-Euro 2,914 thousand) - which in the previous year
included also one-off invoicing of the final tranche of the
success fees to the associate REISA - and the contraction
of cash and cash equivalents (-Euro 6,111 thousand) due
to the non-achievement of a number of financial closes
which would have generated success fees for collection.
The differences in terms of the Proportionate
Consolidation are reduced as the movement in cash and
cash equivalents for the proportionate consolidation
were more contained, which in 2015 reflected greater
cash and cash equivalents, particularly with regards to
the proportionate contribution of WBHO/BE.
Assets for sale (for Euro 1,493 thousand) include the
investments in the Egyptian companies incorporated for
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
TOTAL ASSET 163.481 105.553 55% 165.624 110.330 50%
Total non current asset 148.342 83.663 77% 147.101 83.017 77%
Total current asset 13.646 20.397 (33%) 17.030 25.820 (34%)
Total asset for sale 1.493 1.493 0% 1.493 1.493 0%
TOTAL EQUITY & LIABILITIES 163.481 105.553 55% 165.624 110.330 50%
TOTAL EQUITY 25.966 29.983 (13%) 25.966 29.983 (13%)
Total Group Shareholders' equity 18.498 27.728 (33%) 18.498 27.728 (33%)
Third part equity 7.469 2.255 231% 7.469 2.255 231%
TOTAL LIABILITIES 137.515 75.570 82% 139.658 80.347 74%
Total non current l iabil ities 59.947 50.615 18% 59.947 50.978 18%
Total current l iabil ities 77.567 24.955 211% 79.711 29.369 171%
Total l iabil ities for sale - - n/a - - n/a
Statutory Proportionate consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
22
the construction of two photovoltaic plant of 65 MW
capacity each, whose sale is expected upon financial
close.
Shareholders’ equity principally decreased as a result of
the following factors:
- the net result (-Euro 6,205 thousand),
- the change in the translation reserve due to
currency movements against the Euro as the
reference currency (-Euro 872 thousand);
- the increase in the minority shareholder
portion due to the operation concluded with
Golden Set in the United States (+Euro 4,823
thousand);
- the exit from the consolidation scope of the
liquidated companies (-Euro 1,834 thousand).
There were no changes compared to the proportionate
consolidation.
Non-current liabilities increased Euro 9,332 thousand,
principally due to greater payables to banks and other
lenders for Euro 7,704 thousand and of deferred taxes
for Euro 1,421 thousand.
For further details on these loans, reference should be
made to the Explanatory Notes to the consolidated
financial statements.
The differences compared to Proportionate
Consolidation were not significant.
Finally, current liabilities increased significantly, for Euro
52,613 thousand, principally due to the following
factors:
- the increase in the financial payable to banks
for the subscription of a short-term
“construction loan” for the Iowa wind plant
(+Euro 32,839 thousand);
- increased trade payables to suppliers for the
construction of the above plant;
- increased advances recognised to suppliers
and subcontractors for the construction of the
photovoltaic plant in Uganda.
Income Statement
EBITDA decreased Euro 1,581 thousand on the previous
year; this reduction - partially offset by the recognition
of extraordinary items for Euro 750 thousand - is due to
the fact that during 2015 the final tranche of the success
fees relating to the Reisa plant were recognised which,
net of the release to the income statement of the
related costs, contributed for approx. Euro 2,200
thousand to the previous year’s EBITDA. There were no
significant changes in terms of the proportionate
consolidation. A more detailed analysis of the
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
INCOME STATEMENT
Value of production 17.825 18.352 (527) 20.955 23.812 (2.857)
Consumption of materials and dervices (13.042) (11.845) (1.197) (15.519) (16.756) 1.238
Value Added 4.783 6.507 (1.724) 5.436 7.055 (1.619)
Labour (7.188) (7.330) 142 (7.614) (7.489) (125)
EBITDA (2.404) (823) (1.581) (2.178) (433) (1.744)
Depreciation and amortization (2.731) (5.730) 3.000 (2.777) (5.777) 3.000
EBITD (5.135) (6.554) 1.419 (4.955) (6.210) 1.256
Financial income and charges 1.359 (3.565) 4.924 1.848 (3.370) 5.218
Value adj of financial assets (915) 761 (1.676) (1.461) 471 (1.931)
Operating profit attribuitable to minority - - - -
PROFIT BEFORE EXTRAORDOINARY ITEMS AND TAXES (4.691) (9.358) 4.667 (4.567) (9.110) 4.543
Extraordinary income and expenses - - - - - -
PROFIT BEFORE TAX (4.691) (9.358) 4.667 (4.567) (9.110) 4.543
Tax (1.514) (153) (1.361) (1.639) (401) (1.237)
NET PROFOT/LOSS FOR THE PERIOD (6.206) (9.511) 3.306 (6.206) (9.511) 3.305
Net profit/loss attribuitable to minority 383 237 146 383 237 146
Other components of comprehensive income (872) 662 (1.534) (872) 662 (1.534)
NET PROFOT/LOSS OF PARENT COMPANY (7.078) (8.849) 1.771 (7.078) (8.849) 1.771
Statutory Proportionate consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
23
consolidated income statement accounts is presented below.
