ERG RENEW HALF-YEAR REPORT AS AT JUNE 30, 2008

Transcription

1 ERG RENEW HALF-YEAR REPORT AS AT JUNE 30, 2008

2 CONTENTS DIRECTORS REPORT ON OPERATIONS Corporate Boards page 3 Profile ERG Renew page 4 ERG Renew share performance page 5 Financial highlights page 6 Sector results page 7 Performance overview for the first half-year 2008 page 8 Significant events in the first half-year page 9 Sectors of activity page 11 Financial statements page 16 Subsequent events to the end of the half-year page 20 Outlook page 21 CONSOLIDATED FINANCIAL STATEMENTS Balance sheet page 24 Income statement page 25 Notes to the abbreviated consolidated half year financial statements page 29 AUDITORS REPORT page 48 2

3 CORPORATE BOARDS BOARD OF DIRECTORS BOARD OF STATUTORY AUDITORS CHAIRMAN giuseppe gatti (Legal representative) VICE CHAIRMAN salvatore russo (Legal representative) CHAIRMAN lelio fornabaio STANDING MEMBERS francesco gatti andrea manzitti CHIEF EXECUTIVE OFFICER raffaele tognacca (Legal representative) DIRECTORS luca bettonte Giancarlo Cimoli (Independent) alessandro Garrone vittorio garrone pietro giordano giorgio mazzanti (Independent) ernesto monti (Independent) paolo panella EXECUTIVE RESPONSIBLE Luca giorgerini INDEPENDENT AUDITORS deloitte & touche S.p.A. GENERAL MANAGER francesco del balzo 3

4 PROFILE ERG RENEW ERG Renew, listed on the Milan Stock Exchange, operates in the following sectors: Wind - Italy: through its subsidiaries EOS Windenergy S.r.l. and Eolo S.r.l. produces electricity from wind sources.there are currently 3 plants operational: Troia San Vincenzo, Troia San Cireo and Viticuso for a total installed power of 77 MW (2.2% market share in Italy). ERG Renew also has 28 MW under construction, 113 MW authorised and 209 MW under development. ERG Renew, in addition, following a partial spin-off of ERG Power & Gas S.p.A.to ERG Renew,which will be effective as of October 1,2008,will receive the assets in the wind sector of ERG Power & Gas S.p.A. Following the above operation, ERG Renew will receive a further 1.6 MW installed, 37.5 MW operational, 100 MW under construction and 18 MW under development, to reach a target of 700 MW. through the acquisition of 5 wind-parks for a total installed capacity of 55.2 MW. The French wind-parks are owned by Enerfrance S.a.s. servizi idrici: through the subsidiaries SODAI and DSI, operates in the treatment of industrial waste. While SODAI operates through 20 workshops of Trenitalia (49% shareholder), DSI undertakes solid and liquid waste treatment activities on behalf of third parties. As already reported on several occasions, ERG Renew wishes to cease the activities in the sector as they are considered non core business and will dispose of the relative investments by the end of 2009 Holding: provides services to the parent and the group companies; this activity was not carried out in Wind - France: ERG Renew in November 2007 entered the French market ERG RENEW - CONSOLIDATION SCOPE AT 30/06/2008 ERG RENEW S.p.A. 100% 100% EOS Windenergy S.r.l. 100% EnerFrance S.a.s. 51% SODAI Italia S.p.A. Energie Pulite 2000 S.r.l. 100% EOS 1 Troia S.r.l. 100% Parc Eolien du Carreau S.a.s. 100% DSI S.r.l. 100% EOS 2 Nurra S.r.l. 100% Parc Eolien de la Bruyere S.a.s. 100% EOS 3 Troia S.r.l. 100% Parc Eolien les Mardeaux S.a.s. 100% EOS 4 Faeto S.r.l. 100% Parc Eolien de Lihus S.a.s. 100% EOS 5 Tursi Colobraro S.r.l. 100% Parc Eolien de Hetomesnil S.a.s. 100% EOS 6 Joppolo S.r.l. 100% EOS 7 Ginestra S.r.l. 100% WWEH 2 S.r.l. Wind Italy - 77 MW Wind France - 55 MW Eolo S.r.l. 51% 4 Water services Discontinued operations

5 ERG RENEW SHARE PERFORMANCE At June 30, 2008, the stock market price of ERG Renew shares was Euro 2.49,a decrease of 18.62% on the stock market price at December 28,2007,compared to a 15.72% decrease on the European sector index (Stock Utilities Index) and a 21.81% decrease on the Mibtel index. The following table shows the share price and volumes in the first half-year of 2008 of ERG Renew. Volumes traded No. of shares Maximum volume (29/02/2008) 563,573 Minimum volume (25/06/2008) 8,020 Average volume 91,642 The stock market capitalisation at June 30, 2008 was Euro million (Euro million at December 28, 2007). Share price Euro Share price as at 30/06/ Maximum price (02/01/2008) (1) 3.05 Minimum price (18/03/2008) 2.20 Average price 2.70 (1) the minimum and maximum price recorded during trading on the specified date,although not equalling the official price at that same date. PERFORMANCE OF THE ERG RENEW SHARE PRICE COMPARED WITH THE PRINCIPAL INDICES (NORMALISED) ERG Renew performance vs. Stoxx Utilities Index and Mibtel Jan-08 1-Feb Feb Feb Mar Mar Apr Apr-08 9-May May-08 6-Jun Iun-08 ERG Renew S.p.A. Eqty Prc ERG Renew S.p.A. / MIBTEL ERG Renew S.p.A. /SX6E 5

