10 Biogas 12 Microbiology 14 Corporation. 18 Growth & visions. 16 Company-run plants. 4 Interview CONTENT. BIOGAS. It pays off.

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1 ANNUAL REPOR T 25

2 CONTENT 4 Interview 1 Biogas 12 Microbiology 14 Corporation 16 Company-run plants 18 Growth & visions BIOGAS. It pays off. What is the business of Schmack Biogas AG? 4 Biogas? What is that anyway? 1 1,, workers? Bacteria do the main job? 12 What is an integrated biogas corporation? 14 Will Schmack Biogas become an energy utility? 16 Growth with biogas? 18 3

3 Interview What is the business of Schmack Biogas AG? Ulrich Schmack built his first biogas plant at the age of 2. Herbert Abel was already a successful entrepreneur long before he joined Schmack Biogas AG. They explain what their company is all about today and what they want to achieve in the future. Ulrich Schmack and Herbert Abel on Schmack Biogas AG, the most important resources, 25, farmers and microbiological research. Mr Schmack, as the company founder, has it always been What else do you need to be successful in the your vision to generate sales in excess of EUR 3 million and to biogas industry? employ around 14 people one day? Abel: Schmack Biogas today focuses on two business segments planning and constructing of the plants on the Schmack: Certainly not from the very beginning. After all, I was one only 2 years old when I first started work on a biogas plant. At BIOGAS? the time, power failures still occurred quite frequently. So I built my first biogas plant in a field test so to speak. Apart from making the power supply more reliable, I was also fascinated by the idea of using the farm s resources to generate energy. In the course of the years, I became increasingly impressed by the possibilities which biogas offers and this ultimately led to the vision if you want to call it that of turning this into a business. So you come more from the technical side? hand, operating and servicing them on the other. Since the foundation of our company, we have successfully sold biogas plants to farmers, and in the past two to three years, we have increasingly won new customers among capital investors and professional energy generating companies. These two customer groups do not want to work with several service providers, nor do the capital investors want to operate the plants themselves. We therefore feel it is another competitive advantage that we are a full-service provider who excels at all stages of the value chain, from planning and construction to operation and service. Investors do not want to be involved in the operation of a plant Schmack: If you look at biogas more closely, you learn very they want a return on their investment. quickly that, apart from the technical aspects of planning and constructing a plant, the biological processes play an important role. The profitability of a plant largely depends on the renewable energies for both investors and government Wouldn t you agree that you are competing with other right composition of the ingredients. So you have to know a lot funding? about this. We at Schmack Biogas have conducted hundreds of microbiological analyses and collected thousands of data Abel: Not really. Apart from the social consensus on nature points in recent years, which we can now use for each new preservation there are a number of factors which speak in favour plant in accordance with our customers wishes. And we can do of all renewable energies and support their growth. We only have this very quickly, as nearly all the plants served by us are today to look at our newspapers to see that a fossil energy carrier such monitored online. This allows us to intervene and respond in a as oil has become increasingly expensive in recent years and that timely manner whenever deviations are detected. I think that the supply situation for natural gas is at least critical. This is in this puts us ahead of the competition. favour of all renewable energies, including biogas. 5

4 Interview Schmack: But apart from this, it is interesting, of course, to look at the efficiency of the individual renewable energies, especially at the relative efficiency of the different bioenergies, i.e. bioethanol, biogas and biomass. The net energy output of 1 kilogram of wheat is 3 kwh when using biogas and less than half when using bioethanol. But wind and solar energy are already more advanced, aren t they? Competitive advantage Longtime experience in constructing biogas plants Microbiological process competence Full-service provider Schmack: Wind energy already generates electricity at low cost today, and photovoltaics is experiencing a boom but photovoltaics generates energy at a much higher cost than biogas. electricity is necessary which is mainly generated from natural What is more, biogas is already making a greater contribution to gas. The electricity price therefore increases sharply as the electricity generation in Germany than photovoltaics. Nevertheless, solar energy is very interesting. But and that s the be stored, we can deliver at exactly these times. And our costs price of natural gas is constantly rising. Given that biogas can most important point biogas makes the concert of renewable are likely to become competitive in the near future. energies complete. Does this mean you don`t need government support anymore? Why is that? Schmack: We will obviously need support from the EEG Act Abel: Because these two forms of energy generation are ENERGY effective only when the wind is blowing or when the sun is shining, respectively. By contrast, biogas can supply electricity whenever it is needed. This way, biogas can compensate for weather-related fluctuations in wind and solar energy and thus completes the energy supply from renewable energies. This important capability is often called for when speaking about renewable energies, which are frequently criticised for being unable to guarantee uninterrupted supply. Together with biogas, they can make an important contribution to guaranteeing energy supplies. (German Renewable Energy Act) in the coming years especially for farmers who want to generate electricity and heat with the help of biogas plants. The conditions for biogas, which were included in the EEG Act in 24, and the bonuses for renewable resources combine to make investments in our market plannable and, hence, attractive. Government efforts to liberalise the gas market are also important for us, as they will additionally stimulate the biogas industry. But is biogas already of the same quality as natural gas? We tick just the way the market is accustomed from large energy companies - we deliver power at the push of a button. Maybe this is one of the reasons why we have already built two biogas plants for E.ON Bavaria. What about competitiveness? Schmack: We are working on it. In 25, we launched a pilot plant for the refinement of biogas in Austria. We will continue on this road and believe that efficiency can be increased further. In view of the sometimes uncertain gas imports from Russia, this is an important prospect also with regard to making Germany s energy supplies reliable. Roof Structure COCCUS Second-Stage Fermenter Schmack: This has to do with what Mr Abel just said. During normal times of the day, electricity is available at off-peak rates. During peak times, however, at noon or in the evening when we all switch on our TVs or reading lamps, further supply of The number of agricultural businesses in Germany is not exactly unlimited and they are the main users of biogas plants today. Aren t your market and your potential quite limited? 7