Revenues decreased Euro 2,901 thousand, partially
offset by increased internal works capitalised (+Euro
1,961 thousand) due to the construction of the Tororo
plant, which was absent in the year.
Other operating revenues rose due to the recognition of
extraordinary and non-recurring items. Service costs
increased as a result of higher EPC costs relating to the
Tororo project. Personnel costs and other operating
costs did not report significant changes compared to the
previous year, while amortisation, depreciation and
write-downs improved due to the fact that in 2016 the
Group, although recognising write-downs on projects
no longer considered feasible, did not write-down any
of the projects belonging to entire regions from which it
was decided to fully divest.
A full consolidation EBITDA loss is reported (Euro 2,404
thousand), while the management view reported an
improvement of Euro 227 thousand (loss therefore of
Euro 2,178 thousand), as reflecting the operating
margins of Joint ventures, reporting an overall net profit
(in particular WBHO/BE and Guma/BE, while RES
reported a loss).
Financial management improved overall compared to
the previous year, due to the following developments:
- currency effect (favorable) on foreign
currencies against the Euro (+Euro 4,521
thousand);
- impact (negative) from the valuation at equity
of the JV’s, principally due to the amortisation
of the fair value calculated on the gain
emerging in the year in which the Group
disposed of 90% of the associate REISA PTY
(LTD);
- impact (negative) of financial charges on loans,
due to the greater recourse to such for the
entire financial year, where in the previous
year the most significant (the Euro 30 million
bond loan and the Rand 125 million Future
Growth facility) contributed only from the
month of July.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
24
Cash Flow Statement
Net cash flows were generated from operations due to
changes in net working capital, particularly the increase
in trade payables not settled at December 31, 2016.
Cash flows from investing activities (absorption of Euro
68,960 thousand) principally concern the absorption of
cash to fund expenditure on property, plant and
equipment (for plant under construction) and intangible
assets (relating to the loan for project development).
Cash flows from financing activities relate to the new
debt instruments undertaken by the Group during the
year: the significant increase concerns the short-term
lines subscribed for the construction of the Iowa wind
plant.
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
Cash flows from operating profit (indirect method) 22.227 3.552 >100% 21.360 2.484 >100%
Cash flows from investing activities (68.960) (32.071) 115% (68.438) (32.163) 113%
Cash flows from financing activities 40.623 34.859 17% 41.085 34.701 18%
INCREASE/DECREASE IN CASH (6.110) 6.339 <(100%) (5.994) 5.021 <(100%)
Statutory Proportionate consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
25
Results by operating segment
A reconstruction of EBITDA by the Independent power
producer (“IPP”)”, Operation & Maintenance (“O&M”),
Advanced Energy Services (“AES”) and Design &
Construction (“D&C”) segments, together with an
EBITDA comparison between IFRS and management
through Proportionate Consolidation is shown below.
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
Revenues 3.754 3.226 528 1.849 1.545 304 395 - 395 114 3.931 (3.817) 248 339 (90) (599) (667) 68
Other revenues - - - - - - - - - - - - 1.835 1.372 463 (79) (28) (51)
Increase in fixed asset - - - - - - - - - 10.308 8.635 1.673 - - - - 0 (0)
Total Revenues 3.754 3.226 528 1.849 1.545 304 395 - 395 10.422 12.566 (2.144) 2.083 1.710 373 (678) (695) 17
Consumables - - - (6) (5) (1) - - - - - - (118) (81) (36) (0) - (0)
Services (512) (529) 17 (662) (433) (229) (392) - (392) (8.182) (7.656) (526) (3.133) (3.336) 203 599 1.240 (640)
Personnel - - - - (210) 210 - - - (3.740) (4.205) 465 (3.447) (2.915) (532) (0) - (0)
Other operating cost (715) (181) (534) - - - - - - - - - - (864) 864 78 - 78
EBITDA 2.527 2.516 11 1.182 898 284 3 - 3 (1.500) 705 (2.205) (4.615) (5.486) 872 (1) 545 (545)
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
Revenues 3.754 3.226 528 3.703 3.470 233 395 - 395 1.389 7.463 (6.074) 248 339 (90) (599) (667) 68
Other revenues - - - 1 - 1 - - - - - - 1.835 1.374 461 (79) (28) (51)
Increase in fixed asset - - - - - - - - - 10.308 8.635 1.673 - - - - 0 (0)
Total Revenues 3.754 3.226 528 3.704 3.470 234 395 - 395 11.696 16.098 (4.401) 2.083 1.713 370 (678) (695) 17
Consumables - - - (6) (5) (1) - - - - - - (118) (81) (36) (0) - (0)
Services (512) (529) 17 (2.101) (2.226) 125 (392) - (392) (9.230) (10.681) 1.451 (3.133) (3.429) 296 599 1.240 (640)
Personnel - - - (319) (210) (109) - - - (3.848) (4.205) 358 (3.447) (3.074) (374) (0) - (0)
Other operating cost (715) (181) (534) - - - - - - 10 - 10 - (864) 864 78 - 78
EBITDA 2.527 2.516 11 1.279 1.030 249 3 - 3 (1.371) 1.211 (2.582) (4.615) (5.735) 1.121 (1) 545 (545)
(Euro thousand) 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631st Dec 2015 Variance
Revenues - - - (1.854) (1.925) 71 - - - (1.274) (3.532) 2.258 - - - - - -
Other revenues - - - (1) - (1) - - - - - - - (3) 3 - - -
Increase in fixed asset - - - - - - - - - - 0 (0) - - - - - -
Total Revenues - - - (1.855) (1.925) 69 - - - (1.274) (3.532) 2.258 - (3) 3 - - -
Consumables - - - - - - - - - - - - - - - - - -
Services - - - 1.439 1.793 (354) - - - 1.048 3.025 (1.977) - 93 (93) - - -
Personnel - - - 319 - 319 - - - 107 (0) 107 - 159 (159) - - -
Other operating cost - - - - - - - - - (10) - (10) - - - - - -
EBITDA - - - (97) (132) 34 - - - (129) (507) 377 - 249 (249) - - -
IPP O&M (+ Asset Management) AES Desing & construction Corporate Conso Entries
Proportionate consolidation
IPP O&M (+ Asset Management) AES Desing & construction Corporate Conso Entries
Differences between fully and proportionate consoliated
IPP O&M (+ Asset Management) AES Desing & construction Corporate Conso Entries
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
26
IPP
The Group IPP (“Independent power producer”)
revenues comprise the sale of energy produced by plant
owned by the subsidiaries; from 2016, trading activity
revenues are presented in the AES (“Advance Energy
System”) section.
