Annual report for the year ended 31 December 2008

Transcription

1 Annual report for the year ended 31 December 2008

2 Annual report for the year ended 31 December

3 ACTELIOS S.p.A. Share capital Euro 67,680,000 fully paid Management and coordination by Falck SpA Registered and fiscal address Milan Corso Venezia, 16 REA Milan no Milan Companies Register no VAT and tax code no

4 1 Notice of annual general meeting 5 2 Company officers 6 3 Group structure 7 4 Financial highlights 8 5 Directors report 5.1 Group operating and financial review Actelios group profile Regulatory framework Performance Non-financial performance indicators Share price performance Performance of subsidiaries Performance of associates Review of business in Employees Environment, health and safety Research and development activities Risk factors and uncertainties Legislative Decree 196 of 30 June 2003 data protection Significant events after the balance sheet date Future developments and going concern Operating and financial review of Actelios SpA Financial highlights Performance and review of business in Employees Capital expenditure Directors, statutory auditors, general managers and their interests Related party transactions Managerial and coordination activities Holding of own shares or parent company shares Purchase and sale of own shares or parent company shares Share schemes Proposed distribution of profit for the year Corporate governance Corporate governance structure of the company Implementation of the Code of Self Discipline Attachments 43 6 Consolidated financial statements 6.1 Balance sheet Income statement Cash flow statement Statement of changes in equity Notes to the consolidated financial statements Additional disclosures regarding financial instruments in accordance with IFRS Supplementary information consolidated financial statements 7.1 List of investments in subsidiaries and associates 91 3

5 8 Actelios SpA financial statements 8.1 Balance sheet Income statement Cash flow statement Statement of changes in equity Notes to the financial statements Additional disclosures regarding financial instruments in accordance with IFRS Supplementary information - Actelios SpA 9.1 List of direct and indirect investments in subsidiaries and associates Summary of significant financial data of subsidiaries and associates Certifications on consolidated and parent company financial statements in accordance with article 81-ter of Consob Regulation n of 14 May 1999 and ensuing amendments Report of the board of statutory auditors to the annual general meeting Independent auditors reports 149 4

6 1 Notice of annual general meeting The shareholders are invited to attend the annual general meeting to be held at the Circolo della Stampa in Milan, CorsoVenezia 16, at a.m. on 16 April 2009 in first call and, where necessary, at the same time and address on 17 April 2009 in second call, in order to discuss the following: Agenda 1) The separate parent company financial statements for the year ended 31 December 2008; directors report, independent auditors report, board of statutory auditors report: approval, related resolutions and resulting matters; 2) Presentation of the consolidated financial statements for the year ended 31 December 2008; directors report and independent auditors report; 3) Review of the fees of PricewaterhouseCoopers S.p.A. for the audit of the financial statements for the period : examination, approval related resolutions and resulting matters. Shareholders may attend the annual general meeting where notice from the authorised intermediary, in compliance with article 2370 of the Italian Civil Code, was received by the company at least two days prior to the date established in first call. Shareholders will note that the company financial statements and the consolidated financial statements for the year ended 31 December 2008, the directors report, the report of the board of statutory auditors, the 2008 report on corporate governance, the proposal relating to the review of the audit fees of PricewaterhouseCoopers S.p.A., and the report of the board of directors illustrating the matters on the agenda, will be available to the public at the company s registered offices in Milan, Corso Venezia 16, and from Borsa Italiana SpA from 31 March 2009 and, as soon as they are available, the independent auditors reports will be provided through the same channels detailed above and within the required timeframe. All documentation will also be available from 31 March 2009 on the company website at Milan, 12 March 2009 The Chairman Federico Falck Notice of the annual general meeting was published in the Il Sole 24 Ore of 16 March

7 2 Company officers Board of directors Federico Falck Achille Colombo Paride De Masi Roberto Tellarini Marco Agostini Enrico Falck Giuseppe Gatti Bruno Isabella Ferruccio Marchi Umberto Rosa Chairman Deputy chairman Deputy chairman Managing director Director Director Director Director Director Director Statutory auditors Roberto Bracchetti Aldo Bisioli Nicola Vito Notarnicola Fabio Artoni Giampiero Maci Chairman Statutory auditor Statutory auditor Substitute statutory auditor Substitute statutory auditor Independent auditors PricewaterhouseCoopers SpA Company powers conferred on the directors are illustrated in paragraph 5.3 of the section on corporate governance. 6

8 3 Group structure ACTELIOS SpA 100% 100% 85% 60% 100% 100% Elettroambiente SpA Ecosesto SpA Prima Srl Ambiente 2000 Srl Actelios Solar SpA Actagri Srl 92.36% 100% 58.7% Tifeo Energia Ambiente ScpA Solar Rende Srl Abbiategrasso Bioenergia Srl 82.64% 50% Platani Energia Ambiente ScpA Powercrop SpA 49% Frullo Energia Ambiente Srl 23.27% Palermo Energia Ambiente ScpA Consolidated line-by-line Consolidated by proportional method 7

9 4 Financial highlights (Euro thousands) Revenue 97,699 90,625 95,818 81,939 Gross profit 40,977 35,010 34,346 25,526 Operating profit 32,937 25,507 23,735 18,989 Profit for the year 19,462 14,927 14,243 4,552 Profit for the year attributable to group equity holders 17,927 13,766 12,756 3,588 Earnings per share (Euro) Net financial (assets)/liabilities (178,624) (185,832) (196,474) 54,027 - Non-recourse financing 79,841 92,570 95, ,570 Total net financial position (asset) (98,783) (93,262) (101,168) 161,597 Total equity 354, , ,511 78,640 Equity attributable to group equity holders 350, , ,486 75,528 Equity holders equity per share (Euro) Capital expenditure 17,905 29,870 30,160 40,466 Gross profit /revenue 41.9% 38.6% 35.8% 31.2% Operating profit /revenue 33.7% 28.1% 24.8% 23.2% Profit for the year/total equity 5.5% 4.3% 4.2% 5.8% Net financial position/total equity (0.28) (0.27) (0.30) 2.05 Total number of group employees

10 5 Directors report

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12 Dear Shareholders, The parent company s separate financial statements and the consolidated financial statements for the year ended 31 December 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS). These standards were adopted in 2005 for the first time in relation to the consolidated financial statements and in 2006 for the parent company s separate financial statements. 5.1 Group operating and financial review Actelios group profile The group operates in the renewable energy market. In particular, the group strategy is developed through the management and operation of power plants that are already operational, the installation of plants in the start-up phase and the development of new projects, either directly or through joint ventures, with leading industrial enterprises. Moreover, as the group has acquired know-how relating to plant operations, applying state-of-the-art operation and maintenance methods, it is able to complement its plant ownership activities with the above specialisation and provide a global range of services in this market Regulatory framework The relevant regulatory framework is that of the Italian market for renewable energy and essentially covers the areas detailed below. CIP6: based on a national law issued in 1991 and subsequent directives, this law introduced incentives for the generation of electrical energy from renewable sources with guarantees regarding its collection and pricing. The CIP6 is gauged on different energy sources, applies to an extensive period (8-20 years) and has a clear and calculable inflationary mechanism, is essential for the negotiation of project financing loan contracts and was also used to provide incentives to other projects and technology not directly linked to renewable energy. Green certificates: these are attributed to the production of electrical energy from renewable sources generated after 1 April The National Grid (Italian GSE ) collects the green certificates at the average price for the previous year as communicated by the electrical energy market operator (Italian GME ). These 15 year certificates are a controlled market mechanism in determining the price of electrical energy sales and the number is dependent on the production of energy from renewable sources. These certificates may be traded on the Italian energy market. Energy account: the electrical energy generated by photovoltaic plants is awarded tariffs that are incentivised and differentiated according to whether they are produced by non-integrated, partially or fully integrated plants. The tariffs are issued for a 20 year period starting from the date operations commence and are not adjusted for inflation over this entire period. With regard to plants that will commence operations in 2009 and 2010 a progressive 2% reduction is applied to the tariff. New decrees will be issued in order to determine the new tariffs applicable to the periods after

13 5.1.3 Performance The financial performance of the group is summarised below: (Euro thousands) Revenue 97,699 90,625 Cost of sales (56,722) (55,615) Gross profit 40,977 35,010 Operating profit 32,937 25,507 Profit for the year 19,462 14,927 Profit attributable to group equity holders 17,927 13,766 Invested capital net of provisions 256, ,066 Total equity 354, ,328 Net financial position (asset) (98,783) (93,262) of which non-recourse financing 79,841 92,570 Capital expenditure 17,905 29,870 Group employees at year-end (no.) Ordinary shares (no.) 67,680,000 67,680,000 Revenue increased by Euro 7,074 thousand compared to 2007 principally due to the improvement in CIP6 tariffs compared to 2007 and the strong performance of the plant in Trezzo sull Adda. This compensated for the lost production and sale of electrical energy (45 days) at the Granarolo dell Emilia plant, which, following its repair, performed well as did the biomass plant in Rende. Gross profit also improved, with an increase of Euro 5,967 thousand and represents 41.9% ( %) when expressed as a percentage of revenue. Revenue for the year compared to 2007 may be analysed as follows: (Euro thousands) 2008 % 2007 % Sale of electrical energy 67, , Waste treatment and disposal 25, , Operation of waste to energy (WTE) plants 4, ,274 5 Total 97, , Operating profit increased by Euro 7,430 thousand compared to 2007 and is equal to 33.7% of revenue ( %). Profit for the year, which amounted to Euro 19,462 thousand, represents an increase of Euro 4,535 thousand compared to The net financial position was a total asset of Euro 98,783 thousand, an improvement of Euro 5,521 thousand on the balance at 31 December The net financial position comprises non-recourse borrowings of Euro 79,841 thousand at 31 December Capital expenditure in the period, which amounted to Euro 17,905 thousand, represents the group s investment in the projects in Sicily, the photovoltaic plants in Mesagne, and improvements carried out to operating plants during the year. 12

14 Employee numbers decreased by 2 compared to the total at 31 December 2007, while employee costs were substantially in line with the previous year recording a slight decrease of Euro 194 thousand. The reconciliation between the total equity and profit for the year of the parent company and the total equity and profit for the year of the consolidated financial statements is set out in the notes to the financial statements (note 10. Share capital) Non-financial performance indicators The key non-financial performance indicators are set out below: (Number) Unit of measurement Gross electrical energy generated MWh 318, ,367 Electrical energy sold to the National Grid MWh 293, ,669 CO2 emissions tonn. 529, ,435 CO2 emissions avoided tonn. 155, ,774 Total waste treated tonn. 273, ,955 Total biomass treated tonn. 169, ,660 Families provided - Annual consumption per family kwh 3,000 3,000 - Number of families number 97,720 97,222 - Number of people number 390, , Share price performance The performance of the Actelios SpA share price, which is listed on the Star segment, is illustrated below. The format of communications to shareholders or prospective shareholders is based on a consistent approach that is not necessarily linked to the outline of presentations or road shows. Investor relations are in fact principally based on one to one meetings and the sending of notices and information also by e mail or telephone. Moreover, the company participates at conventions and meetings to discuss financial matters that are organised by the Italian Stock Exchange, enterprises or financial institutions. In 2008 Actelios attended 5 one day meetings with the financial community aimed at illustrating the principal business models that affect the group covering management and strategic development of the new initiatives. Even during this difficult time for the stock markets, the company has been transparent in all of its communications activities. The communication tool that is particularly effective and of great interest to investors is the company website which meets all the requirements for companies listed on the Star segment of the Italian Stock Exchange. 13

15 5.1.6 Performance of subsidiaries The performance of subsidiaries and associates included in the 2008 scope of consolidation may be summarised as follows: Ecosesto SpA The company, which is 100% owned by Actelios SpA, owns a biomass electrical energy plant and also operates in other environmental management activities. In addition, the company owns a photovoltaic plant for the production of electrical energy that is located in Rende. During the year, the company sold the photovoltaic plant in Trezzo sull Adda to Actelios Solar SpA. Profit for the year amounted to Euro 2,042 thousand against revenue of Euro 26,504 thousand. The result is largely due to the strong performance of the biomass plant in Rende. The net financial position of the company was a net indebtedness of Euro 10,919 thousand, while capital expenditure in the period amounted to Euro 73 thousand. Solar Rende Srl This company, which is 100% owned by Ecosesto SpA, was incorporated on 6 November 2008 with registered offices in Rende (CS) in order to develop and construct new initiatives in the photovoltaic power plant sector in Calabria. The company is in a start-up phase and closed the financial year in break even with a net financial position of positive Euro 10 thousand equal to the share capital of the company. Prima Srl Prima Srl, 85% owned by Actelios SpA, owns the WTE plant in Trezzo sull Adda. Prima Srl recorded revenue of Euro 46,046 thousand and a profit for the year of Euro 10,536 thousand in Capital expenditure carried out in the course of the year amounted to Euro 1,060 thousand. The net financial position was a net indebtedness of Euro 33,429 thousand and comprised cash and cash equivalents of Euro 12,682 thousand that are subject to restrictions imposed by the project financing projects, bank borrowings relating to project financing of Euro 37,938 thousand at 31 December 2008, net of Euro 1,286 thousand resulting from application of the amortised cost method to the cost of raising finance, a loan of Euro 6,335 thousand granted by Actelios SpA and other shareholders loans amounting to Euro 1,118 thousand. Furthermore, the net financial position includes Euro 720 thousand of finance costs relating to the fair value 14

16 measurement of derivative instruments entered into to hedge project financing contracts (interest rate swaps IRS to render variable rates fixed). Ambiente 2000 Srl This company, which is 60% owned by Actelios SpA, is responsible for the operation of the WTE plants in Fusina (VE) and Trezzo sull Adda (MI) based on previously acquired contracts. Profit for the year in 2008 amounted to Euro 248 thousand against revenue of Euro 10,785 thousand. The net financial position was a net asset of Euro 677 thousand. Actelios Solar SpA This company became an SpA and changed its name from Immobiliare Samanta to Actelios Solar SpA on 7 May It is the head of the segment involved in the production of electrical energy by photovoltaic plants and it closed the year with a loss of Euro 680 thousand and no revenue. Capital expenditure during the year amounted to Euro 1,720 thousand and related to the purchase of the photovoltaic plant in Trezzo sull Adda and the advance on the plant in Mesagne. The net financial position was a net indebtedness of Euro 1,541 thousand. Actagri Srl This company was incorporated on 16 May 2008 and will become the head of the segment operating in the production of electrical energy using biogas generated by the farming and animal breeding industries. The company is in a start-up phase and closed 2008 with a loss of Euro 33 thousand and no revenue and a positive net financial position of Euro 369 thousand. Abbiategrasso Bioenergia Srl This company was set-up on 15 July 2008 and is 58.74% owned by Actagri Srl. It processed the single authorisation and planning request relating to the construction and operation of a 1MW biogas plant located in the town council of Abbiategrasso (Milan). It closed the financial year with a loss of Euro 15 thousand and a positive net financial position of Euro 185 thousand. Capital expenditure amounted to Euro 80 thousand. Elettroambiente SpA The company, 100% owned by Actelios SpA, is the majority shareholder of two groups of enterprises that are joined in two consortiums: Tifeo Energia Ambiente ScpA and Platani Energia Ambiente ScpA. The companies each own an industrial project aimed at the construction and operation of an integrated waste treatment and electrical energy power system, with installed capacities of 50MW and 30 MW respectively, which benefit from the CIP 6/92 tariffs. In 2008 Elettroambiente SpA recorded a loss of Euro 684 thousand and revenue of Euro 2,233 thousand, which largely relate to owner s engineering services provided to the subsidiary consortium enterprises owned by Elettroambiente. The net financial position was a net indebtedness of Euro 36,448 thousand. Platani Energia Ambiente ScpA Platani Energia Ambiente ScpA, which is 82.64% owned by Elettroambiente SpA, operates with the exclusive aim of implementing a project to utilise the residual portion of urban waste, net of recycled waste, 15

17 through the development of integrated systems in the district councils of Sicily that are part of the Ambiti Territoriali Ottimali (consortia of district councils working together on waste management, hereinafter ATO ), located in the provinces of Agrigento, Caltanissetta, Trapani sector 2 and Palermo sector 4, which constitute the Agrigento System. The company continued the start-up activities and closed the 2008 financial year with a loss of Euro 376 thousand and no revenue. Capital expenditure in the course of the year amounted to Euro 2,502 thousand and the net financial position was a total indebtedness of Euro 15,222 thousand. Tifeo Energia Ambiente ScpA Tifeo Energia Ambiente ScpA, which is 92.36% owned by Elettroambiente SpA, operates with the exclusive aim of implementing a project to utilise the residual portion of urban waste, net of recycled waste, through the development of integrated systems in the district councils of Sicily that are part of the ATO located in the provinces of Catania, Siracusa, Enna and Ragusa, which constitute the Augusta System. The company continued with the start-up activities and closed the 2008 financial year with a loss of Euro 510 thousand and no revenue. In the course of the financial year capital expenditure amounted to Euro 3,479 thousand and the net financial position was a net indebtedness of Euro 19,183 thousand. The progress of the projects in Sicily is detailed below. PLATANI project 1. Integrated Environmental Authorisation Process ( AIA ) On 23 March 2007 Platani Energia Ambiente filed the applications to obtain the AIA for the plants (IPT and WTE) forming part of the Casteltermini/Campofranco plant engineering complex. The system s landfill is not included in this application as it has already received authorisation that is considered valid for AIA purposes. On 6 February 2008 the Regional Council for the Environment and Local Territory issued notice that the process had formally commenced and on 20 February 2008 Platani Energia Ambiente published the related public notices. Subsequently the preliminary proceedings commenced with the Works Meetings that were held on 22 May 2008 and 17 September The authorisation process is awaiting the BAT/MTD assessments that are being carried out by a joint commission between ARRA (Regional Department for Waste and Water) and ARTA (Regional Department for Environmental Protection) service 2. Following these assessments, the other authorities, essentially the Regional Provinces of Agrigento and Caltanissetta and ARTA service 3, will express their opinions. The mayors of the councils of Campofranco and Casteltermini have already expressed favourable opinions. The process is waiting for the decisive Works Meeting to be held. Authorisations for the water drain pipes of the waste collection points of Castelvetrano and Sciacca have been issued. The same authorisation application is currently being processed for the waste collection points of Gela and Ravanusa. 2. Vigilance and Control Body ( OVC ) On 14 February 2008 the OVC published the work carried out by the Scientific Guarantee Committee in On 1 April 2008 the OVC published the summary reports for 2005/2006 relating to the pre-operating Environmental Monitoring work. The OVC and ARRA have not yet released the pre-operating Monitoring Plan for the Aragona landfill. 16

18 3. Work in progress The environmental monitoring campaigns continued in conformance with the Authorisation Ordinance as agreed by ARPA (Regional Environmental Department) and the OVC and as discussed in relation to the AIA (Integrated Environmental Authorisation). 4. CIP 6 - Project financing Despite the fact that under Law n. 210 of 30 December 2008 the CIP 6 incentives were upheld (please refer to article 9 point C of the above law), the mandate with the four mandated lead arranger banks (MLA S) expired on 31 December 2008 due to the problems associated with the new bid for tenders (please refer to the specific paragraph below). 5. Commercial contracts The adjustments necessary in order to update the commercial contracts for use in the new tender are in the process of being finalised. 6. Plant development Platani Energia Ambiente continued with the engineering development activities relating to the plants construction. These activities are dependent on the imminent outcome of the new bid for tenders (please refer to the specific paragraph below). TIFEO project 1. Integrated Environmental Authorisation Process ( AIA ) On 30 March 2007 Tifeo Energia Ambiente filed the applications to obtain the AIA for the plants forming part of the plant engineering complex (3 IPT s and 1 WTE). The system s landfills are not included in this application as they have already received authorisations that are considered valid for AIA purposes. On 19 March 2008 the Regional Council for the Environment and Local Territory issued notice that the process had formally commenced and on 18 April 2008 Tifeo Energia Ambiente published the related public notices. Subsequently the preliminary proceedings relating to the IPT of Augusta-Ogliastro and the WTE plant of Augusta commenced with the Works Meeting that was held on 24 September The authorisation process is awaiting the BAT/MTD assessments that are being carried out by a joint commission between ARRA and ARTA service 2. Following these assessments, the other authorities, principally the Regional Province of Siracusa and ARTA service 3, will express their opinions. During the Works Meeting it emerged that the IPT of Augusta-Ogliastro is part of the Area of National Interest in Priolo and as a consequence the approval of the Ministry for the Environment is required. During the meeting it was noted that Enel SpA had been granted authorisation by the Ministry for the Environment to proceed with the variation relating to the drainage works on the WTE site and that a number of authorities including the Augusta Council and ARPA issued their opinions even after having reviewed the document that certified the drainage work. Further Works Meetings are to be called. Authorisations for the water drain pipes of the waste collection points and the landfills are currently being processed. 2. Vigilance and Control Body( OVC ) On 14 February 2008 the OVC published the work carried out by the Scientific Guarantee Committee in On 1 April 2008 the OVC published the summary reports for 2005/2006 relating to the pre-operating Environmental Monitoring work. 17

19 3. Augusta and Lentini Grotte San Giorgio sites Enel Produzione is still carrying out drainage work on the site. This work has caused severe delays to the handover of the site. Elettroambiente SpA, the direct parent company of Tifeo Energia Ambiente, immediately informed the Department of Waste and Water Protection, requesting assistance in order to expedite work. Elettroambiente SpA has not exercised the right to acquire the business of Enel Produzione relating to the thermal power plant that also includes the land to be transferred to Tifeo Energia Ambiente on which the WTE plant will be constructed. Negotiations are under way, due to pressure by Enel Produzione, to reach an agreement that guarantees to Elettroambiente, and in turn Tifeo Energia Ambiente, legal access to the drained site. Moreover, Enel Produzione has contested the requirement to make the site available. On the contrary, the company upholds that the obligation subsists and is fully effective. Elettroambiente SpA, which holds this right in the interests of Tifeo Energia Ambiente also, has commenced all actions necessary to confirm this right and has asked the Department of Waste and Water Protection to intervene through expropriation of the area as it is considered to be of public interest. 4. Work in progress The environmental monitoring campaigns continued in conformance with the Authorisation Ordinance as agreed by ARPA and the OVC and as discussed in relation to the AIA. Enel Produzione is continuing drainage work on the Augusta WTE plant site in accordance with the amended Decree for works that Enel received from the Ministry for the Environment. 5. CIP 6 Project financing Despite the fact that under Law n. 210 of 30 December 2008 the CIP 6 incentives were upheld (please refer to article 9 point C of the above law), the mandate with the four mandated lead arranger banks (MLA S) expired on 31 December 2008 due to the problems associated with the new tender (please refer to the specific paragraph below). 6. Commercial contracts The adjustments necessary in order to update the commercial contracts for use in the new tender are in the process of being finalised. 7. Plant development Tifeo Energia Ambiente has continued with the engineering development activities relating to the plants construction. These activities are however dependent on the imminent outcome of the new bid for tenders. PALERMO project 1. Integrated Environmental Authorisation Process ( AIA ) On 23 March 2007 and 2 May 2007 the company filed the applications to obtain the AIA for the plants forming part of the Bellolampo plant engineering complex (IPT and WTE and inertisation plant). The system s landfills are not included in this application as they have already received authorisations that are considered valid for AIA purposes. On 26 June 2007 the Regional Council for the Environment and Local Territory issued notice that the process had formally commenced and on 2 July 2007 the company published the related public notices. Subsequently the preliminary proceedings commenced with the Works Meetings that were held on 27/09/07, 04/12/07, 01/02/08, and 10/09/08. The authorisation process is awaiting the BAT/MTD assessments that are being carried out by a joint commission between ARRA and ARTA service 2. Following these assessments, the other authorities, principally the Regional Province of Palermo and ARTA service 3, will express their opinions. 18

20 The process is waiting for the decisive Works Meeting to be held. Trapani Servizi under the provisions of DRS no. 913 of 15/09/08 was awarded the AIA for the IPT plant of the Trapani site in the Belvedere quarter that is part of the Palermo System. Authorisations for the water drain pipes of the waste collection points of Termini Imerese and Carini have been issued. The same authorisation application is currently being processed for the waste collection point of Monreale. 2. Vigilance and Control Body ( OVC ) The OVC, together with ARPA, issued further instructions relating to the Environmental Monitoring Plan for the Bellolampo Engineering Complex that were communicated by ARPA during the AIA process. The OVC has carried out inspections relating to the Trapani IPT plant that is under construction, examining matters relating to the construction and problems regarding the operation of the monitoring work that is under way. On 14 February 2008 the OVC published the work carried out by the Scientific Guarantee Committee in Palermo Energia Ambiente (PEA) and AMIA formally informed the OVC on 05/03/08 of a potential variation to the system of the two landfills in Bellolampo suggesting the use of the fifth tank as a reserve in order to meet the imminent requirements of AMIA and Palermo Council in view of the future storage of the FOS in the ex 2B landfill that has been modified accordingly. This issue is still being reviewed. On 1 April 2008 the OVC published the summary reports for 2005/2006 relating to the pre-operating Environmental Monitoring work. The OVC continued to carry out inspections on the Belvedere quarter of the Trapani site. 3. Bellolampo site The problems relating to the impounding of the site have been resolved satisfactorily, also in respect of the build up of materials that have all been removed. The site is now free from any restraints. The company awaits issue of the Decree of Assignment from the State of the previous army shooting range in order to be able to sign the ground lease over all of the area on which the IPT and WTE plants are to be constructed. 4. Work in progress The environmental monitoring campaigns continued in conformance with the Authorisation Ordinance as agreed by ARPA and the OVC and as discussed in relation to the AIA. The operational division of the IPT plant of Trapani located in the Belvedere quarter is almost complete. 5. CIP 6 - Project financing Despite the fact that under Law n. 210 of 30 December 2008 the CIP 6 incentives were upheld (please refer to article 9 point C of the above law), the mandate with the four mandated lead arranger banks (MLA S) expired on 31 December 2008 due to the problems associated with the new tender (please refer to the specific paragraph below). 6. Commercial contracts The adjustments necessary in order to update the commercial contracts for use in the new tender are in the process of being finalised. 7. Plant development Further to the work described above on the IPT in Trapani, the company has continued with the engineering work relating to the construction of the plants. These activities are however dependent on the imminent outcome of the new bid for tenders (please refer to the specific paragraph below). 19

21 New bid for tenders The European Court of Justice issued sentence number C-382/05 on 18 July 2007 in which it convicted the Italian Republic of violating its obligations under articles 11, 15 and 17 of Council Directive no. 92/50/EC dated 18/06/1992 defining the Convention as a public tender for services ". During the meetings with the European Commission that were held in order to find the most appropriate solutions in order to implement the sentence, the relevant Italian Authorities put forward the environmental and health emergency issue surrounding the matter of the disposal of urban solid waste in Sicily, emphasising the importance of taking all actions allowed under EC and Italian law in order not to compromise the work carried out and realised in executing the requirements of the Convention, in order to avoid interruption of the services. ARRA sent a letter dated 21 March 2008 to inform Tifeo Energia Ambiente ScpA, Platani Energia Ambiente ScpA, Palermo Energia Ambiente ScpA, and the other industrial enterprise responsible for the fourth convention, that during discussions with the Commission in order to identify the most appropriate measures in order to meet the provisions of the sentence, the idea of calling a new bid for tenders in order to award the services was presented. This would be dependent on the commitment of the bidders and subsequently the contractors, which may differ from the existing industrial enterprises, to take over new title to existing legal contracts through replacement of the conventions originally entered into with the enterprises "upon payment of an amount corresponding to the total value of the work performed and construction carried out up until the handover, calculated in advance based on third party estimates, to be attached to the tender documentation and to be drawn up in order that the amount may be predetermined at the time the bid for tenders is called together with the criteria used to calculate the value and the amounts to be paid for activities and construction work carried out up until the effective handover date.this is with the exception of the possibility that it is awarded to the current contractors in the event that no other parties take part in the tender ". In a letter dated 23 May 2008 the Commission also recognised the commitment of the relevant Italian authorities to fulfil the new bid to award the services contracts, confirming that this solution meets the provisions of the sentence and consequently the case was closed. Tifeo Energia Ambiente, Platani Energia Ambiente and Palermo Energia Ambiente recognised the agreements between the Italian authorities, ARRA and the European Commission and noted that in accordance with the terms of the Convention, on 6 July 2006 the industrial enterprises commenced work on the project and they continued, in the spirit of collaboration that always prevailed in relations between the contractors and ARRA, to fulfil the obligations to finalise the project. Tifeo Energia Ambiente, Platani Energia Ambiente and Palermo Energia Ambiente accepted to enter into an agreement with the Regional Department for Waste and Water (ARRA). On 5 March 2009 this agreement was signed and as agreed is awaiting approval from the Sicilian Regional Council and the board of directors of the project companies and their individual shareholders. This agreement defines the main terms and conditions that, on one hand allow the ARRA to call the new bid for tenders without prejudice to the activities and construction work carried out under the Convention and on the other ensure payment to the project companies and their shareholders of the total costs incurred and to be incurred to develop the project, which are to be verified by an advisor nominated jointly by the Sicily Region, the project companies and their shareholders. In the event that the bid is awarded to a third party, the project companies and their shareholders will also be paid a cancellation fee equal to the average EBITDA calculated over the 20 year life of the concession (2005/2024) and attributed in accordance with the relevant appendix to this concession. Also on 5 March 2009, the parties jointly nominated the Banca Infrastrutture Innovazione & Sviluppo SpA as advisor. This engagement foresees preparation of a memorandum for each project summarising a list of costs incurred and work carried out by each industrial enterprise and by the shareholders of each enterprise, and will verify the calculation of the fee corresponding to the average EBITDA for the twenty year period (2005 through 2024), taking into consideration as a reference point the business plan attached to each Convention. 20