5 Interview Schmack: Farmers were the first to use biogas plants for several reasons. First, they have the required land for cultivation. Second, the vegetable and animal waste that is processed by a biogas plant is naturally produced here. Also, biogas delivers not only electricity but also heat, which can be used directly on site. And finally, the fermentation residues can be used as fertiliser that is rich in nutrients. This is virtually a closed system, which gives the earth back what was used in the production of the plants. Incidentally, biogas facilities for agricultural businesses represent a new and economically attractive field of activity. Growth in three dimensions Agricultural business Capital investors and energy utilities Further added-value through company-run plants So you want to engage in electricity trading yourselves? V I S I O N Abel: This is certainly an interesting prospect. If we begin to market peak-load electricity in the medium term, we can optimally exploit the existing earnings potential. To operate such a plant economically, certain conditions need to be fulfilled. First, you need the experience to build the plant this is our core business. Second, the plant must be operated efficiently based on expertise in microbiological process management. This is where we are one of only a few suppliers in the market and which is crucial for the profitability of the plants. And finally, you billion per year. need access to good sites and the respective natural resources. Given that we have operated in this market for many years, we have excellent contacts. So we feel that Schmack Biogas is well positioned to pool all of our acquired competencies and to fully exploit them through the operation of our own plants. But apart from what I just said, biogas is already interesting for capital investors and energy generating companies. We have a phase where the full potential cannot yet be quantified. Of planned, built and operated plants for this target group. Earnings course we want to cover the interesting aspects and implement are easy to predict if the plant runs perfectly, and this is where those projects that are particularly cost-efficient. We are confident that we will sell far more plants to capital investors and our long-standing experience comes in useful. The existing potential only has to be used. energy utilities in future, especially plants larger than 5 kw. But farmers will remain a very interesting target group, too. Finally, we see ourselves as future operators of larger plants, where we would sell the energy ourselves. So far, however, it has been mainly wind and solar energy companies that have attracted attention in the press, amongst the public or on the stock market. Schmack: I am certainly a supporter of wind and solar energy. Good companies and good prospects. But renewable energy experts are also well aware of the growth prospects for biogas. Already today, the installed electrical output is as high as 65 MW. The German Biogas Association expects the annual investment volume to grow by approx. 3% per year in the next five years to EUR 1.8 billion per year in th field of planning and construction alone. By the year 22, it is projected to amount to EUR 7.5 And this is the activity that you want to push ahead? Schmack: Anyone familiar with renewable energies knows that they have developed positively in recent years and what their future perspectives look like. The biogas industry is currently in Biogas Plant Type EUCO Titan 35 9