Group energy production concerns 7 photovoltaic plant
(all fully functional in 2015) and a Green Energy
Temporary Solution (“G.E.T.S.”) plant in use from
October 2015 to May 2016.
Energy sales increased due to the contribution
throughout the year of the Cornell University
photovoltaic plant (Geneva, 2.8 MW photovoltaic),
connected in September 2014.
All IPP revenues generated in 2016 derive from
photovoltaic plant.
The following table compares energy production in the
2015-2016 two-year period:
There were no changes between the statutory view and
Proportionate Consolidation as the Joint ventures taken
into consideration in the Proportionate Consolidation
do not carry out IPP activities.
However, management reports the results not just of
the Joint ventures (included in the proportionate
consolidation in the tables at page 28), but also of the
non-controlled SPV’s involved in IPP activities, which are
not defined at JV’s. For this reason EBITDA Adj (“Earning
Before Interests, Taxes, Depreciation and Amortisation
Adjusted”) was defined as the Group management
EBITDA plus the proportionate share of the JV and SPV
EBITDA. EBITDA Adj is not a recognised accounting
indicator and consequently may not be compared with
other similar indicators used by sector companies.
Specifically, reference is made to the company REISA
LTD which owns the Kathu 81 plant, with a Group
holding of 10% consolidated (both on an IFRS and
Proportionate Consolidation basis of the JV’s) at equity.
The net profit of REISA, following amortisation,
Plant 31st Dec 2016 31st Dec 2015 Δ
Ascoli 995.671 1.011.381 (15.710) -2%
Medole 1.144.996 1.162.837 (17.841) -2%
Asola 4.449.934 4.445.617 4.317 0%
Ostellato 1.082.160 1.091.027 (8.867) -1%
Voghera 2 852.955 831.078 21.877 3%
Total Italy 8.525.716 8.541.940 (16.224)
Italy energy sales (€/000) 2.373 2.486
Average selling price 0,28€ 0,29€
Cornell Snyder Road 2.518.744 2.134.571 384.173 18%
Cornell Geneva 2.699.041 - 2.699.041 n/a
Total US 5.217.785 2.134.571 3.083.214
USA energy sales (€/000) 1.375 706
Average selling price 0,26€ 0,33€
Saudi Arabia 20.840 7.674 13.167 172% PPA
GETS Total 20.840 7.674 13.167
GETS energy sales (€/000) 6 2
Average selling price 0,28€ 0,20€
Total 13.764.341 10.684.185 3.080.156
Tetal revenues 3.754 3.194
Average selling price 0,27€ 0,30€
Price components
Power production (KWh)
market price (*) + Government feed in tariff (IV Conto Energia)
market price (*) + Government feed in tariff (IV Conto Energia)
market price (*) + Government feed in tariff (IV Conto Energia)
market price (*) + Government feed in tariff (IV Conto Energia)
market price (*) + Government feed in tariff (IV Conto Energia)
market price + fedreal feed in tariff (Nyserda)
market price + fedreal feed in tariff (Nyserda)
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
27
depreciation and write-downs, financial management
and income taxes, amounts to Euro 3,603 thousand,
slightly reducing on 2015 (-Euro 200 thousand),
exclusively due to the currency effect, as in fact the
operating profit in the local currency improved 6%.
The following table reports the JV and SPV
Proportionate Consolidation results, together with the
EBITDA Adj indicator, both as an impact on the total
operating result and on the operating result of the b.l.
IPP alone.