22 The Banca Infrastrutture Innovazione & Sviluppo SpA will not be required to present an opinion regarding the qualitative content, independent estimates, the stage of completion of work, or perform any kind of activity that is outside the scope of the work expressly described in the paragraph above. Moreover Tifeo Energia Ambiente, Platani Energia Ambiente and Palermo Energia Ambiente and their shareholders are preparing a further document, the Shareholder Agreement, which governs the new relationships between the shareholders and the industrial enterprises following signing of the agreement with ARRA. The potential accounting impact of the possible outcomes resulting from the agreement with ARRA are set out in the Intangible assets note in the notes to the consolidated financial statements Performance of associates Frullo Energia Ambiente Srl This company, which was set up as a joint venture between Hera SpA (51%) and Actelios SpA (49%), owns the WTE plant in Granarolo dell Emilia (Bologna), which has installed capacity of 22 MW that falls within the CIP6/92 tariff regime. Frullo Energia Ambiente Srl recorded revenue of Euro 48,518 thousand and profit for the year of Euro 11,859 thousand. Capital expenditure during the year amounted to Euro 5,186 thousand. The net financial position, a total indebtedness of Euro 86,146 thousand, comprises cash and cash equivalents of Euro 9,590 thousand, non-recourse borrowings of Euro 85,516 thousand, net of Euro 2,096 thousand arising from application of the amortised cost method to the cost of raising project financing and Euro 8,400 thousand of shareholders loans. The net financial position comprises finance costs of Euro 1,820 thousand relating to the fair value measurement of derivative instruments to hedge the non-recourse borrowings (interest rate swaps - IRS to hedge interest rate risk and render variable rates fixed). Ambiente 3000 Srl This company, set up as a joint venture between Hera SpA (51%) and Actelios SpA (49%), is responsible for the operation and maintenance of the WTE plant owned by Frullo Energia Ambiente Srl in Granarolo dell Emilia. On 1 November 2008 the company merged with Frullo Energia Ambiente Srl with effect from 1 January 2008, consequently the accounting balances at 31 October 2008 were transferred to the accounting records of Frullo Energia Ambiente. Palermo Energia Ambiente ScpA The company, which is % owned by Actelios SpA, was set up to achieve the objectives of the consortium shareholders with the exclusive aim of implementing a project to utilise the residual portion of urban waste, net of recycled waste, through the development of integrated systems in the district councils of the Sicily Region that are part of the ATO s in the Provinces of Palermo and Trapani that form the Palermo system. The company continued its start-up activities and closed the 2008 financial year with a loss of Euro 1,651 thousand with no corresponding revenue. Capital expenditure during the year totalled Euro 5,581 thousand and the net financial position was a total indebtedness of Euro 25,724 thousand. 21

23 Powercrop SpA This company, which was set up on 13 December 2006 as a joint venture between Seci Impianti Srl (50%) and Actelios SpA (50%), is responsible for the redevelopment of a number of sugar refineries into plants that produce electrical energy from biomass and vegetable oils. As this relates to a start-up business the company closed 2008 with a loss of Euro 1,426 thousand. Capital expenditure in the period amounted to Euro 8,090 thousand and principally relates to the acquisition of the land in Russi (RA) on which the biomass plant will be constructed. The net financial position was a net asset of Euro 2,368 thousand Review of business in 2008 In February Actelios SpA paid a deposit of Euro 1,231 thousand for the acquisition from the Solon group of projects relating to the development of photovoltaic plants in Puglia with a total installed capacity of 6 MW, which will result in total capital expenditure exceeding Euro 27,000 thousand. An alternator broke down at the WTE plant in Granarolo dell Emilia on 5 March This resulted in the stoppage of the turbine group with a resulting loss in electrical energy generation. Replacement of the alternator was finalised and production recommenced on 20 April. The subsidiary Immobiliare Samanta Srl became an SpA, changed its name to Actelios Solar SpA and was attributed a share capital of Euro 120 thousand on 7 May Subsequently Actelios Solar SpA acquired from Actelios SpA the business relating to the projects in the photovoltaic segment for Euro 2,037 thousand on 11 June Finally, Actelios SpA paid Euro 1,000 thousand representing its shareholder contribution to the future share capital increase. On 16 May 2008 Actelios SpA set-up Actagri Srl, with a share capital of Euro 50 thousand, which is to become the head of the companies that will operate in the generation of electrical energy from biogas. With regard to the current situation of the projects in Sicily please refer to the details above. 22

24 5.1.9 Employees The number of group employees at the year end was 140 and comprised: (Number) Change Managers (1) White-collar staff (2) Blue-collar staff Total employees in consolidated entities (2) 2 Employees in non-consolidated entities 3 Total employees (1+2) (2) As Frullo Energia Ambiente Srl is consolidated applying the proportional method, the numbers above include the 49% proportional share of the employees of this company that total 1 manager, 17 white-collar staff and 28 blue-collar staff Environment, health and safety During the year the group continued its commitment to meet adequate environmental, safety and quality standards that are consistent with its mission statement, through: - Ongoing improvements in the integration of company management procedures relating to quality, environment and safety, by taking advantage of synergies in these areas; - Periodic training of employees in relation to health and safety in the workplace and increasing awareness regarding the protection and safeguarding of the environment while carrying out their work. In particular, in relation to the principal group operating subsidiaries, the situation at 31 December 2008 was as follows: Company Management system Location ACTELIOS SpA Quality Management system UNI EN ISO 9001:2000 for services - Head office provided to group companies: Human resources, Administration and Finance, Supply, Quality, Environment and Safety. Environmental management system (UNI EN ISO 14001:2004) ECOSESTO SpA Certified Integrated Quality and Environment system - Head office (Reference regulations: UNI EN ISO 9000:2000) - Biomass plant in Rende - Vieste landfill Environmental management system UNI EN ISO 14001: Biomass plant in Rende AMBIENTE 2000 Srl Integrated Quality, Environment and Safety system - WTE plant in (Reference regulations: UNI EN ISO 9000:2000; Trezzo sull Adda UNI EN ISO 14001:2004 and OHSAS 18001) PRIMA Srl Environmental management system (UNI EN ISO 14001:2004). - WTE plant in EMAS II registration no. IT 672 Trezzo sull Adda With regard to accidents, no employees of the Actelios group were involved in accidents in Consequently, accident frequency and criticality rates were nil. 23

25 Research and development activities In November 2008 the Ev-k2-CNR Committee and Actelios SpA signed an agreement to provide photovoltaic panels to the Pyramid Laboratory- Observatory at Everest. The agreement defines that Actelios will provide 44 monocrystalline photovoltaic panels each with an 80W maximum capacity, while the Ev-k2-CNR Committee will be responsible for installing them at the Pyramid building located at an altitude of 5,050m at the Mount Everest Base Camp. The energy generated, which will amount to around 10,000 kwh per annum, will be used to run the scientific equipment installed in the Pyramid. The Everest Pyramid Laboratory-Observatory measures continuously, and records every hour, the ozone concentration in the atmosphere. Furthermore, with regard to Powercrop SpA experimental activities were carried out in the agro-energy field in order to determine the best crops that both preserve the organoleptic qualities of the land while at the same time provide the most effective heat-producing energy Risk factors and uncertainties a) Financial Please refer to paragraphs 6.5.6, 6.6 and 8.6, which set out the principal financial risks and the risk management policies of the company and group. b) Legal The principal legal risks arising from current litigation are as follows.. Ecosesto SpA With regard to the litigation in progress with Syntea SpA, the current status of the legal proceedings does not give cause to believe that the outcome will be dissimilar to that foreseen at the previous year end. Consequently, the existing provision (Euro 300 thousand) represents a prudent valuation of the possible outcome of this litigation. With regard to the litigation with Edison SpA, no concrete reasons exist at present to suggest that a provision is required.. Prima Srl With regard to the arbitration proceedings in course with Protecma, the final award was made on 22 December 2008, which if applied to the letter will result in the payment of approximately Euro 5.4 million of the Euro 17.9 million already received/withheld as settlement for damages. Prima Srl has paid Euro 3.4 million and at the same time filed an amendment request against the award based on presumed errors in calculating certain amounts. The petition, which is not without foundation, was rejected and Prima is considering whether or not to appeal this decision. The provision, which covers the full amount of the award still outstanding, is based on reasonable prudence. 24

26 . Elettroambiente SpA Legal proceedings have commenced between the subsidiary Elettroambiente SpA and Enel Produzione SpA, both shareholders of Tifeo Energia Ambiente ScpA and Platani Energia Ambiente ScpA. On 2 April 2008, Enel Produzione commenced arbitration proceedings against Elettroambiente in order to ascertain the legitimate exercise by Enel Produzione of the right to sell its holdings in Tifeo and Platani, at the same time claiming Elettroambiente had breached its obligation to acquire these shares. Subsequent to acceptance of these claims, Enel Produzione requested that Elettroambiente pay damages of Euro 3,551 thousand. Elettroambiente in turn responded to the claim by Enel Produzione, notifying the appointment of an arbitrator through whom it requested that the opponent s claims be rejected. At the same time it submitted a counterclaim requesting that Enel Produzione be sentenced to transfer the industrial area in Augusta that was identified as the location for construction of one of the WTE plants of the project, following drainage work on the area that should be carried out at the expense of Enel Produzione. Enel Produzione continued drainage work on the site and this work has resulted in a significant delay in handing over the site. Elettroambiente immediately informed the Department for Waste and Water Protection, requesting their intervention to expedite work. Elettroambiente did not exercise the right to acquire the business of Enel Produzione relating to the thermoelectric plant that also comprises the land to be transferred to Tifeo Energia Ambiente for the construction of the WTE plant. Negotiations are under way, given the constant pressure by Enel Produzione, to reach an agreement that guarantees to Elettroambiente, and in turn Tifeo Energia Ambiente, legal access to the drained site. Moreover, Enel Produzione has contested the requirement to make the site available. On the contrary, the company upholds that the obligation subsists and is fully effective. Elettroambiente SpA, which holds this right also in the interests of Tifeo Energia Ambiente, has commenced all actions necessary to confirm this right and has asked the Department of Waste and Water Protection to intervene through expropriation of the area as it is considered to be of public interest. c) Internal and external risks The Actelios group is largely exposed to risks relating to the authorisation process involved with the development of its projects and the authorisations held that are necessary to continue production activities. In order to minimize these risks the group is diversifying both the type of investment and the location of the operating plants in order to distribute the risks across different businesses. With regard to the operating plants, the risks principally relate to the activities performed by the workforce and the operation and maintenance work carried out on the owned plants or those managed by group companies, in order to ensure that they respect the requirements of the Integrated Environmental Authorisation (AIA) and authorisations issued under law. Moreover, the renewable energy market in which the group operates is highly regulated. As a consequence particular care must be paid in order to be continuously updated regarding the relevant rules so that, where possible, the best implementation solutions may be adopted Legislative Decree 196 of 30 June data protection Actelios SpA and its subsidiaries, as already published in previous financial statements, have applied the provisions of Legislative Decree 196/2003 on data protection. They have performed all the activities prescribed by this legislation, in particular the requirement to update the Security Plan. 25

27 This update took place on 12 November 2008 and covered the following areas: Protection of the areas; Custody and filing of documentation and related supporting documents; Firewall check; Training of personnel; Password management Significant events after the balance sheet date Solar Mesagne Srl, which is 100% owned by Actelios Solar SpA, was incorporated on 28 January 2009, with registered offices in Brindisi. It is responsible for planning and developing new initiatives in the photovoltaic plant sector in Puglia. As already detailed above, on 5 March 2009, the Sicily project companies and their shareholders signed an agreement with ARRA, aimed at determining the costs incurred by the industrial enterprises and their shareholders in relation to the projects in Sicily, and the amount to be awarded for cancellation of the contract, which is to be verified by an external advisor. On the same date the parties jointly nominated the Banca Infrastrutture Innovazione & Sviluppo SpA to act as the independent advisor. Tifeo Energia Ambiente, Platani Energia Ambiente and Palermo Energia Ambiente and their shareholders are preparing a further document, the Shareholder Agreement, which governs the new relationships between the shareholders and the industrial enterprises following signing of the agreement with ARRA Future developments and going concern Although profitability increased in 2008 due to the strong performance of the operating plants, a decrease in volumes and a fall in profitability are expected in This is principally due to the fact that the CIP6/92 tariff incentives for 9 MW granted to the biomass plant in Rende expired in February Moreover, it is reasonable to assume that the uncertainty surrounding the world economy, in particular the energy sector, will have a negative impact on energy sales tariffs. The 2009 result will also be affected by the development and start-up costs of new projects, both in respect of the dedicated crop biomass plants owned by Powercrop SpA, and the photovoltaic plants. With regard to the Sicily projects in particular, following the agreement with ARRA, guarantees have been issued regarding the recovery of the costs incurred and compensation to cover lost profits and the goodwill recorded in the event that a new contractor is assigned. From a strategic point of view, the Actelios group is focusing on a wider business strategy that foresees the development of projects in the photovoltaic, biomass, and biogas fields and other initiatives in the production of electrical energy from renewable sources sector. The net financial position is expected to benefit from the significant cash generated by the operating plants. However, the level of investment required to construct the above mentioned plants will continue to impact the net financial position of the Actelios group. 26

28 5.2 Operating and financial review of Actelios SpA Financial highlights (Euro thousands) Revenue 1, Cost of sales (167) Gross profit Operating profit/(loss) (3,729) (6,803) Profit for the year 17,688 15,941 Invested capital net of provisions 85,069 95,531 Total equity 346, ,845 Net financial position - asset 261, ,314 Capital expenditure 1, Employees (no.) Ordinary shares (no.) 67,680,000 67,680, Performance and review of business in 2008 The 2008 financial year closed with a profit for the year of Euro 17,688 thousand, after recording amortisation and depreciation of Euro 47 thousand and an income tax expense of Euro 3,476 thousand. The results have improved compared to the previous year, with an increase in operating profit (+Euro 3,075 thousand) due to higher revenue (+Euro 1,019 thousand), non-recurring income arising from the reversal of over prudent provisions charged in previous years (+Euro 1,103 thousand) and the use of the sundry risks provision (Euro 600 thousand) due to legal proceedings that concluded with lower charges than estimated. Net finance income also improved (+Euro 1,553 thousand). Finally, investment income and costs recorded in 2008 amount to Euro 11,476 thousand and relate to Prima Srl (Euro 5,100 thousand), Frullo Energia Ambiente Srl (Euro 5,684 thousand), Ecosesto SpA (Euro 500 thousand), Ambiente 2000 Srl (Euro 300 thousand), Ambiente 3000 Srl (Euro 172 thousand) and the loss on disposal of the investment in Termini Imerese Energia Ambiente Srl (Euro 10 thousand). The net financial position, a total asset of Euro 261,312 thousand, represents a Euro 17,998 thousand increase compared to the balance at 31 December This is principally due to the 2006 dividends of Prima Srl, the 2006 and 2007 dividends of Frullo Energia Ambiente Srl and amounts due from Italgest Energia SpA Employees The total number of company employees at 31 December 2008 was 30, comprising 10 managers and 20 white-collar staff, with no change in the total number compared to 31 December Capital expenditure Capital expenditure totalled Euro 1,255 thousand and principally relates to the advance for the acquisition of the photovoltaic plants in Mesagne (Euro 1,231 thousand), which were subsequently included in the 27

29 business sold to Actelios Solar SpA in 2008, and expenditure on furnishings and personal computers for a total of Euro 22 thousand Directors, statutory auditors, general managers and their interests Company No. shares held No. shares No. shares No. shares held at purchased sold at Paride De Masi through Italgest Energia SpA Actelios SpA 3,059,320 3,059,320 Marco Agostini 60,000 60,000 Enrico Falck Actelios SpA 8,000 8,000 The information in the table above was provided by the relevant parties Related party transactions Actelios SpA carries out arm s length transactions of both a trade and financial nature with its parent company, subsidiaries and associates. These transactions allow group synergies to be achieved through the use of common services and knowhow and the application of common financial policies. In particular, the transactions relate to specific activities, details of which are provided in the notes to the financial statements and include: - Treasury management, raising finance and issuing guarantees; - Administrative and professional services; - Management of common services. The company also opted to use the consolidated tax regime with its parent company Falck SpA Managerial and coordination activities In accordance with article 2497 bis, paragraph 5 of the Italian Civil Code, it is noted that Falck SpA performs managerial and coordination activities on behalf of the company. The activities performed are of a commercial and financial nature as noted above, and resulted in Euro 6,083 thousand of income in the financial statements in respect of finance income on liquidity invested with Falck SpA calculated applying market rates and Euro 84 thousand representing income from services performed on behalf of the parent company The profit for the year also includes the costs of services performed by Falck SpA for a total Euro 2,321 thousand Holding of own shares or parent company shares In accordance with article 2428, sub-section 2, point 3 of the Italian Civil Code, the company declares that at 31 December 2008 it had no holdings in its own or its parent company shares. 28

30 5.2.9 Purchase and sale of own shares or parent company shares In accordance with article 2428, sub-section 2, point 4 of the Italian Civil Code, the company declares that during the year ended 31 December 2008 it did not purchase or sell holdings in its own or its parent company shares Share schemes The company does not currently operate employee benefit schemes through the implementation of stock option plans Proposed distribution of profit for the year Dear Shareholders, the financial statements for the year ended 31 December 2008 closed with a profit for the year of Euro 17,688,014. We propose to distribute this profit as follows: (Euro) 5% to the legal reserve 884,401 Euro 15 cents to each of the 67,680,000 ordinary sharholders 10,152,000 Retained earnings 6,651,613 Total 2008 profit for the year 17,688,014 Where in agreement, we invite you to approve the 2008 Annual Report comprising the balance sheet, income statement, cash flow statement, statement of changes in equity and notes to the financial statements. On behalf of the board of directors The Chairman Federico Falck Milan, 12 March

31 5.3 Corporate governance Introduction Actelios SpA complies and conforms to the Code of Self Discipline for listed companies, which was issued by Borsa Italiana SpA in The board of directors of Actelios SpA passed a resolution on 27 July 2007 whereby the recommendations of this Code of Self Discipline have been implemented, with the exception of the recommendation to establish a nominations committee. This report on corporate governance is divided into three sections: the first contains a general description of the corporate governance structure adopted; the second analyses and illustrates in more detail the implementation of the requirements of the Code of Self Discipline; the third provides summary details in table format. Finally, please note that company documentation mentioned in this report is available on the company s website in the section The Company Corporate governance structure The corporate governance structure comprises the administration and control department and the body of shareholders. In accordance with current legislation, the control of the accounting records is assigned to a firm of independent auditors. Carlo Magnani was appointed Compliance Officer responsible for the preparation of the company s accounting information as required by Law 262/05 by the board of directors on 24 September The board of directors approved the adoption of the Organisation and Operations Manual on 14 February 2008 in order to incorporate changes introduced to Legislative Decree 231/01 in order to better reflect the current organisation structure of the company. More specifically, the fourth special section relating to crimes against individuals due to violation of accident laws, and the fifth special section regarding crimes against the value of the business committed through fraud. The Organisation and Operations Manual is updated constantly and a further amendment to the text will be reviewed in the board meeting in the first half of The board of directors of Actelios SpA, in the meeting held on 22 December 2008, took note of the fact that the company is subjected to managerial and coordination activities by the parent company Falck SpA which effectively performs coordination activities and/or issues a set of directives for strategic purposes, without affecting the autonomy and independence of the company and the corporate bodies. In accordance with article 2497 bis of the Italian Civil Code, Actelios SpA performs managerial and co-ordination activities in respect of the following group companies: Actagri Srl, Ecosesto SpA, Elettroambiente SpA, Platani Energia Ambiente ScpA, Prima Srl, Solar Mesagne Srl and Tifeo Energia Ambiente ScpA Corporate bodies and respective roles Board of directors The board of directors plays a central role in the corporate governance structure as it is vested with all powers required for the ordinary and extraordinary management of the company (article 20 of the articles of association). The board is responsible for outlining strategic and organisational plans, the review and approval of strategic, industrial and financial plans, the granting and cancellation of proxies, the review and approval of signi- 30

32 ficant financial transactions, in particular in respect of related party transactions. Appointment of the board of directors takes place, in accordance with article 17 of the articles of association and the provisions therein, based on lists submitted by the shareholders who, individually or jointly with other shareholders, represent at least 2.5% of the share capital. Article 17 of the articles of association establishes that the board of directors consists of between 5 and 15 members who may remain in office for three years and, if not appointed by the shareholders in general meeting, the members will elect a chairman, one or more deputy chairmen and managing directors and shall assign executive powers and the related limits. The members of the board of directors who were appointed during the annual general meeting held on 29 April 2008 are as follows: Name Federico Falck Achille Colombo Paride De Masi Roberto Tellarini Marco Agostini Enrico Falck Giuseppe Gatti Bruno Isabella Ferruccio Marchi Umberto Rosa Office Chairman Deputy chairman Deputy chairman (with powers for development limited to the Sicily projects) Managing director Director Director Director Director Director Director The board of directors, together with the board of statutory auditors, receives complete information, at least on a quarterly basis and in accordance with article 150 of Legislative Decree 58/98, from the managing director regarding the activities performed by him during the period in relation to the powers vested in him. The board of directors may also delegate its powers to an executive committee where this exists. An executive committee has not yet been established. The board of directors has set up, in accordance with the Code of Self Discipline, a remuneration committee and an internal control committee that provide consulting and advisory services, and has appointed an investor relator. Board of statutory auditors The board of statutory auditors oversees compliance with the law and the company s articles of association, monitors the correct application of administrative procedures and, in particular, verifies the effectiveness of the internal control system and the organisational, administrative and accounting structure and that this structure functions correctly. The members of the board of statutory auditors are appointed for a three year period and may be reappointed. All members of the board of statutory auditors must possess the requisites of reputation and independence established by law. The board of statutory auditors currently comprises three permanent members and two substitutes who are all members of the Albo dei Revisori Contabili (the Italian register of approved statutory auditors). Appointment of the board of statutory auditors takes place, in accordance with article 24 of the articles of association, applying the rules and regulations thus in conformance with article 148 of the Consolidated Finance Act and article 144-sexies of Consob (the Italian stock exchange commission) regulation dated 14 May 1999 and ensuing amendments, based on lists submitted by the shareholders who at the 31

33 moment of submission demonstrate a minimum holding determined in accordance with the provisions of article 147 ter of Legislative Decree 58 of 24 February 1998, which currently corresponds to 2.5% of share capital. Minority shareholders have the right to appoint one permanent member and one substitute member of the board. The board of statutory auditors was reappointed in the annual general meeting held on 29 April 2008 and the members are as follows: Name Roberto Bracchetti Aldo Bisioli Nicola Vito Notarnicola Office Chairman Statutory auditor Statutory auditor The emoluments of the members of the board of statutory auditors were decided in the shareholders meeting, during which it was decided that for the term in office ( ) the fees for the two permanent members will equal the minimum prescribed in professional standard tables, while the chairman will receive this amount increased by 50%. Meetings of the board of statutory auditors may also take place by audio-videoconference and/or by teleconference on condition that all of those entitled to participate are able to be identified, that they may intervene in discussions in real time and that they are informed sufficiently in advance. Shareholders meetings The annual general meeting (AGM) is the body which represents all of the shareholders and passes ordinary resolutions in relation to: the approval of the annual report, the appointment or removal of the members of the board of directors, the appointment of the members of the board of statutory auditors, the emoluments of the directors and statutory auditors, the appointment for the control of the accounting records, and directors and statutory auditors responsibilities. In extraordinary meetings the shareholders may approve share capital increases, excluding or limiting pre-emption rights when it is in the company s interest to do so and within the limit of 10% of existing share capital. The shareholders convene at least once a year in order to approve the annual report. Those shareholders in respect of whom notice from the intermediary was received at least two days prior to the first call, in accordance with article 2370 of the Italian Civil Code, may attend the shareholders meeting. Shares may not be withdrawn prior to the meeting taking place and any shareholder who has the right to attend the meeting may be represented by proxy. The meeting is chaired by the chairman of the board of directors or, in his absence, the deputy chairman. Ordinary and extraordinary meetings are considered to have been called correctly and have the ability to approve in the first, second and third calls when the numbers and majorities required by law are met. In accordance with Italian stock exchange recommendations, on 27 April 2005, the Rules of the Shareholders Meetings were approved during the annual general meeting. These were updated in the extraordinary shareholders meeting that took place on 21 June The shareholders met once in 2008: on 29 April 2008 to approve the annual report for the year ended 31 December 2007 and the appointment of the board of directors and the board of statutory auditors for the three year term Control of accounting records The control of the accounting records is carried out in accordance with the law by a firm of independent auditors that is registered with Consob. The annual general meeting of 27 April 2005, following consultation with the board of statutory auditors, assigned this engagement to PricewaterhouseCoopers SpA. The shareholders meeting of 27 April 2007 resolved to extend this appointment up to the approval of the

34 annual report following the changes introduced by Legislative Decree 303/2006 that extended the duration of audit appointments from 6 to 9 years. Compliance officer Carlo Magnani was appointed Compliance Officer responsible for the preparation of all the company s accounting information, as required by Law 262/05, on 24 September The Compliance Officer has acquired the relevant experience through managerial roles carried out in the areas of administration, finance and control Share capital Share capital amounts to Euro 67,680, and consists entirely of ordinary shares. Significant shareholders at 31 December 2008 were: - Falck SpA % of share capital; - Italgest Energia SpA % of share capital; The remaining shares are held by shareholders who own less than 2% of share capital. An agreement exists between Falck SpA and Italgest Energia SpA, which was made public in accordance with article 122 of the Consolidated Finance Act, and relates among other things to the call option held by Falck SpA whereby it may acquire the shares currently held by Italgest Energia SpA, applying the terms and conditions stipulated in the agreement. No restrictions regarding share transfers or voting rights exist Organisation and Operations Manual in accordance with Legislative Decree 231/01 The board of directors passed further amendments to the Organisation and Operations Manual on 14 February 2008 in order to align it with the regulations added to Legislative Decree 231/01, which extended the scope of application of this legislation to areas covering safety and money laundering. The Organisation and Operations Manual was updated to include the fourth special section relating to crimes against individuals resulting from violation of the safety rules in line with the provisions of article 9 Law 123 of 3 August 2007; and the fifth special section regarding crimes against the value of the business committed through fraud following the provisions of article 63 of Legislative Decree 231 of 21 November The Organisation and Operations Manual is updated continuously and a further amendment to the text will be reviewed by the board of directors in The Manual reflects the Italian Stock Exchange listing requirements and guidelines on this area. A board, known as the Supervisory Board, consisting of an independent director, a statutory auditor of Actelios SpA and a group internal auditor, which has independent supervisory, control and decision-making powers, has been set up to ensure implementation of the Organisation and Operations Manual of Actelios SpA. The internal control committee constantly checks the effectiveness of procedures in relation to company requirements, and proposes changes where necessary in order to align them with the current corporate environment. All of the companies in the Actelios group have adopted the same Organisation and Operations Manual as Actelios SpA, subject to adjustments to take into consideration the different corporate cultures and any specific requirements Company procedures Company procedures were updated and amended in order to reflect adoption of the Organisation and Operations Manual with particular emphasis placed on the requirements of Legislative Decree 231/01. 33

35 Code of Conduct The Code of Conduct sets out the rules that are fundamental to maintaining ethical conduct and the general principles relating to all corporate governance tools, which should reflect the principles of the code. The rules of the Code of Conduct establish the principles and guidelines to follow in carrying out business, in employee relationships and in all relationships between employees and third parties. The regulations set out in the code are not restricted to employees. Employees are in fact obliged to ensure that the rules established in the Code of Conduct are adhered to by all independent parties who work with or have any form of dealings with the company. This extension of the rules takes on particular importance following introduction of the regulations arising from Legislative Decree 231/01. On 20 October 2008 the board approved the adoption and full implementation of the new version of the Code of Conduct which includes a specific section relating to adherence to the PACI principles (Partnering Against Corruption Initiative for Countering Bribery), which now form an integral part of the Code of Conduct, with express mention of the commitment of the Falck group to the principles for the fight against corruption published by the World Economic Forum. A Code of Conduct and Corporate Governance Implementation Committee has been set up, which reports to the parent company Falck SpA, in order to verify the correct implementation of the Code of Conduct, ensure it is effectively adhered to by all relevant parties and to resolve queries regarding interpretation of the rules therein. This committee also verifies implementation of the principles relating to Legislative Decree 231/2001 and the Code of Internal Dealing. The committee is currently composed of six members: Name Federico Falck Achille Colombo Mario Molteni Angelo Alfieri Carlo Magnani Carlo Sinatra Office Chairman of Falck SpA and Actelios SpA Committee Chairman Managing Director of Falck SpA and Deputy Chairman of Actelios SpA External expert (Prof. of Business Economics of the Università Cattolica del Sacro Cuore in Milan and Director of ALTIS Alta Scuola Impresa e Società dell Università Cattolica) Human Resources Director of Falck SpA Financial Director of Falck SpA Director of Legal and Company Affairs of Falck SpA - Secretary The Code of Conduct and Corporate Governance Implementation Committee met on 26 March 2008 identifying the course of action for 2008 with regard to furthering the level of implementation of the principles of governance and internal training activities across all of the main areas, both of which were carried out Code of Insider Dealing Law 62/05, which implemented into Italian law the EU Directives on market abuse (Directive 2003/6/EC of the European Parliament and Council dated 28 January 2003; Directive 2003/124/EC of the Commission dated 22 December 2003; Directive 2004/72/CE of the Commission dated 29 April 2004), superseded article 114 of Legislative Decree 58/98. Consob, in turn, issued resolution dated 29 November 2005 that forms part of the Listing Rules issued under resolution in 1999, which dictates the implementation rules in relation to the above regulatory requirements. Consequently, Actelios SpA passed resolution on 12 May 2006 to adopt the new Code of Insider Dealing, defined the Procedure ex articles 114 and 115 bis of Legislative Decree 58/98 and according to the provisions of chapter VII sections I and II of the Listing Rules. 34

