Elevion Energy & Engineering Solutions GmbH

Elevion Energy & Engineering Solutions GmbH

Berlin

Befreiender Konzernabschluss zum Geschäftsjahr vom 01.01.2023 bis zum 31.12.2023

Elevion Group B.V.

Amsterdam / Niederlande

117+ LOCATIONS IN 12+ COUNTRIES from the Netherlands to Romania, from Bolzano to Jena and Czarnków, Elevion Group is present throughout Europe's biggest markets.

Energy.

Solutions.

Together.

Elevion Group is a leading European provider of end-to-end decarbonisation and higher energy efficiency solutions. Thanks to its unique structure and its pioneering spirit, its capabilities can be easily scaled across the project scope, for various project sizes and a range of required expertises.

Elevion Group operates on 12+ European markets (including the Netherlands, Germany, Austria, Italy, Poland, Romania and Hungary) through 60+ highly specialised independent companies, but with the financial strength of an international group.

Group at a Glance

^* Adjusted EBITDA without intragroup transfer of Deubach/Reddehausen projects of the BELECTRIC Group and elimination of the related gross margin (that would be otherwise realized in turnkey deliveries) would result to 6.6%.

Highlights

(7%)

Adjusted EBITDA margin decrease

1,243

Total revenues in 2023 (mEUR)

+29%

Adjusted EBITDA increase

+38%

Revenue increase

+3%

Order backlog increase

12

Countries

78

Consolidated companies

65+

MWp of floating photovoltaics

6,000+

Projects

2,000

MWp of Photovoltaics O&M

127

Locations

7

New aquisitions

500+

MWp of new photovoltaics per year

4,919

Employees (headcount)

Letter from CEO

Dear readers,

in 2023, we once again achieved significant revenue growth of 38% year-over-year. Our operating profit growth by 29% was largely driven by the very good performance of the Building Energy Solutions segment. However, notable achievements occurred across all 3 segments. Building Energy Solution companies' revenue grew by + 29% and Euroklimat Sp. z o.o. (Euroklimat) in Poland reached highest revenue and profit in its history.

In the segment of GEE, BELECTRIC constructed 400 MWp of photovoltaic plants and operated and maintained a total of 2,500 MWp (that is 56% YoY growth) at the year-end. In Austria, SYNECOTEC Deutschland GmbH (SYNECOTEC) extended its offering for commercial and industrial clients by battery storage solutions. Dutch Energy Shift (formerly ZOHD) sold 30 battery storage systems during the year with a total capacity of 7.5 MWh and is among the top-10 players in the Netherlands in B2B battery storage systems segment (non-utility scale).

In Energy for Industry segment, Metrolog s. z o.o. (Metrolog) continued his focus on water treatment while demand for cogeneration plants was low. It con-structed 13 water treatment facilities and in the second time in a row it has been awarded for outstanding contribution to Polish Economic Advancement by the Polish Ministry of Development and Technology.

Hermos AG (Hermos) also continued its growth (+8.6% YoY revenue growth) and development of his proprietary FIS system that is utilized in various applications including building automation, energy management, RFID tracking and track and trace. Furthermore, we have embarked on a project involving several high-efficiency cogeneration units in Northern Italy. The units will supply electricity and heat for TAL pipeline that plays a crucial role in oil supply to several EU countries including Germany, Czech Republic and Austria.

Our group has also expanded through additional acquisitions. I'm pleased that over 650 new experts have joined the Elevion team from SERCOO Group GmbH (SERCOO Group), Alexander Ochs Group (Ochs Group),

GESPA GmbH (Gespa), Elektro Hofmockel Gmbh & Co. Elektroanlagen KG (Hofmockel), TRIM-TECH TECHNIKA INSTALACJI Sp. z o. o. (TRIM-TECH) and GEE. Additional-ly, we have acquired 2 new biogas stations in Italy that together with SERCOO expanded our biogas related business.