6 Biogas Barn/Residential house F Industry Future: Biogas as substitute Public electricity grid for natural gas Heat Power F Close supply Greenhouse Residential house Corn silo Heat/ Power Combined heat and power plant Biogas Corn field Heat/ Power Biogas EUCO COCCUS Fermented substrate Main fermenter Second-stage fermenter Agricultural recycling CH4 Energy efficiency CO2 One of the major challenges of today s and tomorrow s energy supply is to choose an efficient form of energy generation. In bio- energy, the main aspect is space efficiency: How much energy do I get from a certain space that is used to grow resources? This is where biogas has an advantage over other forms of bioenergy such as biodiesel, ethanol and wood. According to figures presented by the NawaRo e.v. agency, the energy yield of biogas is higher than that of bioethanol, for instance. Biogas? What is that anyway? Chemically speaking, biogas is a gas mixture whose main components are methane and carbon dioxide which means that biogas is as biological as conventional natural gas. But the prefix bio is justified for four reasons: The base materials are biological substances such as corn, grain, grass or liquid manure. Biogas is produced in a complex microbiological process. The residues from biogas production can be returned to the biological cycle, e.g. as fertiliser used on fields. When converted into electricity or heat, biogas is CO2- neutral, thus making an important contribution to climate protection. Biogas lends itself to a variety of energy generation purposes. Heat and power co-generation plants generate electricity and heat from biogas. Biogas delivers heat, which can be used directly or for additional electricity generation. And pilot projects have shown that biogas can be processed into a full substitute for natural gas. Renewable resources are the feedstock. A complex microbiological process is used to convert this feedstock into biogas, a valuable energy carrier. Biogas that can deliver electricity, heat and gas. The biological resource cycle. The generation of biogas is part of a biological cycle. It starts with renewable resources such as corn, grain or grass. They are the most important resources by far. This gives farmers the opportunity to establish an additional business besides the production of agricultural foodstuffs and fodder, namely as a resource supplier to the bioenergy sector or as an energy provider by operating their own biogas plant. Sample calculations show that 1% of Germany s agricultural land would be sufficient to produce enough biogas resources to replace up to 1% of the country s natural gas imports with biogas. The major advantage of state-of-the-art biogas plants is that they can run on different resources depending on the agricultural region or the season. This way, biogas plants respond to special regional features, e.g. a high rye content or large grass spaces, and may help to prevent the creation of monocultures. After the harvest, the renewable resources are stored in the biogas plant silos. In the course of the year, the plants are fed into the biogas system as so-called silage fodder, producing biogas and fermentation residues. These fermentation residues are a high-quality substitute for mineral fertiliser, which means they can be spread on the fields and thus be returned to the biological cycle. As the next seeds are sowed and the produce harvested, the natural biological cycle is completed. The CO2 produced during the combustion of the biogas is converted into organic carbon by way of plant photosynthesis. That makes biogas CO2 neutral. There are hardly any residues in the process which cannot be reused. From resource to biogas. Nature needed millions of years to produce natural gas deposits inside the Earth. Today s biogas plants perform a similar process only much faster and with a high yield and efficiency. The secret is in the microbiological process. The different resources like corn, grain, grass or liquid manure are mixed in a so-called fermenter, where a fermentation process is started with the help of suitable bacteria and the right temperature. The process is described in detail on the CD attached with this report. The resulting biogas is purified and desulphurised and can be refined to natural gas quality and then compressed. This biogas can easily and cost-efficiently be stored and be converted into electricity and heat in small cogeneration units whenever needed. Alternatively, it is theoretically possible to feed the biogas into the gas network or to use it as vehicle fuel. Biogas facts and figures Corn and grain silage are the most important biological resources Biogas is produced through fermentation of these resources The biogas produced from a 6, square metre corn field is sufficient to supply a family of four with electricity for one year 11

7 Microbiology Experience through practice: Since 1995, Schmack Biogas has collected process data from the plants that have been installed and operated by the company. This provides Schmack Biogas with comprehensive data, e.g. for assessing the feedstock or the fermentation process. This stock of information allows the company to analyse the current plant processes and to translate them into specific instructions for the operator - to ensure that each new biogas plant functions perfectly. 1,, workers? Bacteria do the main job? Once a solar cell has been installed or a wind turbine erected, the energy generation process is determined almost exclusively by nature. In contrast, the construction of a biogas plant is only the first step. The actual process that determines costs, performance and output depends on microbiological expertise. Knowledge of and experience with the complex microbiological process is crucial to the successful operation of a biogas plant. It starts with the commissioning of the plant, which takes about two to three months during which the bacteria flora is established and the different ingredients are ideally matched. Especially during this phase, a lack of competent microbiological support can quickly lead to declining capacity utilisation rates, for instance when overfeeding the plant. This is where many years of experience and know-how are required. But even after the plant has been taken into service, ongoing monitoring, control and adjustment of the microbiological processes are key to good utilisation rates, a high energy yield and efficient long-term operation. Since 1995, Schmack Biogas has collected process data from the plants that have been installed and operated by the company. Today, nearly all plants served by Schmack Biogas are monitored online. Samples taken from the plants are constantly checked for gas yield, fermentation, trace elements and nutrient content in the company s laboratories. These analyses provide the company with comprehensive data, e.g. for assessing the feedstock or the fermentation process. In March 26, Schmack Biogas had some 17,5 fermenter analyses with another approx. 4, added per year. This allows the company to analyse the current plant processes and to translate them into specific instructions for the operator to ensure that each new biogas plant functions perfectly and that maximum capacity utilisation and cost-efficiency are achieved. The figures speak for themselves; according to the company s computations, the plants that participate in the Schmack Biogas Fit for Biogas programme achieve an average capacity utilisation of around 8%, which is above the industry average. Over the years, Schmack Biogas has thus built up a clear competitive advantage, which puts the company at the forefront of the market. To expand this competitive advantage, Schmack Biogas invested in several research projects in 24 and 25, cooperating with companies such as E.ON in Bavaria as well as with various universities. Apart from optimising the microbiological processes in the plants served, the company s current research activities primarily focus on two major areas. One of these is the substitution of natural gas for biogas. Schmack assumes that it will be possible to feed larger quantities of biogas into the gas network in future. In 25, a pilot plant for the refinement of biogas was installed in Austria, which feeds biogas into the local gas network. The research lab is working with partners to find out how the required methane content can be maintained and how biogas can be desulphurised more effectively. Should they be successful, this will open up additional market potential for Schmack Biogas. Making more efficient use of the heat that is produced in the electricity generation process is another important research project. So far, it has only been possible to use this heat locally on the sites of the biogas plants. The company s research and development activities focus on converting this heat into electricity on the basis of an organic rankine cycle (ORC) process, which would greatly increase the efficiency of a biogas plant. Going forward, microbiological process expertise will remain key to success and largely determine the efficiency of a plant. It is therefore the company s strategic objective to expand its market position with a view to increasing its sales and earnings potential. 13