36 The Code of Insider Dealing represents the instrument that guarantees maximum transparency and uniformity of market information in relation to financial operations on the share capital of Actelios SpA undertaken by Relevant Parties, defined as those who have access to significant information regarding the company and the group and as a result possess wider knowledge of the strategies adopted by the company. The rules set out in the Code of Insider Dealing, to be adopted by Actelios SpA and all of its subsidiaries, are compulsory and may not be broken and, as a result, disciplinary action will be taken in the event of noncompliance. As required by article 2 of Section II of the Code of Insider Dealing, the register that details the individuals who, as a result of their work or professional activities or the tasks performed, either permanently or occasionally, have access to privileged information, has been updated on a regular basis Implementation of the Code of Self Discipline Board of directors The board of directors is appointed for a three year period, is vested with the widest range of powers required to perform ordinary and extraordinary managerial activities and meets at least once every three months. The current board of directors includes the following three external representatives: Name Bruno Isabella Giuseppe Gatti Umberto Rosa The board apportions the emoluments to each director and, in line with the articles of association and the provisions of article 7 of the Code of Self Discipline, and based on the proposal of the remuneration committee, defines the emoluments to be paid to those directors who hold specific offices, taking into consideration the powers vested in them The board of directors term in office will expire on approval of the annual report for the year ended 31 December Duties and powers The board of directors examines and approves strategic, industrial and financial plans; delegates and withdraws powers to/from top management; determines, following examination of the proposals of the remuneration committee and having consulted with the board of statutory auditors, the remuneration of those directors who hold specific offices and apportions the total emoluments among the individual board members; oversees the general operating performance, with particular attention to potential conflicts of interest, related party transactions, and those transactions that may be significant in economic and financial terms; examines the adequacy of the organisational and general administrative structure of the company and the group as determined by the managing directors; reports to the shareholders in the AGM. The managing director prepares a report in writing to the board of directors and board of statutory auditors at least once every quarter, detailing operations carried out, general performance, future developments and transactions of significant economic and financial impact and transactions that may result in potential conflicts of interest. Furthermore, the deputy chairman Achille Colombo has been assigned extraordinary and ordinary administrative powers; the deputy chairman Paride De Masi has been assigned ordinary administrative powers in respect of research and development on the projects in Sicily; the managing director Roberto Tellarini has been assigned ordinary administrative powers regarding the co-ordination of company management with a 35

37 limit of Euro 5 million in relation to powers that have a financial impact. In accordance with the company s articles of association, legal representation of the company is vested in the chairman, deputy chairmen and managing director within the limits of the respective responsibilities. In the course of 2008, the board of directors met 7 times with the following attendance by directors and statutory auditors: Meeting Directors attendance Statutory auditors attendance 14 February /10 2/3 17 March /10 3/3 29 April /10 3/3 9 May /10 3/3 29 August /10 3/3 29 October /10 3/3 22 December /10 3/3 The activities of the board of directors are co-ordinated by the chairman who is responsible for the correct application of corporate governance within the board s activities. The chairman co-ordinates and presides over board meetings and ensures that the interested parties receive in advance all information necessary in order that they may participate effectively, with the exception of matters considered urgent or confidential Composition of the board of directors The board of directors comprises the following 10 directors of which 3 are executive and 3 are independent directors: Name Office Federico Falck Chairman and legal representative Achille Colombo Deputy chairman and legal representative Executive Paride De Masi Deputy chairman and legal representative Executive Roberto Tellarini Managing director and legal representative Executive Marco Agostini Director Bruno Isabella Director Independent Enrico Falck Director Giuseppe Gatti Director Independent Ferruccio Marchi Director Umberto Rosa Director Independent The independence of directors is carefully evaluated by verifying the absence of significant financial interests, that no controlling equity interests or interests that may exercise significant influence are held and that the requisites set out by law are in place. 36

38 As required for informative purposes, the roles held by the directors in other companies are as follows: Federico Falck Chairman Chairman of the board of directors of: and legal representative - Falck SpA - Riesfactoring SpA Director of: - Banca Popolare di Sondrio ScpA - Cassa di Risparmio di Parma e Piacenza SpA - Italcementi SpA Member of the council and executive committee of Assolombarda Member of the Control Committee of Italcementi SpA Achille Colombo Deputy chairman Managing director of Falck SpA and legal representative Director of: - Falck Energy SA - Italian Lao Group Co. Ltd Chairman of Falck Bioenergy Singapore Pte. Ltd. Chairman of Falck Financial Services SA Member of the: - World Economic Forum - World Business Council for Sustainable Development (EBCSD) - Aspen Club Paride De Masi Deputy chairman Chairman of the board of directors of: - Antonio Paride DE MASI & C. S.a.p.a. - Italgest Energia SpA - Italgest Energia Prima SpA - Italgest Photovoltaic Srl - Spes Srl - Italgest Wind Srl - Italgest Immobiliare SpA Sole director of: - Italgest Holding Srl - Anemos 1 Srl - Italgest Servizi Srl Member of the board of directors of: - Marpark SpA Roberto Tellarini Managing director Chairman of the board of directors of: and legal representative - Frullo Energia Ambiente Srl Deputy chairman of Ecosesto SpA Member of the board of directors of: - Actagri Srl - Elettroambiente SpA - Palermo Energia Ambiente ScpA - Powercrop SpA 37

39 Bruno Isabella Director Chairman of the board of directors of: - Sirap-Gema SpA - Sirap-Gema Insulation Systems Srl - Amprica SpA - Arriva Italia Srl - Mondi Packaging Italia SpA Chairman of the Steering Committee of: - Petruzalek Ges.m.b.H. Director of: - Falck SpA Umberto Rosa Director Chairman of the board of directors of: - Nerviano Medical Science Srl - Telbios SpA Deputy chairman of the Istituto Europeo di Oncologia Director of: - Amplifon SpA - Finlombarda SGR Enrico Falck Director Chairman and managing director of: - Actagri Srl - Abbiategrasso Bioenergia Srl Director of: - Falck SpA - Bioland SA Giuseppe Gatti Director Chairman of: - Erg Power & Gas SpA - Erg Renew SpA - Iride Mercato SpA - Grandi Reti Scrl Director of Erg SpA and AIEE (Italian Association of Energy Economists) Marco Agostini Director Ferruccio Marchi Director Managing director of: - Marchi Industriale SpA - Giofin Srl Deputy chairman of Falck SpA Deputy chairman of Essemar SpA Director of: - Castello della Pia Srl - Castel di Pietra Srl - Nugola SpA Sole director of Marfin Srl Committees Nominations committee The company has not set up a nominations committee as nominations are submitted by the majority or controlling shareholders who perform a prior selection process on candidates. 38

40 Remuneration committee This was set up on 25 February 2002 with the purpose of formulating proposals regarding remuneration and potential stock option schemes to be assigned to directors that hold specific offices in the company and, in agreement with the managing director, potential stock option schemes for group management. This committee was reappointed on 29 April To date the company has not set up any stock option schemes. The members of the committee are: Name Bruno Isabella Umberto Rosa Enrico Falck Office Chairman The committee did not meet in Internal control committee The internal control committee was set up on 25 February 2002 to put forward proposals and provide consulting services, including; assisting the board of directors in verifying the correct operation of the internal control system, verifying the application of appropriate accounting principles in preparing the consolidated financial statements together with the administration department, and evaluating the proposals put forward by the independent auditors. The committee was reappointed on 29 April 2008 with the following members, all of whom are independent, non-executive directors: Name Umberto Rosa Bruno Isabella Giuseppe Gatti Office Chairman of the committee The board of statutory auditors, the officer in charge of internal controls and the silent participator (Uditore - Salvatore DeVitis) are invited to attend the committee meetings. The chairman may also invite the directors and statutory auditors of the company and its subsidiaries, representatives of the independent auditors and external consultants to attend. The committee met 5 times in 2008 and, in addition to the committee members, the meetings were attended by the full board of statutory auditors, the officer in charge of internal controls and the department heads. A number of matters were discussed, with particular emphasis on the work plan set out by the officer in charge of internal controls and the implementation of the Organisation and Operations Manual that conforms with Legislative Decree 231/ Company procedures and roles Internal procedures of the board of directors and the committees The company has not adopted specific internal procedures regarding the board of directors but does however guarantee that all of the necessary documentation and information are provided sufficiently in advance of meetings. The chairman may invite the department heads and staff to board meetings in order to comment further on the matters on the agenda. 39

41 Appointment of directors and statutory auditors The board of directors of Actelios SpA is appointed by the AGM based on lists submitted by the shareholders, made public in accordance with the law, in which the candidates must be listed in order by number; the lists of candidates, signed by the shareholders who submitted them, must be filed at company headquarters at least fifteen days prior to the date set for the first call of the AGM. The shareholders who hold the right to appoint directors are those who, either individually or jointly with other shareholders, hold at least one fortieth of share capital or the lower percentage determined by law, and are required to prove the number of shares held not later than two working days prior to the first call of the AGM; the list must provide details of the identity of the shareholders who presented it and the relevant shareholding. Shareholders who, individually or jointly, in total represent less than 10% of voting share capital may only submit 3 candidates per list. Submitted lists that do not conform to the above terms are rejected. No shareholder may submit or jointly submit, either by means of a third party or trust company, more than one list; the shareholders that are subject to common control under article 2359 of the Italian Civil Code or those who take part in a syndicate vote may submit, or jointly submit, one list only. Each shareholder may vote for one list only. Each candidate may be included in only one list otherwise they will be considered ineligible. The declarations in which each candidate accepts the nomination and bears witness to the fact that there are no reasons why they should be considered ineligible or incompatible with the requirements of law and that they possess the requirements prescribed by law and the rules of the members of the board of directors, are filed with each list within the above-mentioned time limits together with a curriculum vitae detailing personal and professional characteristics and administration and control roles held in other companies and their ability to be considered an independent director in compliance with law or regulations. Any incomplete or incorrect information relating to individual candidates will result in cancellation of their names from the list to be voted on. In order to obtain the appointment of the candidates presented, the lists submitted and voted on must attain at least half the percentage of votes of those required by the article governing submission of the lists; where this is not achieved the related lists will not be taken into consideration. Election of the members of the board of directors proceeds as follows: a) The total number of directors to be appointed less one is selected based on the progressive order in which they are included in the list that received the highest number of votes in the AGM; b) The remaining director to be appointed is the first name on the list that obtained the second highest number of votes in the AGM, and that is not linked in any way, even indirectly, with the shareholders that submitted or voted for the list that obtained the highest number of votes, and he must possess the professional and reputation requisites prescribed by regulations in force. Where these requisites are not met the appointment will be annulled. In the event that only one list is submitted or put forward for voting, all of the directors will be chosen from this list. Where no lists are submitted or the number of directors appointed is less than the number required by the AGM, the AGM must be called again in order to appoint the full board of directors. Where, due to resignation or any other reason, the board is short of one or more directors, the provisions of article 2386 of the Italian Civil Code must be followed. With regard to the appointment of the board of statutory auditors, the provisions of law and regulations are applied. Minority shareholders may appoint one permanent auditor and one substitute auditor. In the event that there are equal votes between the minority shareholder lists, the oldest candidates for permanent auditor and substitute auditor will be appointed respectively. Shareholders who intend to submit a list of candidates must hold, at the time the lists are submitted, the minimum amount determined in accordance with article 147 ter of Legislative Decree 58 of 24 February At least one of the permanent auditors and one of the substitute auditors are chosen from the Regi- 40

42 stro dei Revisori Contabili (the Italian register of approved statutory auditors) who are required to have practiced as auditors for not less than three years. The statutory auditors who do not meet the above requirement are chosen from those who have gained experience for at least a consecutive three-year period in: - a managerial role in administration, finance and control in a listed company with a share capital of not less than Euro two million; - a professional role or as a university lecturer in law, economics and financial subjects that are closely related to the business of the company; - a managerial role in state entities or in public administration authorities that operate in the areas of credit, finance, insurance, property as well as in the energy, industrial, environmental, commercial and information technology sectors and that perform activities closely related to those carried out by the company in similar areas, either directly or through subsidiaries. These rules reflect the new regulatory requirements of Law 262/05 and Legislative Decree 303/06. Supervisory board In compliance with both article 6.1. paragraph b) of Legislative Decree 231/01 and the procedures required by the provisions of the above-mentioned legislation, following the resolution passed on 29 April 2008, the supervisory board was appointed and the current members are: Name Office Umberto Rosa Committee Chairman Roberto Bracchetti Gianni Fanizza (who replaced Gianluca Gemma from 1 January 2009) The supervisory board met 3 times in the course of The half-year report was presented to the board of directors meeting of 29 October 2008, while the annual report was reviewed in the meeting that took place on 12 March Internal control system As set out in the Code of Self Discipline, the company appointed an officer in charge of internal controls who does not report to any members of operations management but reports to the internal control committee, the board of statutory auditors and the directors responsible for this function. Gianluca Gemma was appointed to this role on 24 September 2007 through to 31 December The new internal controls officer will be appointed in the first half of 2009 as Gianluca Gemma has left the company. Investor Relator The company appointed Giorgio Botta as Investor Relator on 1 June Compliance Officer responsible for the preparation of company accounting information in compliance with Law 262/05 Carlo Magnani was appointed Compliance Officer responsible for the preparation of the company accounting information on 24 September 2007, in compliance with Law 262/ Board of statutory auditors The appointment of the board of statutory auditors takes place in compliance with codified and statutory regulations. The current board of statutory auditors term of office ends on the date of approval of the annual report for the year ended 31 December 2010 and comprises the following members: 41

43 Name Roberto Bracchetti Aldo Bisioli Nicola Vito Notarnicola Office Chairman Statutory auditor Statutory auditor Other appointments held by the above statutory auditors are listed in the table below: Roberto Bracchetti Chairman of the board Chairman of the board of statutory auditors of: of statutory auditors - Alsco Italia Srl - Borgo Antico Srl - Ecosesto SpA - Frullo Energia Ambiente SpA - Pirelli & C. Real Estate SpA - Pirelli & C. Ambiente SpA - Pirelli & C. Ambiente Site Remediation SpA - Prima Srl - RRL Immobiliare Srl - SIM SpA Statutory auditor of: - ABB SpA - Alstom SpA - Alstom Power Italia SpA - Coface Assicurazioni SpA - Coface Factoring Italia SpA - Coface Service SpA - Energia Italiana SpA - Energia Molise SpA - Iniziative Immobiliari Srl - Iniziative Retail Srl - La Rinascente SpA - Pirelli Tyre SpA - Sir. Tess SpA - Sorgenia SpA - Sorgenia Holding SpA Aldo Bisioli Statutory auditor Chairman of the board of statutory auditors of Veneto SpA. Statutory auditor of: - Finanziaria Immobiliare d Este Srl - Colorado Film Production Srl - Sugarmusic SpA - Ferriera Sider Scal SpA - Hydroservice SpA - Iven SpA - Marghera Portuale - Medacta Italia Srl - Plastotecnica SpA - Nine SpA Nicola Vito Notarnicola Statutory auditor Chairman of the board of statutory auditors of: - Findast SpA - PAV.I. Srl 42

44 5.3.3 Attachments The following tables are provided as attachments to this report: - membership of the board of directors and committees - board of statutory auditors - other provisions of the Code of Self Discipline Membership of the board of directors and committees Board of Directors Internal Remune- Non Independ- Attendance Other Control ration Office Member Executive Executive ent % appoint. N. Committee Committee Chairman Federico Falck X Deputy chairman Achille Colombo X Deputy chairman Paride De Masi X 72 Managing director Roberto Tellarini X 100 Director Bruno Isabella X X 72 X X Director Enrico Falck X X Director Giuseppe Gatti X X 86 4 X Director Ferruccio Marchi X Director Umberto Rosa X X X X Director Marco Agostini X 86 Number of meetings held Board of directors 7 Internal control committee 5 Remuneration committee 0 Board of statutory auditors Office Member % attendance Other appointments no. Chairman Roberto Bracchetti Statutory auditor Aldo Bisioli Statutory auditor Nicola Vito Notarnicola Number of meetings held 6 Quorum required for minority shareholders to submit nomination lists 1/40 of share capital 43

45 Other provisions of the Code of Self Discipline YES NO Reason for departing from recommendation Delegation procedure and related party transactions The board of directors (BOD) has assigned powers establishing: a) limits X b) method of operating X c) timing of reporting X It is practice to provide information during every board meeting The BOD has maintained the task of examining and approving significant economic and financial transactions (including related party transactions)? X The BOD has defined guidelines and criteria for identifying significant transactions? X Powers are already assigned with limits The guidelines and criteria are detailed in the attached report? X The BOD has defined specific procedures to examine and approve related party transactions? X The approval procedure for related party transactions is set out in the attached report? X Procedures applied for the most recent appointment of directors and statutory auditors The nomination for the role of director was deposited at least 10 days prior to the meeting? X Nomination to the role of director included sufficient information? X Nomination to the role of director included documentation supporting the independence of the candidates? X Presentation of the nominees for the office of statutory auditor took place at least 10 days prior to the meeting? X Nomination to office of statutory auditor included the relevant supporting information? X Shareholders' meetings The company approved the procedural rules regarding shareholders' meetings? X These were adopted in the shareholders' meeting of 27 April 2005 and modified on 21 June 2007 The nominees operate independently of department heads? X Is there a department assigned to internal controls? X Investor relator The company has nominated an investor relator (IR)? X Investor relations department and references of IR. X Giorgio Botta Sesto San Giovanni, Via Alberto Falck 4/16 tel fax

46 6 Consolidated financial statements for the year ended 31 December 2008

47

48 6.1 Consolidated balance sheet Note of which of which (Euro thousands) related parties related parties Assets A Non-current assets 1 Intangible assets (1) 69,698 68,752 2 Property, plant and equipment (2) 221, ,403 3 Financial assets (3) Medium/long-term financial receivables (4) 2, Deferred income tax assets (7) 10,470 9,152 6 Other receivables (6) Total 305, ,228 B Current assets 1 Inventories (8) 5,588 4,630 2 Trade receivables (5) 27, ,602 10,347 3 Other receivables (6) 11, , Financial assets (4) 178, ,288 7, Investments 6 Cash and cash equivalents (9) 21, ,943 Total 243, ,983 C Non-current assets held for sale Total assets 548, ,211 Liabilities D Equity 1 Ordinary shares 67,680 67,680 2 Reserves 251, ,733 3 Retained earnings 13,086 8,094 4 Profit for the year 17,927 13,766 Capital and reserves attributable to group equity holders (10) 350, ,273 5 Minority interest in equity 4,976 4,055 Total equity (10) 354, ,328 E Non-current liabilities 1 Medium/long-term financial liabilities (13) 76,745 89,790 2 Other non-current liabilities (15) Deferred income tax liabilities 4 Provisions for other liabilities and charges (11) 813 2,483 5 Staff leaving indemnity (12) 2,130 2,089 Total 80,084 94,667 F Current liabilities 1 Trade payables (14) 46,598 5,330 50,362 4,774 2 Other payables (15) 41,199 26,992 36,415 25,564 3 Short-term financial liabilities (13) 25,892 1,691 24,439 1,648 4 Provisions for other liabilities and charges Total 113, ,216 G Liabilities attributable to non-current assets held for sale Total liabilities 548, ,211 Related party transactions are detailed on page

49 6.2 Consolidated income statement Note of which of which (Euro thousands) related parties related parties A Revenue (16) 97, , Direct labour costs (17) (6,036) (6,128) Direct costs (18) (50,686) (49,487) B Cost of sales (56,722) (55,615) C Gross profit 40,977 35,010 Other income (19) 5, , Other employee costs (17) (4,083) (4,185) Administrative expenses (20) (9,503) 3,051 (9,582) (2,872) D Operating profit 32,937 25,507 Finance costs - net (21) (363) 6,523 2,531 6,013 Investment costs (22) (10) E Profit before income tax 32,564 28,038 Income tax expense (23) (13,102) (13,111) F Profit for the year 19,462 14,927 G Profit attributable to minority interest (1,535) (1,161) H Profit attributable to group equity holders 17,927 13,766 There were no non-recurring income or costs in Related party transactions are detailed on page

50 6.3 Consolidated cash flow statement Note of which of which (Euro thousands) related parties related parties Cash flows from operating activities Profit for the year 19,462 14,927 Adjusted for: Amortisation and impairment of intangible assets Depreciation and impairment of property, plant and equipment 14,059 13,865 Staff leaving indemnity provision Fair value of financial assets Finance income (9,878) (6,082) (8,234) (5,675) Finance costs 10, , Dividends received Share of profit of investments carried at equity Gain on sale of intangibles Profit on disposal of property, plant and equipment Profit on sale of investments Other changes 45 Income tax expense (income statement) 13,102 13,111 Operating profit before changes in net working capital and provisions 47,944 42,383 (5,582) Change in inventories (957) 284 Change in trade receivables 842 7,682 Change in trade payables (3,763) (3,239) Change in other receivables/payables (5,279) (11,873) Net change in provisions (1,669) (638) Change in employee payables - staff leaving indemnity paid during year (425) (289) Cash generated from operating activities 36,693 34,310 Interest paid (9,263) (130) (6,724) (93) Tax paid (6,019) (6,507) Net cash generated from operating activities (1) 21,411 21,079 (93) Cash flows from investing activities Dividends received Proceeds from sale of property, plant and equipment 3, Proceeds from sale of intangible assets Proceeds from investment activities Purchases of intangible assets (1,436) (872) Purchases of property, plant and equipment (16,125) (28,843) Acquisition of investments (7) (15) Sale of investments 34 Change in scope of consolidation 15 Interest received 11,493 6,082 7,417 5,675 Net cash used in investing activities (2) (2,508) (22,265) Cash flows from financing activities Dividends paid (11,252) (7,732) (6,769) (4,651) Proceeds from issue of ordinary share capital increase and capital contribution Proceeds from borrowings 1,283 Loans granted (172,288) (1,043) New borrowings ,995 Repayments of borrowings (16,534) (55,511) Net cash (used in) financing activities (3) (197,835) (13,109) Net decrease in cash and cash equivalents and bank overdrafts(1+2+3) (178,932) (14,295) Cash and cash equivalents and bank overdrafts at 1 January 199, ,258 Cash and cash equivalents and bank overdrafts at 31 December (9) 21,031 (653) 199,963 49

51 6.4 Consolidated statement of changes in equity (Euro thousands) Share Reserves Profit Capital and Minority Total capital for the year reserves interest equity attributable to in equity group equity holders At , ,050 12, ,486 4, ,511 Appropriation of 2006 profit 5,988 (12,756) (6,768) (6,768) Dividends (1,148) (1,148) Other movements (211) (211) 17 (194) Profit for the year to 31 December ,766 13,766 1,161 14,927 At , ,827 13, ,273 4, ,328 Appropriation of 2007 profit 3,614 (3,614) Dividends (10,152) (10,152) (1,100) (11,252) Other movements (30) (30) Profit for the year to 31 December ,927 17,927 1,535 19,462 At , ,411 17, ,018 4, ,994 50

52 6.5 Notes to the consolidated financial statements Basis of preparation of the consolidated financial statements The consolidated financial statements for the year ended 31 December 2008 have been prepared in accordance with International Financial Reporting Standards (International Accounting Standards - IAS and International Financial Reporting Standards - IFRS), and the relevant interpretations (Standing Interpretations Committee SIC and International Financial Reporting Interpretations Committee IFRIC). The financial statements used for consolidation purposes are those presented by the board of directors for approval at the shareholders meetings of each company, reclassified and adjusted in line with International Financial Reporting Standards (IAS/IFRS) and group policy. IFRS7 Financial instruments: Disclosures has been applied from This did not give rise to changes in the valuation of the financial statements but rather on the disclosures as the standard requires extensive disclosures on the nature and management of credit, liquidity and market risks. With regard to the layout of the consolidated financial statements, the company has opted to present the following accounting statements:. Consolidated balance sheet The consolidated balance sheet is presented in sections with separate disclosure of assets and liabilities and equity. Assets and liabilities are classified in the consolidated financial statements as either current or non-current.. Consolidated income statement The consolidated income statement presents costs by function, also using the variable element of cost as a distinguishing factor. For a better understanding of the normal results of ordinary operating, financial and tax management activities, the income statement presents the following intermediate consolidated results: - gross profit; - operating profit; - profit before income tax; - profit for the period; - profit attributable to minority interest; - profit attributable to group equity holders. No segmental reporting has been presented as the information used by management to evaluate operating results and for decision-making purposes in the individual business units coincides with the economic and financial information of each legal entity.. Consolidated cash flow statement The consolidated cash flow statement presents an analysis by areas that generate cash flows as required by International Financial Reporting Standards.. Consolidated statement of changes in equity The consolidated statement of changes in equity is presented as required by International Financial Reporting Standards with separate disclosure of the profit for the period and each item of revenue, income, cost and expense not recorded in the income statement but charged directly to consolidated equity based on specific IAS/IFRS requirements Consolidated entities The Actelios group consists of 14 companies, of which 11 are consolidated on a line-by-line basis and 3 are consolidated applying the proportional method. Details of the companies included in the scope of consolidation at 31 December 2008 are disclosed in the supplementary information (paragraph 9.1). The consolidated financial statements include the financial statements of the parent company Actelios SpA and all of the entities in which the former holds, either directly or indirectly, majority voting rights. 51

53 6.5.3 Change in the scope of consolidation Companies consolidated on a line-by-line basis this year also include: - Abbiategrasso Bioenergia Srl 58.7% owned by Actagri Srl - Actagri Srl 100% owned by Actelios SpA - Actelios Solar SpA 100% owned by Actelios SpA - Solar Rende Srl 100% owned by Ecosesto SpA Actelios Solar SpA, previously named Immobiliare Samanta Srl, was valued at cost in the prior year financial statements. Following the merger with Frullo Energia Ambiente Srl, Ambiente 3000 Srl is no longer included in investments consolidated applying the proportional method. In addition to Immobiliare Samanta Srl, Termini Imerese Energia Ambiente Srl is no longer included in companies valued at cost following its disposal in Principles of consolidation The companies included within the scope of consolidation applying the line-by-line method are those controlled by the parent company also through indirect holdings. The companies on which the parent company exercises control together with other third parties are consolidated applying the proportional method. Associated companies are accounted for under the equity method. The financial statements of the companies included within the scope of consolidation have been adjusted, where necessary, to bring them into line with group accounting policies that conform to IAS/IFRS. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which the parent company gains control and up to the date on which this control ceases. All significant intercompany balances and transactions are eliminated. Profits arising on transactions between consolidated entities, or with companies accounted for under the equity method, which are included within assets at the year-end as they are not yet realised, are eliminated if significant. The book value of consolidated investments is eliminated against the related share of equity inclusive of any fair value adjustments on acquisition. The resulting difference is treated as goodwill and is accounted for in accordance with IFRS 3. The minority interests in net equity and profit for the period of consolidated entities are disclosed under separate headings in the consolidated balance sheet and income statement. Differences between acquisition cost and net equity at current fair values at the acquisition date are, where possible, allocated to specific assets and liabilities of the acquired company. In the event that the residual difference relates to a higher purchase price paid for goodwill this is recorded within intangible assets and subjected to an impairment test on an annual basis. Where the remaining difference is negative the amount is charged against equity. The ownership percentage used for companies consolidated either line-by-line or proportionally is the statutory amount considering also indirect holdings. Dividends received by the parent company or other consolidated companies from investments included within the scope of consolidation are reversed in the consolidated income statement Accounting policies The valuation and measurement of the financial information for the year ended 31 December 2008 have been based on the IAS/IFRS currently in force and the related interpretations as set out in the documents issued to date by the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC). The consolidated financial statements are prepared in Euro and all values are rounded to thousands of Euro except where otherwise indicated. The consolidated financial statements are prepared under the historical cost convention, with the exception of derivative instruments and available-for-sale financial assets, which are measured at market value (fair value). Non-current assets and tangible fixed assets held for sale are recorded at the lower of net book value and market value. Preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates, valuations and assumptions based on historical results and experience that could influence the accounting value of a number of assets and liabilities, costs and revenues and disclosures relating to contingent assets and liabilities at the date of the financial 52

54 statements. Estimates and assumptions principally relate to the realisable value of intangible assets, the definition of the useful life of property, plant and equipment, the recoverability of receivables, the recognition and/or valuation of provisions and the valuation of receivable balances arising on the sale of electrical energy. These estimates and assumptions are reviewed periodically and, in particular, at the end of each financial period. The accounting policies detailed below were applied to the current financial year and comparative amounts for the prior year. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Financial Reporting Standards Board, based on the documents published in the European Community s Official Gazette (ECOG). The following International Financial Reporting Standards and interpretations that had already been published in the ECOG have been applied from 2008, with no impact on the Actelios group financial statements: IFRIC 11 Group and treasury share transactions that provides guidance on the principles of IFRS 2 on share-based payments; regulation 1004/2008 that partially modifies the provisions of IAS 39 and IFRS 7. The latter amendment allows, where requisites are met, reclassification of certain balance sheet assets, excluding derivatives, from financial assets held for trading at fair value through profit or loss, to available for sale financial assets with changes in fair value through equity or, where these relate to loans and receivables held until maturity, they are reclassified in receivables valued at cost (nominal rate or effective interest rate). The group has not opted to apply this regulation. The following International Financial Reporting Standards and interpretations, published in the ECOG before January 2009, will be adopted in The company is currently determining the related impact on the group financial statements. More specifically: The amendment to IFRS 2 Share-based payments, prescribes changes to vesting conditions and their cancellation; IFRS 8 Operating segments will replace IAS 14 Segment reporting. Compared to the current standard it widens disclosures to include an analysis of products offered and services provided and principal customers; IAS 23 that eliminates the alternative treatment in relation to capitalisation of borrowing costs (applied by Actelios). Consequently, it is obligatory to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset where it takes a substantial period of time to get ready for its intended use or sale; IAS 1, which requires the disclosure of additional information in the income statement with regard to the statement of comprehensive income of the group and other third parties. Comprehensive income includes, among other headings, the change in the cash flow hedge reserve, the change in the translation reserve and the changes in available-for-sale financial assets. Until now changes in these elements were disclosed in the note to the changes in equity reserves in which they were classified; Small amendments to a series of international accounting standards as part of the project to harmonise IFRS with accounting principles in certain countries not included within the European Union, in particular the US. These changes (Improvements to IFRS 2007) may be adopted between 2009 and The principal accounting policies and valuation methods adopted in the preparation of these consolidated financial statements are set out below: Intangible assets An intangible asset is recorded only when it is identifiable, controllable, is expected to generate economic benefits in future periods and the cost may be reliably measured. Intangible assets are recorded at cost including directly attributable expenses and are amortised systematically over their estimated useful economic life. Intangible assets with a finite useful life are classified at cost net of accumulated amortisation and any permanent losses in value. Amortisation is based on the estimated useful life and commences when the asset is available for use. Intangible assets with an indefinite useful life and those not available for use are tested for impairment. This test consists in a comparison between the future estimated cash flows from the intangible asset and the net book value. The method of discounted operating cash flows is applied based on projections included in future business plans approved by company management. Costs relating to the acquisition of CIP 6/92 rights are amortised over the related benefit period. Goodwill principally relates to the differences arising on first-time consolidation between the book value of the investments and the corresponding share of equity of the consolidated companies, adjusted in order to take into consideration both significant intercompany transactions and the fair values of the identifiable assets and liabilities of the acquired company. Goodwill that did not originate from consolidation differences relates to the purchase price paid by Frullo Energia Ambiente Srl following acquisition of a business. Goodwill is subjected to an impairment test, at least on an annual basis, in order to identify permanent reductions in value. In order to perform the impairment test correctly, goodwill has been allocated to each of the cash generating units (CGU) that benefit from the acquisition. 53