6 FINANCIAL HIGHLIGHTS YEAR INCOME STATEMENT (THOUSANDS EURO) FIRST HALF ,023 OPERATING REVENUES 21,257 18,589 19,598 EBITDA (1) 6,925 10,478 8,577 EBIT (529) 6,351 2,125 NET PROFIT/(LOSS) (2,494) 3, OF WHICH, MINORITY INTEREST SHARE 38 (48) 2,265 RISULTATO NETTO DI GRUPPO (2,456) 3,218 Balance sheet (million Euro) NET CAPITAL EMPLOYED NET EQUITY NET FINANCIAL DEBT OF WHICH NON-RECOURSE PROJECT FINANCING % DEBT/EQUITY 48.1% 13.5% 33.8 INVESTMENTS Operating data 132 WIND CAPACITY INSTALLED MW INSTALLED CAPACITY IN ITALY MW INSTALLED CAPACITY IN FRANCE MW ,983 SALE OF ELECTRICITY MWH 143,624 75, ,897 SALE OF ELECTRICITY IN ITALY MWH 81,976 75,980 24,086 SALE OF ELECTRICITY IN FRANCE MWH 61, ,219 LIQUID WASTE TREATED MC 185, ,769 11,709 SOLID WASTE TREATED TONS 7,946 4, EMPLOYEES AT END OF PERIOD Electricity valuation / green certificates SALES PRICE OF ELECTRICITY EURO/MWH _ GREEN CERTIFICATES 08 EURO/MWH GREEN CERTIFICATES 07 EURO/MWH GREEN CERTIFICATES 06 EURO/MWH (1) Net result adjusted for income taxes, the result from discontinued operations, financial income and charges, amortisation and depreciation, provisions for risks and charges, other provisions and write-downs of non-current assets.the EBITDA is a measure utilised by ERG Renew to monitor and assess the operating performance and is not an accounting measure as per IFRS and, therefore, should not be considered as an alternative measure for evaluating interim results. As the composition of the EBITDA is not regulated by the applicable accounting standards, the criteria used in the calculation of the EBITDA by ERG Renew may not be uniform with the criteria adopted by other groups and, therefore, may not be comparable. 6

7 SECTOR RESULTS YEAR OPERATING REVENUES (THOUSANDS EURO) FIRST HALF ,981 WIND ITALY 11,505 15,510 1,993 WIND FRANCE 5,166 30,974 TOTAL WIND 16,671 15,510 6,049 WATER SERVICES 3,595 3,079 HOLDING ,023 TOTAL 21,257 18,589 EBITDA 22,712 WIND ITALY 7,136 12,708 1,641 WIND FRANCE 4,359 24,353 TOTAL WIND 11,495 12, WATER SERVICES (4,787) HOLDING (4,676) (2,448) 19,598 TOTAL 6,926 10,478 EBIT 15,059 WIND ITALY 3,410 8, WIND FRANCE ,541 TOTAL WIND 4,275 8,901 (772) WATER SERVICES (109) (67) (6,192) HOLDING (4,694) (2,483) 8,577 TOTAL (528) 6,351 INTANGIBLE AND TANGIBLE ASSETS 118,960 WIND ITALY 133, ,755 89,146 WIND FRANCE 85,656 _ 208,106 TOTAL WIND 219, ,755 20,353 WATER SERVICES 20,174 20, HOLDING 992 1, ,444 TOTAL 240, ,835 TANGIBLE AND INTANGIBLE ASSET INVESTMENTS 33,750 WIND ITALY 18,136 20,945 WIND FRANCE 33,750 TOTAL WIND 18,136 20, WATER SERVICES HOLDING 25 33,850 TOTAL 18,195 21,063 7

8 PERFORMANCE OVERVIEW FOR THE FIRST HALF-YEAR 2008 In the first half of 2008, revenues amounted to Euro 21.3 million, growth of 14.3% on the same period of the previous year due to the consolidation of the new French wind-parks acquired on October 31, 2007 which offset the decrease in revenues from the Italian Wind business; this latter, although recording an increase in the production of electricity of 7.9% compared to the first half of 2007, includes (i) a lower electricity price, (ii) a lower green certificate price and (iii) a non-recurring charge on the adjustment of 2007 revenues from electricity for Euro 2.4 million.the revenues in the water sector amounted to Euro 3.6 million, a growth of 16.7% on the same period in the previous year thanks to an increase in the liquid and solid waste treated by DSI S.r.l.; also in the first half year, holding service revenues were recorded of Euro 1 million, not present in 2007 and related to the provision of services to the parent and group companies from The EBITDA amounted to Euro 6.9 million compared to Euro 10.5 million in the first half of 2007.The decrease (33.9%) is due to the following factors: Wind Italy: contributed Euro 7.1 million compared to Euro 12.7 million in the first half of The lower EBITDA reflects, in addition to the matters outlined in relation to revenues, a review of the value of the green certificates. In particular, it was considered necessary to reduce the value of (i) the 2006 green certificates from Euro 98 MWh to Euro 79 MWh,(ii) the 2007 green certificates from Euro 98 MWh to Euro 85 MWh and (iii) the 2008 green certificates from Euro 95 MWh adopted in the first quarter of 2008 to Euro 91 MWh. Wind France: contributed Euro 4.4 million. The five companies, which hold a similar number of wind-parks, are consolidated since November 1, 2007, the effective date of the acquisition. 50.9% on the first half of 2007; the net reduction was related to the combined contribution from DSI S.r.l. which benefited from a significant recovery in the volumes treated, compared to a reduction in volumes conferred by Trenitalia. Holding: the EBITDA of the Holding business in the first half of 2008 was a loss of Euro 4.7 million, an increased loss on the first half of 2007 (Euro 2.5 million); the increased losses are due to as further described below non-recurring consultancy fees as well as costs related to the integration of the ERG Renew with the parent company. The EBIT was consequently a loss of Euro 0.5 million (Euro 6.4 million in the first half of 2007) after amortisation and depreciation of Euro 7.5 million; these latter charges increased by Euro 3.4 million compared to the first half of 2007 following the consolidation of the new French wind-parks. The net loss was Euro 2.5 million compared to a net profit of Euro 3.2 million in the first half of 2007 (Euro -5.7 million). In the first half of 2008, Group investments amounted to Euro 18.2 million (Euro 21.1 million in the first half of 2007) and related almost exclusively to the wind business. The net debt at June 30,2008 amounted to Euro million, an increase of Euro 20.8 million on December 31, 2007 (Euro million). This increase is principally due to the project financing loans relating to the "wind" business. The net capital employed at June 30, 2008 amounted to Euro million, an increase of Euro 19.7 million compared to December 31, 2007 (Euro million); the increase is entirely attributable to the wind business. Water services: the EBITDA of the water services business in the first half of 2008 was Euro 0.1 million, a decrease of 8