We had a good start into 2024 as the backlog is exceptionally robust overall, surpassing 70% of 2024 planned revenue. Our main goal for this year is to successful-ly deliver the contracted projects and continue the expansion of our business across all three segments to strengthen our position as one stop-shop decarbonization solutions provider for European companies.

Lastly, I would also like to mention that in 2023 we have issued the very first Elevion Group's consolidated ESG report. As providers of end-to-end decarbonization solutions to our clients, we want to demonstrate our commitment to continuous improvement in this area and alignment of our activities with European climate strategies and targets.

Our vision

New Generation of Energy for Europe

We are pioneers and innovators in decarbonization, higher energy efficiency and protection of natural energy resources. We deliver economic success to our customers, while at the same time achieving technological and ecological safety in energy management. This is our way of fulfilling the responsibility we have towards our people, our clients and nature.

Our mission

Future-Proof Energy Solutions

The world is dynamically developing, but our energy resources are still the same - if not harder to come by. We provide sustainable CO ₂ reduction, higher energy efficiency, savings in energy costs, and we cover all areas of technical building equipment and services. Within this complex approach, we come up with sustainable, future-proof solutions to energy generation, energy consumption and energy efficiency.

Jaroslav Macek

Managing Director & Chief Executive Officer

Jiří Pecka

Chief Financial Officer

Michal Janda

Chief Commercial Officer

Paulína Friedová

Head of Group

Marketing & ESG

Slavomír M. Čauder

Chief Legal Officer

Jiří Halouzka

Chief Information Officer

Lucie Vosečková

Head of Group Governance, Risk & Compliance

Jaroslav Macek

Managing Director & Chief Executive Officer

Miroslav Šindelář

Managing Director

Derk Berend Blik

Managing Director

Martina Kubešová

Managing Director

Each of 60+ companies that form Elevion Group has a deep level of expertise and experience in their respective industries, making us true specialists for any task related to decarbonisation and energy efficiency. Togetherness is a key value of Elevion Group.

WE CONSIDER OUR SELVES TO BE DEFINED NOT ONLY BY WHAT WE DO AND HOW WE DO IT, BUT ALSO WHY

Company Profile & Structure

Financial Stability

Complexity Of Delivery

Attracting Talents

Elevion Group B.V. (hereafter "The Group" or "Elevion Group"), a 100% subsidiary of CEZ Holdings B.V., is an energy solutions provider (ESCO, Energy Service Company) for all tasks related to the intelligent use of energy. Elevion Group B.V. is a leading European provider of end-to-end decarbonization and higher energy efficiency solutions. Thanks to its unique structure and its pioneering spirit, its capabilities can be easily scaled across the project scope, for various project sizes and a range of required expertise.

Elevion Group operates on 12+ European markets (including the Netherlands, Germany, Austria, Italy, Poland, Romania and Hungary) through 60+ highly specialized independent companies, but with the financial strength of an international group. The Elevion Group belongs to CEZ Group, as CEZ Holdings B.V. is a 100% subsidiary of ČEZ, a. s. (CEZ Group). CEZ Group is one of the ten largest energy companies in Europe. This enables the Elevion Group to generate and leverage synergies and benefits for customers and partners across Europe.

Elevion Group Services

The Group provides its customers with a range of solutions. The portfolio can be clustered into 3 pillars.

1

Building Energy Solutions combine design & build, a comprehensive range of services for technical building equipment including HVAC, electrical installations and solutions for industrial automation, decarbonization with execution and installation and all segments of maintenance and repair.

2

Our Green Energy portfolio provides services related to the generation of energy from renewable sources, energy management solutions, and other sustainable and tailor-made solutions for decarbonization and energy transition.

3

Energy for Industry services provide energy-efficient solutions for industry from planning to completion, such as decarbonization, comprehensive implementation of investments in the field of thermal energy as well as the construction of water treatment systems to provide energy-saving and ecological, safety and functionality-oriented solutions.

Structure of Companies Under Elevion Group B.V.

The subsidiaries under the umbrella of the Elevion Group are successful, regionally rooted and highly specialized companies with decades of experience, whose core competencies span all market segments from Building Energy Solutions, Energy for Industry to Green Energy services.