55 The CGU s identified within the Actelios group are the various cash-flow generating projects: Trezzo, Rende, Frullo, Tifeo, Platani and Palermo. The remaining intangibles comprise costs relating to the automation and mechanisation of a number of information systems. Property, plant and equipment Property, plant and equipment is recorded at acquisition or production cost including directly attributable costs. Property, plant and equipment is valued at cost, net of depreciation and accumulated permanent losses in value, with the exception of land, which is not depreciated and is valued at cost less accumulated losses in value. In the event that significant components of an item of property, plant and equipment have differing useful lives, each component is attributed a separate useful life for depreciation purposes (component approach). The depreciation rates applied represent the estimated useful life of the assets. The rates applied to the various asset categories are as follows: (%) Industrial buildings lightweight construction General and specific plant Heavy plant and operating machinery 9-10 Equipment Office machinery and equipment Vehicles These rates are applied based on months of actual use with regard to assets that come into use during the year. Ordinary maintenance costs are charged to expenses in the year in which they are incurred. Maintenance costs that increase the future economic benefits derived from the assets are capitalised on the related asset and depreciated over the asset s residual useful life. Borrowing costs for the construction of a plant or its acquisition are capitalised up until the moment in which the asset is ready for use in the production process. Impairment of assets In the presence of circumstances that potentially indicate a loss in value, impairment tests are conducted on tangible and intangible assets, by estimating the recoverable amount of the asset and comparing it with the related net book value. In the event that the recoverable value is lower than the carrying value an impairment loss is recorded in the income statement. Where there is an indication that an impairment loss recognised in a previous accounting period is no longer required, the carrying value is restated to the new estimated recoverable value which may not exceed the carrying value that would have been recognised had the original impairment not occurred. The reversal is also recorded in the income statement. Investments and securities Investments in subsidiaries and associates Investments in subsidiaries excluded from the scope of consolidation are valued at cost when the effect of their consolidation would not have a significant impact on the consolidated financial position and on the consolidated profit for the period. Investments in associates in which the Actelios group holds more than 20% (or 10% if listed) are valued applying the equity method. Investments in other companies and other securities In accordance with IAS 39 and 32, investments in companies that are neither subsidiaries nor associates are measured at fair value through profit or loss with the exception of those circumstances in which market price or fair value cannot be determined, in which case the cost method is applied. Gains and losses arising on adjustments to value are recognised as a specific reserve within equity. Where impairment losses in value exist or in the event of disposal of the related asset, the gains and losses recorded in equity up until this point are charged to the income statement. Investments held for sale are measured at fair value with any adjustment recognised in the income statement. Cost is reduced for any impairment losses in the event that investments have recorded losses and no profits are foreseeable in the near future to cover these losses; the original value may be restated in subsequent accounting periods in the event that the circumstances that gave rise to the write-down no longer exist. Joint ventures Holdings in joint ventures are consolidated applying the proportional method whereby the consolidated financial statements reflect line-by-line the relevant share of the assets, liabilities, profits and losses of the entity in which the company has invested. 54

56 Financial assets Classification In accordance with IAS 39 and IAS 32, financial assets are classified into the following four categories: 1. Financial assets at fair value through profit or loss ; 2. Held-to-maturity investments; 3. Loans and receivables; 4. Available-for-sale financial assets. The classification depends on the reason for which the investment was initially purchased and is subsequently held and management is required to determine the initial classification on initial recognition updating this at each financial year end. A description of the principal characteristics of each asset category detailed above may be summarised as follows: Financial assets at fair value through profit or loss This category has two sub-categories: 1. Financial assets held for trading; 2. Financial assets designated to the fair value category on initial recognition. This category includes all financial investments, except for equity instruments that are not quoted in an active market but for which a fair value may be reliably measured. Financial instruments, with the exception of hedge instruments, are included in this category and their fair value recorded in the income statement. All assets within this category are classified as current if they are held for trading purposes or where disposal is expected within 12 months from the year end. Designation of a financial instrument to this category is irrevocable and may take place only on initial recognition. Held-to-maturity investments Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity, which the group intends to hold to maturity (e.g. underwritten debentures). Evaluation of the intent and ability to hold the asset to maturity must be made on initial recognition and at each subsequent balance sheet date. In the event of sale before maturity (of a significant amount and not in exceptional circumstances) of held-to-maturity securities, all such investments are reclassified as financial assets held for trading and measured at fair value. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market and which the group does not intend to trade in. These are included in current assets with the exception of the portion expiring more than 12 months after the balance sheet date, which is classified in non-current assets. Loans and receivables are classified within the financial statements under the headings financial receivables and other receivables. Available-for-sale financial assets All non-derivative instruments that are not classified in another category are designated as available-for-sale financial assets. These are classified as non-current assets unless management intends to dispose of them within 12 months of the balance sheet date. Accounting treatment Financial assets at fair value through profit or loss held for trading (category 1) and available-for-sale financial assets (category 4) are recorded at fair value including costs directly attributable to acquisition. Gains or losses relating to financial assets held for trading are recognised immediately in the income statement. Gains or losses relating to financial assets available for sale are recorded within a separate heading in equity until they are sold or otherwise disposed of, or until circumstances indicate they may be impaired. Where any of these events takes place, all gains or losses recognised to date and recorded in equity are reclassified to the income statement. Fair value represents the amount at which an asset may be exchanged or a liability settled in an arm s length transaction between knowledgeable, willing parties. As a result it is assumed that the entity is a going concern and that neither party needs to liquidate its assets through transactions applying unfavourable terms. In the case of securities traded on an active market, fair value is determined with reference to the bid price at the end of trading at the balance sheet date. In the event that a market valuation is not available for the investment, fair value is determined either based on the current mar- 55

57 ket value of another substantially similar financial instrument or applying appropriate valuation techniques (discounted cash flows - DCF). Where fair value may not be reliably determined, the financial asset is valued at cost with disclosure in the notes to the financial statements regarding the type of asset and explanation of the accounting treatment. Held-to-maturity investments (category 2) and loans and receivables (category 3) are recorded at cost representing the fair value of the initial consideration exchanged and are subsequently valued applying the amortised cost method utilising the effective interest rate and taking into consideration any discounts or premiums received at the date of acquisition in order to record them over the entire period of ownership up to maturity. Gains and losses are recognised in the income statement either when the investment reaches maturity or where circumstances indicate that it has suffered an impairment loss, in the same way they are identified during the normal amortisation period foreseen by the amortised cost method. Investments in financial assets may be derecognised only when the contractual rights to receive cash flows from the investments have expired (e.g. final payment of underwritten bonds) or when the group transfers the financial asset together with all of the related risks and rewards. Inventories Finished goods are stated at the lower of purchase cost and net realisable value. Purchase cost is determined using the weighted average cost method. Obsolete and slow moving inventory is valued based on possible future use or realisation. With regard to contract work in progress that spans more than one accounting period, valuation is based on income earned to date with reasonable certainty, determined by comparing actual costs to date with the total estimated costs to completion. Receivables Receivables are initially recorded at the fair value of the amount to be received, which for this category normally relates to the nominal value indicated on the invoice, adjusted where necessary to the estimated recoverable amount through recognition of a provision for doubtful accounts. Subsequently, where the required conditions exist, receivables are valued applying the amortised cost method. Cash and cash equivalents Cash and cash equivalents include cash on hand and short term bank balances. Non-current assets disposed of or held for sale Non-current assets that have been disposed of or that are held for sale include those assets (or groups of assets) due to be disposed of and for which the accounting value will be recovered principally through sale rather than future use. Non-current assets held for sale are valued at the lower of their carrying amount and fair value less costs to sell. In accordance with IFRS, information relating to discontinued operations is presented in two specific headings in the balance sheet: non-current assets held for sale and liabilities attributable to non-current assets held for sale; and in a specific heading in the income statement: net profit/(loss) of discontinued operations or non-current assets held for sale. Provisions Provisions are recognised when a present obligation (legal or constructive) exists as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount may be made. No provision is made for risks in relation to which the recognition of a liability is only possible. In this case the risk is disclosed in the relevant note on contingencies and commitments and no provision is made. Provisions may be analysed as follows: Litigation This provision includes the charge for future costs relating to legal proceedings. Investments Provision is made to recognise potential permanent losses in the carrying value of non-consolidated subsidiaries. Environmental This provision is set up to meet future requirements in relation to the redevelopment of landfills in accordance with the obligations undertaken on receipt of authorisations from the relevant authorities. The provision is based on estimates prepared by specialist enterprises. 56

58 Sundry provisions This provision includes all other future liabilities not included above, which are reasonably quantifiable but for which the date of occurrence is uncertain. Staff leaving indemnity (TFR) Post employment defined benefits and other long-term employee benefits are subjected to actuarial valuation. The liability recognised in the balance sheet is the present value of the group s obligations. Actuarial gains and losses are recognised in the income statement. Valuation of the liability is performed by independent actuaries. Pursuant to the Finance Act 296 of 27 December 2006, only the liability relating to the TFR held within the company has been valued for the purpose of IAS 19 as future provisions are paid to a separate entity. Consequently, in respect of future payments the company is not subject to the reporting requirements relating to the future benefits payable during employment. Trade payables Trade payables with normal trading terms are recorded at nominal value. Borrowings and financial liabilities Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are stated at amortised cost. Finance costs are determined using the effective interest method. Other financial liabilities comprise derivative instruments entered into in order to hedge interest rate risk. The derivative instruments are not accounted for using hedge accounting and in accordance with IAS 39 are recognised at fair value through profit or loss. The company adopted IAS 39 from 1 January Current tax liabilities The provision for income taxes is based on the estimated taxable income for the period for each individual company, taking into consideration tax credits and losses brought forward and utilised in the period. Accruals, prepayments and deferrals Accruals, prepayments and deferrals are determined applying the accruals concept. Share capital Ordinary shares are classified within share capital at nominal value. Incremental costs directly attributable to capital transactions by the parent company are recorded as a deduction in equity. Foreign currency translation The functional currency of the group is the Euro and is the currency in which the consolidated financial statements are prepared and presented. Foreign currency transactions are recorded at the exchange rate existing at the date of the transaction. Receivables and payables are translated at the closing rate at the balance sheet date. Exchange gains or losses arising on translation are recognised in the income statement in the period in which they arise. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction. Non-monetary items measured at fair value are translated using the exchange rate at the date when the fair value was determined. Revenue recognition Revenue is recorded net of returns, discounts and rebates, as well as direct taxes on the sale of goods or provision of services. Revenue from product sales Revenue from the sale of products is recognised on the transfer of ownership, which normally takes place on delivery or despatch of the goods. Revenue from services Revenue from services is recognised once the service has been rendered. Interest Finance income is accounted for applying the accruals concept. Dividends Dividends are recognised when the right to receipt of the dividend is established, which normally corresponds with the approval of distribution in the shareholders meeting. 57

59 Other income Other income comprises amounts that do not relate to the core business of the group and, in accordance with IAS 1 which has been applied from 1 January 2005, they are classified in ordinary activities and where significant in value are disclosed separately in the notes to the financial statements. Costs Costs are recognised net of returns, discounts, bonuses and premiums, as well as direct taxes relating to the purchase of goods and services. Taxation including deferred income tax Income tax is calculated and provided for based on estimated taxable income for the year and applying existing tax legislation. Deferred income taxes are calculated applying the liability method on all temporary differences between the tax bases of assets and liabilities and the financial reporting values at the balance sheet date. Deferred income tax assets are recognised only when sufficient future taxable income, against which these assets can be utilised is reasonably foreseeable. The balance of deferred income tax assets is reviewed at each balance sheet date and a valuation allowance is provided in the event that it is no longer probable that sufficient future taxable profits will be available to offset all or part of the tax credit. Deferred income tax assets and liabilities are measured at the enacted tax rates that will be in effect in the periods in which the assets are realised or the liability is settled and are classified in non-current assets and liabilities, respectively Financial risk management: objectives and criteria The financial instruments of the group, other than derivatives, comprise bank borrowings, demand and short-term bank deposits. Similar instruments are employed in financing the group operating activities. The group uses derivative financial instruments, principally interest rate swaps. The group s aim is to manage interest rate risk on the group s transactions and various forms of financing. The group s debt financing expose it to a variety of financial risks that include interest rate, liquidity and credit risk. Interest rate risk The group s exposure to market risk in respect of variations in interest rates principally relates to the long-term obligations entered into by the group using a mix of fixed and variable interest rates. In order to manage this mix effectively, the group purchases interest rate swaps under which it agrees to exchange, at specific levels, the difference between fixed interest rates and variable rates calculated on a pre-determined notional capital amount. The swaps are designated to hedge the underlying obligations. Credit risk The group only trades with reliable and reputable customers. Credit risk relates to the other financial activities of the group that include cash and cash equivalents, available-for-sale financial assets and a number of derivative instruments, and present a maximum risk equal to the book value of these assets. Liquidity risk The objective of the group is to achieve a balance between maintaining available funds and flexibility through the use of loans and bank overdrafts. 58

60 6.5.7 Balance sheet content and movements Assets Non-current assets 1 Intangible assets Movements during the year were as follows: At Acquisitions Capital.n Change in Disposals Other Impair- Amorti- At and reclass.n scope of move- ment sation (Euro thousands) consol.n ments losses 1.1 Industrial patent rights (20) Concessions, licences, trademarks and similar 1,149 (13) (470) Goodwill 66,719 66, Other intangibles 1.5 Assets under construction and advances 832 1,433 2,265 Total 68,752 1,436 (490) 69,698 Goodwill principally consists of the differences arising on first time consolidation between the book value of the investments and the corresponding share of net equity of the consolidated companies that is attributable to the group. In addition, this heading includes the purchased goodwill arising on the acquisition of a business line by Frullo Energia Ambiente Srl (Euro 1,519 thousand). Since 1 January 2005, goodwill has not been amortised but is subjected to an annual impairment test. The goodwill resulting from business combinations has been allocated to separate cash generating units (CGU) in order to identify any reduction in value. The cash generating units identified are: - Prima Srl (WTE plant in Trezzo sull Adda) - Frullo Energia Ambiente Srl (WTE plant in Granarolo dell Emilia) - Platani Energia Ambiente ScpA (WTE plant in Casteltermini) - Tifeo Energia Ambiente ScpA (WTE plant in Augusta) - Palermo Energia Ambiente ScpA (WTE plant in Bellolampo) An impairment test on goodwill was performed at 31 December 2008 following the procedures required by IAS 36. In particular, the recoverable amount of the individual cash generating units was determined based on value in use, which is calculated using the projection of cash flows over a period of time corresponding to the estimated useful life of each individual project and a weighted average cost of capital (WACC) of 7.2% for the Sicily projects and 7.5% for all other projects. This test fully supported the goodwill values recorded in the financial statements and as a result no impairment loss was recognised. In light of the new bid for tenders detailed above and in line with the various hypotheses that may arise based on the alternatives available under the agreement with ARRA, the company estimated the impact on the amounts in the financial statements, in particular the goodwill recognised in non-current assets. Moreover, in line with prior years and assuming that the Sicily projects continue, an impairment test in accordance with IAS 36 was performed. The results of the above analyses confirmed, both in the event that the contract is terminated and damages awarded and that the project continues, full recovery of the book values comprising goodwill; considering the other hypotheses to be less probable, no impairment loss was recognised. 59

61 Goodwill at 31 December 2008 comprised: (Euro thousands) Carrying value Frullo Energia Ambiente Srl 1,519 Platani Energia Ambiente ScpA 16,095 Prima Srl 15,252 Palermo Energia Ambiente ScpA 651 Tifeo Energia Ambiente ScpA 33,202 Total 66,719 Acquisitions largely relates to expenditure on the biomass plant projects of Powercrop SpA (Euro 717 thousand) and the project to develop the third line of the WTE plant in Granarolo dell Emilia (Euro 637 thousand). 2 Property, plant and equipment Movements during the year were as follows: At Additions Capital.n Change in Disposals Impair- Deprec- At and scope of ment iation reclass.n consol.n losses (Euro thousands) (A) Gross value 2.1 Land 15,037 3, (10) 18, Buildings 6, (27) 6, Plant and machinery 99,579 2,502 (398) 101, Industrial and office equipment Other assets 1, (6) 1, Assets operated under concession 94, (2,704) 92, Assets under construction and adv. 68,013 9,383 (533) 76,863 Total gross value 285,697 15,634 (3,118) 298,213 Accumulated depreciation 2.1 Land 2.2 Buildings (3,852) (102) (3,954) 2.3 Plant and machinery (30,293) 84 (8,587) (38,796) 2.4 Industrial and office equipment (332) (88) (420) 2.5 Other assets (1,459) 6 (94) (1,547) 2.6 Assets under construction and adv. (26,358) (5,188) (31,546) Total depreciation (62,294) 90 (14,059) (76,263) Net book amounts 2.1 Land 15,037 3, (10) 18, Buildings 2, (27) (102) 2, Plant and machinery 69,286 2,502 (314) (8,587) 62, Industrial and office equipment (88) Other assets (94) Assets operated under concession 68, (2,704) (5,188) 60, Assets under construction and adv. 68,013 9,383 (533) 76,863 Total net book amounts 223,403 15,634 (3,028) (14,059) 221,950 60

62 A) Additions - These comprise: (Euro thousands) Waste to Energy project in Augusta 3,479 Land in Russi 3,331 Improvements to Waste to Energy plant in Granarolo dell'emilia 2,541 Waste to Energy project in Casteltermini 2,502 Waste to Energy project in Palermo 1,299 Photovoltaic plant in Mesagne 1,230 Improvements to Waste to Energy plant in Trezzo sull'adda 1,060 Other 192 Total 15,634 Disposals principally relate to the adjustment of Euro 2,705 thousand on the WTE plant in Trezzo sull Adda following finalisation of the arbitration award issued on 22 December Finance costs allocated during the year to property, plant and equipment amounted to Euro 397 thousand and relate to third party shareholders loans on the plants under construction in Sicily. Property, plant and equipment at 31 December 2008 does not include amounts relating to revaluations carried out in accordance with local monetary revaluation legislation or arising from economic revaluations. 3 Financial assets Financial assets at 31 December 2008 may be analysed as follows: (Euro thousands) Change Investments in subsidiaries 15 (15) Investments in associates 34 (34) Investments in other entities Securities Total (42) Equity investments Subsidiaries valued at cost The change compared to 2007 relates to the investment acquired on 22 December 2007 in Immobiliare Samanta Srl that changed its name to Actelios Solar SpA and commencing with the 2008 financial statements has been consolidated applying the line-by-line method. Associates valued at cost (Euro thousands) Change Termini Imerese Energia Ambiente Srl 34 (34) Total 34 (34) The decrease is due to the disposal of this investment. Other entities valued at cost The only investment included in this heading is Riesfactoring SpA, the value of which increased by Euro 7 thousand following the shareholders capital contribution made on 31 December

63 4 Financial receivables Financial receivables at 31 December 2008 may be analysed as follows: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts owed by third parties 8,102 2,099 6,003 7, , ,858 (1,283) Amounts owed by subsidiaries Amounts owed by associates Amounts owed by parent company 172, , , ,266 Amounts owed by other group companies Derivative financial instruments Total 180,390 2, ,291 7, , ,841 1, ,983 The amounts owed by the parent company are due from Falck SpA, which exercises managerial and coordination activities on behalf of Actelios SpA. In respect of these activities an agreement was signed with the purpose of optimising and rationalising the financial management of Actelios SpA and Falck SpA within the Falck group, while maintaining the autonomy and managerial independence of Actelios SpA. This agreement covers the non working capital liquidity management of Actelios SpA, with Falck SpA undertaking to repay the liquidity required for the Actelios group s capital expenditure, in whole or in part and in line with the notice periods established in the agreement. Actelios SpA s liquidity is invested with Falck SpA and is interest bearing at current market rates represented by Euribor +spread. The agreement is annual and is automatically renewed in the event that it is not cancelled by one of the parties in which case there is a two month notice period. 5 Trade receivables Trade receivables at 31 December 2008 consisted of the following: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Trade receivables 27,579 27,579 28,510 28,510 (931) (931) Amounts owed by subsidiaries Amounts owed by associates Amounts owed by parent company Amounts owed by other group companies (26) (26) Total 27,759 27,759 28,602 28,602 (843) (843) An analysis of trade receivables by geographical area is not considered necessary as almost all customers are located in Italy. Trade receivables are disclosed net of the provision for doubtful accounts of Euro 702 thousand at 31 December 2008, recorded in order to adjust them to fair value. 62

64 6 Other receivables Other receivables at 31 December 2008 consisted of the following: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts owed by third parties , ,207 (792) 173 (965) Amounts owed by subsidiaries Amounts owed by associates Amounts owed by parent company Amounts owed by other group companies Advances (63) (63) Tax credits 7,553 7,553 6,072 6,072 1,481 1,481 Guarantee deposits Accrued income and prepayments 2,815 2,815 1,894 1, Total 11, ,060 10, ,500 1, ,560 The amounts owed by third parties have decreased following the insurance repayment received in relation to damages suffered at the plant in Trezzo sull Adda (Euro 1,049 thousand). Amounts owed by the parent company relate to group VAT due from Falck SpA. Current tax credits relate to VAT due to Palermo Energia Ambiente ScpA (Euro 687 thousand), Platani Energia Ambiente ScpA (Euro 1,986 thousand) and Tifeo Energia Ambiente ScpA (Euro 3,022 thousand), while the balance relates to recoverable IRAP (trade income tax). Accrued income and prepayments at the year-end amounted to Euro 2,815 thousand and largely relate to the one off advance on the ground lease for the land to be used by Tifeo Energia Ambiente ScpA for the construction of the WTE plant, maintenance prepayments and deferred charges on expenses relating to guarantees, insurance and royalties payable. 7 Deferred income tax assets Deferred income tax assets may be analysed as follows: Temporary Deferred income Temporary Deferred income (Euro thousands) difference tax asset difference tax asset Intangible assets 9,807 3,115 6,599 2,072 Property, plant and equipment 11,630 3,732 9,263 3,022 Risk and expenses provisions 1, , Provision for doubtful accounts , Tax losses carried forward 1, , Share capital increase expenses 1, , Amounts due to employees , Financial instruments 1, (3) (1) Amortised cost method 4,556 1,503 3, Other Total 10,470 9,152 Deferred income tax assets and liabilities generated on the differences between the tax bases of assets and liabilities and the IFRS financial reporting values are only offset when there is a legal enforceable right of offset and when they relate to taxes levied by the same fiscal authority. Deferred income tax assets on tax losses carried forward are recognised as they are considered recoverable and may be carried forward without time limit as they were generated by the project companies Tifeo and Platani during the first three years of operation. 63

65 Movements in the deferred tax account were as follows: (Euro thousands) At 31 December ,152 Movements through the income statement 1,318 Recorded in equity Other movements At 31 December ,470 B Current assets 8 Inventories Inventories at 31 December 2008 consisted of the following: (Euro thousands) Change Raw materials and consumables 1, ,138 Semi-finished goods Work in progress 2,071 2,196 (125) Finished goods 2,264 2,320 (56) Advances Total 5,587 4, Raw materials comprise the stocks of biomass while finished goods relate to spare parts for the operating plants. Work in progress is disclosed gross of advances received amounting to Euro 2,004 thousand that are classified in liabilities. 9 Cash and cash equivalents (Euro thousands) Change Short-term bank and post office deposits Cash in hand 21, ,933 (178,912) Total 21, ,943 (178,912) Cash and cash equivalents may be detailed as follows: (Euro thousands) Change Cash at bank and in hand 21, ,943 (178,912) Bank overdrafts Invoice advances Group current accounts (653) 20 (673) Total cash and cash equivalents 20, ,963 (179,585) Cash at bank and in hand largely relates to the current accounts of Prima Srl (Euro 12,681 thousand), Frullo Energia Ambiente Srl (Euro 4,696 thousand), Tifeo Energia Ambiente ScpA (Euro 1,050 thousand) and Powercrop SpA (Euro 1,184 thousand). The current account balances of Prima Srl are subject to the restrictions imposed by the project financing contracts. The decrease in cash at bank and in hand is due to the new agreement with Falck SpA as described in note 4 above. 64

66 Liabilities D Equity 10 Share capital Share capital consists of 67,680,000 issued and fully paid ordinary shares, with a nominal value of Euro 1 each. No changes took place in the number of shares during Movements in equity during 2007 and 2008 were as follows: Other reserves Share Share Monetary Legal Reserves De-merger Reserve for Consolid.n Retained Profit Group Minority Total capital premium reval.n reserve ex art reserve expenses reserve earnings for the share of interest account reserve Pres. on share year equity Decree capital (Euro thousands) 917/86 increase At , ,828 1, ,076 3,936 (3,277) 3,041 5,171 12, ,486 4, ,511 Appropriation of 2006 profit of parent company to reserves 507 2,557 2,924 (12,756) (6,768) (6,768) Dividends distributed (1,350) (1,350) Other movements (215) 4 (211) Profit for the year 13,766 13,766 1,161 14,927 At , ,828 1, ,076 3,936 (3,492) 5,602 8,095 13, ,273 4, ,328 Other reserves Share Share Monetary Legal Reserves De-merger Reserve for Consolid.n Retained Profit Group Minority Total capital premium reval.n reserve ex art reserve expenses reserve earnings for the share of interest account reserve Pres. on share year equity Decree capital (Euro thousands) 917/86 increase At , ,828 1, ,076 3,936 (3,492) 5,602 8,095 13, ,273 4, ,328 Appropriation of 2007 profit of holding company to reserves 796 (2,173) 4,991 (13,766) (10,152) (10,152) Dividends distributed (1,100) (1,100) Other movements (30) (30) Profit for the year 17,927 17,927 1,535 19,462 At , ,828 1,003 1,575 4,076 3,936 (3,492) 3,399 13,086 17, ,018 4, ,994 Earnings per share Basic earnings per share, which are equivalent to diluted earnings, is calculated by dividing the profit for the year attributable to the ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding during the year, based on the following information: Weighted average number of ordinary shares (number) 67,680,000 67,680,000 Earnings attributable to the ordinary shareholders of the parent company (Euro thousands) 17,837 13,776 Basic earnings per share (Euro per share) Number of ordinary shares at the year-end (number) 67,680,000 67,680,000 Earnings attributable to the ordinary shareholders of the parent company (Euro thousands) 17,837 13,776 Earnings per share (Euro per share)

67 Reconciliation of capital and reserves attributable to group equity holders and profit for the year The consolidation reserve includes the differences arising from the elimination of the book value of consolidated investments against the related share of net equity. As a result the other equity headings correspond to the amounts disclosed in the parent company financial statements. The reconciliation of capital and reserves attributable to group equity holders and the profit for the year ended 31 December 2008 may be summarised as follows: Share capital Profit Capital and and reserves for the year reserves attr. to group (Euro thousands) equity holders Actelios SpA financial statements 328,693 17, ,381 - Difference between adjusted net equity of consolidated entities and book value of the related investments (3,330) 13,717 10,387 - Reversal of dividends from consolidated companies 11,756 (11,756) - Profits realised on sale of assets between group companies, net of depreciation, inventories and other minor amounts (5,028) (1,722) (6,750) Consolidated profit for the year and capital and reserves attributable to group equity holders 332,091 17, , Provisions for other liabilities and charges Change At in scope of Charged Credited Reclass.n At (Euro thousands) consolidation Provisions for pensions and similar obligations Provisions for taxation - Current - Deferred income taxes Total tax provisions Other provisions - litigation 600 (300) investments - environmental (121) restructuring - sundry provisions 1, (1,999) 60 9 Total other provisions 2, (2,420) Total 2, (2,420) All provisions are non-current. The environmental provision relates to the costs that Ecosesto SpA is required to incur at the end of utilising the landfills in order to restore environmental conditions. The litigation provision has been recognised in order to cover probable liabilities that may arise on current legal proceedings. Sundry provisions that included the provision prudently recognised by Prima Srl in respect of costs relating to the arbitration proceedings with Protecma Srl and the provision set up by Frullo Energia Ambiente Srl for costs to be incurred to make the old WTE plant safe, was almost fully utilised during the year following materialisation of the events for which the provisions were originally charged. Moreover the provision made by Actelios SpA to cover probable liabilities in respect of open legal proceedings was utilised in part and the balance reversed as it was no longer considered necessary. 66

68 12 Staff leaving indemnity At Charges Transfers/ Utilised/ At (Euro thousands) new consol.n paid Managers (219) 388 White-collar staff and special cat.s 1, (157) 1,092 Blue-collar staff (50) 650 Total 2, (426) 2,130 The Trattamento di Fine Rapporto, TFR (staff leaving indemnity provision), was subjected to an actuarial valuation by an independent expert. The resulting calculation did not differ significantly from the amount provided under Italian GAAP and as a result the group did not record any adjustments. The financial actuarial assumptions utilised to calculate the estimated cost in 2008 are as follows: (%) Change Annual discount rate 5.00% 5.45% -0.45% Annual inflation rate 2.00% 2.00% 0.00% Annual total pay increase rate 3.00% 3.00% 0.00% Annual TFR increase rate 3.00% 3.00% 0.00% 13 Financial liabilities Financial liabilities at 31 December 2008 consisted of the following: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Due to third parties 19,493 10,530 8,963 19,773 10,684 9,089 (280) (154) (126) Due to subsidiaries Due to associates Due to parent company 1,691 1,691 1,648 1, Due to other group companies Project financing 79,841 64,603 15,238 92,570 78,868 13,702 (12,729) (14,265) 1,536 Derivative financial instruments 1,612 1, ,374 1,374 Total 102,637 76,745 25, ,229 89,790 24,439 (11,592) (13,045) 1,453 Liabilities supported by real guarantees relate to the project financing of Prima Srl, secured by pledges on the shares of the company, and the non-recourse borrowings of Frullo Energia Ambiente Srl, which is guaranteed by a mortgage and special privileges on the plant s assets. The effective interest rates on non-recourse borrowings following application of the amortised cost method to the costs of raising this finance are as follows: - project financing Prima Srl 7.11% - non-recourse borrowing Frullo Energia Ambiente Srl 5.94% The difference between the nominal value and the fair value on these borrowings derives from application of the amortised cost method to the expenses incurred in raising this finance. In order to hedge the interest rate risk on project financing, the subsidiary Prima Srl has entered into interest rate swap contracts (IRS) amounting to a total notional value of Euro 30,975 thousand, with the purpose of rendering variable rates fixed at conditions that are substantially in line with market rates. The fair value of these IRS contracts is negative Euro 720 thousand. Frullo Energia Ambiente Srl has taken out IRS contracts with a total notional value of Euro 17,364 thousand to hedge project financing, again with the purpose of rendering variable rates fixed at conditions that are substantially in line with market rates. The fair value of these IRS contracts is negative Euro 892 thousand. 67