9 SIGNIFICANT EVENTS IN THE FIRST HALF-YEAR Wind In February, the installation of the Vestas wind-turbines at the Faeto wind-park began. Also in February, the new electricity connection line of the Viticuso (FR) park became operational. On April 17, the Basilicata Regional Administration Court heard the appeal presented by the promoter against the Region for the suspension of the work at the Tursi Colobraro wind-park. The decision of the Court will be adopted once the constitutional legitimacy of the regional law is resolved, which was brought up during the proceedings. Proceedings on the dispute during the period did not give rise to the Directors considering that risks to the normal advancement of the initiative exist, although it is currently not possible to estimate the timeframe for the work and completion of the park. On May 9, ERG Renew and Repower Systems AG signed a master agreement for the supply of up to 80 wind-turbines of 2 MW each, of which 30 under option. Based on this agreement, ERG Renew has secured the supply of total power of 160 MW.The windturbines will be utilised for ERG Renew s Italian projects, with the possibility to allocate 12 of the 30 optioned machines to the French market. On the signing of this contract a reservation fee was paid of Euro 5.2 million, which will be repaid on the activation of the wind-turbine supply contracts (at the date of the present report, the counterparty has already repaid Euro 2.1 million). Based on the master agreement signed on May 9, on June 30 EOS 7 Ginestra and Repower Systems AG signed a contract for the supply of 20 wind-turbines of 2 MW each to be installed at the Ginestra park (40 MW). Water services After numerous extensions, on January 8, 2008, the Lazio Region - Institutional Department - Regional Operations Office communicated to the company DSI S.r.l., (i) to have authority, transferred from the Environmental Emergency Commission of Lazio, for the procedure to obtain the environmental authorisation, (ii) that this procedure has commenced following the presentation of the relative documentation, (iii) to have appointed the person responsible for the procedure. The first hearing of the Services Conference was held on February 11, 2008 dealing with procedural matters. On April 23,the Lazio Region extended the environmental authorisation to January 31, 2009 for the company DSI S.r.l.which had expired on April 30, However, the Lazio Region indicated as part of its decision, the extension to January 31, 2009 as a reasonable period for the reorganisation of the structures and the completion of the technical and administrative procedures necessary for the definitive authorisation requested. Holding On January 22, following the resignation of the Director Giulio Antonello, the Board of Directors of ERG Renew S.p.A. co-opted Giorgio Mazzanti. On March 14, within the framework of the integration process of ERG Power & Gas s renewable energy activities into ERG Renew, the Board of Directors decided to implement organisational changes in order to facilitate the operational integration of the activities. As part of this process, the directors Mr.Salvatore Russo and Mr.Paolo Panella resigned as Chief Executive Officers and also therefore the related powers conferred to them.the Board of Directors appointed Mr. Raffaele Tognacca as CEO of ERG Renew S.p.A. In addition, the organisational structure was also changed to reflect the new business activities; the Board of Directors appointed Mr. Francesco Del Balzo as the General Manager. The Board of Directors also proposed to the Shareholders Meeting to increase the number of directors from 9 to 11, appointing two new directors holding specific professional attributes. On April 22, the Shareholders Meeting of 9

10 ERG Renew confirmed Raffaele Tognacca and Giorgio Mazzanti as Directors, who were co-opted to the Board of Directors on September 21, 2007 and January 22, 2008 respectively. The number of members on the Board of Directors was increased and two new Directors appointed: Luca Bettonte and Vittorio Garrone. The Shareholders Meeting also appointed the new Board of Statutory Auditors, fixing the duration of office for three years, until the approval of the 2010 Annual Accounts. The following were appointed as Statutory Auditors: Lelio Fornabaio, Chairman, Andrea Manzitti and Francesco Gatti. Alternate Auditors: Carlo Ravazzin and Stefano Brunello. On May 12, the Board of Directors of ERG Renew approved the integration into the company of the renewable energy sector assets of ERG Power & Gas through the partial spin-off of ERG Power & Gas S.p.A.(company spun-off) to ERG Renew (beneficiary). Following the conferment of the business spun-off, the operation provides for an increase in the share capital of ERG Renew through the assignment of 37,789,734 newly issued shares to ERG, sole shareholder of ERG Power & Gas. ERG, following the operation, will hold 77.4% of the share capital of ERG Renew. Following the integration, ERG Renew will be conferred the following investments, which constitute the assets spun-off: in the wind sector, 100% of ERG Eolica, whose assets derive from the spin-off of ERG Cesa Eolica and of other companies and investments held by ERG Power & Gas; in the production of electricity from mini-hydro plants: 100% of Ecopower and 90% of ISEA. Overall, these companies have a total installed power of 43 MW (of which 39 MW in the wind sector), 100 MW under construction (100% in wind, with the supply of the relative turbines assured by the agreement with Nordex) and 22 MW under development (of which 18 MW in the wind sector), for a total of 165 MW (of which 157 MW in the wind sector). Unicredit was the financial advisor to ERG Renew, providing a fairness opinion on the share swap of the spin-off. In addition, in accordance with best practice, on the presentation of transactions with related parties, ERG Renew, on the initiative and indication of the Internal Control Committee, requested a further opinion on the financial terms and conditions of the spin-off, provided by Studio Bernoni. On June 30, the Shareholders' Meeting approved the partial spin-off project of ERG Power & Gas to ERG Renew with the consequent assignment of 37,789,734 newly issued shares to ERG S.p.A., sole shareholder of the spun-off company. Following this extraordinary operation, which will be effective as of October 1, 2008, the share capital of ERG Renew will increase from the current Euro 94,876,941 to Euro 132,666,675. The spin-off includes (i) the total shareholding in the company ERG Eolica S.r.l., which in turn has shareholdings in the companies ERG Eolica Calabria S.r.l.(100%), ERG Eolica Fossa del Lupo S.r.l. (100%), Green Vicari S.r.l. (100%), ERG Eolica Basilicata S.r.l.(98%),VCC Abruzzo S.r.l.(30%),VCC Agrigento S.r.l.(30%), VCC Agrigento 2 S.r.l. (30%) and VCC Enna S.r.l. (30%); (ii) the 99% shareholding in the companies Eolico Agira S.r.l., Eolico Mirabella S.r.l., Eolico Palagonia S.r.l., Eolico Ramacca S.r.l. and Eolico Troina S.r.l.; (iii) the total shareholding in the company Ecopower S.r.l. operating in the hydroelectric sector; (iv) the 90% shareholding in the company ISEA S.r.l. operating in the hydroelectric sector. During the same Shareholders Meeting, powers were delegated to the Board of Directors to increase the share capital up to an amount of Euro 200 million, including any share premium, to be offered as options to shareholders. ERG Renew appointed the UniCredit Group and BNP Paribas as joint bookrunners.the share capital increase will provide equity to finance projects totalling Euro 880 million from the Industrial Plan approved on May 12 and which will permit ERG Renew to reach approx.700 MW installed in Italy and France by Finally, the Shareholders Meeting also approved the change of the company name from Enertad S.p.A. to ERG Renew S.p.A. 10