(Euro thousand) 31 dicembre 201631st Dec 2015 Variance 31 dicembre 201631 dicembre 2015 Δ
Total revenues 20.955 23.812 (2.857) 3.754 3.226 528
REISA 10% 4.135 4.390 (255) 4.135 4.390 (255)
Total Revenues Adj 25.090 28.202 (3.112) 7.889 7.617 273
Ebitda (2.178) (433) (1.744) 2.527 2.516 11
REISA 10% 3.604 3.803 (199) 3.604 3.803 (199)
Ebitda Adj 1.426 3.370 (1.944) 6.131 6.319 (188)
Proportionate consolidation + REISA 10% IPP
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
28
O&M
The Group operates as an O&M contractor (“Operation
& maintenance” i.e. “provider of renewable energy
plant management and maintenance services”) for both
owned plant and third party plant through the following
companies:
- Homes S.r.l. (subsidiary) which provides
management and maintenance services to
photovoltaic plant owners in Italy;
- RES Llc (Joint Venture) which provides O&M
services to photovoltaic plant owners in
America;
- Guma/BE Pty Ltd (Joint Venture) which
provides management and maintenance
services exclusively for the Kathu plant in South
Africa. The following table, reporting also
“contractualised” MW, compares the key
statutory and management figures for 2016-
2015.
IFRS revenues from O&M activities increased Euro 304
thousand, principally due to increased extraordinary
maintenance, particularly in Italy where during the year
there was a normal turnover of new contracts and
concluding contracts. For the Proportionate
Consolidation the contribution from Kathu plant
activities is greater as the revenues of the Guma/BE JV
are considered, in addition to the consultancy services
provided by the Group. The EBITDA difference between
the statutory and management figures is not significant
as both Joint ventures only contribute marginally.
Plant 31st Dec 2016 31st Dec 2015 Δ 31st Dec 2016 31st Dec 2015 Δ
Ascoli 0,80 0,80 - 0,80 0,80 -
Asola 3,95 3,95 - 3,95 3,95 -
Medole 0,92 0,92 - 0,92 0,92 -
Ostellato 0,98 0,98 - 0,98 0,98 -
Voghera 2 0,83 0,83 - 0,83 0,83 -
Casamassima I 1,00 1,00 - 1,00 1,00 -
Casamassima II 1,00 1,00 - 1,00 1,00 -
Conversano I 1,00 1,00 - 1,00 1,00 -
Conversano II 1,00 1,00 - 1,00 1,00 -
Pieve di Cento 1,69 1,69 - 0,00 - -
Poggiardo 0,92 0,92 - 0,00 - -
Rutigliano 1,00 1,00 - 0,00 - -
Voghera 1 0,58 0,58 - 0,00 - -
Alanno (PE) 1,00 - 1 1,00 - 1
Torricella 0,97 - 1 0,00 - -
Montenerodomo 1,60 - 2 1,60 - 2
San Benedetto 0,60 - 1 0,60 - 1
Torricella Peligna 0,99 - 1 0,00 - -
Lesegno 1,00 - 1 0,00 - -
Rivolta d'Adda Land 1,00 - 1 0,00 - -
Rivolta d'Adda Roof 1,00 - 1 1,00 - 1
Cremona 1,00 - 1 0,00 - -
Rio Martino 0,00 1,73 (2) 0,00 1,73 (2)
Montalto di castro 0,00 2,74 (3) 0,00 2,74 (3)
Borgo Piave 0,00 3,52 (4) 0,00 3,52 (4)
Nettuno 0,00 2,55 (3) 0,00 2,55 (3)
Total Italy (MW) 24,80 26,2 9 15,68 22,0 4
Totale revenues Italy (€/000) 1.062 859 1.062 859
Cornell Snyder Road 2,10 2,10 - 2,10 2,10 -
Cornell Geneva 2,80 - 3 - - -
Baltimora - 1,20 (1) - 1,20 (1)
Total Usa (MW) 4,90 3,30 2 2,10 3,30 (1)
Totale revenues USA (€/000) 121 - 121 29
Kathu 81,00 81,00 - 81,00 81,00 -
Total Africa (MW) 81,00 81,00 - 81,00 81,00 -
Totale revenues Africa (€/000) 666 686 2.520 2.581
Total O&M revenues 1.849 1.545 304 3.703 3.470 233
Relationship between MW under O&M contracts and main financial data
Statutory Proportionate consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
29
D&C
The Group is engaged in development and construction,
undertaking an integrated approach.
Project development (which includes, among others,
feasibility studies, system design, permit applications,
grid connection, negotiation of PPA and other
agreements) is managed directly by the Group through
the holding company and its local subholdings.
Revenues from this activity are broken down as follows:
- development revenues, including (i) revenues
from invoicing of third party consultancy and
(ii) revenues from development completion
(“Success Fees”);
- increase in fixed assets for internal work, which
represents the development of proprietary
projects.
During the construction phase, the Group carries out
both EPC contractor operations and engineering,
procurement and design services in support of
construction.
EPC contractor activities are generally carried out by
Joint ventures (WBHO/BE and RES) and generate direct
EPC revenues. WBHO/BE is operative in South Africa and
was incorporated in 2012 together with the industrial
partner WBHO PTY, for the construction of the Kathu 81
MW photovoltaic plant, while RES is operative in the
United States and was incorporated in 2013 with the
industrial partner ABM to identify industrial
opportunities for the construction of onsite
photovoltaic plant (in addition to the management of
O&M activities in the same region).
In 2016, however, the parent company returned to
directly execute EPC contractor operations: through the
incorporation of a branch in Uganda, Building Energy
S.p.A. operated as a contractor for the construction of a
10 MW photovoltaic plant under construction in
Uganda, on behalf of the subsidiary Tororo Solar North.