69 In relation to the above borrowings, the lending banks have imposed covenants that the company is obliged to meet for the entire contract period and are verified by the banks every six months. These checks did not identify any non-fulfilment of the defined parameters. The Actelios group held the following IRS contracts 31 December 2008: Description of IRS Contract Contract Residual Fixed Fair value (Euro thousands) start-date expiry date notional value rate Frullo IRS Intesa 25/9/ /12/ , % (919) Frullo IRS Unicredit 25/9/ /12/ , % (902) Prima IRS Double Fixed 23/7/ /12/ , % (298) Prima IRS Cancellable 23/7/ /12/ , % (422) The values relating to the IRS of Frullo disclosed in the above table represent the total values while the consolidated financial statements include only the proportional share of 49%. 14 Trade payables Trade payables at 31 December 2008 compared to the previous financial year-end may be analysed as follows: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Trade payables 41,268 41,268 45,588 45,588 (4,320) (4,320) Amounts due to subsidiaries Amounts due to associates Amounts due to parent company 3,596 3,596 2,718 2, Amounts due to other group companies 1,734 1,734 2,056 2,056 (322) (322) Total 46,598 46,598 50,362 50,362 (3,764) (3,764) An analysis by geographical area is not considered necessary as almost all of the trade payables are due to Italian suppliers. 15 Other payables Other payables at 31 December 2008 compared to 31 December 2007 consisted of the following: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts due to third party creditors 33,683 33,683 30,387 30,387 3,296 3,296 Amounts due to subsidiaries Amounts due to associates (17) (17) Amounts due to parent company 6,992 6,992 5,547 5,547 1,445 1,445 Amounts due to other group companies Accruals and deferred income Total 41, ,199 36, ,415 4, ,784 68

70 Third party creditors may be detailed as follows: (Euro thousands) Amounts due for acquisition of Elettroambiente SpA 20,000 20,000 Amounts due to Protecma for arbitration award 5,407 Tax payables 2, Advances 2,004 2,113 Environmental contribution 1, Other amounts due to employees 668 2,131 Amounts due to Hera by Frullo Energia Ambiente Srl under group taxation regime Holiday pay Dividends to be distributed by Prima Srl 450 1,350 Social security payables Insurance payments Other Total 33,683 30,387 The amounts due for the acquisition of Elettroambiente SpA are payable to Italgest Energia SpA, a related party of Actelios SpA. The amount due to the parent company relates to IRES (corporation tax) payable under the group taxation regime with the parent company Falck SpA. Commitments and contingencies Guarantees issued at 31 December 2008 amounted to Euro 67,687 thousand. Guarantees relating to subsidiary undertakings principally consist of performance bonds to guarantee completion of work in progress and to participate in contract bids, for a total of Euro 51,445 thousand, guarantees given to the VAT authorities in relation to requests for repayment of VAT receivables for Euro 15,088 thousand and other guarantees of Euro 1,154 thousand. Personal guarantees issued, which amount to Euro 42,294 thousand, have decreased compared to the previous year ( Euro 49,900 thousand). Related party transactions Trade receivables Trade payables (Euro thousands) Change Change Parent company Falck SpA ,596 2, Total parent company ,596 2, Other group companies Falck Financial Services Sa 1 61 (60) Falck Renewables Italia Srl 3 29 (26) Riesfactoring SpA 1,726 1,991 (265) Total other group companies 3 29 (26) 1,734 2,056 (322) Other related parties Italgest Servizi Srl 10,255 (10,255) Total other related parties 10,255 (10,255) Total ,347 (10,167) 5,330 4, % incidence on balance sheet heading 36.2% 11.4% 9.5% 69

71 Financial receivables Financial payables (Euro thousands) Change Change Parent company Falck SpA 172, ,266 1,691 1, Total parent company 172, ,266 1,691 1, Total 172, ,266 1,691 1, % incidence on balance sheet heading 100% 0.3% 6.6% 6.7% Other receivables Others payables (Euro thousands) Change Change Parent company Falck SpA ,992 5,547 1,445 Total parent company ,992 5,547 1,445 Associates Termini Imerese Energia Ambiente Srl 17 (17) Total associates 17 (17) Other related parties Italgest Energia SpA 20,000 20,000 Total other related parties 20,000 20,000 Total ,992 25,564 1,428 % incidence on balance sheet heading 2.8% 1.3% 65.5% 70.2% The net financial position is disclosed below in accordance with Consob (the Italian Stock Exchange Commission) communication DEM/ of 28 July Net financial position (Euro thousands) Change Short-term third party financial liabilities (24,201) (22,792) (1,409) Short-term group financial liabilities (1,691) (1,648) (43) Short-term third party financial receivables 6,003 7,286 (1,283) Short-term group financial receivables 172, ,266 Other securities Cash and cash equivalents 21, ,943 (178,912) Short-term net financial position 173, ,811 (9,381) Medium/long-term third party financial liabilities (76,746) (89,790) 13,044 Medium/long-term group financial liabilities Medium/long-term third party financial receivables 2, ,858 Medium/long-term group financial receivables Other securities Medium/long-term net financial position (74,647) (89,549) 14,902 Total net financial position 98,783 93,262 5,521 - of which non-recourse financing (79,841) (92,570) 12,729 70

72 6.5.8 Income statement content and movements 16 Revenue Revenue consisted of the following: (Euro thousands) Change Revenue from sales of goods 67,321 63,223 4,098 Revenue from provision of services 30,378 27,402 2,976 Total 97,699 90,625 7,074 Revenue arising from the sale of goods, compared to the previous year, may be attributed to the following business segments: (Euro thousands) Change Sale of electrical energy 66,275 62,325 3,950 Sale of thermal energy 1, Total 67,321 63,223 4,098 Revenue arising from the provision of services, compared to 2007, is attributable to the following business segments: (Euro thousands) Change Waste treatment and disposal 25,430 23,128 2,302 Operation and maintenance 4,948 4, Total 30,378 27,402 2,976 Revenue is generated almost entirely in Italy. 17 Employee costs Employee costs may be analysed as follows: (Euro thousands) Change Cost of production employees 6,036 6,128 (92) Cost of administrative staff 4,083 4,185 (102) Total 10,119 10,313 (194) Total employee costs analysed by nature of expense are as follows: (Euro thousands) Change Wages and salaries 6,910 7,351 (441) Social security costs 2,259 2,428 (169) Staff leaving indemnity (TFR) Other costs Total 10,119 10,313 (194) The average number of group employees was as follows: (Number) Managers White-collar staff Blue-collar staff Total average number of employees

73 As Frullo Energia Ambiente Srl is consolidated applying the proportional method, the numbers above include the 49% proportional share of the employees of this company that total 1 manager, 18 white-collar staff and 28 blue-collar staff. 18 Direct costs Direct costs increased by Euro 1,199 thousand compared to The principal movements relate to the cost of materials (+ Euro 1,649 thousand), other costs (+ Euro 2,193 thousand) and the lower amount of costs capitalised on assets under construction (-Euro 4,001 thousand). The cost of services decreased by Euro 2,639 thousand. Overall costs were affected by the utilisation of operating provisions compared to a net charge in the prior year, resulting in a difference of Euro 2,950 thousand. (Euro thousands) Change Materials 14,938 13,289 1,649 Services 18,574 21,213 (2,639) Other costs 8,194 6,001 2,193 Change in inventories (957) 284 (1,241) Charges to/(utilisation of) operating provisions (1,299) 1,651 (2,950) Amortisation and impairment of intangibles (3) Depreciation and impairment of property, plant and equipment 14,011 13, Employee costs capitalised on assets under construction (3,252) (7,253) 4,001 Total 50,686 49,487 1, Other income Other income consisted of the following: (Euro thousands) Change Income from operating activities 1, Income from non-operating activities 4,081 3, Total 5,546 4,264 1,282 Income from operating activities may be further detailed as follows: (Euro thousands) Change Income from services provided to other group companies Recharged expenses Other (8) Total 1, Income from non-operating activities may be further detailed as follows: (Euro thousands) Change Income relating to other accounting periods 1,966 1, Gains on disposal of property, plant and equipment 1 4 (3) Damages compensation 1,600 (1,600) Insurance compensation 2, ,595 Other Total 4,081 3, Income relating to other accounting periods principally relates to provisions made in previous years in respect of the variable element of remuneration due to management and legal expenses. Insurance compensation relates to the damages suffered at the WTE plant in Granarolo dell Emilia. 72

74 20 Administrative expenses Administrative expenses may be analysed as follows: (Euro thousands) Change Consumables Services 7,659 7, Other costs 1,260 1, Non-operating expenses 1, Amortisation and impairment of intangible assets (4) Depreciation and impairment of property, plant and eq.pt Charges to/(utilisation of) provisions (1,473) (80) (1,393) Total 9,503 9,582 (79) These are largely in line with the total for the year ended 31 December 2007, with a slight decrease of Euro 79 thousand. 21 Finance costs - net Finance income and costs may be analysed as follows: (Euro thousands) Change Finance costs (10,638) (7,753) (2,885) Finance income 9,878 9,976 (98) Interest capitalised on assets under construction Total (363) 2,531 (2,894) Finance costs consisted of the following: (Euro thousands) Change Payable to parent company (130) (1) (129) Payable to others (10,508) (7,752) (2,756) Total (10,638) (7,753) (2,885) Finance costs for 2008 and 2007 may be further analysed as follows: Debenture Bank Others Total (Euro thousands) loans loans Payable to parent company Payable to others 10, ,508 Total 10, , Debenture Bank Others Total (Euro thousands) loans loans Payable to parent company 1 1 Payable to others 7,752 7,752 Total 7, ,753 73

75 Finance income for the year ended 31 December 2008 decreased compared to the amount recorded in 2007: (Euro thousands) Change Interest and commission - parent company 6,083 5, Interest and commission - banks 3,041 3,859 (818) Other Total 9,878 9,976 (98) 22 Investment costs This relates to the loss on disposal of the investment in Termini Imerese Energia Ambiente Srl. 23 Income tax expense (Euro thousands) Change Current tax 14,420 14, Deferred income tax (credit) (1,318) (942) (376) Totale 13,102 13,111 (9) Current taxes are based on the estimated taxable income for the period calculated in accordance with current tax legislation. Total taxes differ from the theoretical amount that results from applying the tax rate to the consolidated group profit. The corresponding reconciliation is detailed below. (Euro thousands) Profit before taxation 32,564 28,038 Taxes calculated applying tax rate to group profit (11,942) (10,624) Profits not subject to tax Expenses not deductible for tax purposes (1,692) (1,361) Utilisation of tax losses carried forward 333 Deferred income tax assets for change in tax rate (Robin Hood tax) 380 Adjustment of deferred income tax assets for rate change (1,143) Tax losses for which no deferred income tax was recognised (196) Total income tax (13,102) (13,111) Related party transactions Revenue Revenue Other Direct Admin. Finance Finance Income from sale from income costs expenses costs income from (Euro thousands) of goods services investments Parent company Falck SpA , ,083 Total parent company , ,083 Group companies Falck Renewables Italia Srl Total group companies Other related parties Italgest Servizi Srl 570 Total related parties 570 Total , ,653 % incidence on income statement heading 0.3% 2.3% 32.1% 1.2% 67.3% 74

76 24 Significant non-recurring events and transactions In accordance with Consob communication DEM/ of 28 July 2006, the only significant non-recurring transactions that took place in the Actelios group in the course of 2008 related to the insurance compensation of Euro 2,095 thousand received in relation to the damages suffered at the Granarolo dell Emilia plant and the finalisation of the arbitration award with Protecma Srl as a result of which Euro 5,407 thousand was recorded in other payables and Euro 974 thousand was recorded in net finance costs. 25 Uncharacteristic and uncommon transactions In accordance with Consob communication DEM/ of 28 July 2006, in the course of 2008 the Actelios group did not carry out any uncharacteristic and/or uncommon transactions, as defined in the above communication. 26 Auditors remuneration Company Audit Control of Other activities (Euro thousands) annual report and half-year accounting records Actelios SpA Ambiente 2000 Srl 7 5 Actelios Solar SpA 10 7 Ecosesto SpA 22 6 Elettroambiente SpA 8 4 Frullo Energia Ambiente Srl 18 9 Palermo Energia Ambiente ScpA 10 5 Platani Energia Ambiente ScpA 10 5 Powercrop SpA 10 5 Prima Srl Tifeo Energia Ambiente ScpA 10 5 Total

77 6.6 Additional disclosures on financial instruments in accordance with IFRS7 This note sets out the additional disclosures relating to financial assets and liabilities in accordance with IFRS 7. This disclosure respects the order of the IFRS. Where the information requested was not considered significant the related paragraph was omitted. The note is presented in two sections. The first sets out detailed information regarding financial assets and liabilities, in particular regarding their classification in compliance with IAS 39, the impact on the income statement for the year and their fair value. The second section presents information regarding the risks attributable to the financial assets and liabilities, in particular credit risk, liquidity risk and market risk. This includes both qualitative and quantitative information that is analysed into points (e.g. 1.) and sub-points (e.g. 1.2). The detailed quantitative information is provided for 31 December 2008 and where significant at 31 December Prior to presenting the detailed disclosures, a summary of the principal disclosures is provided as follows. The Actelios group holds significant financial assets in the form of financial receivables due from the parent company Falck SpA, and has an overall positive net financial position. The financial assets and liabilities are almost entirely measured at cost and amortised cost in the financial statements, with the exception of certain derivative instruments on interest rates that, although undertaken to hedge exposure, are not measured in accordance with hedge accounting. The main impact of the derivative instruments on the income statement does not arise from changes in the value of the principal financial assets and liabilities recorded on the balance sheet, but from the interest income and expense and the changes in value of the derivative financial instruments. Credit and liquidity risk are not considered to be significant. In particular, credit risk exposure is extremely limited: the high concentration of trade receivables due from a few counterparties is strongly mitigated by the corresponding credit rating. The only market risk considered to be significant is interest rate risk as almost all group borrowings are at variable rates. This exposure is limited by the natural matching of liquid assets against financial liabilities. Although a formal risk management policy has not been defined, the Actelios group adopts well-established internal procedures in the management of credit, liquidity and market risks on financial assets and liabilities. Section I: Supplementary disclosures on financial assets/liabilities 1. Balance sheet 1.1 Categories of financial assets and liabilities The tables below illustrate the carrying values at 31 December 2008 and 31 December 2007 of the financial assets and liabilities classified in accordance with IAS 39. In order to reconcile with the balance sheet totals the penultimate column sets out the values of the assets and liabilities that are not included in the scope of IFRS7. At 31 December 2008 the total financial assets of the Actelios group amounted to Euro 233,329 thousand and financial liabilities totalled Euro 169,235 thousand, against a total balance sheet amount of Euro 548,768 thousand. The financial assets and liabilities are almost entirely measured at cost and amortised cost. The principal financial assets comprise financial receivables while the main financial liabilities relate to borrowings and trade payables. The financial impact of financial assets and liabilities measured at fair value through profit or loss is not significant and consists of derivative financial instruments. 76

78 Fair value Amortised cost Fair value through against equity profit or loss or cost Total Loans Financial Financial FA/FL FA/FL FA FA/FL A/L not Balance and receiv. assets liabilities designation held for available- within within sheet bls held-to- at amortised on initial trading for-sale scope scope total (Euro thousands) maturity cost recognition of IFRS7 of IFRS7 Assets Property, plant and equipment and intangibles 291, ,647 Securities and investments Financial receivables 180, , ,390 Inventories 5,587 5,587 Trade receivables 27,759 27,759 27,759 Deferred income tax assets 10,470 10,470 Other receivables 3, ,320 7,552 11,872 Cash and cash equivalents 21,032 21,032 21,032 Total 232, , , ,768 Liabilities Total equity 354, ,994 Financial payables 101,025 1, , ,637 Trade payables 46,598 46,598 46,598 Other payables 20,000 20,000 21,596 41,596 Provisions for other liabilities and charges Staff leaving indemnity 2,130 2,130 Total 167,623 1, , , , Fair value Amortised cost Fair value through against equity profit or loss or cost Total Loans Financial Financial FA/FL FA/FL FA FA/FL A/L not Balance and receiv. assets liabilities designation held for available- within within sheet bls held-to- at amortised on initial trading for-sale scope scope total (Euro thousands) maturity cost recognition of IFRS7 of IFRS7 Assets Property, plant and equipment and intangibles 292, ,155 Financial investments Financial receivables 7, ,549 7,549 Inventories 4,630 4,630 Trade receivables 28,602 28,602 28,602 Deferred income tax assets 9,152 9,152 Other receivables 3, ,054 6,383 10,437 Cash and cash equivalents 199, , ,943 Total 239, , , ,521 Liabilities Total equity 346, ,328 Financial payables 113, , ,230 Trade payables 50,362 50,362 50,362 Other payables 20,000 20,000 17,030 37,030 Provisions for other liabilities and charges 2,483 2,483 Staff leaving indemnity 2,088 2,088 Total 184, , , ,521 77

79 1.2 Collateral financial assets pledged as security for liabilities and collateral accepted as security for assets Financial assets pledged as security for liabilities comprise the pledge on the shares of Prima Srl owned by Actelios SpA for a nominal value of Euro 4,615 thousand. The principal terms of the pledge contracts do not grant the possibility to sell the pledged shares as these companies do not have an active market. 2. Income statement and net equity 2.1 Impact of financial assets and liabilities on the income statement and net equity The table below illustrates the net gains or losses generated in financial years 2008 and 2007 from the financial assets/liabilities reclassified according to IAS 39. The only amount relates to the increase in value of derivative financial instruments Gains/(losses) Gains/(losses) Gains/(losses) through profit reversed from equity recorded (Euro thousands) or loss to profit or loss against equity Total FA at fair value through profit or loss FA held for sale FL at fair value through profit or loss (1,607) (1,607) FL held for sale FA available-for-sale FA held-to-maturity Loans and receivables FL at amortised cost Total (1,607) (1,607) Gains/(losses) Gains/(losses) Gains/(losses) through profit reversed from equity recorded (Euro thousands) or loss to profit or loss against equity Total FA at fair value through profit or loss FA held for sale FL at fair value through profit or loss FL held for sale FA available-for-sale FA held-to-maturity Loans and receivables FL at amortised cost Total The amount of Euro 1,607 thousand represents the total change in fair value of the contracts entered into to hedge interest rate risk. The table below illustrates total interest income/expense (calculated using the effective interest rate method) and the fee income/expense generated by financial assets/liabilities not measured at fair value through profit or loss and the fee income/expense arising from trust and other fiduciary activities in 2008 and

80 (Euro thousands) Interest income (expense) Fee income (expense) Total FA not at fair value through profit or loss 9,878 9,878 FL not at fair value through profit or loss (8,993) (8,993) Trust and other fiduciary activities (40) (40) Other (not within scope of IFRS7) Total 1,284 (40) 1, (Euro thousands) Interest income (expense) Fee income (expense) Total FA not at fair value through profit or loss 9,159 9,159 FL not at fair value through profit or loss (4,018) (4,018) Trust and other fiduciary activities (3,735) (3,735) Other (not within scope of IFRS7) Total 5,449 (3,735) 1,714 The reconciliations of the above amounts with net finance costs and income recorded in the 2008 and 2007 income statements are as follows. (Euro thousands) Gains/losses through profit or loss (1,607) Total interest income/expense 1,284 Fee income/expense (40) Total (363) Net finance costs per income statement (363) (Euro thousands) Gains/losses through profit or loss 817 Total interest income/expense 5,449 Fee income/expense (3,735) Total 2,531 Net finance income per income statement 2, Allowances In 2008 a charge of Euro 85 thousand was made to the provision for doubtful accounts. Subsequent to the administration proceedings of Biothec Sistemi SpA, Euro 1,448 thousand of the provision was utilised. 3 Further additional disclosures 3.1 Accounting policies The accounting policies adopted for the recognition and measurement of financial assets and liabilities are presented in the notes to the consolidated financial statements in paragraph Accounting policies. 3.2 Fair value The tables below disclose the fair value of the financial assets/liabilities and the related carrying amount at 31 December 2008 and 31 December The carrying amount of the financial assets/liabilities valued at cost and amortised cost (see point 1.1) is a reasonable estimate of fair value as these relate to either short-term or variable rate financial assets and liabilities or medium/long-term financial liabilities that, based on sample calculations, did not give rise to significant differences. The fair value of derivative financial instruments at the balance sheet date is equal to the discounted future cash flows given the Euro curve at 31 December and its related forward rates. 79

81 (Euro thousands) Carrying amount Fair value Financial assets Securities and investments Financial receivables 180, ,390 Trade receivables 27,759 27,759 Other receivables 4,137 4,137 Cash and cash equivalents 21,032 21,032 Total 233, ,329 Financial liabilities Financial payables 102, ,637 Trade payables 46,598 46,598 Other payables 20,000 20,000 Total 169, , (Euro thousands) Carrying amount Fair value Financial assets Securities and investments Financial receivables 7,549 7,549 Trade receivables 28,602 28,602 Other receivables 4,054 4,054 Cash and cash equivalents 199, ,943 Total 240, ,201 Financial liabilities Financial payables 114, ,230 Trade payables 50,362 50,362 Other payables 20,620 20,620 Total 185, ,212 80

82 Analysis of financial liabilities at 31 December 2008 and 31 December 2007 by instrument and conditions Interest rate Fair Carrying Current Non-current (Euro thousands) (%) value amount portion portion Efibanca loan Euribor 6 m + spread 2,388 2,388 1,355 1,033 Efibanca loan EIB + 1% Banca Popolare Sondrio loan Euribor 3 m + spread 7,471 7,471 1,191 6,280 Loan Euribor 3 m + spread 1,118 1,118 1,118 Due to other financial institutions Euribor 6 m + spread 2,099 2,099 2,099 Loans for projects in Sicily Euribor 3 m + spread 4,168 4,168 4,168 Other loans Euribor 3 m + spread 1,690 1,690 1,690 Other loans Euribor 1 m + spread 1,500 1,500 1,500 Other loans Euribor 1 m + spread Total loans 21,184 21,184 10,654 10,530 Project financing Prima Srl Euribor 6 m + spread 37,938 37,938 9,750 28,188 M/L loan Frullo Srl Euribor 6 m + spread 41,903 41,903 5,488 36,415 Total amounts due for project financing 79,841 79,841 15,238 64,603 IRS Prima Srl IRS Frullo Energia Ambiente Srl Total derivative financial instruments 1,612 1,612 1,612 Total financial liabilities 102, ,637 25,892 76, Interest rate Fair Carrying Current Non-current (Euro thousands) (%) value amount portion portion Efibanca loan Euribor 6 m + spread 4,067 4,067 1,678 2,389 Efibanca loan EIB + 1% Banca Popolare Sondrio loan Euribor 3 m + spread 8,620 8,620 1,149 7,471 Loan Euribor 3 m + spread 1,118 1,118 1,118 Due to other financial institutions Euribor 6 m + spread 2,099 2,099 2,099 Loans for projects in Sicily Euribor 3 m + spread 3,871 3,871 3,871 Other loans Euribor 3 m + spread 1,648 1,648 1,648 Total loans 21,423 21,423 8,346 13,077 Project financing Prima Srl Euribor 6 m + spread 47,291 47,291 10,125 37,166 Project financing Frullo Srl Euribor 6 m + spread 45,278 45,278 3,577 41,701 Total amounts due for project financing 92,569 92,569 13,702 78,867 IRS Prima Srl IRS Frullo Energia Ambiente Srl Total derivate financial instruments Total financial liabilities 114, ,230 22,048 92,182 81

83 Analysis of financial receivables due from third parties at 31 December 2008 and 31 December 2007 by instrument and conditions Interest rate Fair Carrying Current Non-current (Euro thousands) (%) value amount portion portion Palermo Energia Ambiente ScpA Euribor + spread 5,247 5,247 5,247 Frullo Energia Ambiente Srl Euribor+ spread 2,099 2,099 2,099 Derivative instruments Amounts due to Actelios SpA from Falck SpA Euribor 1m+ spread 172, , ,288 Powercrop SpA receivables Euribor 1m+ spread Other receivables Total receivables 180, , ,291 2, Interest rate Fair Carrying Current Non-current (Euro thousands) (%) value amount portion portion Palermo Energia Ambiente ScpA Euribor + spread 5,181 5,181 5,181 Frullo Energia Ambiente Srl Euribor+ spread 2,099 2,099 2,099 Derivative instruments Other receivables Total receivables 7,527 7,527 7, Section II: Risks arising from financial instruments 1. Credit risk 1.1 Qualitative disclosures Credit risk represents both potential losses from non-settlement of receivables and the counterparty risk connected to the negotiation of other financial activities. The credit risk exposure of the Actelios group is very limited in respect of both commercial customers and financial counterparties. Firstly due to the nature of the commercial customers: almost two thirds of amounts due from third parties (not related parties) is owed by the Italian national electrical energy supplier (Enel). The degree of concentration of customers is medium-high, however they have a high credit rating. The credit risk attributable to the counterparties with which the derivative financial instruments are negotiated is also limited as the derivatives are negotiated with primary financial institutions. A summary quantitative indication of the maximum exposure to credit risk is the carrying amount of the financial assets, expressed gross of derivatives with a positive fair value and net of any guarantees. 1.2 Quantitative disclosures At 31 December 2008 the maximum credit risk exposure amounted to Euro 233,318 thousand and comprised: (Euro thousands) Gross Provision Net Financial receivables 180, ,390 Trade receivables 28,461 (702) 27,759 Other receivables 4,137 4,137 Cash and cash equivalents 21,032 21,032 Total 234,020 (702) 233,318 82

84 At 31 December 2007 the maximum credit risk exposure amounted to Euro 240,148 thousand and comprised: (Euro thousands) Gross Provision Net Financial receivables 7,549 7,549 Trade receivables 30,667 (2,065) 28,602 Other receivables 4,054 4,054 Cash and cash equivalents 199, ,943 Total 242,213 (2,065) 240,148 An analysis of trade receivables at 31 December 2008 and 31 December 2007 by class of customer with the corresponding percentage of total receivables is set out below. This provides a summary indication of the concentration of commercial credit risk Class of customer Total exposure % exposure by class (Euro thousands) of customer Italian National Grid (GSE - Enel) 15,319 55% Public authorities (town councils) 2,183 8% Other entitites 10,073 36% Other entities (related parties) 185 1% Total trade receivables 27, % Class of customer Total exposure % exposure by class (Euro thousands) of customer Italian National Grid (GSE - Enel) 8,214 29% Public authorities (town councils) 6,307 22% Other entitites 3,735 13% Other entities (related parties) 10,346 36% Total trade receivables 28, % The ageing analysis of trade receivables by class of customer, analysed by the overdue periods used internally to monitor receivables, as at 31 December 2008 and 31 December 2007, is set out below. Balances not yet due at 31 December 2008 and 31 December 2007 are also presented Total Overdue Total Not yet (Euro thousands) exposure > overdue due Italian National Grid (GSE - Enel) 15, ,941 5,960 9,359 Public authorities (town councils) 2, , Other entities 10,073 2, ,344 3,436 7,387 2,686 Other entities (related parties) Total trade receivables 27,760 2, ,687 10,023 15,547 12, Total Overdue Total Not yet (Euro thousands) exposure > overdue due Italian National Grid (GSE - Enel) 8, ,184 Public authorities (town councils) 6, ,636 1,933 4,374 Other entities 3,735 1, ,455 1,280 Other entities (related parties) 10,346 10,254 10, Total trade receivables 28,602 1, ,158 14,672 13,930 83

85 2. Liquidity risk 2.1 Qualitative disclosures Liquidity risk is summarised in the tables below that illustrate the financial liabilities grouped by maturity date. The Actelios group has a group treasury department that does not use a cash pooling system but carries out netting of opposing balances through the use of specific intercompany correspondence accounts. With regard to the management of Actelios s liquidity, in accordance with the agreement between Falck SpA and Actelios SpA, Actelios transfers to Falck the liquidity not required for working capital, and Falck undertakes to repay the liquidity, either in whole or in part, in order to meet the Actelios group s capital expenditure commitments, in line with the notice terms of the agreement. Finally, the Actelios group prepares an update of the cash flow statement and the cash budget on a monthly basis, in which the actual data for the period are supported by a summary evaluation and commentary. 2.2 Quantitative disclosures Financial liabilities are analysed by contractual maturity across four time bands. The analysis has been concentrated on bank borrowings and shareholders loans, the latter have been disclosed separately as the maturity dates are not defined based on individual contractual agreements and repayments are generally subordinated to bank borrowings. Analysis of financial liabilities (principal amounts: amounts due by contractual maturity) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total Bank borrowings 8,034 7,397 13,585 23,555 52,571 Project financing 9,750 12,000 17,685 39,435 Trade payables 46,598 46,598 Total 64,382 19,397 31,270 23, ,604 Analysis of financial liabilities (principal amounts: amounts due by estimated maturity) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total Shareholders' loans 8,108 3,217 11,325 Other payables 20,000 20,000 Total 8,108 23,217 31,325 Analysis of financial liabilities (principal amounts: amounts due by contractual maturity) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total Bank borrowings 6,405 8,035 16,928 27,870 59,238 Project financing 10,125 9,750 25,125 4,500 49,500 Trade payables 50,362 50,362 Total 66,892 17,785 42,053 32, ,100 Analysis of financial liabilities (principal amounts: amounts due by estimated maturity) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total Shareholders' loans 5,518 3,217 8,735 Other payables 20,000 20,000 Total 5,518 23,217 28,735 84