11 SECTORS OF ACTIVITY Wind Italy ERG Renew operates in the sector for the production of wind energy in Italy through 3 wind-parks with a total installed power of 77 MW. The wind-parks consist of wind-turbines capable of transforming the kinetic energy in wind into mechanical energy, which in turn is utilised for the production of electricity. Subject to the availability of the plant, the expected results of each wind-park are obviously impacted by the weather characteristics of the site where the parks are located. The operating result is also impacted by the price of the electricity sold and of the green certificates, while the net result is also impacted by interest rates. The 2008 Finance Act established, for the three-year period , Euro 180 per MWh as the total price (for electricity and green certificates) of electricity production from wind plants in Italy. ELECTRICITY SALES PRICE AND VALUATION OF GREEN CERTIFICATES year Electricity valuation/ (Euro/MWh) first half 2007 green certificates SALES PRICE OF ELECTRICITY GREEN CERTIFICATES GREEN CERTIFICATES GREEN CERTIFICATES Reference should be made to the notes to the half-year consolidated financial statements for the considerations at the end of the half year in relation to the valuation of the green certificates, based on the market trends (present and expected) and electricity prices. FINANCIAL HIGHLIGHTS year Results (thousands Euro) first half ,981 Operating revenues 11,505 15,510 22,712 Ebitda 7,136 12,708 (7,653) AMORTISATION, DEPRECIATION AND WRITE-DOWNS (3,726) (3,807) 15,059 Ebit 3,410 8,901 33,750 TANGIBLE AND INTANGIBLE ASSET INVESTMENTS 18,136 20,945 Operating data (MWh) 153,897 Production 81,976 75,980 OF WHICH 80,002 TROIA SAN VINCENZO 40,860 38,845 64,046 TROIA SAN CIREO 34,307 32,156 9,849 VITICUSO 6,809 4,979 The operating revenues of the "wind - Italy" business in the first half of 2008 decreased by 25.8% compared to the same period of 2007, from Euro 15.5 million to Euro 11.5 million. This decrease, although the sale of electricity increased by 7.9% from 75,980 MWh in the first half of 2007 to 81,976 MWh in the first half 2008, is due to the decrease 11

12 in the sales price of electricity, from Euro 80.3 MWh in the first half of 2007 to Euro 80.2 MWh in the first half 2008 and the decrease in the value of the green certificates, from Euro 115 MWh in the first half of 2007 to Euro 91 MWh in the first half of As further described in the notes to the condensed half-year consolidated financial statements, ERG Renew valued the green certificates available based on the expected price in the year in which, by law, they must be purchased by GSE (or by March of the third subsequent year of production), where still unsold, taking into account the expected scenario in the next three years for the cost of electricity. In relation to electrical energy, the decrease in revenues is attributable to a negative adjustment of Euro 2.4 million on the sale of electricity in 2007 following resolution No. 48/08 of the Electricity and Gas Authority. This latter, in fact, in February 2005 established that the sales price of electricity by the producers of renewable sources may only include component a) of article 30,letter a) of the Supplementary Finance Act. Subsequently, Ministerial Decree of October 24, 2005 overruled the AEEG recognising to renewable energy producers a price also including components b) and c) of the Supplementary Finance Act. AEEG appealed before the Lazio Administrative Regional Court and subsequently, following rejection, before the Council of State which, with sentence No. 44/08 of January 2008 published and executive only in June 2008, proclaimed in favour of AEEG.As this latter,in accordance with the provisions of Ministerial Decree of October 24, 2005, had in the meantime recognised to the producers the full sales price, they requested, following the sentence of the Council of State, the repayment of the higher price recognised. Finally, also with regard to revenues from electricity sales, there was a Euro 0.4 million negative adjustment on the first half of 2008;in fact,while until 2007,the tariff applied was the zone average, from the current year, the tariff applied is the national level based on time. The EBITDA of the wind business in Italy was Euro 7.1 million, a decrease of 43.8% compared to the first half of The decrease is due to the reasons already reported in relation to the operating revenues and to the write-down of the 2006 green certificates from Euro 98 MWh to Euro 79 MWh (Euro 0.3 million) and of the 2007 green certificates from Euro 98 MWh to Euro 85 MWh (Euro 2 million). The decrease in the value was necessary due to the abnormal movements in trading prices in the second quarter of 2008 which, in the absence of regulatory clarification, on the method for the determination of the price, whose re-definition was sanctioned by the 2008 Finance Act, was characterised by extremely limited volumes traded compared to the potential offer..this situation is attributable to the behaviour of small operators with the sole objective of immediate realisation with consequent significant depreciation of the value of the green certificates traded in the final part of the half-year compared to those defined with the benchmark formula introduced by the 2008 Finance Act. Consequently, as further described in the notes to the condensed consolidated half-year financial statements, ERG Renew valued the green certificates available based on the expected price in the year in which, by law, they must be sold by the GSE (or by March of the third subsequent year of production), where still unsold, taking into account this expected outlook in the next three years for the cost of electricity and the financial capacity to finance the payment of the project financing instalments due, also utilising bank credit lines, without the necessity of forced realisation of the production of green certificates at values significantly lower than those assumed above. Therefore, with reference to the green certificates produced in 2006, the price was aligned to the average matured at June 30, 2008 on the bids made on the GSE platform and which will represent the repurchase (1) expected in a decree, not yet issued, which will contribute to stabilising the green certificate market at appropriate values compared to the expectations of the return on the investment with reference to the 2008 Finance Act in the definition of the mechanisation for the valuation of the green certificates. 12