We are an internationally active group that generates and utilizes synergies and benefits for customers and partners across Europe. The operational foundation of the Elevion Group is effectively supported by a lean organizational structure.

Elevion Group B.V., headquartered in Amsterdam, acts as a strategic holding company for the Elevion Group.

60+ highly specialised companies which together provide end-to-end decarbonization solutions and higher energy efficiency

Elevion Group operates through three separate divisions which unite the independent subsidiaries of the respective markets under one roof. This structure allows us to provide a one-stop-shop for any energy-related tasks - from project development to planning, conception and installation of a building or a plant to the end of its lifecycle, aiming for long-term customer loyalty.

Building Energy

Solutions:

Green Energy

Energy for Industry

CEZ Group's Profile

CEZ Group is a stable energy group, one of the largest economic entities in Czechia and Central Europe, contributing significantly to the development of the region's energy sector in compliance with the European Union's sustainability targets. In 2023, CEZ Group again proved that it remains a safe and reliable harbor for its customers and was able to ensure maximum energy supply for Czechia and its neighboring countries.

In its activities, CEZ Group emphasizes the implementation of global climate goals, decarbonization, and the environment in general. It focuses on developing nuclear and renewable energy and innovation in the energy sector to provide reliable and sustainable services to its customers. The core value arises from emission-free generation and the distribution and sale of electricity and heat. Other important activities are commodity trading, distribution and sale of natural gas, mining, and especially the provision of complex energy and technological services.

CEZ Group employs nearly 31,000 people and supplies power and modern energy solutions to millions of customers in Czechia, Germany, Poland and Slovakia. It also operates in particular in Hungary, France, Italy, Austria and the Netherlands.

The Share of Cez Group's Main Activities in Ebitda 2023

%

Vision and Corporate Social Responsibility

The long-term vision of CEZ Group is to bring innovations for addressing energy needs and contribute to higher quality of life. The VISION 2030-Clean Energy of Tomorrow strategy is aimed at a dynamic transformation of the generation portfolio to low-emission and achieving full climate neutrality by 2040. An integral part is the commitment to fundamentally limit the generation of heat and electricity from coal by 2030. The massive development of nuclear power and the construction of new renewable energy facilities are fundamental to the zero-emission vision and the priority of energy self-sufficiency. CEZ Group continues to invest in the development of electromobility and in the field of batteries, including the extraction of critical raw materials for their production. The overall goal is to ensure safe and competitive energy for customers.

In distribution and sales, the core objective is to provide the most advantageous energy solutions and the best customer experience on the market. Therefore, CEZ Group invests significantly in modernizing and digitizing its distribution grids, aims to be the most reliable supplier of energy and modern comprehensive energy services, and intends to be a leader in the energy transformation and decarbonization of industry in Czechia and Central Europe.

CEZ Group's business activities are governed by strict ethical standards that include responsible behavior toward employees, society and the environment. It adheres to the principles of sustainable development, and its entire strategy is based on ESG (Environmental, Social, Governance) pillars. The principles of sustainability are thus an integral part of the management and direction of the entire company, and CEZ Group emphasizes their fulfillment with its suppliers as well.

CEZ Group supports energy efficiency and effectiveness, promotes new technologies and innovations, and focuses on investments into modern technology, science and research. The corporate culture emphasizes safety, internal efficiency in order to promote the growth of CEZ Group's value, and creating a safe and stimulating environment for its employees' career development based on the principle of equal opportunities for everyone. One of its priorities is close cooperation with communities and the most customer-friendly approach. A comprehensive goal for CEZ Group is to remain among the top 20% in ESG rankings.

The largest shareholder of the parent company ČEZ is the Czech Republic, with a nearly 70% stake in the company's stated capital. ČEZ shares are traded on the Prague and Warsaw stock exchanges and included in the PX and WIG-CEE exchange indices. The market capitalization of ČEZ as at December 31, 2023, amounted to CZK 515 billion and during its existence the company has paid CZK 446 billion to its shareholders in dividends.