86 In order to provide a better analysis of the financial commitments including derivatives illustrated in the table above, a calculation was made of interest due to be paid for each maturity period shown. As contractual interest rates on the above borrowing instruments are all variable, quarterly or six-monthly, and closely linked to Euribor rates, this calculation was made taking into consideration the implicit rates of the swap rate curve correlated with Euribor rates at 31 December Calculation of the quarterly and six-monthly interest was simplified by assuming that the payment periods for each instrument had the same start and end date. With regard to interest payable, the estimated value of the differentials relating to derivative financial instruments held at 31 December 2008 was calculated and is disclosed on the IRS differentials line in the table below. The estimated differentials were calculated applying the implicit forward rates in the swap curve at 31 December In this case a detailed analysis of each derivative instrument held was performed. Analysis of financial liabilities (estimated flows on contractual basis: interest expense plus IRS differentials) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total IRS differentials ,640 Bank borrowings 1,838 1,412 3,964 3,393 10,607 Project financing 1,501 1,014 1,283 3,798 Total 4,013 3,014 5,575 3,443 16,045 Analysis of financial liabilities (estimated flows on contractual basis: interest expense plus IRS differentials) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total Shareholders' loans Total Analysis of financial liabilities (estimated flows on contractual basis: interest expense plus IRS differentials) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total IRS differentials Bank borrowings 3,120 2,548 5,693 5,294 16,655 Project financing 2,784 2,048 2, ,867 Total 5,904 4,644 8,540 5,482 24,570 Analysis of financial liabilities (estimated flows on contractual basis: interest expense plus IRS differentials) (Euro thousands) < 12 months 1-2 years 2-5 years > 5 years Total Shareholders' loans Total Market risks 3.1 Interest rate risk Qualitative disclosures The Actelios group manages interest rate risk centrally. Although it does not define in advance the maximum variable rate debt exposure, it does follow well-established procedures aimed at monitoring risk and that avoid undertaking transactions of a speculative nature. The type and suitability of hedging instruments is evaluated for each specific case in consideration of the amount of exposure and current financial market conditions. 85

87 The Actelios group uses derivative financial instruments to hedge interest rates and in particular enters into interest rate swaps (IRS) with the exclusive aim of hedging. Moreover, the derivatives held at the year-end were acquired in order to allow the debt structure to meet the covenants requested by the financial institutions in relation to the project financing. In particular, the borrowings at variable rates for these contracts are matched with opposing IRS that partially convert the borrowings from variable to fixed rates. Although these operations are entered into to hedge interest rate risk, hedge accounting is not applied to these derivative financial instruments. Consequently, changes in fair value of the derivatives follow the general rule applied to trading derivatives and are charged directly to the income statement with a direct effect on the profit for the year. A sensitivity analysis was performed on the interest rate risk exposure of Actelios applying the guidelines provided in paragraph 40 of IFRS 7 and the examples illustrated in Implementation Guide (IG) 35. A brief description of the methodology used to perform the sensitivity analysis and the results obtained is provided below. The effect on profit for the year was determined applying a different yield curve to that used at the reporting date. For Actelios this means recalculating the fair value of the derivative instruments and charging directly to the income statement the difference between the simulated fair value and the value at the year-end. This provides both the portfolio risk on derivatives held at the balance sheet date and the related effect on the profit for the year. The actual effect on profit for the year of a different scenario for interest rates also depends on the average financial assets and liabilities for the period on which interest accrues. The example provided in IG35 of IFRS7 refers to the effect on the actual financial statements originating from a different interest rate arising during the year. Once the finance income and expenses relating to a new scenario become known it is easy to verify, measuring the difference between these and the actual income/expense, the effect of a new interest rate scenario on the income statement. The sensitivity analysis assumed two scenarios, a decrease and an increase in interest rates. Changes in interest rates for each scenario have been applied: 1) to the yield curve at the reporting date, assuming a parallel shift in the yield curve; 2) to the average interest rate paid in the course of the year on variable rate borrowings; 3) to the average interest rate earned during the year on variable rate financial assets; 4) to the interest rates used to determine the differentials paid/received during the year on derivative financial instruments. As already noted the change in fair value of each derivative instrument held at 31 December 2008, together with the related impact on profit for the year, was calculated for each scenario. The impact on profit arising from changes in finance income and expense was also calculated for each scenario. The tables below illustrate the outcome of these analyses. An increase of 50 basis points would have resulted in a positive impact on profit of approximately 5.09%, while a decrease of 50 basis points would have determined a negative impact on profit for the year of approximately (5.73%) Quantitative disclosures Scenario Euribor +50bp Derivatives impact Scenario I - Euribor rate + 50bp Accounting Base Scenario Change Change Change % (Euro thousands) treatment value value FV BS IS of PFY (*) Interest Rate Swap Frullo No Hedge Accounting (892) (703) % Interest Rate Swap Prima (Double Fixed) No Hedge Accounting (422) (337) % Interest Rate Swap Prima (cancellable) No Hedge Accounting (298) (186) % Total (1,612) (1,226) % 86

88 Total impact Scenario I - Euribor rate + 50bp (Euro thousands) Change BS Change IS % of PFY Impact of change in fair value of derivatives % Impact on finance costs (562) (2.89%) Impact on finance income % Impact on IRS % Total % Note: (*) PFY (profit for year) at 31 December 2008 The income statement impact is calculated gross of any tax effect. Scenario Euribor -50bp Derivatives impact Scenario II - Euribor rate + 50bp Accounting Base Scenario Change Change Change % (Euro thousands) treatment value value FV BS IS of PFY (*) Interest Rate Swap Frullo No Hedge Accounting (892) (1,118) (226) (226) (1.16%) Interest Rate Swap Prima (Double Fixed) No Hedge Accounting (422) (514) (92) (92) (0.47%) Interest Rate Swap Prima (cancellable) No Hedge Accounting (298) (395) (97) (97) (0.50%) Total (1,612) (2,027) (415) (415) (2.13%) Total impact Scenario II - Euribor rate + 50bp (Euro thousands) Change BS Change IS % of PFY Impact of change in fair value of derivatives (415) (2.13%) Impact on finance costs % Impact on finance income (993) (5.10%) Impact on IRS (270) (1.39%) Total (1,116) (5.73%) Note: (*) PFY (profit for year) at 31 December 2008 The income statement impact is calculated gross of any tax effect. 87

89

90 7 Supplementary information to consolidated financial statements

91

92 7.1 List of investments in subsidiaries and associates Companies consolidated applying line-by-line method % Indirect holding Registered Currency Share Direct office capital holding % Subsidiary Actelios SpA Milan Euro 67,680,000 Abbiategrasso Bioenergia Srl Sesto San Giovanni (Mi) Euro 54, Actagri Srl Actagri Srl Sesto San Giovanni (Mi) Euro 50, Actelios Solar SpA Sesto San Giovanni (Mi) Euro 120, Ambiente 2000 Srl Milan Euro 103, Ecosesto SpA Milan Euro 5,120, Elettroambiente SpA Sesto San Giovanni (Mi) Euro 245, Platani Energia Ambiente ScpA Palermo Euro 2,764, Elettroambiente SpA Prima Srl Sesto San Giovanni (Mi) Euro 5,430, Solar Rende Srl Rende (Cosenza) Euro 10, Ecosesto SpA Tifeo Energia Ambiente ScpA Palermo Euro 2,680, Elettroambiente SpA Companies included applying proportional method % Indirect holding Registered Currency Share Direct office capital holding % Subsidiary Frullo Energia Ambiente Srl Bologna Euro 17,139, Palermo Energia Ambiente ScpA Palermo Euro 120, Powercrop SpA Sesto San Giovanni (Mi) Euro 4,000,

93

94 8 Actelios SpA company financial statements for the year ended 31 December 2008

95

96 8.1 Actelios SpA balance sheet Note of which of which (Euro thousands) related parties related parties Assets A Non-current assets 1 Intangible assets (1) Property, plant and equipment (2) Financial assets (3) 102,023 96,941 4 Medium/long-term financial receivables (4) 10,451 10,451 6,335 6,335 5 Deferred income tax assets (7) 660 1,520 6 Other receivables (6) Total 113, ,947 B Current assets 1 Inventories (8) 96 2 Trade receivables (5) 4,733 4,637 6,970 6,966 3 Other receivables (6) 2,552 2,550 17,503 17,494 4 Financial assets (4) 252, ,637 79,386 79,386 5 Investments 6 Cash and cash equivalents (9) ,800 Total 260, ,755 C Non-current assets held for sale Total assets 373, ,702 Liabilities D Equity 1 Ordinary shares 67,680 67,680 2 Reserves 247, ,130 3 Retained earnings 13,086 8,094 4 Profit for the year 17,688 15,941 Capital and reserves attributable to group equity holders (10) 346, ,845 5 Minority interest in equity Total equity (10) 346, ,845 E Non-current liabilities 1 Medium/long-term financial liabilities (13) 2 Other non-current liabilities (15) 3 Deferred income tax liabilities 4 Provisions for other liabilities and charges (11) Staff leaving indemnity (12) Total 473 1,121 F Current liabilities 1 Trade payables (14) 1, , Other payables (15) 23,125 22,059 24,050 21,257 3 Short-term financial liabilities (13) 2,153 2,153 1,207 1,207 4 Provisions for other liabilities and charges Total 26,707 27,736 G Liabilities attributable to non-current assets held for sale Total liabilities 373, ,702 Related party transactions are disclosed on page

97 8.2 Actelios SpA income statement Note of which of which (Euro thousands) related parties related parties A Revenue (16) 1, Direct labour costs (17) Direct costs (18) (167) B Cost of sales (167) C Gross profit Other income (19) 4,212 2,970 3,018 2,851 Other employee costs (17) (3,868) (3,918) Administrative expenses (20) (4,978) (2,322) (5,957) (2,122) D Operating loss (3,728) (6,803) Finance income - net (21) 13,146 12,356 11,593 10,458 Investment income (22) 11,746 11,746 13,285 13,285 E Profit before income tax 21,164 18,075 Income tax expense (23) (3,476) (2,134) F Profit for the year 17,688 15,941 Earnings per share (Euro per share) (10) Related party transactions are disclosed on page

98 8.3 Actelios SpA cash flow statement Note of which of which (Euro thousands) related parties related parties Cash flows from operating activities Profit for the year 17,688 15,941 Adjusted for: Amortisation and impairment of intangible assets Depreciation and impairment of property, plant and equipment Staff leaving indemnity provision Fair value of financial assets Finance income (13,221) (12,418) (11,593) (10,413) Finance costs Dividends received (11,756) (11,756) (13,285) (13,285) Share of profit of investments valued at equity Gain on sale of intangibles Profit on disposal of property, plant and equipment (808) Profit on sale of investments 10 Other cash flows Income tax (income statement) 3,476 2,134 Operating loss before changes in net working capital and provisions (4,342) (6,475) Change in inventories 96 Change in trade receivables 2,238 (1,370) Change in trade payables (1,049) (416) Change in other receivables/payables 23,575 2,262 Net change in provisions (600) Change in employee payables - staff leaving indemnity paid during year (217) (130) Cash generated from/(used in) operating activities 19,701 (6,129) Interest paid (75) (62) (123) Tax paid (410) (265) Net cash generated from/(used in) operating activities (1) 19,216 (6,517) Cash flows from investing activities Dividends received Proceeds from sale of property, plant and equipment 2,039 2,039 Proceeds from sale of intangible assets Proceeds from investment activities Purchases of intangible assets (2) (40) Purchases of property, plant and equipment (1,231) (78) Acquisition of investments (5,117) (5,110) (825) Sale of investments 24 Interest received 13,221 (12,418) 11,593 Net cash generated from investing activities (2) 8,934 10,650 Cash flows from financing activities Dividends paid (10,152) (6,768) (6,768) Proceeds from issue of ordinary share capital increase and capital injections Proceeds from borrowings 16,936 16,936 Loans granted (194,303) (194,303) (16,936) (16,936) New borrowings Repayments of borrowings Net cash (used in) financing activities (3) (187,519) (23,704) Net (decrease) in cash and cash equivalents and bank overdrafts(1+2+3) (159,369) (19,571) Cash and cash equivalents and bank overdrafts at 1 January 157, ,164 Cash and cash equivalents and bank overdrafts at 31 December (9) (1,776) 157,593 97

99 8.4 Actelios SpA statement of changes in equity (Euro thousands) Share Reserves Profit Capital and Minority Total capital for the year reserves interest equity attributable to in equity company equity holders At , ,010 10, , ,887 Appropriation of 2006 profit 3,429 (10,197) (6,768) (6,768) Expenses on share capital increase (215) (215) (215) Profit for the year to 31 December ,941 15,941 15,941 At , ,224 15, , ,845 Appropriation of 2007 profit 5,789 (15,941) (10,152) (10,152) Expenses on share capital increase Profit for the year to 31 December ,688 17,688 17,688 At , ,013 17, , ,381 98

100 8.5 Notes to the financial statements of Actelios SpA Managerial and coordination activities In accordance with article 2497 bis, paragraph 4 of the Italian Civil Code, the key information from the latest approved financial statements of Falck SpA (31 December 2007) is disclosed, due to the fact that the latter performs managerial and coordination activities. For a full and better understanding of the financial position of Falck SpA at 31 December 2007, and the profit for the year then ended, reference should be made to the financial statements complete with the independent auditors report, which are available at the parent company s registered offices and on its website. 99

101 Balance Sheet Falck SpA 31 december december 2006 Assets Amounts due within 12 months Amounts due after 12 months Total (Euro) Amounts due within 12 months Amounts due after 12 months Total (Euro) A) SHARE CAPITAL SUBSCRIBED AND NOT YET PAID B) FIXED ASSETS I. Intangible assets 1 Start-up and expansion costs 2 Research, development and advertising expenses 3 Industrial patent rights 375, ,858 4 Concessions, licences, trademarks and similar rights 13,616 16,418 5 Goodwill 6 Assets under construction and advances 7 Other intangible assets Total intangible assets 388, ,276 II. Tangible assets 1 Land and buildings 420, ,538 2 Plant and machinery 31,404 40,023 3 Industrial and commercial equipment Other tangible assets 430, ,498 5 Assets operated under concession 6 Assets under construction and advances 50,000 50,000 Total tangible assets 932, ,137 III. Financial assets 1 Equity investments : a subsidiaries 299,750, ,200,411 b associates 1,853,970 1,853,970 c other companies 32,539,158 32,515,909 Total equity investments 334,143, ,570,290 2 Receivables : a due from subsidiaries b due from associates c due from parent company d due from others 103, ,711 39,880 39,880 e due from other group companies f guarantee deposits 149, , , ,020 Total receivables 103, , ,731 39, , ,900 3 Securities 4 Own shares (nominal value Euro 6,906,258) 12,187,024 12,186,904 Total financial assets 346,583, ,946,094 TOTAL FIXED ASSETS 347,904, ,176,507 C) CURRENT ASSETS I. Inventory 1 Raw materials and consumables and goods 2 Work in progress, semi-finished products and goods 3 Contract work in progress 4 Finished products and goods 5 Advance payments Total inventory II. Receivables 1 Trade receivables 1,119,896 1,119,896 2,055,403 2,055,403 2 Due from subsidiaries a trade 1,137,359 1,137,359 1,814,135 1,814,135 b financial 213,724, ,724,016 99,048,951 99,048,951 c other 6,400,407 6,400,407 2,211,795 2,211,795 Total receivables due from subsidiaries 221,261, ,261, ,074, ,074,881 3 Due from associates a trade 7,668,973 7,668,973 5,590,784 5,590,784 b financial 7,083,194 7,083,194 5,658,944 5,658,944 c other 2,418 2,418 2,418 2,418 Total receivables due from associates 14,754,585 14,754,585 11,252,146 11,252,146 4 Due from parent company a trade b financial c other Total receivables due from parent company 4bis Tax credits 3,082,979 3,082,979 1,155,733 1,155,733 4terDeferred tax assets 5 Due from others a financial 4,928 4,928 b advance payments 16,425 16,425 c other 15,165,285 15,165,285 15,123,011 15,123,011 Total receivables due from others 15,181,710 15,181,710 15,127,939 15,127,939 6 Due from other group companies a trade b financial c other Total receivables due from other group companies Total receivables 255,400, ,400, ,666, ,666,102 III. Short-term investments 1 Investments in subsidiaries 2 Investments in associates 3 Investments in other companies 4,352,289 4,352,289 4 Own shares 5 Securities 34,550 34,550 6 Bills receivable Total short-term investments 4,386,839 4,386,839 IV. Cash and bank 1 Bank and post office accounts 1,163, ,472 2 Cheques 3 Cash in hand 10,052 6,708 Total cash and bank 1,173, ,180 TOTAL CURRENT ASSETS 260,961, ,782,121 D) ACCRUED INCOME AND PREPAID EXPENSES 58,919 64,200 TOTAL ASSETS 608,924, ,022,

102 31 december december 2006 Liabilities Amounts due within 12 months Amounts due after 12 months Total (Euro) Amounts due within 12 months Amounts due after 12 months Total (Euro) A) SHAREHOLDERS' EQUITY I. Share capital 72,742,313 72,742,313 II. Share premium reserve 28,656,654 28,656,654 III. Revaluation reserve 1 reserve ex Law 72/83 2 reserve ex Law 413/91 Total revaluation reserve IV. Legal reserve 31,375,994 31,375,994 V. Statutory reserve VI. Reserve for own shares 12,187,024 12,186,904 VII. Other reserves 1 Extraordinary reserve 17,187,170 17,187,170 2 Contributions from shareholders 450, ,000 Total other reserves 17,637,170 17,637,170 VIII.Profit /(loss) carried forward 99,433,629 92,072,848 IX. Profit /(loss) for the year 5,469,980 9,862,838 TOTAL SHAREHOLDERS' EQUITY 267,502, ,534,721 B) PROVISIONS FOR RISKS AND CHARGES 1 For pensions and similar obligations 2 For taxes a Current b Deferred Total provision for taxes 3 Other provisions a Provision for litigation 2,238,996 2,238,996 b Provision for equity investment risks 5,687,000 5,687,000 c Provision for environmental improvements d Provision for reorganisation and liquidation costs e Sundry provisions 46,692,686 46,710,566 Total other provisions 54,618,682 54,636,562 TOTAL PROVISIONS FOR RISKS AND CHARGES 54,618,682 54,636,562 C) EMPLOYEE SEVERANCE INDEMNITY 701, ,798 D) PAYABLES 1 Bonds and debenture loans 2 Convertible bonds and debenture loans 9,149,819 26,944,420 36,094,239 36,094,239 36,094,239 3 Shareholders' loans 8,024 8,024 8,024 8,024 4 Bank loans and overdrafts 241,206, ,206, ,304, ,304,928 5 Other financing creditors 6 Advance payments received 7 Trade payables 3,082,712 3,082,712 3,234,381 3,234,381 8 Bills payable 9 Due to subsidiaries a trade 575, ,958 1,003,206 1,003,206 b financial 145, , , ,038 c other 1,636,065 1,636, , ,515 Total amount due to subsidiaries 2,357,988 2,357,988 1,658,759 1,658, Due to associates a trade b financial c other Total amount due to associates 11 Due to parent company a trade b financial c other Total amount due to parent company 12 Tax payables 624, , , , Social security and national insurance contributions 373, , , , Other payables 1,608,475 1,608,475 1,756,357 1,756, Due to other group companies a trade b financial c other Total amount due to other group companies TOTAL PAYABLES 258,411,484 26,944, ,355, ,311,033 36,094, ,405,272 E) ACCRUED LIABILITIES AND DEFERRED INCOME 745, ,475 TOTAL LIABILITIES 608,924, ,022,

103 Profit and loss account Falck SpA (euro) A) Value of production 1 Revenue from sales and services 1,083,685 1,064,943 2 Change in work in progress, semi-finished and finished products 3 Change in contract work in progress 4 Own work capitalised a production and inventory b capitalised interest Total own work capitalised 5 Other income a grants received b other operating income 1,296, ,889 c recharged expenses 5,032,403 5,219,650 d sundry income 118,089 84,460 e property income f gains from ordinary operations g non-recurring income 396, ,211 Total other income 6,843,768 6,140,210 Total value of production 7,927,453 7,205,153 B) Cost of production 6 Raw materials and consumables and goods (109,971) (185,569) 7 Cost of services a services (6,420,716) (6,091,674) b utilities (125,148) (125,139) c sundry costs (677,717) (743,686) Total cost of services (7,223,581) (6,960,499) 8 Rentals and leasing charges (1,744,293) (1,741,463) 9 Employee costs a salaries and wages (2,721,863) (3,686,050) b social security charges (812,217) (964,538) c staff leaving indemnity (TFR) (169,844) (200,496) d pensions and similar obligations e other costs (120,811) (65,645) Total employee costs (3,824,735) (4,916,729) 10 Amortisation,depreciation and write-downs a amortisation of intangible assets (81,910) (55,754) b depreciation of tangible assets (182,216) (144,966) c other write-downs on fixed assets d write-down of current assets and cash e utilisation of bad debt provision in respect of current assets and cash 4,126 f bad debts (4,126) (942,797) Total amortisation,depreciation and write-downs (264,126) (1,143,517) 11 Change in inventory of raw materials and consumables and goods 12 Provision for contingencies a Charge to provision for litigation b Utilisation of provision for litigation Total provision for contingencies 13 Other provisions 14 Other operating charges a indirect taxes (52,175) (44,505) b property charges c losses from ordinary operations d non-recurring expenses (243,898) (107,935) e other (524,840) (1,160,873) Total other operating charges (820,913) (1,313,313) Total cost of production (13,987,619) (16,261,090) Difference between value and cost of production (6,060,166) (9,055,937) C) Financial income and charges 15 Income from equity investments a subsidiaries 7,487,730 1,462,473 b associates c other companies 2,703,218 1,578,385 d tax credits on dividends e gains on disposal of equity investments Total income from equity investments 10,190,948 3,040,

104 (euro) Other financial income a From receivables included in fixed assets a.1 subsidiaries a.2 associates a.3 parent company a.4 other group companies a.5 others Total from receivables included in fixed assets b From securities included in fixed assets c From securities included in current assets c.1 interest income from securities c.2 gains from disposal of securities Total income from securities included in current assets d Other income d.1 interest and commission from subsidiaries 9,889,422 3,294,707 d.2 interest and commission from associates 400, ,390 d.3 interest and commission from parent company d.4 interest and commission from other group companies d.5 interest and commission from banks 178, ,515 d.6 interest and commission from others and sundry income ,709,637 Total other income 10,468,148 17,366,249 Total other financial income 10,468,148 17,366, Interest expense and other financial charges a subsidiaries (5,700,728) (3,208,523) b associates c parent company d other group companies e others (4,655,512) (13,340,320) f losses on disposal of equity investments g losses on disposal of securities Total interest expense and other financial charges (10,356,240) (16,548,843) 17bis Exchange gains and losses a exchange gains 10,571,359 1,016,126 b exchange losses (12,791,466) (1,498,439) Total exchange gains and losses (2,220,107) (482,313) Total financial income and charges 8,082,749 3,375,951 D) Adjustments to financial assets 18 Revaluations a equity investments 1,094,378 b financial assets included in fixed assets c securities included in current assets Total revaluations 1,094, Write-downs a equity investments a.1 permanent losses on equity investments (39,436) a.2 provision for equity investment risks a.3 utilisation of provision for equity investment risks Total write-downs on equity investments (39,436) b of financial assets included in fixed assets c of securities included in current assets Total write-downs (39,436) Total adjustments to financial assets (39,436) 1,094,378 E) Extraordinary income and expenses 20 Income a gains from extraordinary disposals 801,789 12,917,212 b other extraordinary income 33,453 1,016,886 c utilisation of provision for reorganisation and liquidation costs Total extraordinary income 835,242 13,934, Expenses a losses from extraordinary disposals (1,372) b tax relating to prior financial periods c other extraordinary charges (48,425) d reorganisation and liquidation costs Total extraordinary expenses (49,797) Total extraordinary items 835,242 13,884,301 Profit for the year before taxation 2,818,389 9,298, Tax on profit for the year 2,651, , Profit for the year 5,469,980 9,862,

105 8.5.1 Accounting policies The valuation and measurement of financial information for the year ended 31 December 2008 have been based on the IAS/IFRS currently in force and their related interpretations as set out in the documents issued to date by the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC). The separate company financial statements are prepared in Euro and all values are rounded to thousands of Euro except where otherwise indicated. The financial statements have been prepared applying the historical cost convention, with the exception of derivative instruments and financial assets available for sale, valuation of which is based on the market value (fair value) principle. Non-current assets and tangible fixed assets held for sale are recorded at the lower of book and market value. The accounting policies detailed below were applied to the current financial year, comparative amounts for the prior year and in the preparation of the opening IFRS financial statements at 1 January 2005 representing the date of transition to IFRS. All adjustments arising from the first time adoption of IAS/IFRS have been recorded in net equity. In addition, on first time adoption of IFRS, as prescribed by IFRS 1, the standards IFRS 3, IAS 32 and IAS 39 were adopted from 1 January As a result, commencing this date, amortisation of goodwill has no longer been accounted for and derivative financial instruments are measured at fair value without retrospective application. The principal accounting policies and valuation methods adopted in the preparation of the separate company financial statements are set out below: Intangibles An intangible asset is recorded only when it is identifiable, controllable, is expected to benefit future periods and the cost may be reliably measured. Intangible assets are recorded at cost including directly attributable expenses and are amortised systematically over their estimated useful economic life. Intangible assets having a finite useful life are classified at cost net of accumulated amortisation and any permanent losses in value. Amortisation is based on the estimated useful life and commences when the asset is available for use. Costs relating to the acquisition of CIP 6/92 rights are amortised over the related benefit period. The remaining intangibles comprise costs relating to the automation and mechanisation of a number of information systems. Property, plant and equipment Actelios SpA opted for the cost method in preparing the first IAS/IFRS financial statements, as prescribed by IFRS 1. As a result, with regard to property, plant and equipment, the company has preferred not to adopt the fair value approach. Property, plant and equipment is recorded at acquisition or production cost including directly attributable costs. Property, plant and equipment is valued at cost, net of depreciation and accumulated permanent losses in value, with the exception of land, which is not depreciated and is valued at cost less accumulated losses in value. In the event that significant components of an item of property, plant and equipment have differing useful lives, each component is attributed a separate useful life for depreciation purposes (component depreciation). The depreciation rates applied represent the estimated useful life of the assets. The rates applied to the various asset categories are as follows: (%) Industrial buildings light construction General and specific plant Heavy plant and operating machinery 9-10 Equipment Office machinery and equipment Vehicles These rates are applied based on months of actual use with regard to assets that come into use during the year. Ordinary maintenance costs are charged to expenses in the year in which they are incurred. Maintenance costs that increase the future economic benefits derived from the assets are capitalised on the related asset and depreciated over the asset s residual useful life. Borrowing costs for the construction of a plant or its acquisition are capitalised up until the moment in which the asset is ready for use in the production process. 104

106 Impairment of assets In the presence of circumstances that potentially indicate a loss in value, impairment tests are conducted on tangible and intangible assets, by estimating the recoverable amount of the asset and comparing it with the related net book value. In the event that the recoverable value is lower than the carrying value an impairment loss is recorded in the income statement. When there is an indication that an impairment loss recognised in a previous accounting period is no longer required, the carrying value is restated to the new estimated recoverable value which may not exceed the carrying value that would have been recognised had the original impairment not occurred. The reversal is also recorded in the income statement. Investments and securities Investments in subsidiaries and associates Investments in subsidiaries excluded from the scope of consolidation are valued at cost. The book value is written down to reflect permanent losses in value in the event that the investments are in a loss-making situation and no profits are foreseeable in the near future to cover the losses reported; the original value is restated in future financial periods in the event that the reasons for the write down no longer exist. Investments in other companies and other investments In accordance with IAS 39 and 32, investments in companies that are neither subsidiaries nor associates are measured at fair value with the exception of those circumstances in which market price or fair value cannot be determined: in this event the cost method is applied. The book value is written down to reflect permanent losses in value in the event that investments are in a loss-making situation and no profits are foreseeable in the near future to cover the losses reported; the original value is restated in future financial periods in the event that the circumstances that give rise to the write-down no longer exist. Financial assets Classification In accordance with IAS 39 and IAS 32, financial assets are classified into the following four categories: 1. Financial assets at fair value through profit or loss ; 2. Held-to-maturity investments; 3. Loans and financial receivables similar to loans; 4. Available-for-sale financial assets. The classification depends on the reason for which the investment was initially purchased and is subsequently held and management is required to determine the initial classification on initial recognition updating this at each financial year end. A description of the principal characteristics of each asset category detailed above may be summarised as follows: Financial assets at fair value through profit or loss This category has two sub-categories: 1. Financial assets held for trading; 2. Financial assets designated to the fair value category on initial recognition. This category includes all financial investments other than equity instruments that are not quoted in an active market but for which a fair value may be reliably measured. Financial instruments, with the exception of hedge instruments, are included in this category and their fair value recorded in the income statement. All assets within this category are classified as current if they are held for trading purposes or where disposal is expected within 12 months from the year end. Designation of a financial instrument to this category is irrevocable and may take place only on initial recognition. Held-to-maturity investments Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity, which the company intends to hold to maturity (e.g. underwritten debentures). Evaluation of the intent and ability to hold the asset to maturity must be made on initial recognition and at each subsequent balance sheet date. In the event of sale before maturity (of a significant amount and not in exceptional circumstances) of held-to-maturity securities, all such investments are reclassified as financial assets held for trading and measured at fair value. 105

107 Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market and which the company does not intend to trade in. These are classified in current assets with the exception of the portion expiring more than 12 months after the balance sheet date, which is classified in non-current assets. Loans and receivables are classified within the financial statements under the headings financial receivables and other receivables. Available-for-sale financial assets All non-derivative instruments that are not classified in another category are designated as available-for-sale financial assets. These are classified as non-current assets unless management intends to dispose of them within 12 months of the balance sheet date. Accounting treatment Financial assets at fair value through profit or loss held for trading (category 1) and available-for-sale financial assets (category 4) are recorded at fair value including costs directly attributable to acquisition. Gains or losses relating to financial assets held for trading are recognised immediately in the income statement. Gains or losses relating to financial assets available for sale are recorded within a separate heading in equity until they are sold or otherwise disposed of, or until circumstances indicate they may be impaired. Where any of these events takes place, all gains or losses recognised to date and recorded in equity are reclassified to the income statement Fair value represents the amount at which an asset may be exchanged or a liability settled in an arm s length transaction between knowledgeable, willing parties. As a result it is assumed that the entity is a going concern and that neither party needs to liquidate its assets through transactions applying unfavourable terms. In the case of securities traded on an active market, fair value is determined with reference to the bid price at the end of trading at the balance sheet date. In the event that a market valuation is not available for the investment, fair value is determined either based on the current market value of another substantially similar financial instrument or applying appropriate valuation techniques (discounted cash flows - DCF). Where fair value may not be reliably determined, the financial asset is valued at cost with disclosure in the notes to the financial statements regarding the type of asset and explanation of the accounting treatment. Held-to-maturity investments (category 2) and loans and receivables (category 3) are recorded at cost representing the fair value of the initial consideration exchanged and are subsequently valued applying the amortised cost method utilising the effective interest rate and taking into consideration any discounts or premiums received at the date of acquisition in order to record them over the entire period of ownership up to maturity. Gains and losses are recognised in the income statement either when the investment reaches maturity or where circumstances indicate that it has suffered an impairment loss, in the same way they are identified during the normal amortisation period foreseen by the amortised cost method. Investments in financial assets may be derecognised only when the contractual rights to receive cash flows from the investments have expired (e.g. final payment of underwritten bonds) or when the company transfers the financial asset together with all of the related risks and rewards. Inventories Finished goods are stated at the lower of purchase cost and net realisable value. Purchase cost is determined using the weighted average cost method. Obsolete and slow moving inventory is valued based on possible future use or realisation. With regard to contract work in progress that spans more than one accounting period, valuation is based on income matured to date with reasonable certainty, determined by comparing actual costs to date with the total estimated costs to completion. Receivables Receivables are initially recorded at the fair value of the amount to be received, which for this category normally relates to the nominal value indicated on the invoice, adjusted where necessary to the estimated recoverable amount through recognition of a provision for doubtful accounts. Subsequently, where the required conditions exist, receivables are valued applying the amortised cost method. Cash and cash equivalents Cash and cash equivalents include cash on hand and short term bank balances. 106