The increase in revenues on 2015 with regards to the
EPC activities reflects the construction operations,
which reached 24% completion by 31/12/2016.
The following table compares the key statutory and
management figures for 2016/2015.
In general, D&C division revenues reduced on the
previous year, principally due to the non-recognition of
success fees related to the financial closes (in 2016
there were no financial closes, while in 2015 - as
previously stated - the final tranche of the success fees
related to the REISA plant were recognised for Euro
(Euro thousand)31st Dec 2016 31st Dec 2015 Δ 31st Dec 2016 31st Dec 2015 Δ
Revenues from Success fees (€/000) - 3.600 (3.600) - 3.600 (3.600)
Revenues from development advisory fees (€/000) 114 80 35 1.389 80 1.309
Total development fees revenues (€/000) 114 3.680 (3.565) 1.389 3.680 (2.291)
Total increase in fixed asset for internal work (€/000) 6.817 8.635 (1.818) 5.543 8.635 (3.091)
Total increase in fixed asset for internal work (€/000) 6.817 8.635 (1.818) 5.543 8.635 (3.091)
- -
Different plants - - 992 992
Scilla - 251 (251) - 2.538 (2.538)
Total EPC USA - 251 (251) 992 2.538 (1.546)
Uganda 3.490 3.490 3.490 3.490
Kathu - - 282 1.245 (963)
Total EPC South Africa 3.490 - 3.490 3.772 1.245 2.528
Total revenues from D&C activities 10.422 12.566 (2.144) 11.696 16.098 (4.401)
Statutory Proportionate consolidation
D&C
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
30
3,600 thousand).
The increase for internal works was greater than the
previous year: the reduction in capitalised development
activities (reflecting the increased generic development
and scouting operations in the year) were offset by
increased activities concerning the internal construction
of the Tororo plant.
The management view (Proportionate Consolidation),
includes the amounts for the construction of the Kathu
plant (Joint Venture WBHO/BE) and the plant
constructed during the year in America (RES Joint
Venture). Revenues decreased on the previous year
due to the substantial conclusion of the Kathu plant
construction; the contribution of American operations
reduced on the previous year.
Reclassified Financial Statements
The “reclassified” balance sheet and income statement
are reported below, along with the key financial
indicators.
Reclassified balance sheet
Reclassified income statement
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
-
-
A) TOTAL NON CURRENT ASSETS 138.565 72.691 65.874 137.149 71.824 65.324
Intangible assets 27.227 22.159 5.069 27.227 22.159 5.069
Fixed asset 98.099 36.420 61.679 98.234 36.571 61.663
Fiancial asset 13.239 14.113 (874) 11.688 13.095 (1.407)
B) WORKING CAPITAL (20.967) (7.221) (13.746) (22.158) (8.863) (13.295)
Trade receivables 2.639 5.553 (2.914) 2.639 8.478 (5.839)
Other current asset 8.717 6.391 2.325 9.669 6.575 3.094
Payable (27.544) (12.627) (14.917) (27.544) (16.236) (11.308)
Provision for riscks (386) (190) (195) (386) (535) 149
Other current l iabil ities (4.393) (6.349) 1.956 (6.536) (7.145) 609
C) INVESTED CAPITAL NET OF WC (A+B) 117.598 65.470 52.128 114.991 62.962 52.029
D) STAFF RELATED FUNDS (612) (601) (12) (612) (601) (12)
E) INVESTED CAPITAL NET OF WC AND STAFFREL. FUNDS (S+D) 116.986 64.869 52.117 114.378 62.361 52.017
F) EQUITY 25.966 29.983 (4.017) 25.966 29.983 (4.017)
Group's equity 18.498 27.728 (9.231) 18.498 27.728 (9.231)
Third parte equity 7.469 2.255 5.214 7.469 2.255 5.214
G) MEDIUM AND LONG TERM FINANCIAL DEBTS 64.307 49.627 14.679 64.307 49.646 14.661
Short term debts toward banks 57.331 49.627 7.704 57.331 49.646 7.685
Short term debts toward other lenders - - - -
Short term debts and other current financila asset 6.976 - 6.976 6.976 - 6.976
H) SHORT TERM FINANCIAL DEBTS 26.712 (14.741) 41.453 24.105 (17.268) 41.374
Short term debts toward banks 38.655 5.979 32.675 38.655 5.988 32.667
Short term debts toward other lenders - - - -
Short term debts and other current financila asset (8.159) (10.775) 2.616 (8.334) (10.996) 2.662
Cash and cash available (3.783) (9.945) 6.161 (6.215) (12.260) 6.045
I) NET FINANCIAL POSITION (G+H) 91.019 34.887 56.133 88.412 32.378 56.035
J) SOURCES (F+I) 116.986 64.870 52.116 114.378 62.361 52.018
Statutory Proportionate consolidation
(Euro thousand) 31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015
FIXED ASSET FINANCING INDICES
Fixed asset to equity capilat margin (€/000) (112.599) (42.708) (111.182,50) (41.841)
Equity ratio 19% 41% 19% 42%
Fixed asset to capital employed margin (€/000) (48.292) 6.919 (46.875,65) 7.804
Return on total asser ratio 65% 110% 66% 111%
FINACIAL RATIOS
Total debt ratio 397% 185% 397% 186%
Total financial debts ratio 149% 20% 149% 20%
SOLVENCY RATIOS
Net working capital (€/000) (63.922) (4.558) (62.680,99) (3.549)
Current ratio 18% 82% 21% 88%
Current l iabil ities to l iquidity margin (€/000) (66.136) (6.040) (65.672,24) (8.005)
Proportionate consolidationStatutory
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
31
We highlight that due to the type of activities
undertaken by the company and its subsidiaries as well
as the timeframe normally required for the
development of initiatives relating to the construction
of renewable energy production plant, some indicators
may not be particularly significant.