CEZ Group has long been one of the largest taxpayers in Czechia and one of the main pillars of the Czech economy. Since the establishment of the joint-stock company in 1992, ČEZ has paid more than a trillion Czech crowns to the Czech state in dividends, taxes, levies, donations, and payments for emission allowances.

WE CONSIDER OUR SELVES TO BE DEFINED NOT ONLY BY WHAT WE DO AND HOW WE DO IT, BUT ALSO WHY

Our values:

We turn our customer's problems into future-oriented solutions.

We always strive for top performance and maximum commitment.

We take responsibility for the people we work with and the environment we operate in.

We work together on all levels

Major Events 2023

1st quarter

BELECTRIC signs UK operations and maintenance agreement with next energy solar fund

After signing a framework agreement for the next three years, BELECTRIC will add an expected portfolio of at least ten solar farms with a total capacity of more than 150 MWp to its O&M footprint in the United Kingdom. The solar power plants range from 5 MWp to 34 MWp in capacity and are located in various counties across England, including Dorset, East Sussex and Lincolnshire.

ZOHD Group has commissioned the first big project for peak shaving

The customer is a welding company. Because of the big use of power during the morning it got a penalty from the DSO. To avoid this penalty Zonnepanelen op het dak has installed 311 kW PV and 656 kWh storage capacity. With this solution the customer can keep his usage from the grid between the thresholds.

IWC begins construction of the first CO2-positive combined heat and power plant for a hotel business in Europe

This innovative backwards power plant generates electricity and heat for the hotel's own needs in three process stages. Wood chips from regional waste wood are converted into a gaseous fuel, CO ₂ is bound in high-quality charcoal and renewable energy is generated in the hotel's own biomass cogeneration plant. The resulting biochar is used as an additive in animal feed, fertilizers and building materials. IWC is responsible for the entire project management, parts of the planning and construction supervision.

Rudolf Fritz is responsible for the installation of the high- and low-voltage systems for the new ABB company headquarters in Mannheim

Approximately 1,200 employees of ABB Germany will work in an area of 24,000 m ². The building's electrical equipment will cover the technology company's portfolio in the smart building sector: building automation, intelligent products and systems as well as the appropriate charging infrastructure for e-cars.

2nd quarter

Acquisition of Elektro Hofmockel Gmbh & Co. Elektroanlagen KG

Elevion Group acquired Elektro Hofmockel GmbH & Co. Elektroanlagen KG as of April 20th, 2023. Elevion Group is thus further expanding its competencies in the field of automation technology. Hofmockel is a provider of customized automation solutions in the field of water and wastewater technology for municipal and industrial plants.

SYNECOTEC project won Austrian Environmental Award

The heat recovery system of the Salzburg Regional Hospitals won the Energy Globe Award in June 2023, one of the world's most prestigious environmental awards with the intention of presenting particularly innovative and sustainable projects to a broad public. As a key member of Interregional Hospital Network for Energy Sustainability, an interregional network of hospital operators, research institutions and engineering firms with the aim of institutionalizing energy efficiency and energy management in the healthcare sector, the idea and conceptual design of the heat recovery project came from SYNECOTEC. The planning and implementation of the project was undertaken by Moser & Partner Ingenieurbüro GmbH (MPI).

SYNECOTEC enters battery storage market

SYNECOTEC has entered the market for battery storage solutions ranging from 15 kWh to 10 MWh, catering to both industrial and private clients in Austria. These storage solutions are utilized by customers for peak load management and day-night consumption, resulting in cost savings and potential revenue generation. Like photovoltaic (PV) systems, the battery storage systems are made available through a contracting model, enhancing the overall appeal of the offering. SYNECOTEC aims to integrate battery storage as a significant component of its portfolio, encompassing smart energy management systems.