8 Corporation What is an integrated biogas corporation? The birthplace of Schmack Biogas AG was the parental farm of the Schmack brothers. At the age of 2, Ulrich Schmack built his first biogas plant which contributed 22 kw to the farm s electricity supply. Up until today, Schmack Biogas has built biogas plants with the required renewable resources including the residues from a combined nominal output of around 28.9 MW. Some their livestock activities. These farmers use the energy generated by the biogas plants to cover their own electricity and heat 12 biogas plants have been delivered to agricultural businesses alone. Professional energy generating companies and capital requirements or feed electricity into the network. Going forward, investors are also among the company s customers and partners. farmers will remain a key target group of Schmack Biogas, both as Schmack Biogas offers them products and services along the buyers of the company s products and as resource suppliers for complete value chain. 24 plants have been build for these target other biogas plants. groups. By contrast, energy generating companies and capital investors This means that the Schmack Biogas business model is based are usually supplied with the full range of services, from the first on three customer groups. For many years, farmers have been project sketch to long-term operation of the biogas plant. The among the company s main customers; today, they usually order company s Planning and Construction Division identifies suitable sites, manages the approval process and plans the overall plants with an output between 185 and 5 kw. Schmack Biogas plans and builds the plants for this customer group and provides plant. During the plant construction phase, it is additionally them with microbiological support, but the operation of these necessary to coordinate the network connection and to ensure plants is usually in the hand of the farmers who have access to the integration in the existing infrastructure. Experience and expertise in the microbiological process are the connecting link between this Division and the Service and Plant Management Division. The commissioning of the biogas plant is probably one of the most complex phases in the life of such a plant. During this two- to three-month phase, the bacteria flora is established, the complete biological process is started, controlled and monitored until the perfect flow is achieved. This first major phase ends with an initial trial run. Even during the plant operation process, regular monitoring of the microbiological process and constant fine-tuning to ensure efficient fermentation of the ingredients remains a key task after all, this determines the profitability of the biogas plant. The range of services is completed by technical monitoring and maintenance. For energy utilities and the plants that are operated for capital investors, Schmack Biogas additionally coordinates the feedstock purchases and manages the harvest logistics including the use of the fermentation residues. For these two customer groups, the company mainly builds plants with an output of 5 kw and above, as this is the size where energy generation is more costefficient using a biogas plant. This provides energy utilities with additional resources for the generation of energy, while capital investors are mainly interested in generating a good return. The aim of Schmack Biogas AG is to increase sales in the two business segments as well as sales to all three customer groups. The company expects to see growing demand for 5 kw+ plants from energy utilities. Partnerships with this industry already exist and several projects have been completed successfully, so that the company believes it has a good market position and an excellent basis to start from. As of March 26, another 57 plants are being planned, while 11 biogas plants are already in the construction phase. The proposed third business unit, i.e. the operation of own plants with direct gas/electricity sales, is also based on the company s long-standing experience and expertise along the value chain. To be successful in this market, you need access to both good sites and to resource suppliers as well as expertise in plant construction, microbiological process management and plant management. Selling electricity at the power exchanges or directly to energy utilities will allow the company to tap additional sales and earnings potential along the value chain. PLANNING & CONSTRUCTION Planning Planning of the plant Management of the approval procedure Site search Provision of documents required for financing Construction Construction supervision Construction approval Coordination of utility connection Integration of plant into existing infrastructure Start-up of the biogas plant Formation of optimum bacteria flora Biological process optimisation Controlled start-up / trial run tuning Adjustment to customer s operations Operator training SERVICE & PLANT MANAGEMENT Service Microbiological process management and optimisation (FIT FOR BIOGAS ) Technical service Plant management Microbiological support Technical service Advice on resource logistics Advice on valuation of energy generated Total plant management Full operation: Resource purchasing Logistics Autonomous plant operation Utilisation of energy generated OPERATION OF COMPANY-OWNED PLANTS* Energy generation Energy generation using company-owned plants *planned 15