13 price by the Electricity and Gas Authority on March 31, 2009; on the other hand, with reference to the green certificates of the year 2007, based on the matters described previously, the price was determined assuming the sale in March 2010 to prices aligned to those defined with the current calculation method introduced by the 2008 Finance Act taking into account the expected price of electricity at the moment of sale as assumed on the basis of the current energy market. Depreciation/amortisation and write-downs in the first half amounted to Euro 3.8 million, in line with the first half of 2007 (Euro 3.7 million). The EBIT of the Italian wind business amounted to Euro 3.4 million, a decrease of Euro 5.5 million compared to the first half of 2007 for the reasons already outlined for revenues and the Ebitda. Wind France Financial Highlights year Results (thousands Euro) first half ,993 Revenues 5,166 1,641 Ebitda 4,359 (1,159) AMORTISATION, DEPRECIATION AND WRITE-DOWNS (3,494) 482 Ebit 865 TANGIBLE AND INTANGIBLE ASSET INVESTMENTS Operating data (MWh) 24,086 Production 61,648 OF WHICH 4,691 HETOMESNIL 12,424 4,920 LE MARDEAUX 11,621 4,814 LE CARREAU 12,286 4,356 LIHUS 12,627 5,305 LA BRUYERE 12,690 The revenues of the wind France business of Euro 5.2 million relate to the production of 61,648 MWh by the five French windparks purchased on Octobber 31, 2007.The French regulations on the production of electricity from wind sources provides for a sales price to the operator EDF of Euro 83.8 per MWh inclusive of the price of electricity sold and of the incentive. This tariff derives from a price of Euro 82 per MWh contractually agreed at the beginning of the operations of the parks, valid for ten years and is indexed each year to the rate of inflation; for a further five years, the tariff is based on production performance of the parks. The contribution to the consolidated EBITDA of the wind - France business was Euro 4.4 million, while the EBIT, after amortisation/ depreciation of Euro 3.5 million, was Euro 0.9 million. 13

14 Water services FINANCIAL HIGHLIGHTS year Results (thousands Euro) first half ,049 Revenues 3,595 3, Ebitda (804) AMORTISATION, DEPRECIATION AND WRITE-DOWNS (216) (285) (772) Ebit (109) (67) 100 TANGIBLE AND INTANGIBLE ASSET INVESTMENTS Operating data Waste treated 337,186 SODAI ITALIA - WASTE TREATED (MC) 176, ,261 15,033 DSI INDUSTRIAL SERVICES - LIQUID WASTE TREATED (MC) 9,442 6,508 11,709 DSI INDUSTRIAL SERVICES - SOLID WASTE TREATED (TONNES) 7,946 4,745 The operating revenues of the "water services" business in the first half of 2008 increased by 16.7% compared to the same period of The increase is principally due to the revenue growth in DSI S.r.l. from Euro 1.0 million in the first half of 2007 to Euro 1.6 million in the first half of 2008,as the subsidiary benefited from a strong recovery in volumes treated - from 4,745 mc in the first half of 2007 to 7,946 mc in the first half of 2008, an increase of 67.5%. Good revenues from DSI S.r.l. more than offset the decrease in revenues of SODAI Italia S.p.A. (Euro 2.1 million in the first half of 2007 compared to Euro 2.0 million in the first half of 2008).The decrease in revenues of SODAI Italia S.p.A.is due to the lower waste volumes treated which decreased from 179,261 mc in the first half of 2007 to 176,342 mc in the first half of 2008 (-1.6%). The EBITDA of the water services business was Euro 0.1 million, a decrease of 50.9% on the first half of The company DSI S.r.l. contributed Euro 0.2 million, an increase on the first half of 2007 which recorded a break-even result, while the company SODAI Italia S.p.A. recorded a negative EBITDA of Euro 0.1 million, a decrease of Euro 0.3 million on the first half of 2007, due to some non-recurring extraordinary items. The EBIT of the water services in the first half of 2008 was a loss of Euro 0.1 million, in line with the first half of With reference to SODAI ITALIA S.p.A.,it is recalled that the future profitability projections of the subsidiary justifies the carrying value of the tangible and intangible assets relating to its business; this is in spite of the weak performance in the first half of the year as described previously; in particular, the Directors underlined that, although profitability is still adequate for the above valuation of these assets, this is dependent on the positive outcome of an appeal to the Basilicata Regional Administrative Court to ascertain that there are matters damaging to the company in the current Provincial Plan for the management of waste which does not consider the project presented for the development of the Melfi San Nicola platform. The Directors consider the assumptions of the Business Plan to be reasonable and constitute a fundamental basis for the medium-term development of the company s activities based on the utilisation of the San Nicola di Melfi platform, in spite of the uncertainty of the outcome of the above-mentioned appeal.the failure to obtain the authorisation for the construction and management of the above-mentioned platform could result in a write-down of tangible and intangible assets which will be monitored by the Directors at each interim and annual reporting period. 14