3rd quarter

Elevion Group received the award "Treasury Project of the Year"

Czech Treasury Association in cooperation with EY grant the award "Treasury Project of the Year". It is an award for those who have enriched the treasury field with something interesting and innovative. By definition, these projects are work not only of individuals, but of entire teams made up of representatives from different areas within the company. This year, the Elevion Group Treasury team received the award with the project of Multilevel Cash Pooling Structure.

Metrolog concluded one of the largest contracts

In August 2023, Metrolog concluded a significant and one of the largest contracts in its history with Celsium Serwis Sp. z o.o. for the construction of a source of high-efficiency cogeneration together with the necessary technical infrastructure in Chojnice.

Acquisition of Sercoo group Gmbh and its subsidiaries

The group of companies, headquartered in Lingen, is one of the leading German providers of services for operators of biogas plants and combined heat and power plants as well as the overhaul of engines and other plant components. With this acquisition, Elevion Group strengthens its market position in the areas of renewable energies and decentralized energy supply and at the same time gains competence for the increasing future demand for alternative drive systems for stationary and mobile applications.

Reuters named BELECTRIC one of Europe ́s 100 Leaders

In the report "100 Leaders in European PV, Onshore Wind and Storage" by Reuters, BELECTRIC was named as one of Europe's 100 leaders in the fields of photovoltaic, onshore wind and storage. This makes BELECTRIC one of a total of ten listed EPC players in the renewable industry.

Deubach and Reddehausen

BELECTRCIC finalized construction of two PV projects in Germany: Deubach, with installed capacity of 48.6 MWp and Reddehausen, with installed capacity 7.6 MWp. Both plants will be kept on balance sheet of Elevion Group.

Acquisition of Alexander Ochs Wärmetechnik Gmbh

Elevion Group has acquired Alexander Ochs Group (Ochs Group), further expanding its portfolio in the field of heating, air conditioning and ventilation technology. The group is one of the region's leading medium-sized suppliers in the field of heating, air-conditioning, ventilation and sanitary engineering (HVAC) and focuses on the entire energy management of buildings. The installation of measurement, control and regulation technology (MCR) as well as comprehensive customer service completes the service portfolio. As a fullservice provider, the group undertakes the planning, consulting, installation and maintenance of HVAC systems.

4th quarter

SYNECOTEC expands its services to Germany

For Felder KG, an international producer of high precision woodworking machines headquartered in Hall in Tirol, SYNECOTEC not only equipped the large factory in Hall with a photovoltaic system, but also installed a total of 390 kWp for the exhibition centers in Germany.

Wikisolar once again listed BELECTRIC as one of the top 10 solar EPC service providers worldwide

According to the latest analysis published by the internet platform Wiki-Solar, BELECTRIC ranks 8th among EPC service providers worldwide.

Wiki-Solar analyses and compares the solar capacity installed by the largest companies in the PV industry. BELECTRIC comes third in Europe and first in Germany.

New investments in biomethan production plants in Italy

Elevion Group completed the acquisition of the biogas plants of agri-company Fattorie Novella Sentieri (Novella Sentieri). The acquisition of these already 6th biogas plants will integrate Elevion Group's portfolio of bioenergy asset in Italy and as others it will be operated by inewa, Elevion Group's subsidiary with headquarters in the city of Bolzano. Following this further acquisition, the total installed capacity will rise to 5.3 MW.

A new cross-border project for greater energy independence of Central Europe

Elevion Group has entered the project of several high-efficiency cogeneration units in Northern Italy. The project consists of the construction and operation of 7 cogeneration units at 4 locations with an installed capacity of more than 26 MWe. The units will be installed along the SIOT-TAL oil pipeline and potentially can be fueled by biomethane in the future.

Acquisition of TRim-tech technika instalacji sp. Z O.O.

The company fits into the strategic development of Elevion Group's activities on the Polish market in the building energy solution segment. TRIM-TECH provides design services primarily in the areas of ventilation, heating, air conditioning, gas and water installation and internal and external networks of wastewater systems. The company also offers consulting services such as supervision of the proper procedure for requests for necessary permits or legal matters or calculation of investment costs, etc.