(Euro thousand) 31st Dec 2016 31st Dec 2015 Variance 31st Dec 2016 31st Dec 2015 Variance
INCOME STATEMENT
Value of production 17.825 18.352 (527) 20.955 23.812 (2.857)
Consumption of materials and dervices (13.042) (11.845) (1.197) (15.519) (16.756) 1.238
Value Added 4.783 6.507 (1.724) 5.436 7.055 (1.619)
Labour (7.188) (7.330) 142 (7.614) (7.489) (125)
EBITDA (2.404) (823) (1.581) (2.178) (433) (1.744)
Depreciation and amortization (2.731) (5.730) 3.000 (2.777) (5.777) 3.000
EBITD (5.135) (6.554) 1.419 (4.955) (6.210) 1.256
Financial income and charges 1.359 (3.565) 4.924 1.848 (3.370) 5.218
Value adj of financial assets (915) 761 (1.676) (1.461) 471 (1.931)
Operating profit attribuitable to minority - - - -
PROFIT BEFORE EXTRAORDOINARY ITEMS AND TAXES (4.691) (9.358) 4.667 (4.567) (9.110) 4.543
Extraordinary income and expenses - - - - - -
PROFIT BEFORE TAX (4.691) (9.358) 4.667 (4.567) (9.110) 4.543
Tax (1.514) (153) (1.361) (1.639) (401) (1.237)
NET PROFOT/LOSS FOR THE PERIOD (6.206) (9.511) 3.306 (6.206) (9.511) 3.305
Net profit/loss attribuitable to minority 383 237 146 383 237 146
Other components of comprehensive income (872) 662 (1.534) (872) 662 (1.534)
NET PROFOT/LOSS OF PARENT COMPANY (7.078) (8.849) 1.771 (7.078) (8.849) 1.771
Statutory Proportionate consolidation
31st Dec 2016 31st Dec 2015 31st Dec 2016 31st Dec 2015
PROFITTABILITY RATIOS
Net ROE (27%) (30%) (27%) (30%)
Gross ROE (18%) (31%) (18%) (30%)
ROI (4%) (10%) (4%) (10%)
ROS (29%) (78%) (24%) (45%)
Statutory Proportionate consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
32
Key Financial Indicators
12.74715.807
18.352 17.825
57.271
25.52223.812
20.955
-
10.000
20.000
30.000
40.000
50.000
60.000
70.000
2013 2014 2015 2016
Production value (€/000)
IFRS Prop. consolidation
(2.042)
(607)(823)
(2.404)
6.166
2.010
-433
-2.178(3.000)
(2.000)
(1.000)
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
2013 2014 2015 2016
EBITDA (€/000)
IFRS Prop. consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
33
28.967
36.704
29.983
25.966
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
2013 2014 2015 2016
Equity (€/000)
IFRS Prop. consolidation
37.77442.383
64.869
116.986
21.242
38.754
62.962
114.378
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
2013 2014 2015 2016
Net Invested capital (€/000)
IFRS Prop. consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
34
8.8075.679
34.887
91.019
1.518 1.532
32.378
114.378
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
2013 2014 2015
NFP (€/000)
IFRS Prop. consolidation
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
35
Transactions with group companies and related parties
Transactions with group companies and/or related
parties are carried out in accordance with normal
market prices and conditions. During the year, the
following transactions took place:
Company RelationshipTrade
receivablesTrade payables
loan
receivablesloan payables Revenues Costs
BUILDING ENERGY HOLDING controllante 0 0 0 201 0 55
BIOTWIN SRL controllata 100 0 2.371 0 37 0
BIOTWIN 2 SRL controllata 5 0 611 0 17 0
BE SOLAR 4 SRL controllata 15 0 34 0 12 0
BE ASCOLI SRL controllata 25 0 314 0 12 0
BE SOLAR 2 SRL controllata 4 23 591 0 12 0
HOMES SRL controllata 30 243 0 0 34 177
SIE SOLAR SRL controllata 0 0 0 0 0 0
BUILDING ENERGY DEVELOPMENT AFRICA SRL controllata 72 0 6.579 0 7 0
BUILDING ENERGY DEVELOPMENT AFRICA 2 SRL controllata 9 12 43 0 7 12
BUILDING ENERGY DEVELOPMENT AFRICA 3 SRL controllata 9 24 3.927 0 7 24
BUILDING ENERGY DEVELOPMENT AFRICA 4 SRL controllata 2 12 0 0 7 10
BUILDING ENERGY DEVELOPMENT AFRICA 5 SRL controllata 2 4 0 0 7 0
BE Japan Godo Kaisha controllata 0 0 6 0 0 0
BE Holding U.S. LLC controllata 3.296 0 22.083 0 3.257 0
BOESMANLAND PTY (Ltd) controllata 0 0 0 0 0 0
BLUE SKY SOLAR PTY (Ltd) controllata 0 0 0 0 0 0
LOKIAN PTY (Ltd) controllata 0 0 0 0 0 0
SKUITDRIFT PTY (Ltd) controllata 0 0 0 0 0 0
GREEN SKY SOLAR PTY (Ltd) controllata 0 0 0 0 0 0
RED SKY SOLAR PTY (Ltd) controllata 0 0 0 0 0 0
NAVOSYNC PTY (Ltd) controllata 0 0 0 0 0 0
BE Service & Operation PTY (Ltd) controllata 2.499 4.540 8.084 0 1.691 0
BE BALKAN DOO controllata 41 0 660 0 31 0
BE KRUSEVAC controllata 3.248 0 0 0 1.264 0
BE PANAMA controllata 250 0 10 0 0 0
BUILDING ENERGY DEVELOPMENT LATINOAMERICAcontrollata 0 0 2.061 0 91 0
BE SOLAR PIEMONTE SPA controllata 36 0 448 0 34 0
BUILDING ENERGY CROATIA controllata 1 0 20 0 1 0
TORORO SOLAR NORTH controllata 507 0 2.685 0 0 0
0 0 0
WBHO-Building Energy PTY (Ltd) collegata 52 0 0 0 0 0
GUMA BUILDING ENERGY (PTY) LTD collegata 113 0 0 0 0 0
RENEWENERGY SOLUTIONS LLC collegata 69 0 0 0 3 0
BUILDING ENERGY EGYPT collegata 3 867 33 0 0 0
REISA collegata 0 0 0 0 0 0
BE ENERGY EGYPT JDC collegata 0 473 0 0 5 0