15 holding year Results (thousands euro) first half Revenues 991 (4.787) Ebitda (4.676) (2.448) (1.405) AMORTISATION, DEPRECIATION AND WRITE-DOWNS (18) (35) (6.192) Ebit (4.694) (2.483) TANGIBLE AND INTANGIBLE ASSET INVESTMENTS 25 The Holding company revenues amounted to Euro 1.0 million and were made up of services to the parent and group companies. These revenues were not present in the first half of In the first half of 2008,the EBITDA was a loss of Euro 4.7 million,an increased loss of Euro 2.2 million on the first half of 2007.This negative performance is due to: (i) some extraordinary technical consultancy work; (ii) costs relating to the transfer of the office and personnel from Milan to Genoa, also inclusive of higher costs for the maintenance, during the first half of 2008, of an office at Milan until the normal expiry of the rental contract, and of the new office at Genoa; (iii) the staff and technical services provided by the parent company and group companies supporting ERG Renew in the integration within the ERG Group as well as the development of the Investment Plan approved in May. At EBIT level, ERG Renew recorded a loss of Euro 4.7 million,an increased loss of Euro 2.2 million due to the reasons already described in relation to the EBITDA. Investments Investments by ERG Renew in the first halfyear of 2008 amounted to Euro 18.2 million (Euro 21.1 million in the first half of 2007). The breakdown of the investments by sector is shown in the table below: year Investments (thousands Euro) first half ,750 WIND ITALY 18,136 20,945 WIND FRANCE 33,750 Total Wind 18,136 20, WATER SERVICES HOLDING 25 33,850 Total 18,195 21,063 The investments related almost exclusively to the wind - Italy business; investments continued for the construction of the windpark by the company EOS 4 Faeto S.r.l.For informational purposes, on July 2 and therefore after the current reporting period, the first payments were made for the wind-turbines for the Ginestra wind-park. In relation to the Nurra wind-park, managed by EOS 2 Nurra S.r.l., whose construction has incurred delays, no impairment is considered to have taken place on the recovery of the carrying value of the investments already made to date, principally consisting of a deposit of Euro 2.5 million paid in previous years. 15

16 FINANCIAL STATEMENTS Accounting principles utilised for the half year report The half-year report at June 30, 2008 was prepared in accordance with international accounting standards (IAS/IFRS) adopted by ERG Renew in the preparation of the consolidated financial statements from the year 2005 and by ERG Renew S.p.A.in the preparation of the separate financial statements from the year Reclassified Income Statement year Reclassified Income Statement first half 2007 (thousands euro) ,023 OPERATING REVENUES 21,257 18, OTHER REVENUES AND INCOME ,856 TOTAL REVENUES 21,835 19,134 (453) RAW, ANCILLARY AND CONSUMABLES (127) (239) AND GOODS FOR RESALE (10,862) SERVICES (8,536) (5,146) (4,914) PERSONNEL COSTS (3,375) (2,254) (2,029) OTHER OPERATING EXPENSES (2,872) (1,017) 19,598 EBITDA 6,925 10,478 (9,255) AMORTISATION & DEPRECIATION (7,454) (4,043) (1,766) PROVISIONS & WRITE-DOWNS (84) 8,577 EBIT (529) 6,351 (3,084) NET FINANCIAL INCOME AND CHARGES (2,680) (1,056) 5,493 PROFIT/(LOSS) BEFORE TAXES (3,209) 5,295 (3,368) INCOME TAXES FOR THE PERIOD 715 (2,125) 140 MINORITY INTEREST SHARE RESULT FROM DISCONTINUED OPERATIONS 2,265 GROUP NET PROFIT/(LOSS) (2,456) 3,218 Net financial income and charges The net financial charges amounted to Euro 2.7 million, an increase of Euro 1.6 million; this increase is due to the charges matured on the project financing for the French windparks acquired in October 2007 and which have already been described in detail. Income taxes for the period The income taxes, which amount to income of Euro 0.7 million, relate to deferred tax income of Euro 1.1 million following the increase in the write-downs made on the value of the green certificates deductible only in the year of sale, which are expected not to be assessable; this positive income tax was in part offset by a regional IRAP tax charge of Euro 0.4 million. There was no IRES income tax charge for the period following a negative assessable tax income. 16

17 Reclassified Balance Sheet (thousands euro) 30/06/ /12/ /06/2007 FIXED ASSETS 246, , ,100 PROPERTY, PLANT AND EQUIPMENT 174, ,361 97,472 INTANGIBLE ASSETS 65,749 65,083 35,363 FINANCIAL ASSETS 6,059 4,265 4,265 WORKING CAPITAL 29,833 22,631 31,239 INVENTORIES TRADE RECEIVABLES 9,717 9,360 6,211 OTHER ASSETS 55,199 50,064 42,719 TRADE PAYABLES (9,769) (14,564) (9,004) PROVISION FOR RISKS AND CHARGES (4,177) (4,169) (2,472) OTHER LIABILITIES (21,110) (18,060) (6,215) EMPLOYEE LEAVING INDEMNITY (444) (425) (446) NET CAPITAL EMPLOYED 275, , ,893 NET EQUITY 143, , ,214 PARENT COMPANY 143, , ,995 MINORITY INTEREST NET FINANCIAL DEBT 132, ,651 22,679 NET EQUITY AND FINANCIAL DEBT 275, , ,893 At June 30, 2008, the net capital employed amounted to Euro million, an increase of Euro 19.7 million on December 31, The debt ratio, expressed as a ratio between the total net financial debt and the net capital employed, was 48.1% (43.6% at December 31, 2007 and 13.5% at June 30, 2007). Fixed assets The fixed capital includes tangible, intangible and financial fixed assets.the increase on December 31,2007 is due to investments in the wind business in Italy. Net Working Capital The net working capital increased by Euro 6.5 million, from Euro 22.6 million at December 31,2007 to Euro 29.1 million at June 30, This increase is principally attributable (i) to the increase in the account Other Assets for Euro 5.1 million which include the green certificates matured during the half year,(ii) to the decrease in the account Trade Payables for Euro 4.1 million relating almost exclusively to the wind-park of EOS 4 Faeto, for the payment of the wind-turbines and (iii) to the increase of the account Other Payables for Euro 3.6 million, principally comprising the payable to GSE for the adjustment of Euro 2.4 million on the electricity sold in 2007 and as already described under wind business revenues. 17