9 Company-run plants In Germany, 1 kwh of electricity costs 6 cents on average. At peak times, however, when all offices are working or lights and TVs are switched on throughout the country, the price at the European Energy Exchange in Leipzig may rise to over 3 cents per kwh. Exactly when this peak power is needed, biogas is available and can be converted into electricity in small co-generation plants and fed into the networks. Will Schmack Biogas become an energy utility? There are three reasons that make biogas a good investment and why operating own plants is an interesting strategic alternative: 1. Biogas supplies three forms of energy or energy source: electricity, gas and heat. 2. Biogas supplies energy at the push of a button, making it suitable as a source of peak-load electricity - biogas can produce electricity exactly when power demand reaches the highest level and prices are most attractive. 3. Biogas plays a key role in the energy mix with the other renewable energies. Because only the right mix of renewable energies can make a contribution to making energy supplies reliable. Capital investors have also come to realise that investments in biogas plants are attractive. They represent the company s third customer group besides farmers and energy utilities. Capital investors know that, to make their investment pay off, they need a partner who can supply all services from planning to plant management and who has proven expertise and a long track record. It is probably no coincidence that Schmack Biogas covers major aspects of plant management, not least thanks to its great microbiological expertise, down to full plant management for many plants that have been built for capital investors and energy utilities to date. From the full service provided by Schmack Biogas AG, it is only a small imaginary step but a major strategic step to the operation of company-owned plants. After all, why shouldn t Schmack Biogas benefit from the cost-efficiency of biogas plants, too? The near-term objective of Schmack Biogas therefore is to generate energy with its own plants, thus covering additional stages of the value chain in the biogas market. The operation of own plants will open up additional potential if several local biogas plants can successfully be integrated into a single virtual and controllable large-scale power plant. This would result in economies of scale, which would increase the possibilities for marketing electricity and heat. This means that it is generally possible to sell energy generated in Schmack s own plants on attractive terms. Apart from feeding under the EEG Act, this could happen via power exchanges as well as through direct sales to energy utilities. Biogas has additional potential here, as there is hardly another energy carrier that can be stored as easily and economically as gas. The fact that electricity from biogas is available at the press of a button is an advantage as it allows electricity to be marketed at exactly those times when market prices are high. This means that biogas is suitable as a source for the production of peak-load electricity. Perspective: Peak power demand in Germany today is mainly covered with natural gas and crude oil, two energy carriers whose prices have risen in recent years and months. Biogas may become an attractive alternative, especially when individual biogas plants can be combined to form an integrated large-scale plant which is centrally manageable. 17

10 Growth & visions Growth with biogas? The planned growth of Schmack Biogas is based on several strategic pillars. The key initiatives are: 1. Concentration on full-scale plants with outputs from Attendant market development. The trend towards renewable 185 kw and the expansion of the total plant management energies is driven by a number of factors from climate protection to rising oil and gas prices to ambitious political objectives activities a. Expansion of market and technology leadership to cover part of the energy consumption with renewable energies. Today, the total electrical output of all biogas plants already b. Expansion of total plant management activities, above all for energy utilities and capital investors installed in Germany amounts to around 65 MW. Experts from the German Biogas Association expect this figure to rise to up to 2. Strengthening of research and development 9,5 MW by the year 22. a. Integration of new technologies b. Projects for optimised heat-to-electricity conversion Renewable energies are likely to gain in importance. Fossil fuels such as natural gas and oils will last only for a limited time. It is 3. Operation of own biogas plants therefore a simple law of the market that the prices of crude oil a. Construction of new biogas plants and acquisition and natural gas will continue to rise in the mid- and long term. of existing ones b. Use of alternative utilisation channels: feeding under the Another important factor in the development of the biogas EEG Act, sale via power exchanges and direct sale to energy sector is the growing demand for natural gas. So far, this demand utilities has mainly been covered by imports, whose prices have risen, however, and whose continued supply is uncertain as seen 4. Regional growth and careful internationalisation most recently at the beginning of 26. Refined biogas can be an a. Expansion of sales activities in Germany alternative to natural gas. Experts assume that it will be possible b. Only moderate expansion in foreign markets in the to profitably feed biogas of the same quality as natural gas into medium term the gas network. Several pilot projects have already confirmed that this is technically feasible. The important thing now is to enable access to the network. Also, it will be interesting to see how the framework conditions, especially the transmission prices for natural gas will develop. In view of the above, it is not surprising that the German Biogas Association is optimistic about the future. According to a study published in 25, the Association expects the installed electrical output in Germany to rise from around 65 MW in 25 to around 9,5 MW in 22. Accordingly, annual power generation from biogas could increase more than twentyfold from 3.2 billion kwh to 76 billion kwh. Sales generated from the planning and construction of biogas plants could thus increase from EUR 45 million to EUR 7.5 billion. Other growth drivers in the market for renewable energies include the upward trend in energy prices and the government s funding policy, which are directly reflected in increased capital spending. Figures published by the Federal Ministry of the Environment, Nature Preservation and Reactor Safety (BMU) Investments in the planning and construction of renewable energy plants in Germany (in EUR m) Mio show that investments increased from EUR 6.5 billion in 24 to EUR 8.7 billion in 25. According to the Ministry and the Renewable Energy Statistics (AGEE-Stat) working group, global investments in the construction of renewable energy plants may climb to EUR 115 billion in 21 and to EUR 2 billion in 22. Another growth driver resides in the biomass and biogas market, namely the situation in the agricultural markets and the direct impact on farmers income situation. Farmers currently have the opportunity to evolve from pure-play suppliers of agricultural products into suppliers of energy. By investing in the cultivation of renewable resources and the generation of biogas, farmers can make their revenues more independent of the price development in the agricultural markets and generate more steady incomes. In view of the above, the biogas market should develop favourably. According to the above sources, investments in new plants will increase. It is to assume that the market volume for plant operation and service can develop similarly positively. These are the conditions for further growth in the biogas market. The German market today accounts for 9% of the world biogas market. Schmack Biogas therefore intends to intensify its sales activities in the home market. But the company also plans to expand cautiously into foreign markets, especially Italy and The Netherlands. Basically, the most interesting market will obviously be the one that offers the highest compensation for electricity and heat produced from biogas Source: Fachverband Biogas e.v. (German Biogas Association), October 25 19