108 Non-current assets disposed of or held for sale Non-current assets that have been disposed of or that are held for sale include those assets (or groups of assets) due to be disposed of and for which the accounting value will be recovered principally through sale rather than future use. Non-current assets held for sale are valued at the lower of their carrying amount and fair value less costs to sell. In accordance with IFRS, information relating to discontinued operations is presented in two specific headings in the balance sheet: non-current assets held for sale and liabilities attributable to non-current assets held for sale; and in a specific heading in the income statement: net profit/(loss) of discontinued operations or non-current assets held for sale. Provisions Provisions are recognised when a present obligation (legal or constructive) exists as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount may be made. No provision is made for risks in relation to which the recognition of a liability is only possible. In this case the risk is disclosed in the relevant note on contingencies and commitments and no provision is made. Provisions may be analysed as follows: Litigation This provision includes the charge for future costs relating to legal proceedings. Investments Provision is made to recognise potential permanent losses in the carrying value of non-consolidated subsidiaries. Environmental This provision is set up to meet future requirements in relation to the redevelopment of landfills in accordance with the obligations undertaken on receipt of permission from the relevant authorities. The provision is based on estimates prepared by specialist enterprises. Sundry provisions This provision includes all other future liabilities not included above, which are reasonably quantifiable but for which the date of occurrence is uncertain. Staff leaving indemnity (TFR) Post employment defined benefits and other long-term employee benefits are subjected to actuarial valuation. The liability recognised in the balance sheet is the present value of the company s obligations. Actuarial gains and losses are recognised in the income statement. Valuation of the liability is performed by independent actuaries. Trade payables Trade payables with normal trading terms are recorded at nominal value. Borrowings and financial liabilities Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are stated at amortised cost. Finance costs are determined using the effective interest method. Other financial liabilities comprise derivative instruments entered into in order to hedge interest rate risk. The derivative instruments are not accounted for using hedge accounting and in accordance with IAS 39 are recognised at fair value through profit or loss. The company adopted IAS 39 from 1 January Current tax liabilities The provision for income taxes is based on the estimated taxable income for the period for each individual company, taking into consideration tax credits and losses brought forward and utilised in the period. Accruals, prepayments and deferrals Accruals, prepayments and deferrals are determined applying the accruals concept. Share capital Ordinary shares are classified within share capital at nominal value. Incremental costs directly attributable to capital transactions are recorded as a deduction in equity. 107

109 Foreign currency translation The functional currency of the company is the Euro and is the currency in which the annual financial statements are prepared and presented. Foreign currency transactions are recorded at the exchange rate existing at the date of the transaction. Receivables and payables are translated at the closing rate at the balance sheet date. Exchange gains or losses arising on translation are recognised in the income statement in the period in which they arise. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction. Non-monetary items measured at fair value are translated using the exchange rate at the date when the fair value was determined. Revenue recognition Revenue is recorded net of returns, discounts and rebates, as well as direct taxes on the sale of goods or provision of services. Revenue from product sales Revenue from the sale of products is recognised on the transfer of ownership, which normally takes place on delivery or despatch of the goods. Revenue from services Revenue from services is recognised once the service has been rendered. Interest Finance income is accounted for applying the accruals concept. Dividends Dividends are recognised when the right to receipt of the dividend is established, which normally corresponds with the approval of distribution in the shareholders meeting. Other income Other income comprises amounts that do not relate to the core business of the company and, in accordance with IAS 1 which has been applied from 1 January 2005, they are classified in ordinary activities and where significant in value are disclosed separately in the notes to the financial statements. Costs Costs are recognised net of returns, discounts, bonuses and premiums, as well as direct taxes relating to the purchase of goods and services. Taxation including deferred income tax Income tax is calculated and provided for based on estimated taxable income for the year and applying existing tax legislation. Deferred income taxes are calculated applying the liability method on all temporary differences between the tax bases of assets and liabilities and the financial reporting values at the balance sheet date. Deferred income tax assets are recognised only when sufficient future taxable income against which these assets can be utilised is reasonably foreseeable. The balance of deferred income tax assets is reviewed at each balance sheet date and a valuation allowance is provided in the event that it is no longer probable that sufficient future taxable profits will be available to offset all or part of the tax credit. Deferred income tax assets and liabilities are measured at the enacted tax rates that will be in effect in the periods in which the assets are realised or the liability is settled and are classified in non-current assets and liabilities, respectively. 108

110 8.5.2 Balance sheet content and movements Assets Non-current assets 1 Intangible assets Movements during the year were as follows: At Acquisitions Capital.n Change in Disposals Other Impair- Amorti- At and reclass.n scope of move- ment sation (Euro thousands) consol.n ments 1.1 Industrial patent rights 38 3 (11) Concessions, licences, trademarks and similar 1.3 Goodwill 1.4 Other intangibles 1.5 Assets under construction and advance payments Total 38 3 (11) 30 Additions relate to software updates acquired during the year. 2 Property, plant and equipment Movements during the year were as follows: At Additions Capital.n Change in Disposals Impair- Deprec- At and scope of ment iation reclass.n consol.n losses (Euro thousands) (A) Gross value 2.1 Land 2.2 Buildings 2.3 Plant and machinery 2.4 Industrial and office equipment 3.5 Other assets Assets operated under concession 3.7 Assets under construction and advances 1,231 (1,231) Total gross value 214 1,253 (1,231) 236 Accumulated depreciation 2.1 Land 2.2 Buildings 2.3 Plant and machinery 2.4 Industrial office and equipment 3.5 Other assets (102) (36) (138) 3.6 Assets operated under concession Total depreciation (102) (36) (138) Net book amounts 2.1 Land 2.2 Buildings 2.3 Plant and machinery 2.4 Industrial and office equipment 2.5 Other assets (36) Assets operated under concession 2.7 Assets under construction and advances 1,231 (1,231) Total net book amounts 112 1,253 (1,231) (36)

111 A) Additions Additions comprise: (Euro thousands) Personal computers 16 Furnishings 6 Advance for the photovoltaic plants in Mesagne (BR) 1,231 Total 1,253 Disposals relate to the sale of the business to the subsidiary Actelios Solar SpA, which included the advance on the plants in Mesagne. 3 Financial assets The total at 31 December 2008 may be analysed as follows: (Euro thousands) Change Investments in subsidiaries 88,891 86,232 2,659 Investments in associates 13,121 10,705 2,416 Investments in other entities Securities Total 102,023 96,941 5,082 The increase in investments in subsidiaries relates to the capital contribution of Euro 1,000 thousand paid to Elettroambiente SpA, the share capital increase of Euro 1,109 thousand in Actelios Solar SpA and the incorporation of and subsequent share capital increase in Actagri Srl for a total of Euro 550 thousand. The net increase in investments in associates relates to the share capital increase of Euro 2,450 thousand in Powercrop SpA and the disposal of the investment in Termini Imerese Energia Ambiente Srl for Euro 34 thousand. The higher book value of investments compared to the proportionate share of shareholders equity does not require recognition of an impairment loss given the future profits that are expected to be realised on the projects. In particular with regard to Elettroambiente and Palermo Energia Ambiente (the holders of the projects in Sicily), the alternative scenarios relating to the outcome of the implementation of the agreement with ARRA, as detailed in the directors report, were taken into consideration. 4 Financial receivables Financial receivables at 31 December 2008 may be analysed as follows: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts owed by third parties Amounts owed by subsidiaries 79,846 6,335 73,511 74,831 6,335 68,496 5,015 5,015 Amounts owed by associates 10,954 4,116 6,838 10,868 10, ,116 (4,030) Amounts owed by parent company 172, , , ,266 Amounts owed by other group companies Derivative financial instruments Total 263,088 10, ,637 85,721 6,335 79, ,367 4, ,251 Non-current receivables owed by subsidiaries relate to the loan granted to Prima Srl, while those owed by associates relate to Frullo Energia Ambiente Srl. Amounts owed by the parent company relate to Falck SpA, which carries out managerial and coordination activities on behalf of Actelios SpA. In respect of these activities an agreement was signed with the purpose of optimising and rationalising the 110

112 financial management of Actelios SpA and Falck SpA within the Falck group, while maintaining the autonomy and managerial independence of Actelios SpA. This agreement covers management of the non working capital liquidity of Actelios SpA, with Falck SpA undertaking to repay the liquidity required for the Actelios group s capital expenditure, in whole or in part and in line with the notice periods established in the agreement. Actelios SpA s liquidity is invested with Falck SpA and is interest bearing at current market rates. The agreement is annual (calendar year) and is automatically renewed in the event that it is not cancelled by one of the parties in which case there is a two month notice period. The current portion of amounts owed by associates amounting to Euro 6,838 thousand is due from Palermo Energia Ambiente ScpA. 5 Trade receivables Trade receivables at 31 December 2008 consisted of the following: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Trade receivables ,035 3,035 (2,940) (2,940) Amounts owed by subsidiaries 2,083 2,083 1,914 1, Amounts owed by associates 2,524 2,524 1,974 1, Amounts owed by parent company Amounts owed by other group companies (25) (25) Total 4,733 4,733 6,970 6,970 (2,237) (2,237) The company does not have a provision for doubtful accounts. The company does not have significant receivables due from non-domestic customers that require disclosure. 6 Other receivables Other receivables at 31 December 2008 comprised: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts owed by third parties Amounts owed by subsidiaries 2,550 2,550 7,650 7,650 (5,100) (5,100) Amounts owed by associates 9,844 9,844 (9,844) (9,844) Amounts owed by parent company Amounts owed by other group companies Tax credits Accrued income and prepayments (7) (7) Total 2,552 2,552 17,503 17,503 (14,951) (14,951) Amounts owed by subsidiaries and associates are in respect of the dividends declared by the shareholders of Prima Srl but not yet paid. 111

113 7 Deferred income tax assets Deferred income tax assets may be analysed as follows: Temporary Deferred income Temporary Deferred income (Euro thousands) difference Rate tax asset difference Rate tax asset Other provisions % 165 Employee bonuses % 122 1, % 548 Reserve for share capital increase expenses 1, % 538 2, % 807 Total 660 1,520 B Current assets 8 Inventories The company has no inventories at 31 December Cash and cash equivalents (Euro thousands) Change Short-term bank and post office deposits ,800 (158,423) Cash in hand Total ,800 (158,423) Cash and cash equivalents may be further detailed as follows: (Euro thousands) Change Cash at bank and in hand ,800 (158,423) Bank overdrafts Invoice advances Group current accounts (2,153) (1,207) (946) Total cash and cash equivalents (1,776) 157,593 (159,369) Cash and cash equivalents have decreased significantly principally as a result of the above-mentioned new agreement with Falck SpA. 112

114 Liabilities D Equity 10 Share capital Share capital consists of 67,680,000 issued and fully paid ordinary shares, with a nominal value of Euro 1 each. In the course of the year the number of shares did not change. Total equity may be analysed as follows: Summary of utilisation Total Possible Share in three previous financial years (Euro thousands) utilisation available To cover losses Other reasons Share capital 67,680 Capital reserves Share premium 240,828 A-B 240,828 Reserve for share capital increase expenses (3,492) (3,492) Revaluation reserve ex Law 72/83 1,003 A-B 1,003 Reserve ex art.54 Pres. Decree 597/73 3,423 A-B 3,423 Reserve ex art.55 Pres. Decree 597/ A-B 653 Demerger surplus 3,936 A-B 3,936 Earnings reserves Legal reserve 1,576 B 1,576 Profit carried forward 13,086 A-B-C 13,086 Total 328, ,013 Key: A: share capital increase B: to cover losses C: distributed to shareholders Movements in equity during 2007 and 2008 were as follows: At Appropriation Profit for Share capital Other At (Euro thousands) of result the year increase movements Share capital 67,680 67,680 Share premium 240, ,828 Revaluation reserve 1,003 1,003 Legal reserve Reserve for own shares (3,277) (215) (3,492) Statutory reserve Other reserves - ex art. 54 Pres. Decree 597/73 3,424 3,424 - ex art. 55 Pres. Decree 597/ demerger surplus 3,936 3,936 Retained earnings 5,171 2,922 8,093 Profit for the year 10,197 (10,197) 15,941 15,941 Total 329,887 (6,768) 15,941 (215) 338,

115 At Appropriation Profit for Share capital Other At (Euro thousands) of result the year increase movements Share capital 67,680 67,680 Share premium 240, ,828 Revaluation reserve 1,003 1,003 Legal reserve ,576 Reserve for own shares (3,492) (3,492) Statutory reserve Other reserves - ex art. 54 Pres. Decree 597/73 3,424 3,424 - ex art. 55 Pres. Decree 597/ demerger surplus 3,936 3,936 Retained earnings 8,093 4,992 13,085 Profit for the year 15,941 (15,941) 17,688 17,688 Total 338,845 (10,152) 17, ,381 Earnings per share Basic earnings per share, which are equivalent to diluted earnings, have been calculated by dividing the profit for the year attributable to the ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding during the year, based on the following information: Weighted average number of ordinary shares (number of shares) 67,680,000 67,680,000 Earnings attributable to the ordinary shareholders of the parent company (Euro thousands) 17,688 15,941 Basic earnings per share (Euro per share) Number of ordinary shares (number of shares) 67,680,000 67,680,000 Earnings attributable to the ordinary shareholders of the parent company (Euro thousands) 17,688 15,941 Earnings per share (Euro per share) Provisions for other liabilities and charges At Change in scope Charge Utilised Reclassified At (Euro thousands) of consol.n Provisions for pensions and similar obligations Provisions for taxation - Current - Deferred tax Total tax provisions Other provisions - litigation - investments - environmental - restructuring - sundry provisions 600 (600) Total other provisions 600 (600) Total 600 (600) The sundry provision was utilised in order to cover the costs relating to legal proceedings with employees that were settled during the year following which the balance of this provision was released. 114

116 12 Staff leaving indemnity (TFR) At Charges Transfers/ Utilised/ At (Euro thousands) new consol.n paid Managers (9) (185) 231 White-collar staff and special categ.s (23) 242 Blue-collar staff Total (9) (208) 473 The Trattamento di Fine Rapporto (TFR) (staff leaving indemnity provision), was subjected to an actuarial calculation by an independent expert. Given that the resulting calculation did not differ significantly from the amount determined in accordance with Italian Generally Accepted Accounting Principles (Italian GAAP), no adjustment was recorded. The financial actuarial assumptions used at 31 December 2008 and for the purpose of estimating the cost for 2008 were as follows: (%) Change Annual discount rate 5.00% 5.45% -0.45% Annual inflation rate 2.00% 2.00% Annual total pay increase rate 3.00% 3.00% Annual TFR increase rate 3.00% 3.00% 13 Financial liabilities Financial liabilities at 31 December 2008 consisted of the following: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts due to third parties Amounts due to subsidiaries ,207 1,207 (554) (554) Amounts due to associates 1,500 1,500 1,500 1,500 Amounts due to parent company Amounts due to other group companies Project financing Derivative financial instruments Total 2,153 2,153 1,207 1, Amounts due to subsidiaries relate to the current accounts with Actagri Srl and Ambiente 2000 Srl amounting to Euro 360 thousand and Euro 293 thousand respectively, while amounts due to associates relate to the loan granted by Powercrop SpA. 115

117 14 Trade payables Trade payables at 31 December 2008 compared to the previous year are as follows: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Trade payables 1,147 1,147 2,047 2,047 (900) (900) Amounts due to subsidiaries 4 4 (4) (4) Amounts due to associates Amounts due to parent company (86) (86) Amounts due to other group companies (60) (60) Total 1,429 1,429 2,479 2,479 (1,050) (1,050) The company does not have significant trade payables with non-domestic customers that require disclosure. 15 Other payables Other payables at 31 December 2008 compared to 31 December 2007 are as follows: Change Total Non- Current Total Non- Current Total Non- Current (Euro thousands) current current current Amounts due to third party creditors 21,066 21,066 22,793 22,793 (1,727) (1,727) Amounts due to subsidiaries Amounts due to associates (17) (17) Amounts due to parent company 2,059 2,059 1,240 1, Amounts due to other group companies Accruals and deferred income Total 23,125 23,125 24,050 24,050 (925) (925) Third party creditors may be detailed as follows: (Euro thousands) Amounts due for acquisition of Elettroambiente SpA 20,000 20,000 Other amounts due to employees (Mbo) 444 1,993 Holiday pay Social security payable Tax payable Advances 118 Other Total 21,066 22,793 Amounts due to parent company relate to the amount due to Falck SpA in respect of groupvat (Euro 170 thousand) and IRES (corporation tax) of Euro 1,889 thousand, as Actelios SpA is a member of the group tax regime headed by Falck SpA. Commitments and contingencies Guarantees issued at 31 December 2008 amounted to Euro 47 thousand. Other personal guarantees amounted to Euro 49,726 thousand, representing an increase of Euro 371 thousand on 31 December

118 Related party transactions Trade receivables Trade payables (Euro thousands) Change Change Subsidiaries Actagri Srl 3 3 Ambiente 2000 Srl (120) 2 (2) Ecosesto SpA Elettroambiente SpA 8 12 (4) 2 (2) Platani Energia Ambiente ScpA Prima Srl (192) Tifeo Energia Ambiente ScpA Total subsidiaries 2,083 1, (4) Associates Ambiente 3000 Srl 21 (21) Frullo Energia Ambiente Srl Palermo Energia Ambiente ScpA 2,111 1, Powercrop SpA (128) Total associates 2,524 1, Parent company Falck SpA (86) Total parent company (86) Group companies Falck Financial Services Sa 60 (60) Falck Renewables Italia Srl 4 29 (25) Total group companies 4 29 (25) 60 (60) Other related parties Italgest Servizi Srl 3,031 (3,031) Total other related parties 3,031 (3,031) Total 4,637 6,966 (2,329) (150) % incidence on balance sheet heading 98% 99.9% 19.73% 17.4% Financial receivables Financial payables (Euro thousands) Change Change Subsidiaries Actagri Srl Actelios Solar SpA 1,610 1,610 Ambiente 2000 Srl (412) Ecosesto SpA 1,172 1, (502) Elettroambiente SpA 70,729 68,496 2,233 Prima Srl 6,335 6,335 Total subsidiaries 79,846 74,831 5, ,207 (554) Associates Frullo Energia Ambiente Srl 4,116 4,116 Powercrop SpA 1,500 1,500 Palermo Energia Ambiente ScpA 6,838 6, Total associates 10,954 10, ,500 1,500 Parent company Falck SpA 172, ,266 Total parent company 172, ,266 Total 263,088 85, ,367 2,153 1, % incidence on balance sheet heading 100% 100% 100% 100% 117

119 Other receivables Others payables (Euro thousands) Change Change Subsidiaries Prima Srl 2,550 7,650 (5,100) Total subsidiaries 2,550 7,650 (5,100) Associates Frullo Energia Ambiente Srl 9,844 (9,844) Termini Imerese Energia Ambiente Srl 17 (17) Total associates 9,844 (9,844) 17 (17) Parent company Falck SpA 2,059 1, Total parent company 2,059 1, Other related parties Italgest Energia SpA 20,000 20,000 Total other related parties 20,000 20,000 Total 2,550 17,494 (14,944) 22,059 21, % incidence on balance sheet heading 99.9% 99.9% 95.4% 88.4% Income statement content and movements 16 Revenue Revenue consisted of the following: (Euro thousands) Change Revenue from sales of goods Revenue from provision of services 1, ,019 Total 1, ,019 The increase is principally due to development costs (Euro 623 thousand) that were invoiced as part of the sale of the photovoltaic business to Actelios Solar SpA, for employees on transfer to Falck Renewables Italia Srl (Euro 191 thousand) and services carried out in Iran (Euro 151 thousand). 17 Employee costs Employee costs may be analysed as follows: (Euro thousands) Change Cost of production employees Cost of administrative staff 3,868 3,918 (50) Total 3,868 3,918 (50) Total employee costs analysed by nature of expense are as follows: (Euro thousands) Change Wages and salaries 2,539 2,842 (303) Social security costs (118) Staff leaving indemnity (TFR) Other costs Total 3,868 3,918 (50) 118

120 The average number of employees was as follows: (Number) Managers White-collar staff Blue-collar staff Total average number of employees Direct costs (Euro thousands) Change Materials Services Other costs 7 7 Change in inventories Changes in/(utilisation of) operating provisions Amortisation and impairment of intangible assets Depreciation and impairment of property, plant and eq.pmt Employee costs capitalised on assets under construction Total Other income Other income may be analysed as follows: (Euro thousands) Change Income from operating activities 2,911 2, Income from non-operating activities 1, ,136 Total 4,212 3,018 1,194 Income from operating activities may be further detailed as follows: (Euro thousands) Change Income from services provided to other group companies 2,837 2, Recharged expenses Other Total 2,911 2, Income from non-operating activities may be further detailed as follows: (Euro thousands) Change Income relating to other accounting periods 1, Gains on disposal of property, plant and equipment Gains on disposal of investments Utilisation of provisions Insurance compensation Other Total 1, ,136 Income relating to other accounting periods largely relates to the excess provisions charged in prior years in respect of the variable element of remuneration due to management and legal expenses. 119

121 20 Administrative expenses Administrative expenses may be detailed as follows: (Euro thousands) Change Consumables (7) Services 4,519 4,979 (460) Other costs Non-operating expenses 5 13 (8) Amortisation and impairment of intangible assets (4) Depreciation and impairment of property, plant and equipment Charges to/(utilisation of) provisions (600) (600) Total 4,978 5,957 (979) 21 Finance income - net Finance income and costs comprised: (Euro thousands) Change Finance costs (75) (123) 48 Finance income 13,221 11,716 1,505 Interest capitalised on assets under construction Total 13,146 11,593 1,553 Finance costs consisted of the following: (Euro thousands) Change Payable to subsidiaries (49) (104) 55 Payable to parent company (13) (1) (12) Payable to others (13) (18) 5 Total (75) (123) 48 Finance costs for 2008 and 2007 may be further analysed as follows: Debenture Bank Others Total (Euro thousands) loans borrowings Payable to subsidiaries Payable to parent company Payable to others Total Debenture Bank Others Total (Euro thousands) loans borrowings Payable to subsidiaries Payable to parent company 1 1 Payable to others Total

122 Finance income for the year ended 31 December 2008 was higher than the amount recorded in 2007 and may be detailed as follows: (Euro thousands) Change Interest income and commission from subsidiaries 5,605 4,142 1,463 Interest income and commission from associates Interest income and commission from parent company 6,070 5, Interest income and commission from banks 637 1,153 (516) Interest income and commission from others Other 13,221 11,716 1, Investment income (Euro thousands) Change Ambiente 2000 Srl Ambiente 3000 Srl Ecosesto SpA Frullo Energia Ambiente Srl 5,684 5, Prima Srl 5,100 7,650 (2,550) Loss on disposal of Termini Imerese Energia Ambiente Srl (10) (10) Total 11,746 13,285 (1,539) 23 Income tax expense (Euro thousands) Change Current tax 2,616 (1,677) 4,293 Deferred tax 860 (457) 1,317 Total 3,476 (2,134) 5,610 (Euro thousands) Profit before taxation 21,164 18,075 Taxes calculated applying tax rate to profit (6,841) (6,914) Profits not subject to tax 3,390 4,919 Expenses not deductible for tax purposes (25) (24) Reversal of deferred income tax assets (115) Total income tax (3,476) (2,134) 121

123 Related party transactions Revenue Other Recharged Other Income Services Other Income Other Interest from sales operating expenses income relating to costs from equity financial and other and services income other investments income financial (Euro thousands) periods charges Subsidiaries Ambiente 2000 Srl Actelios Solar SpA Actagri Srl 3 3 Ecosesto SpA Elettroambiente SpA 8 1 5,017 Platani Energia Ambiente ScpA Prima Srl Tifeo Energia Ambiente ScpA Total subsidiaries 729 2, , Parent company Falck SpA 84 2, , Total parent company 84 2, , Associates Ambiente 3000 Srl 29 Frullo Energia Ambiente Srl Palermo Energia Ambiente ScpA Powercrop SpA Total associates Group companies Falck Renewables Italia Srl Total group companies Other related parties Italgest Servizi Srl Total other related parties Total 921 2,970 2, , % incidence on income statement heading 85.8% 70.5% 46.6% 94.5% 82.7% 122

124 8.5.4 Other information Emoluments of directors, statutory auditors and managing directors In accordance with Consob Circular no of 14 May 1999, details of all emoluments and fees, for all amounts paid to each party, including amounts from subsidiaries, are provided below: (Euro) Duration Emoluments Other Bonuses and Other Name Office of term benefits other incentives emoluments Federico Falck Chairman Actelios SpA Approval annual report ,344 Achille Colombo Deputy chairman Actelios SpA Approval annual report Paride De Masi Deputy chairman Actelios SpA Approval annual report ,344 66,667 Roberto Tellarini Managing director Actelios SpA Approval annual report ,344 11,333 Deputy chairman Ecosesto SpA Approval annual report ,000 30,000 Director Elettroambiente SpA Approval annual report ,000 Chairman Approval annual Frullo Energia Ambiente Srl report Director Approval annual Palermo Energia Ambiente ScpA report Chairman Powercrop Srl Approval annual report Marco Agostini Director Actelios SpA Approval annual report ,344 Enrico Falck Director Actelios SpA Approval annual report ,344 Remuneration committee Approval annual of Actelios SpA report ,344 Giuseppe Gatti Director Actelios SpA Approval annual report ,344 Internal control committee Approval annual of Actelios SpA report ,016 Bruno Isabella Director Actelios SpA Approval annual report ,344 Remuneration committee Approval annual of Actelios SpA report ,344 Internal control committee Approval annual of Actelios SpA report ,016 Ferruccio Marchi Director Actelios SpA Approval annual report ,344 Umberto Rosa Director Actelios SpA Approval annual report ,344 Remuneration committee Approval annual of Actelios SpA report ,344 Internal control committee Approval annual of Actelios SpA report ,344 Supervisory board Approval annual of Actelios SpA report ,

125 (Euro) Duration Emoluments Other Bonuses and Other Name Office of term benefits other incentives emoluments Roberto Bracchetti Chairman of the board of Approval annual statutory auditors Actelios SpA report ,975 Supervisory board Actelios SpA Approval annual report ,016 Chairman of the board of Approval annual statutory auditors Ecosesto SpA report ,891 Chairman of the board of Approval annual statutory auditors Prima Srl report ,397 Chairman of the board of statutory auditors Approval annual Frullo Energia Ambiente Srl report ,911 Aldo Bisioli Statutory auditor Actelios SpA Approval annual report ,317 Nicola Vito Notarnicola Statutory auditor Actelios SpA Approval annual report ,317 These financial statements present a true and fair view of the company s state of affairs, financial position and profit for the year and are in agreement with the accounting records. On behalf of the board of directors The Chairman Federico Falck 124

126 8.6 Additional disclosures on financial instruments in accordance with IFRS7 This note sets out the additional disclosures relating to financial assets and liabilities in accordance with IFRS 7. These disclosures are presented in the same order as they are set out in the IFRS and have been omitted where not considered significant. The note is presented in two sections. The first sets out detailed information regarding financial assets and liabilities while the second presents information regarding the risks attributable to the financial assets and liabilities, in particular credit risk, liquidity risk and market risk. This includes both qualitative and quantitative information that is analysed into points (e.g. 1.) and sub-points (e.g. 1.2). The detailed quantitative information is provided for 31 December 2008 and where significant at 31 December Before presenting the detailed disclosures it is important to note that Actelios holds significant financial assets in the form of financial receivables that results in a strong positive net financial position. The financial assets and liabilities are almost entirely measured at cost and amortised cost in the financial statements. These did not give rise to profits or losses in 2007 or The only impact of the financial instruments on the income statement arises from the interest income and expense and this is limited given the low level of borrowings as mentioned above. Credit and liquidity risk are not considered to be significant. Credit risk exposure is limited as the majority of trade and financial receivables are from other group companies and not third parties. Liquidity risk is also considered to be low due to the low level of indebtedness and the high level of liquidity. Interest rate risk is low for the same reason; consequently a sensitivity analysis was not performed. Actelios adopts specific procedures to manage the credit, liquidity and market risk on financial assets and liabilities. These procedures have not been documented in a formal risk policy. Section I : Financial instruments 1. Balance sheet 1.1 Categories of financial assets and liabilities The tables below illustrate the carrying value at 31 December 2008 and 31 December 2007 of the financial assets and liabilities classified in accordance with IAS 39. In order to reconcile with the balance sheet totals the penultimate column sets out the values of the assets and liabilities that are not included within the scope of IFRS7. 125