18 CONSOLIDATED NET FINANCIAL POSITION (thousands euro) 30/06/ /12/ /06/2007 CURRENT FINANCIAL ASSETS 69,022 79,741 89,849 HOLDING COMPANIES GROUP COMPANIES THIRD PARTIES 12,600 12,600 16,116 CASH AND CASH EQUIVALENTS 48,029 60,437 71,766 CASH AND EQUIVALENT UNDER LIEN 4,170 4,170 RECEIVABLES FOR DERIVATIVE INSTRUMENTS 4,223 2,534 1,967 CURRENT FINANCIAL LIABILITIES (39,759) (40,340) (27,545) HOLDING COMPANIES (62) (62) (62) THIRD PARTIES (20,403) (22,778) (9,983) DERIVATIVE INSTRUMENTS (19,294) (17,500) (17,500) CURRENT FINANCIAL POSITION 29,263 39,401 62,304 NON-CURRENT FINANCIAL ASSETS THIRD PARTIES NON-CURRENT FINANCIAL LIABILITIES (162,160) (151,466) (85,397) THIRD PARTIES (162,160) (151,466) (85,397) DERIVATIVE INSTRUMENTS NON-CURRENT NET FINANCIAL POSITION (161,746) (151,052) (84,983) NET FINANCIAL POSITION (132,483) (111,651) (22,679) The consolidated net debt at June 30, 2008 was Euro million, an increase of Euro 20.8 million on December 31, Current financial assets principally refer to: liquidity of Euro 52.2 million, of which Euro 20.9 million relating to the wind business and therefore restricted almost exclusively to the project financing and Euro 22.2 million relating to ERG Renew as the residual funds from the sale of the Steel and Waste to energy/waste management businesses; receivables from third parties of Euro 12.6 million relating to securitisation insurance policies taken out in order to obtain the contractual guarantees required for the acquisition of 49% of the subsidiary SODAI Italia from the shareholder Trenitalia which exercised a put option in May 2007 but whose right is not recognised as valid by ERG Renew. Current financial liabilities refer to: financial payables to third parties amounting to Euro 20.4 million of which Euro 5.5 million a bank overdraft of ERG Renew S.p.A. and Euro 14.9 million a short-term non-recourse payable relating to the project financing of the wind business; payable of Euro 19.3 million relating (i) to the put option of Euro 17.5 million granted to the company Trenitalia on 49% of the company SODAI Italia S.p.A. This amount represents the value which Trenitalia, on May 22, 2007, wished to exercise the put option. However, on June 11, 2007, ERG Renew communicated to Trenitalia that it did not con- 18

19 sider the put option rights on the shares of SODAI Italia (49%) valid. Currently the arbitration procedure is on-going based on the contract signed on December 23, 2003; (ii) to the put option of Euro 1.8 million granted to the company Gepafin on 0.69% of the company Ansaldo Fuel Cells S.p.A. held, to be exercised by January 29, The non-current financial assets relate to a capital insurance policy agreed to guarantee a surety in favour of the subsidiary EOS 1 Troia (San Vincenzo) benefiting landowners where the wind-turbines are located. The non-current financial liabilities are principally represented by Euro million of medium/long-term non-recourse payables relating to the project financing of the wind business and by Euro 41 million of a medium/long-term loan granted to ERG Renew. The operations with derivative products of ERG Renew existing at June 30,2008 refer to a notional amount of Euro million, a decrease of Euro 4.6 million compared to Euro million at December 31, This decrease is due to the repayment of the instalments on the various project financing contracts of the parks in production, in part offset by new derivatives for the project financing of the wind-park of EOS 4 Faeto under construction. Hedging instruments Notional Notional (thousands euro) at 30/06/2008 at 31/12/2007 INTEREST RATE SWAP (IRS) RELATING TO "WIND" RELATING TO MEDIUM/LONG TERM LOAN INTEREST RATE CAP RELATING TO "WIND" RELATING TO MEDIUM/LONG TERM LOAN Total In relation to the current and non-current financial liabilities, it should be noted that, as there were no sales of green certificates and due to the recognition of the 2007 electricity price adjustment previously commented upon, the subsidiary EOS 3, with total project financing of Euro 30.1 million (of which 1.9 million within one year),did not comply with the financial covenants agreed with the financial institution. At the current date, the financial institution recognised a waiver of the half year financial covenants renouncing the right to an advanced repayment, which therefore permits, although non compliant, to maintain Euro 28.2 million of the debt as non-current. At June 30, 2008, there were no other cases of non compliance of financial covenants on the debt of ERG Renew. 19