11 F I N A N C I A L S T A T E M E N T S FOR THE YEAR ENDING 12/31/25 ACCORDING TO IFRS

12

13 CONTENT INCOME STATEMENT... 5 BALANCE SHEET... 6 CASH FLOW STATEMENT... 8 STATEMENT OF CHANGES IN EQUITY... 9 NOTES I. GENERAL DISCUSSION 11 II. RECOGNITION AND MEASUREMENT PRINCIPLES 13 III. BALANCE SHEET DISCLOSURES 19 IV. REPORTING ON FINANCIAL INSTRUMENTS 28 V. CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS 31 VI. INCOME STATEMENT DISCLOSURES 32 VII. DISCLOSURES ON INDIVIDUAL LINE ITEMS IN THE CASH FLOW STATEMENT 37 VIII. DISCLOSURES ON SEGMENT REPORTING 38 IX. SUBSEQUENT EVENTS 39 X. EMPLOYEES 39 XI. RELATED PARTIES 4 XII. DISCLOSURES ON THE COMPANY S CORPORATE BODIES 45 INDEPENDENT AUDITOR S REPORT 46 DISCLAIMER 51

14 Income Statement 4

15 INCOME STATEMENT FOR THE YEAR ENDING 12/31/ Notes Revenues 2 34,134 16,416 Cost of sales 21-29,75-16,135 Gross profit 4, Distribution costs 22-1, General administrative expenses 23-1,718-1,43 Research and development expenses Other operating expenses Other operating income 27 2,232 2,3 Operating income (loss) 2, Net finance costs Income (loss) before taxes 2, Income taxes Net income (loss) 2, Accumulated losses carried forward -5,559-4,67 Withdrawal from a capital reserves accord. to Sec. 15 AktG (Stock Corporation Act) 3,382 Unappropriated retained earnings (losses carried forward) 335-5,559 Earnings per share 3 Basic Earnings per share (EUR) Diluted earnings per share (EUR)

16 Balance Sheet ASSETS Non-current Notes 12/31/25 12/31/24 Intangible assets Property, plant and equipment 2 1,313 1,132 Financial assets ,99 1,528 Current assets Inventories Gross amount due from customers for contract work 5 2, Trade receivables 6 5,595 3,148 Other assets Cash and cash equivalents 8 3,586 1,983 12,159 6,372 TOTAL ASSETS 14,258 7,9 6

17 EQUIT Y AND LIABILITIES Equity Notes 12/31/25 12/31/24 Subscribed capital Capital reserves 1 2,765 4,82 Appropriated retained earnings Unappropriated retained earnings 335-5,559 3, Non current liabilities Deferred tax liabilities Other provisions Financial liabilities ,765 1,177 3,18 Current liabilities Other provisions 15 1,88 2,51 Financial liabilities Trade payables 17 5,293 1,895 Advances received Other liabilities 19 1, ,643 5,355 TOTAL EQUITY AND LIABILITIES 14,258 7,9 7