BE Uganda collegata 0 0 2 0 0 0
ACCESS BRE SOLAR ONE collegata 0 0 0 0 0 0
0 0 0
BRIFF SRL parte correlata 0 0 0 0 0 0
COMBIGAS parte correlata 0 500 0 0 0 0
SOLAR NRG SRL parte correlata 0 0 0 1.555 0 73
ADOBE SPA parte correlata 0 167 0 0 0 0
totale 10.387 6.865 50.564 1.756 6.537 351
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
36
Treasury shares and shares of holding companies
No treasury shares or parent company shares were held
at the reporting date. During the year, treasury shares
or parent company shares were not acquired, even
through trust companies or nominees.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
37
Tax consolidation and tax transparency
In 2016, the following companies were involved in the
tax consolidation together with the parent company
Building Energy S.p.A.:
- Be Ascoli S.r.l.
- Be Solar 2 S.r.l.
- Be Solar 4 S.r.l.
- Beddom S.r.l.
- Biotwin S.r.l.
- Building Energy Development Africa S.r.l.
- Building Energy Development Africa 2 S.r.l.
- Building Energy Development Africa 3 S.r.l.
- Building Energy Development Africa 4 S.r.l.
- Building Energy Development Africa 5 S.r.l.
From 2015, the National tax consolidation option was
exercised by Building Energy Holding S.p.A. which
permits the calculation of the IRES charge on a tax base
representing the aggregate of the taxable income and
tax losses of the individual companies.
The transactions, in addition to the reciprocal
responsibilities and obligations, between the
consolidating company and the previously-stated
subsidiaries, are defined within the individual contracts
for involvement in the national tax consolidation signed
between the consolidating company and the
subsidiaries, to which reference should be made for all
of the conditions.
The contracts establish that the tax benefits which will
be transferred to Building Energy Holding S.p.A. are paid
to the subsidiary only upon actual usage.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
38
Subsequent events
- a partnership agreement was signed with the
South African investor Old Mutual, permitting
the Group to develop its wind project pipeline,
guaranteeing the funding necessary for
construction, both as an equity investor
through the acquisition of direct holdings in
the vehicle company, and as a lender of the
Group equity share;
- Building Energy S.p.A. concluded with the
Chilean developer Scotta Chile (already a
partner of the company Building Energy Solar
Piemonte S.r.l.) an agreement for the setting
up of a new on site company to optimise
developments in Chile, with Scotta’s deep
knowledge and understanding of the market
and its mechanisms putting the company in the
best position to profitability develop new
initiatives, alongside existing initiatives;
- having verified the conditions concerning the
purchase of the 4Energia S.r.l. holding, Building
Energy S.p.A. will acquire control of the
company, guaranteeing the Group greater
revenue and financial stability;
- full acquisitions were agreed for Simo S.r.l. and
Idrolap S.r.l. by the associate Building Energy
Hydro Verbano S.r.l.;
- an Italian JV was set up with the partner Refeel
for a start-up (“ReFeel eMobility”) to be
operational within the year involved in
innovative electric car sharing ideas both for
private individuals and corporate clients;
- the Hartford and Musgrave USA photovoltaic
plant were connected to the network in Q1
2017;
- the first wind plant in the history of Building
Energy S.p.A. was unveiled: in the state of
IOWA 10 3MW turbines entered into use (in
the first month, the project’s Tax Equity
Investor injected capital of USD 30,000,000);
- on June 5, an investment agreement was
signed concerning the issue of a convertible
bond loan for an amount of not less than Euro
100 million including the refinancing of the
current bond loan subscribed by THCP in July
2015 (the “Investment agreement”). The
agreement will enable the Group to source the
new funding of approx. Euro 68 million
required for the further growth of the
company as per its industrial plan. The closing
of the operation and the relative subscription
to the funds by the new investors is scheduled
for the end of the current month of June and
however not beyond July 24, 2017. The
Investment Agreement stipulates for the
signing and closing the completion of a number
of corporate operations for which
management does not foresee particular
difficulties; among these, we highlight the
initiation of the reverse merger through which
the parent company Building Energy Holding
S.p.A. will be incorporated into Building Energy
S.p.A (the merger, approved by the
Shareholders’ Meetings of the companies
involved on June 16, 2017, will however be
subject to the successful outcome of the
convertible bond issue).