20 SUBSEQUENT EVENTS TO THE END OF THE HALF-YEAR On July 24, the Shareholders Meeting of the company EOS 7 Ginestra S.r.l. and of its 100% subsidiary WWEH 2 S.r.l. approved the merger by incorporation of this latter into the former.this operation will be effective as of October 1, RISKS AND DISPUTES Holding On February 24, 2004, ERG Renew S.p.A. sold to Fin.Ind.Int SA its 33% holding in the company Eurosviluppo Industriale S.p.A. The sales/purchase contract provided that in the case where the buyer, already with a further holding of 33%, sold the investment in Eurosviluppo Industriale S.p.A. to third parties by December 31, 2004 or, alternatively this latter sold its 99% investment in Eurosviluppo Elettrica S.p.A., the price would be increased in accordance with the terms of the contract. Despite the materialisation of the above conditions Fin.Ind.Int. SA did not make the payment in accordance with the contract. Therefore, having exhausted all actions for the application of the sales contract, through recourse on August 29, 2006 and another appeal on January 23, 2006, ERG Renew S.p.A. requested the President of the Milan Court to appoint the sole judge to make a decision on the dispute with the company Fin.Ind.Int. SA. The case has not yet commenced, as the appointed judge resigned due to a conflict of interests. The Company is preparing a request to appoint a new judge. It is highlighted however, in relation to the contractual recognition of this further amount due to ERG Renew S.p.A., that the company has prudently not recorded this asset. In relation to the sale of the Steel business in May 2006, ERG Renew S.p.A., in compliance with the contractual conditions, guaranteed the buyer compensation for any unaccrued liabilities up to a maximum amount of 30% of the sales price,as further described in the Information Document prepared in accordance with CONSOB regulations, arising in the two years subsequent to the closing, which expired on May 31 last. An exception relates to any indemnities of a fiscal, legal and environment nature which provides for greater guarantees. In relation to the sale of the Waste to energy/waste management business to ACEA S.p.A. in May 2006 and the guarantee provided to this latter by ERG Renew S.p.A. relating to the reimbursement for damages or claims by third parties not exceeding 80% of the consideration paid for the equity, ACEA has undertaken an arbitration process in order to be recognised some prior-sale charges. However, ERG Renew, on the nomination of its own arbitrator, claimed the non payment of some prior-sale income, the recognition of two fiscal earn-out annuities of the original six contractually agreed deriving from the transfer of approx. Euro 15 million losses carried forward relating to TAD Energia Ambiente and its subsidiaries, as well as the payment of some trade receivables also from TAD Energia Ambiente and its subsidiaries, currently subject to injunctions. In addition, ERG Renew guarantees the book value of trade receivables of TAD Energia Ambiente as at May 17, 2006,the date of the sales contract of the investment, which was originally Euro 12.9 million net of the relative doubtful debt provision and not paid in the two years subsequent to the signing of the sale contract of TAD Energia Ambiente.ERG Renew,at the reporting date, did not consider the request to repurchase the receivables legitimate, in particular as they have not received details of these amounts and secondly as the correct and timely management of the credit recovery has not been demonstrated, as required contractually. Water services ERG Renew has initiated an appeal against Trenitalia with the intention of declaring 20

21 the put option recognised to Trenitalia in the contract signed on December 23, 2003 relating to 49% held in the company SODAI Italia (51% ERG Renew) and which Trenitalia exercised in May 2007, as null, cancelled or resolved.the judge, which will decide on the value of the put requested by the counterparty already recorded in the accounts, will most likely provide his conclusions within the current year. In November 2005, the Court of Rome rejected a company s application for the provisional enforcement of a court order for the payment of Euro 343, from DSI S.r.l., value already recorded under trade payables, for waste disposal services carried out in the period prior to DSI becoming part of ERG Renew. DSI S.r.l. had appealed the court order and the case is still pending. In March 2006, the company began proceedings to assign responsibility deriving from the violation of contractual guarantees made by the counterparty in the contract signed in October 2003, and relating to the 100% sale to ERG Renew S.p.A.of DSI S.r.l. ERG Renew quantified the damages incurred as Euro 1,034,456.65, reserving the right to quantify any further damages in course. Against the above-mentioned disputes, the provisions for risks and charges in the abbreviated consolidated half-year financial statements are considered appropriate for the probable risk quantifiable at the present date. OUTLOOK The results of ERG Renew will be in line with the Industrial Plan approved by the Board of Directors of ERG Renew SpA on May 12, In particular, ERG Renew forecasts an EBITDA equal to the compound growth rate (Compounded Average Growth Rate CAGR) of 65%. The Industrial Plan includes, for the period under consideration, an investment cycle to achieve the growth plan amounting to Euro 880 million, of which Euro 863 million relating to the wind business, Euro 16 million to the hydroelectric business and Euro 1 million to the water services business. The above forecasts are based on certain assumptions on external factors not determined by ERG Renew (among which market place changes, changes in the price of electricity and green certificates, potential increase in installed capacity, the effective production from the wind-parks, the effective completion of the investments planned, the actual operating and overhead costs as well as the macroeconomic scenario - and in particular the inflation rate) and key strategic actions undertaken by ERG Renew. The non realisation of these assumptions given the uncertainty relating to future events, and in particular those not under our control, or the realisation of these assumptions in a differing manner to those assumed in the plan, could result in significantly lower differences in the actual results compared to those forecast. Renewable The construction work on the wind-park at Faeto (24 MW) will be completed in the second half of 2008, and the park will then be fully operational. For the second part of the year a strong improvement in profitability is expected with the entry into production of the Faeto windparks and the integration of the renewable assets of the ERG Group into ERG Renew. From October 1, the spin-off of ERG Power & Gas described in the Significant events in the first half year section of the present report will become effective. From that date ERG Renew will consolidate the production of the wind-park at Pian dei Corsi (1.6 MW), already operational, and at Vicari (37.5 MW), currently in commissioning, which is expected to be fully operational in the second half of the year, as well as the mini-hydro stations (3 MW) and the wind-parks under development and construction. The consolidation will also include the debt relating to the investments transferred to ERG Renew and, in particular, relating to the project financing provided for the construction of the Vicari wind-park. Commencement of the work on the windpark of EOS 7 Ginestra will commence in 21