18 Cash flow statement CASH FLOW STATEMENT FOR THE YEAR ENDING 12/31/ Net income (loss) 2, /- Depreciation/write-ups on non current assets /- Increase/decrease of provisions ,789 +/- Other non-cash income and expenses -1,587-1,599 -/+ Profit on disposals of non-current assets /+ Increase/decrease of inventories /+ Increase/decrease of trade accounts receivable -2, /+ Increase/decrease of other assets /+ Increase/decrease of gross amount due from customers for contract work -1, /- Increase/decrease of trade payables 3, /- Increase/decrease of advances received /- Increase/decrease of other liabilities Cash flows from operating activities 1, Proceeds from disposal of property, plant and equipment Purchase of investments in property, plant and equipment Purchase of investments in intangible assets Purchase of investments in financial assets -93 Cash flows from investing activities Cash receipts from issue of capital 1,398 2,567 + Cash proceeds from short - or long - term borrowings 5 - Cash repayments of short - or long - term borrowings Payment of finance leases liabilities Cash flows from financing activities 1,217 2,254 Change in cash funds from cash- relevant transactions 1,63 1,48 + Cash funds at the beginning of the period 1, Cash funds at the end of the period 3,586 1,983 8

19 Statement of Changes in Equity STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDING 12/31/25 Appropr. Unappropr. Subscribed Capital retained retained Total capital reserves earnings earnings Balance on January 1, 24 (IFRS) 67 2, ,67-2,151 Capital increase according to the Supervisory Board s resolution, dated 3/11/ Capital increase against cash contribution Capital increase against cash contribution 2 2 Capital increase against cash contribution Capital increase against cash contribution 55 1,445 1,5 Transaction costs Net loss for the year ending 12/31/ Equity as of December 31, 24 (IFRS) 166 4, , Capital increase according to the Board of Director s resolution, dated 5/24/25, to use the authorized capital dated 11/12/ ,436 1,49 Transaction costs Net income for the year ending 12/31/25 2,512 2,512 Withdrawal from capital reserves -3,382 3,382 Equity as of December 31, 25 (IFRS) 22 2, ,438 99

20 Notes SCHMACK BIOGAS AG, SCHWANDORF NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31,

21 I. GENERAL DISCUSSION Schmack Biogas AG with its subsidiaries (hereinafter Schmack Biogas Group or the Company) is an allsupplier in the field of biogas plants. The Companies operation is divided into the business units Project management and construction of biogas plants, Service and operational management, and Operation. In the main field of business Project development and construction, the Company prepares plans of biogas plants, assists in the public-law procedure to obtain the required permits and licenses, provides assistance to customers with regard to financing, builds plants, involving subcontractors and hands over the plants by initial operation in a micro-biologically state ready for operation. The second business unit of Schmack Biogas, Service and operational management, offers microbiological analysis and consulting services, laboratory and technical services, aiming to increase efficiency and enhance utilization of the plants capacity; furthermore, Schmack Biogas operates biogas plants, which includes the coordination of procurement and fermentation residue processing. In the future, the Company intends to use the know-how obtained in the first two business units for the operation of its own biogas plants as an additional field of business, and thus aims at becoming a power generating company. The separate financial statements of Schmack Biogas AG, Schwandorf, for the year ending 12/31/25 were compiled in accordance with the International Accounting Standards, the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), London. In doing so we observed all of the binding IFRS and interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The standards that ending before were revised in the course of the IASB Improvements Project are not binding for financial years that begin on or after January 1, 25. It is recommended to apply them earlier. The following standards that apply to Schmack Biogas AG in their revised edition have been applied beginning in the 23 financial year. IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 1 Events After the Balance Sheet Date IAS 16 Property, Plant and Equipment IAS 17 Leases IAS 21 The Effects of Changes in Foreign Exchange Rates IAS 24 Related Party Disclosures IAS 27 Consolidated and Separate Financial Statements In addition we are applying the new and revised standards issued by the IASB in 24 IFRS 3 Business combinations, IAS 32 Financial Instruments: Disclosure and Presentation, IAS 36 Impairment of assets, IAS 38 Intangible assets and IAS 39 Financial Instruments: Recognition and Measurement beginning in the 23 financial year. 11

22 Notes The financial statements are compiled in Euro. If not otherwise noted, all amounts are presented in thousands of Euro (). Due to the necessary rounding there can be differences of +/- 1 thousand Euros. The balance sheet is classified according to liquidity in accordance with IAS 1 Presentation of Financial Statements and the income statement was compiled using the cost of sales method. If financial statement line items were aggregated to improve the clarity of presentation, these items are disclosed separately in the notes to the financial statements. 12