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
39
Outlook
2017 is expected to figure as a key year in the company’s
recent history. At a strategic level, there will be
significant changes both for the business and in terms of
corporate governance. With regards to the former, the
injection of capital guaranteed by the issue of the new
bond loan will enable the Group to:
- consolidate its activities as an integrated
renewable energy producer, focusing all
resources necessary on finally completing the
projects closest to execution;
- guarantee in addition the funding necessary
for the fundamental development phase also
on new markets: it is highlighted that the
development phase has allowed in fact the
Group to become a highly rated independent
producer and in which leading third parties
continue to place their confidence and invest;
- develop new energy service businesses.
The following are expected at an operating level:
- conclusion of construction of the Tororo
photovoltaic plant and its entry into use by Q3
2017;
- the financial close of the water projects for the
two plant to be constructed in the Alto
Verbano area of Piedmont;
- the financial close of:
o African projects originally scheduled
for 2016;
o Krusevac (Serbian biomass plant) and
the beginning of its construction.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
40
Adoption of the Organisational Model as per Legislative Decree 231/2001
The Group approved in December 2013 the internal
organisation model pursuant to Legislative Decree
231/2001.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
41
Workplace safety as per Legislative Decree 81/2009
In 2012, the Parent Company Building Energy S.p.A.
appointed the positions established by Legislative
Decree 81/2008 in terms of worker safety and
protection. In 2015, these roles were appointed at all
Group companies employing workers.
In terms of workplace health and safety, during the year
the Company continued to provide training and
information to employees according to the program
shared with the employer and the prevention and
protection services manager: both new hires and
existing employees therefore attended medical visits
(and “follow-ups”) in addition to training and
information courses under the applicable regulation.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
42
Management system certification
At the end of 2011 the Parent Company received UNI EN
ISO 9001:2008 Certification as possessing a quality
management system run on the basis of procedures and
processes which cover all phases of company
operations.
With a view to ongoing improvement, in subsequent
years the quality system was supplemented with Health,
Safety and Environmental Management Systems,
achieving the relative certifications according to the
OHSAS 18001:2007 and UNI EN ISO 14001:2004
protocols.
In 2016, following inspections by the relative Bodies, all
of the certifications indicated were renewed.
These company operating systems are applied to all
Group companies.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
43
Human resources
No employees received fatal injuries in the course of
their duties during the year.
No serious workplace accidents took place during the
year which involved serious injury to employees.
No issues in relation to workplace health matters
concerning employees or ex-employees or misconduct
against the company arose in the year.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
44
Privacy
As Parent Company, as well as undertaking
responsibility for the administrative, accounting and
contractual management of the subsidiaries, Building
Energy S.p.A. improved its internal security procedures,
installing two internal servers for data, protected by
security systems.
The privacy protection procedures were also improved.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
45
Secondary offices
The Parent Company’s secondary offices are as follows:
- Faenza (RA), via Vittime civili di guerra, 5;
- Savona (SV) Largo delle Coffe, int. 14/1.
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
46
Corporate Boards
Board of Directors
In office since July 31, 2015 and until the approval of the
2017 Annual Accounts:
Gian Luca Bandini, Chairman
Fabrizio Zago, Director
Sergio Benocci, Director
Matteo Brambilla, Director
Mauro Moretti, Director
Gianfilippo Cuneo, Director
Alessandro Tatistscheff, Director
Statutory Auditors
In office since June 8, 2016 and until the approval of the
2018 Annual Accounts:
Roberto Spada, Chairman
Gabriele Lamanuzzi, Statutory Auditor
Carla Maria Monti, Statutory Auditor
Sardu Anna, Alternate Auditor
Luca Zoani, Alternate Auditor
Supervisory Board (appointed by the BoD on December
18, 2013)
In office since December 12, 2016, with three-year
mandate: Paolo Maria Trezzi, Chairman
Andrea Zoppi
Mario Chiodi
Building Energy Group – Directors’ Report on the Consolidated Financial Statements at December 31st, 2016
47
Independent Audit Firm
In office since June 8, 2016 and until the approval of the
2018 Annual Accounts:
PricewaterhouseCoopers S.p.A.
We thank you for the trust afforded to us and invite you to approve the financial statements as presented.
Milan, June 20, 2017
Gian Luca Bandini
Chairman of the Board of Directors