127 Fair value Amortised cost Fair value through against equity profit or loss or cost Total Loans Financial Financial FA/FL FA/FL FA FA/FL A/L not Balance and receiv. assets liabilities designation held for available- within within sheet bls held-to- at amortised on initial trading for-sale scope scope total (Euro thousands) maturity cost recognition of IFRS7 of IFRS7 Assets Property, plant and equipment and intangibles Investments , ,023 Financial assets 263, , ,088 Inventories Trade receivables 4,733 4,733 4,733 Deferred income tax assets Other receivables 2,552 2,552 2,552 Cash and cash equivalents Total 270, , , ,561 Liabilities Total equity 346, ,381 Financial liabilities 2,153 2,153 2,153 Trade payables 1,429 1,429 1,429 Other payables 22,980 22, ,125 Provisions for other liabilities and charges Staff leaving indemnity Total 26,562 26, , , Fair value Amortised cost Fair value through against equity profit or loss or cost Total Loans Financial Financial FA/FL FA/FL FA FA/FL A/L not Balance and receiv. assets liabilities designation held for available- within within sheet bls held-to- at amortised on initial trading for-sale scope scope total (Euro thousands) maturity cost recognition of IFRS7 of IFRS7 Assets Property, plant and equipment and intangibles Investments ,887 96,941 Financial receivables 85,721 85,721 85,721 Inventories Trade receivables 6,970 6,970 6,970 Deferred income tax assets 1,520 1,520 Other receivables 17,503 17, ,813 Cash and cash equivalents 158, , ,800 Total 110, , ,048 98, ,012 Liabilities Total equity 338, ,845 Financial liabilities 1,207 1,207 1,207 Trade payables 2,479 2,479 2,479 Other payables 23,875 23, ,360 Provisions for other liabilities and charges Staff leaving indemnity Total 27,561 27, , ,

128 1.2 Collateral Financial assets pledged as security for liabilities and collateral accepted as security for assets Financial assets pledged as security for liabilities comprise the pledge of the shares of Prima Srl that are owned by Actelios SpA and have a nominal value of Euro 4,615 thousand. The principal terms of the pledge contracts do not grant the possibility to sell the pledged shares as these companies do not have an active market. 2. Income statement and net equity 2.1 Income, expenses, profits or losses No profits or losses on financial assets and liabilities were recognised in 2008 and The table below illustrates total interest income/expense (calculated using the effective interest rate method) and the fee income/expense generated by financial assets/liabilities not measured at fair value through profit or loss and the fee income/expense arising from trust and other fiduciary activities in 2008 and (Euro thousands) Interest income (expense) Fee income (expense) Total FA not at fair value through profit or loss 13,222 13,222 FL not at fair value through profit or loss (62) (12) (74) FL at fair value through profit or loss Trust or other fiduciary activities Other (not within scope of IFRS7) (2) (2) Total 13,158 (12) 13, (Euro thousands) Interest income (expense) Fee income (expense) Total FA not at fair value through profit or loss 11,715 11,715 FL not at fair value through profit or loss (105) (11) (116) FL at fair value through profit or loss Trust or other fiduciary activities Other (not within scope of IFRS7) (7) (7) Total 11,603 (11) 11, Further additional disclosures 3.1 Accounting policies The accounting policies adopted for the recognition and measurement of financial assets and liabilities are presented in the notes to the separate financial statements of Actelios SpA in paragraph Accounting policies. 3.2 Fair value The tables below disclose the fair value of the financial assets/liabilities and the related carrying amount at 31 December 2008 and 31 December The carrying amount of the financial assets/liabilities valued at cost and amortised cost (see point 1.1) is a reasonable estimate of fair value, as these relate to either short-term or variable rate financial assets and liabilities. 127

129 (Euro thousands) Carrying amount Fair value Financial assets Securities and investments Financial receivables 263, ,088 Trade receivables 4,733 4,733 Other receivables 2,552 2,552 Cash and cash equivalents Total 270, ,761 Financial liabilities Financial payables 2,153 2,153 Trade payables 1,429 1,429 Other payables 22,980 22,980 Total 26,562 26, (Euro thousands) Carrying amount Fair value Financial assets Securities and investments Financial receivables 85,721 85,721 Trade receivables 6,970 6,970 Other receivables 17,503 17,503 Cash and cash equivalents 158, ,800 Total 269, ,048 Financial liabilities Financial payables 1,207 1,207 Trade payables 2,479 2,479 Other payables 23,875 23,875 Total 27,561 27,561 Analysis of financial receivables due from third parties at 31 December 2008 and 31 December 2007 by instrument and conditions Interest rate Fair Carrying Current Non-current (Euro thousands) (%) value amount portion portion Loans due from subsidiaries (Prima Srl) Euribor + spread 6,335 6,335 6,335 Loans due from associates (Palermo Energia Ambiente ScpA, Frullo Energia Ambiente Srl) Euribor+ spread 10,954 10,954 6,838 4,116 Group correspondence accounts Euribor + spread 245, , ,799 Total financial receivables 263, , ,637 10, Interest rate Fair Carrying Current Non-current (Euro thousands) (%) value amount portion portion Loans due from subsidiaries (Prima Srl) Euribor + spread 6,335 6,335 6,335 Loans due from associates (Palermo Energia Ambiente ScpA, Frullo Energia Ambiente Srl) Euribor+ spread 10,868 10,868 10,868 Group correspondence accounts Euribor + spread 68,518 68,518 68,518 Total financial receivables 85,721 85,721 79,386 6,

130 4. Risks arising from financial instruments 4. 1 Credit risk Credit risk is not considered significant as the majority of the exposure consists of cash and cash equivalents. Moreover, financial and trade receivables are mainly due from other group companies. The credit risk exposure of Actelios is very limited. The maximum credit risk exposure at 31 December 2008 amounted to Euro 270,750 thousand and consisted of the following: (Euro thousands) Financial receivables 263,088 Trade receivables 4,733 Other receivables 2,552 Cash and cash equivalents 377 Total 270,750 The maximum credit risk exposure at 31 December 2007 amounted to Euro 268,994 thousand and consisted of the following: (Euro thousands) Financial receivables 85,721 Trade receivables 6,970 Other receivables 17,503 Cash and cash equivalents 158,800 Total 268, Liquidity risk The liquidity risk of Actelios is not considered to be significant in consideration of the fact that financial liabilities at 31 December 2007 and 31 December 2008 amounted to Euro 1,207 thousand and Euro 2,153 thousand respectively. These compare with total liabilities amounting to Euro 368,012 thousand and Euro 373,561 thousand, respectively. Consequently, a detailed analysed of financial liabilities, for example by maturity, is not considered meaningful. 4.3 Market risk Interest rate risk Given the low level of borrowings, interest rate risk is not considered significant and relates almost entirely to financial assets. Moreover, Actelios does not enter into interest rate derivatives. Consequently, a sensitivity analysis was not carried out while the total financial assets and liabilities exposed to changes in interest rates are detailed below: (Euro thousands) Financial assets Financial receivables 263,088 Cash and cash equivalents 377 Total 263,465 Financial liabilities Financial liabilities (2,153) Total (2,153) Net exposure 261,312 (Euro thousands) Financial assets Financial receivables 85,721 Cash and cash equivalents 158,800 Total 244,521 Financial liabilities Financial liabilities (1,207) Total (1,207) Net exposure 243,

131

132 9 Supplementary information to the financial statements of Actelios SpA

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134 9.1 List of direct and indirect investments in subsidiaries and associates Share- Profit Direct Indirect Registered Currency Share capital holders' (loss) share- share- Book office equity holding holding value (Euro (Euro thousands) thousands) (%) (%) (Euro) Directly controlled subsidiaries Actagri Srl Sesto San Giovanni (Mi) Euro 50, ( 33) ,000 Actelios Solar SpA Sesto San Giovanni (Mi) Euro 120, ( 680) ,124,979 Ambiente 2000 Srl Milan Euro 103,000 2, ,874 Ecosesto SpA Milan Euro 5,120,000 8,493 2, ,788,473 Elettroambiente SpA Sesto San Giovanni (Mi) Euro 245,350 1,039 ( 684) ,070,000 Prima Srl Sesto San Giovanni (Mi) Euro 5,430,000 24,204 10, ,494,159 88,891,485 Indirectly controlled subsidiaries Abbiategrasso Bioenergia Srl Sesto San Giovanni (Mi) Euro 54, ( 16) Platani Energia Ambiente ScpA Palermo Euro 2,764,000 2,556 ( 376) Solar Rende Srl Rende (Cosenza) Euro 10,000 10, Tifeo Energia Ambiente ScpA Palermo Euro 2,680,000 2,418 ( 510) Associates Frullo Energia Ambiente Srl Bologna Euro 17,139,100 32,165 11, ,471,678 Palermo Energia Ambiente ScpA Palermo Euro 120,000 ( 870) (1,651) ,349,731 Powercrop SpA Sesto San Giovanni (Mi) Euro 4,000,000 4,103 (1,426) ,300,000 13,121,

135 9.2 Summary of significant financial data of subsidiaries and associates Balance sheet Non- Current Shareholders' Non- Current Currency current assets equity current liabilities (Euro thousands) assets liabilities Directly controlled subsidiaries Actagri Srl Euro Actelios Solar SpA Euro 1, ,676 Ambiente 2000 Srl Euro 5,524 2, ,639 Ecosesto SpA Euro 15,785 12,070 8,493 9,540 9,822 Elettroambiente SpA Euro 7,869 64,857 1, ,660 Prima Srl Euro 67,130 24,844 24,204 36,400 31,370 Indirectly controlled subsidiaries Abbiategrasso Bioenergia Srl Euro Platani Energia Ambiente ScpA Euro 33,408 2,648 2,556 33,500 Solar Rende Srl Euro Tifeo Energia Ambiente ScpA Euro 49,565 5,098 2,418 52,245 Associates Frullo Energia Ambiente Srl Euro 125,483 25,389 32,166 85,683 33,023 Palermo Energia Ambiente ScpA Euro 41,546 3,062 (870) 45,478 Powercrop SpA Euro 9,454 7,848 4,103 13,199 Income statement Cost of Gross Operating Profit Profit for Currency Revenue sales profit profit before the year (Euro thousands) tax Directly controlled subsidiaries Actagri Srl Euro (26) (26) (48) (45) (33) Actelios Solar SpA Euro (821) (821) (976) (975) (680) Ambiente 2000 Srl Euro 10,785 (9,605) 1, Ecosesto SpA Euro 26,504 (22,697) 3,807 3,779 3,024 2,042 Elettroambiente SpA Euro 2,233 (633) 1,600 1,624 (619) (684) Prima Srl Euro 46,046 (22,736) 23,310 21,348 16,486 10,536 Indirectly controlled subsidiaries Abbiategrasso Bioenergia Srl Euro (10) (10) (17) (16) (16) Platani Energia Ambiente ScpA Euro (462) (463) (376) Solar Rende Srl Euro Tifeo Energia Ambiente ScpA Euro (584) (584) (510) Associates Frullo Energia Ambiente Srl Euro 48,518 (26,715) 21,803 25,541 19,155 11,859 Palermo Energia Ambiente ScpA Euro (773) (761) (1,651) Powercrop SpA Euro 1,023 (1,221) (198) (1,980) (1,963) (1,426) 134

136 10 Certifications on the consolidated financial statements and parent company financial statements in accordance with article 81- ter of Consob regulation of 14 May 1999 and subsequent amendments

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138

139

140 11 Report of the board of statutory auditors to the annual general meeting of shareholders

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142 Report of the board of statutory auditors to the annual general meeting of shareholders of Actelios SpA on 16 April 2009 in accordance with article 153 of Legislative Decree no. 58/1998 During the financial year ended 31 December 2008, we carried out the controls required by law, in accordance with the principles of conduct for boards of statutory auditors recommended by the Consigli Nazionali dei Dottori Commercialisti and Esperti Contabili (representative bodies of the Italian accounting professions) to which we refer in this report, which was prepared also taking into consideration the guidelines issued by Consob (the Italian stock exchange commission) in communication of 6 April 2001 and ensuing amendments. Having regard to the manner in which we performed our institutional activities we confirm that: - We attended all of the meetings of the shareholders, the board of directors and the internal control committee that took place during the year and we obtained from the directors timely and adequate information regarding the activities performed, in accordance with regulatory and statutory requirements; - We obtained suitable information in order to be able to perform our required duties regarding verification of the adequacy of the company's organisation structure and compliance with principles of correct administrative practice, through direct enquiries, the collation of information from officers responsible for the respective functions and exchanges of information and data with the independent auditors and with the boards of statutory auditors of the subsidiary companies; - We controlled, collectively and on an individual basis, the internal control and accounting, administrative systems, with the objective of verifying their adequacy to support operational requirements, as well as their reliability in presenting transactions, by examining company documentation, obtaining information from the heads of the relevant departments, and analysing the results of the work carried out by the independent auditors; - We verified compliance with current legislation regarding the preparation, presentation and layout of both the company and consolidated financial statements, taking into consideration the fact that the company has prepared the separate company and the consolidated financial statements in accordance with International Financial Reporting Standards; - We verified that the directors report for 2008 conforms to the law and is in agreement with the resolutions approved by the board of directors and with transactions presented in the company s and the consolidated financial statements. No observations were required to be made by the board of statutory auditors in relation to the half-year report of the company and the group. The quarterly and half-yearly reports were prepared and published in accordance with current legislation and regulations. In the course of our verifications, carried out in the manner described above, no significant matters emerged that required notification to the regulatory bodies. On the basis of our findings from the tests carried out and from information obtained, the decisions taken by the directors appear to comply with the law and the company s articles of association, principles of correct administrative practice, are appropriate to and compatible with the company s size and net assets, and meet company requirements. The board of statutory auditors notes that on 22 December 2008 the board of directors of Actelios SpA, following the communication dated 19 December 2008 issued by its parent company Falck SpA, recognised and resolved to confirm on this date the management and coordination of the company by the parent company, in accordance with the provisions of article 2497 and ensuing articles of the Italian Civil Code, while recognising the company s complete operational independence and interests. As a result of this resolution, which supersedes the board of directors resolution of 14 September 2005, the managerial and coordination activities will be performed by Falck SpA only on behalf of Actelios SpA, which in turn coordinates and directly controls its subsidiaries. The board of statutory auditors notes that in accordance with article 3.C.1 of the Code of Self Discipline ( the Code ) and the evaluation criteria therein, on 12 March 2009 the board of directors successfully assessed the independence of its nonexecutive members; the board of statutory auditors noted the correct application of the criteria and the independence assessment procedures adopted by the board of directors and has no matters to note. The board of statutory auditors also verified that its own members hold the same independence requirements adopted by the board of directors in assessing the independence on an annual basis of its members and took on board the Code s recommendation that requires it to declare its own or any third party interests in specific transactions presented to the board of directors; in the course of 2008 no situations arose that required the members of the board of statutory auditors to declare any such interests. * * * 141

143 The specific disclosures to be included in this report are set out below in the order prescribed in the above mentioned Consob communication of 6 April We have obtained adequate information in respect of significant economic, financial and equity transactions undertaken by the company and its subsidiaries, as noted in the directors report. In particular, the following transactions should be noted: - With regard to the individual projects companies in Sicily, Tifeo Energia Ambiente ScpA, Platani Energia Ambiente SpcA and Palermo Energia Ambiente SpcA (PEA), it is noted that the European Court of Justice in sentence C-382/05 of 18 July 2007, convicted the Italian Republic of violating the obligations of articles 11, 15 and 17 of Council Directive 92/50/EC dated 18/06/1992, defining the Conventions between the Sicily Region and these companies to be public service tenders. As a consequence of this judgement and the meetings held between the European Commission and the relevant national and regional authorities in order to identify the most appropriate and reasonable actions to employ in order to implement the above sentence, the Sicily Regional Department for Waste and Water (ARRA) expressed its desire to call a new bid for tenders in order to assign the services contract, which will be dependent on the commitment of the bidders and subsequently the assignees, who may differ from the current contractors, to settle the sum equal to the entire value of the activities performed and construction work carried out up until the date that the Conventions originally established with the project companies are handed over. In this regard, in the final months of 2008 and the early part of 2009, ARRA collaborated with Tifeo, Platani, PEA and their shareholders, in order to define an agreement that in the first instance allows the new bid to be called and thus help resolve the emergency environmental and hygiene situation relating the disposal of solid urban waste in Italy, without interrupting the work performed to date, and secondly, to protect the work carried out under the terms of the original conventions from unfair financial prejudice. The related agreement was signed by the parties on 5 March 2009 and has been put forward for approval by the Sicilian Regional Council and the board of directors of the project companies and their shareholders. The signed agreement prescribes that ARRA may call a new bid for tenders within the terms detailed above and that the project companies Tifeo, Platani, PEA and their shareholders will be paid an amount corresponding to the costs incurred and that are still to be incurred for the project development, which will be verified by an advisor (Banca Infrastrutture Innovazione e Sviluppo SpA) nominated jointly by the parties; furthermore, in the event that the new bid is awarded to a third party, the project companies and their shareholders will also be paid a cancellation fee equal to the average EBITDA calculated based on estimates for the twenty year life of the concessions (2005/2024) and presented in the business plan attached therein. Based on the above and the most probable hypothetical scenarios that may arise from the agreement with ARRA, the directors valued the related impact on the financial statements, confirming full recovery of all amounts classified as assets relating to the Sicily projects, including the value of the goodwill on the investments in the project companies, Tifeo, Platani and PEA. Finally, in respect of the call for the new bid for tenders, we note that the mandate issued by the project companies to the four Lead Arranger banks to secure project financing expired on 31 December 2008, while the CIP6/92 incentives relating to the production of electrical energy from waste for plants holding authorisation but not yet operational, were upheld following issue of Law 210 of 30/12/ With regard to Frullo Energia Ambiente Srl, a joint venture between HERA (51%) and Actelios SpA (49%), an alternator broke down at the WTE plant in Granarolo dell Emilia on 5 March 2008, which resulted in the stoppage of the turbine group and resulted in a loss in production of electrical energy until 20 April In relation to the investment in Frullo Energia Ambiente Srl, this company merged with Ambiente 3000 Srl, also a joint venture between HERA SpA (51%) and Actelios SpA (49%), with effect from 1 November The subsidiary Immobilare Samanta Srl was converted to an SpA and its name was changed to Actelios Solar SpA on 7 May 2008, and this now represents the sub-holding of the group s activities in the photovoltaic energy sector. In June 2008 Actelios Solar SpA, which had a share capital of Euro 120,000 received a capital contribution from the parent company Actelios SpA in order to cover the future share capital increase of Euro 1 million, and it acquired from the parent company the business relating to projects in the photovoltaic sector for Euro 2,037,000. These projects comprise the construction of photovoltaic plants in Puglia with a total installed capacity of 6 MW, acquired by Actelios SpA from the Solon group in February 2008 through payment of an advance of Euro 1,231,000 on a total investment estimated at more than Euro 27 million. - The parent company Actelios SpA incorporated Actagri Srl on 16 May 2008 with a share capital of Euro 50,000. The latter is to become the sub-holding of the activities in the production of electrical energy from biogas sector. Actagri set-up Abbiategrasso Bioenergia Srl in July 2008, in which it holds 58.74%, in order to develop a project to construct and operate a 1MW biogas plant in the Abbiategrasso (MI) town council. 142

144 - With regard to Powercrop SpA, an equal joint venture between Actelios SpA and Seci Impianti Srl, a member of the Maccaferri group, relating to the conversion of a number of sugar refineries into plants that will produce electrical energy from biomass and vegetable oils, we note that the authorisation process (V.I.A. and A.I.A.)is already under way for a number of the plants, while work continues on securing the contracts with the farmers and forest enterprises in relation to the supply of biomass. - Capital expenditure amounted to Euro 17.9 million in 2008 and principally relates to the financial commitment of the group on the projects in Sicily, the photovoltaic plants in Mesagne (Puglia), the development of the projects for the production of electrical energy from biomass and vegetable oils and improvement work on the operating plants. Details of all of the above transactions are included in the directors report and the notes to the consolidated financial statements and the notes to the financial statements of Actelios SpA. The information obtained allowed us to confirm that the above-mentioned transactions comply with the law and the company s articles of association and we consider that they do not possess the characteristics that would result in the requirement on our part to provide specific comment on these transactions. 2. We have obtained information in respect of uncharacteristic and/or unusual transactions and on intra-group transactions and those carried out with related parties, in relation to which we provide the following observations. 2.1 With regard to uncharacteristic and/or unusual transactions carried out with related parties during the year we note the following. - The parent company Actelios SpA received payment for the amounts owed by Italgest Servizi Srl, a member of the Italgest Energia SpA group that is also a shareholder of Actelios, relating to the sale of the 4 MW CIP6/92 rights to Italgest Servizi and the 40 % investment in Energie Tecnologie Ambiente SpA on 18 December The board of directors of Actelios SpA approved a treasury management agreement with the parent company Falck SpA on 22 December This arose as a result of the temporary delay on the investments in Sicily that gave Actelios liquidity resources that up until this date Actelios SpA had used for the purpose of the current account with the parent company. The agreement in question, which is at arm s length, states that as an essential requirement Falck, acting as the controlling parent company and carrying out managerial and coordination activities, is required to manage the financial needs of Actelios also in relation to its investment work and provides that Actelios has the right to ask on demand repayment of the advances and that Falck is obliged to repay amounts up to a maximum of Euro 20 million (in one quarter) within 5 working days, and within 90 days for sums exceeding this amount and Actelios may also invest further sums applying the established conditions. 2.2 The ordinary financial and trading transactions carried out between group companies or with related parties are disclosed in the directors' report and in the notes to the company and the consolidated financial statements. In particular, these related to a number of specific transactions including treasury management, the provision of loans and guarantees, the provision of professional and other services, which are all made at arm s length and are regulated by contractual agreements. The information obtained allowed us to confirm that the above transactions took place in accordance with the law and the company s articles of association and that they were undertaken in the interests of the company and the group. 3. On the whole, the information provided by the directors in their report in accordance with article 2428 of the Italian Civil Code, in respect of uncharacteristic and/or unusual transactions and in respect of ordinary transactions, as detailed at point 2 above, may be considered sufficient to provide all of the information requested. 4. The independent auditors PricewaterhouseCoopers SpA issued on today s date audit opinions, in accordance with article 156 of the Consolidated Finance Text (TUF), on the individual company financial statements and the consolidated financial statements for the year ended 31 December 2008, which contained separate mention of the wide disclosures made by the directors in both the directors report and in the notes to the financial statements regarding the Sicily projects and the potential impact on the amounts in the financial statements, in particular on the goodwill classified as an asset in the balance sheet. In the above audit reports, the auditors confirm that the company and consolidated financial statements for the year ended 31 December 2008 comply with the provisions relating to the preparation of financial statements, that they have been properly presented and that they give a true and fair view of the state of affairs and the profit for the year of the parent company Actelios SpA and of the Actelios group and that the directors report reflects the information disclosed in the financial statements. 143

145 5. No claims have been filed to date under article 2408 of the Italian Civil Code. 6. No petitions have been filed to date. 7. We received information from the relevant company management that the additional engagements assigned to the independent auditors PricewaterhouseCoopers SpA in 2008 comprised (i) the issue of two reports on the amounts disclosed in two declarations issued by the company regarding tenders submitted to the Israeli Government, for total fees of Euro 10,000 plus VAT and (ii) the control of the bilancio elettrico (financial statements prepared in accordance with requirements of the Italian electricity and gas authorities), for a total fee of Euro 7,000 plus VAT. For the purpose of completeness we note that in relation to the audit of the entire Actelios group, comprising the statutory financial statements, consolidated financial statements, half-year report and accounting records control, total fees of Euro 323,000 were paid to PricewaterhouseCoopers SpA, including the ISTAT (index linked) increase and may be analysed as follows: Company Fees (Euro) Engagement Actelios SpA 143,000 Audit of financial statements, half-year report, control of accounting records Ambiente 2000 Srl 12,000 Audit of financial statements, half-year report, control of accounting records Elettroambiente SpA 12,000 Audit of financial statements, half-year report, control of accounting records Platani Energia Ambiente ScpA 15,000 Audit of financial statements, half-year report, control of accounting records Tifeo Energia Ambiente ScpA 15,000 Audit of financial statements, half-year report, control of accounting records Ecosesto SpA 28,000 Audit of financial statements, half-year report, control of accounting records Prima Srl 24,000 Audit of financial statements, half-year report, control of accounting records Actelios Solar SpA 17,000 Audit of financial statements, half-year report, control of accounting records FEA Frullo Energia Ambiente Srl 27,000 Audit of financial statements, half-year report, control of accounting records PEA Palermo Energia Ambiente ScpA 15,000 Audit of financial statements, half-year report, control of accounting records Powercrop SpA 15,000 Audit of financial statements, half-year report, control of accounting records Total 323,000 With regard to the audit engagement for the three-year period , it is noted that the independent auditors requested a fee increase of Euro 8,900 per annum, in order to cover the increased work and responsibility arising from Legislative Decree 32/2007 and the 2008 Finance Act. The board of statutory auditors agree with this increase. 8. No engagements were assigned to third parties that have relations of a continuous nature with the independent auditors. 9. In the course of financial year 2008, the board of statutory auditors did not issue any opinions prescribed by law. 10. The control activities described above were carried out in 2008 during 6 meetings of the board of statutory auditors, by attending 7 meetings of the board of directors and through attendance, either by the chairman of the board of statutory auditors and/or another auditor, at the 5 internal control meetings. The remuneration committee did not meet in We have no particular observations to make regarding compliance with principles of correct administrative practice, which appear to have been applied consistently. 12. The board of statutory auditors has constantly updated its knowledge and verified the effectiveness of the company s organisation structure, comparing it with the company organisation charts approved and published by CONSOB, through information gathered from each area and meetings with the internal control officer and the independent auditors. The current organisation structure would appear to be appropriate to the size of the group and also meets the operating requirements of the group. 13. The board of statutory auditors verified the internal control system adopted by the company and evaluated its effectiveness through meetings held with the internal control officer and management and by attending the meetings of the internal control committee and the supervisory board, reinstated in accordance with Legislative Decree 231/

146 In particular, it was noted that the internal control officer reports directly to the internal control committee, to the board of statutory auditors and the directors responsible for this area and carries out his work based on a six-monthly plan, prepared independently by the officer himself or taking into consideration areas identified by the control bodies and the independent auditors. In the course of 2008 the internal control committee focused on the review of the activities of the Sicily projects, related party transactions and transactions between group companies, verification of the implementation of the new information system and the organisation and accounting procedures to meet with the provisions of Law 262/2005 relating to the preparation of company accounting information, and to the evaluation of management performance indicators (KPI). Mr G. Gemma, the group internal auditor and internal control officer, left the company on 31 December His replacement has already been identified and will join the company shortly. Actelios SpA and all of the group companies have adopted the Organisation and Operations Manual (the Manual ) prepared in accordance with Legislative Decree 231/01, aimed at preventing the commission of illegal acts as defined in the decree, thus safeguarding the administrative responsibility of the company. The Manual was updated by the board of directors in the course of 2008 in order to incorporate the regulations introduced to Legislative Decree 231/2001, which extended the scope of application of this legislation to areas regarding safety and fraud, through the new Fourth and Fifth special sections. The Manual is updated continuously and reflects the relevant guidelines and the obligations inherent with being listed on the stock exchange. A Supervisory Board (SB) has been appointed in order to enforce implementation of the Manual. The SB carries out supervisory, control and other activities independently and is composed of an independent director, the chairman of the board of statutory auditors and the group internal auditor. Following Mr. G. Gemma s resignation from the company, the board of directors appointed Mr. G. Fanizza as the third member of the SB commencing 1 January In the course of 2008, the main subsidiaries of Actelios transformed the supervisory boards from single members to full boards. In the course of 2008, in carrying out its activities the SB verified in particular the application of internal procedures, the preparation and update of control forms, the effective performance of training and updating of all employees in relation to the Manual, and no significant matters came to their attention. The new Code of Internal Dealing was adopted by Actelios following the resolution passed on 12 May We have no particular observations to report with regard to the adequacy of the administrative-accounting system and of its ability to present fairly company transactions, also taking into consideration the centralisation of the administrative function of the subsidiaries by the parent company. It is noted that, in order to comply with Law 262/05 (law on savings) the company appointed a Compliance Officer responsible for the preparation of the accounting records and in 2008 completed, with the assistance of a specialist consultancy firm, the project to align the administrative and accounting procedures to the provisions of the law relating to the preparation of company accounting information, with the aim of guaranteeing that the certifications on the financial statements and all financial communications may be relied upon in full. Furthermore, we note that during the course of the year the implementation of the new company information system (Microsoft s ERP Navision) was finalised and go-live took place on 12 May The accounting information system resulted in the adoption of a new chart of accounts (shorter and in line with new accounting and business requirements), the new codification of cost centres, contracts in progress and sub-contracts, which resulted in greater and more accurate management information being available and more effective and usable reporting. 15. An adequate flow of information between the parent company and subsidiaries (also in relation to the communications covered by article of Legislative Decree no. 58/1998) is ensured through specific instructions sent to the subsidiaries by parent company management. 16. We met with the members of the boards of statutory auditors of the principal subsidiaries in order to exchange information regarding the group s activities and coordinate the controls and supervisory activities and we have no specific matters to report. 17. No significant matters emerged that require specific mention either during the periodic meetings between the statutory auditors and the independent auditors, held in accordance with article of Legislative Decree no. 58/1998, or from our examination of the quarterly report issued by the external auditors. 145

147 18. We have verified that the directors report includes a separate section on corporate governance, prepared in accordance with the instructions provided by Emittenti Titoli and Assonime, the association of Italian joint stock companies. In particular we note that in the course of 2007, the company adopted the new Code of Self Discipline for Italian listed companies published by the Corporate Governance Committee of the Italian Stock Exchange in March 2006, and that in the meeting held on 29 October 2008, it approved the new edition of the Code of Conduct, which includes a separate section relating to the principles of PACI (Partnering Against Corruption Initiative for Countering Bribery), or rather the international principles in the fight against corruption formally published by the Word Economic Forum. Finally, it is noted that the company is listed on the STAR segment of the Italian Stock Exchange, which it was admitted to on 20 September Our work was carried out during the 2008 financial year under normal circumstances and from our work no omissions, censurable actions or other irregularities emerged that require disclosure. The board of statutory auditors also notes that no matters emerged from the analysis of the information received in relation to the activities carried out by the boards of statutory auditors of the subsidiaries and from the representations made by the independent auditors in relation to the reports issued in respect of these subsidiaries. 20. In conclusion to the work performed during the financial year, we do not have any observations to report under article of Legislative Decree no. 58/1998 in relation to the financial statements, their approval and on matters we are required to report. In addition, we have no observations to make regarding the proposal of the board of directors regarding the appropriation of the profit for the year and the amount of the dividend to be distributed. Milan, 30 March 2009 The board of statutory auditors Roberto Bracchetti Aldo Bisioli Nicola Notarnicola 146

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