23 II. RECOGNITION AND MEASUREMENT PRINCIPLES When compiling its financial statements as per IFRS, the Company applies certain recognition and measurement principles which are of material importance for the presentation of the financial and earnings position of the Schmack Biogas Group. The application of these recognition and measurement principles requires estimates and assumptions which now require difficult and complex judgments and decisions. These judgments and decisions could afterwards prove to be inaccurate and therefore lead to a change to the respective financial information. The recognition and measurement methods which the Company believes to be material are as follows: INTANGIBLE ASSETS Intangible assets are mainly development expenses, acquired patents, software and similar rights. Purchased and internally produced intangible assets are recorded at acquisition or production cost less straight-line amortization in accordance with IAS 38 Intangible Assets. Intangible assets are amortized over their contractual or estimated useful life. Research and development expenses not eligible for capitalization are recorded as expense in the period incurred. Development expenses are capitalized at cost if the expenses can reliably be accrued and the technological feasibility as well as the capability to be sold or used internally are assured. The development activity also has to lead to corresponding future cash inflows or cost savings with sufficient probability. Only those costs can be capitalized that are directly and indirectly attributable to the development process. Once the intangible asset is ready to be put into operation or ready for sale, its capitalized development expenses are amortized using the straight-line method over an estimated useful life of generally five years. We refer to the disclosures on the accounting of leases for the accounting of intangible assets from leasing business. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is recorded at acquisition or production cost less scheduled straight-line depreciation according to its estimated useful life. Production costs of internally produced assets include all direct costs attributable to the production process and a reasonable portion of the production-related overheads. Included therein is depreciation related to production and a share of attributable general and administrative expenses. We did not take advantage of the option to include interest in the calculation of the acquisition or production cost in accordance with IAS 23 Borrowing Costs for assets whose acquisition or production process extends over longer periods (qualifying assets). 13

24 Notes Property, plant and equipment is depreciated over the following useful lives. Buildings Technical equipment Other technical, operating and business equipment 33 years 3 to 15 years 3 to 15 years RESEARCH AND DEVELOPMENT SUBSIDIES AND INVESTMENT GRANTS IAS 2 Accounting for Government Grants and Disclosure of Government Assistance differentiates between grants related to assets and grants related to income. It is the general opinion that the provisions of IAS 2 are also applicable to private grants. The grants received for the acquisition or production of defined assets lessen their acquisition or production cost. Income-related grants in connection with expenses or losses that have already been incurred are recorded as income immediately. If these grants are related to the future then they are deferred over the respective period. IMPAIRMENT OF ASSETS In accordance with IAS 36 Impairment of Assets, intangible assets and property, plant and equipment are subject to impairment losses if special events or market developments show a correction of the estimated useful life or a loss in value. The value of an asset is tested through a comparison of the book value with the recoverable amount (impairment test). The recoverable amount is defined as the higher value between the fair value less costs to sell and the present value of the future cash flows (value in use). If this value is less than the book value of the asset, then an impairment loss should be recorded. If the reason for an earlier recorded impairment loss is no longer valid, then the asset is appreciated up to but not exceeding the book value of the asset that would have been determined had no impairment loss been recognized in prior years. FINANCIAL ASSETS Shares of subsidiaries, jointly controlled entities and associated companies are carried at cost or the lower fair value in accordance with IAS 27 Consolidated and Separate Financial Statements. INVENTORIES Inventories are carried at the lower of cost and net realizable value in accordance with IAS 2 Inventories. The production costs include, in addition to the direct costs, a reasonable share of the necessary indirect material and indirect labor as well as production-related depreciation and a share of the general and administrative expenses that can be directly allocated to the production process. Risks to inventory due to extended storage or obsolescence, for example, are accounted for through valuation allowances. If the reasons for the write-down no longer exist, the write-down is reversed. 14

25 LONG-TERM CONSTRUCTION CONTRACTS Long-term construction contracts are recognized using the percentage-of-completion method (PoC method) in accordance with IAS 11 Construction Contracts. The percentage of completion that determines the revenue to be recognized for each contract is calculated by the ratio between the costs to date and the calculated total costs (cost-to-cost method). If the outcome of the construction contract cannot be estimated reliably, revenue is only recognized in the amount of the contract costs incurred. If the contract costs incurred including recognized income exceed the advances received in individual cases, the construction contracts are reported as an asset under gross amount due from customers for contract work. If there is a credit balance after deducting the advances received, the item is reported under advances received. Expected contract losses are accounted for by recording provisions. ACCOUNTS RECEIVABLE AND OTHER ASSETS Accounts receivable and other assets are carried at nominal value or at cost. Any recognizable individual risks are acccounted for by recording value allowances. There are no interest-free or low-interest receivables with maturities of over one year. Foreign exchange receivables are if any recorded at the middle rate on the balance sheet date. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and bank balances. DEFERRED TAXES Deferred tax assets and liabilities are recorded in accordance with the balance sheet-oriented liability method in accordance with IAS 12 Income Taxes, in the amount that the payment from or to the tax authorities is expected when the asset is finally realized or the obligations are fulfilled. Deferred taxes are recorded for all temporary differences between the balances for tax reporting and the IFRS balance sheet. Deferred tax assets loss carryforwards are also recorded once it is probable that they can be offset against future net income. The deferrals are recorded in the amount of the predicted tax expense or benefit in future years based on the tax rate when they are realized. The tax consequences of dividend distributions are not recognized until there is a resolution on appropriation of earnings. Deferred tax assets and liabilities calculated based on the expected tax rates on taxable income in the years when these temporary differences reverse. When tax rates change the respective impacts on the latent tax assets and liabilities are recognized in the income statement in the period for which the new tax rate is effective. 15