Metrolog again among the most dynamic SMEs in Poland

For the 24 ^th time, the Polish economic daily Puls Biznesu published a list of the most dynamic Polish enterprises in the SME (small medium enterprise) sector, with Metrolog again included in this prestigious ranking. The ranking is based on the criteria of financial results.

ZOHD Group Sold Eos 2023

Company has sold 30 BESS in 2023 with a total capacity of 7.5 MWh. The company has started with this product at the end of 2022. With this amount of sold BESS Zonnepanelen op het dak is the top-10 player in the Netherlands.

Hermos builds advanced control system for the new Allmendfeld water treatment plant

For Hessenwasser GmbH & Co. KG, Hermos has played a crucial role in constructing the Allmendfeld water treatment plant, ensuring the Frankfurt/Rhine-Main area receives up to 3,000m ³ /h of drinking water. Specializing in the plant's technical control, Hermos implemented top-tier control and communication technologies, such as Profinet/Ethernet, Profibus, and Modbus, coupled with sophisticated bus cabling including LWL and specific bus cables. At the heart of the operation are three Siemens SIMATIC S7-1500 controllers, enhanced with dedicated extensions to efficiently oversee over 2,500 physical data points. This innovative control system not only guarantees unparalleled supply security and operational reliability, but also enhances operational efficiency through automation.

Euroklimat: Euroklimat has been awarded a contract to supply plumbing technology with high technical requirements for a customer in Pomeranian Voivodeship, a world leader in digital security.

The strategic project of the customer includes the construction of a new plant that will strengthen its production capacity and enable it to respond more easily to global market demand. The new 15,000 m ² plant will optimize the customer's production processes.

EAG is working on a project of construction of a new cardiology center on the campus of the University Hospital Magdeburg (UKMD)

with a floor area of approx. 2275 m ² , where it is responsible for the low-voltage technology of the building. The heart center will house the University Clinic for Cardiology and the University Clinic for Cardiac Surgery.

Elevion Group brings added value in:

Financial stability

Any of our companies has the fifinancial guarantees an i security of the whole group, allowing them to take on the biggest projects on the market.

Complex:ity of delivery

We are able to scalle any Company with capabilities av lilable within the group, in order to create a one-stop-shop across specialisations and project pipeline.

Att ractinig talent

Within Elevion Group, we can provide more diverse career opportunities, attracting especially younger people, who want to keep more options open.

Our added value

Macro & Industry

Environment 2023

Germany

German economy was undergoing challenging times, grappling with issue ranging from the ongoing war in Ukraine to inflation, escalating energy costs, and supply constraints. Economic performance remained virtually stagnant in the first two quarters of 2023. After its weak development in the first half of the year, the economy began even with a slight decline in performance in the second half. Germany's foreign trade decreased considerably compared to 2022, with notable declines in both exports and imports of goods and services.

Economic Situation in the Building Energy Solutions Segment

The Central Association of German Construction Industry has reported a decline in the turnover of the construction industry in Germany in 2023. Specifically, residential construction has been notably affected. Overall increased prices for materials and labor, along with higher interest rates, are impending construction activity.

Renewable energies are increasingly dominating the electricity mix in Germany.

Economic Situation in the Green Energy Segment

Renewable energies are increasingly dominating the electricity mix in Germany. During the first half of 2023, they already comprised 52% of gross electricity consumption with projections indicating that this figure will rise to 80% by 2030. The installation of new photovoltaic systems is progressing. the German government intends to further accelerate photovoltaic installation and increase the expansion targets.

Nevertheless, the negative impact was felt due to high interest rates, energy prices and shortage of skilled workforce. Delays in project timelines were further exacerbated by slow permitting processes and growing issues with grid connection.

Economic Situation in the Energy for Industry Segment

In 2023, the energy for the industry sector demonstrated resilience amidst economic pressures and EU climate mandates. Despite challenges like high energy costs and limited demand, the sector remained committed to sustainable practices. Efficiency improvements and a decline in energy intensive production underscore a strategic shift towards green energy. The growing interest in renewable solutions, particularly photovoltaic, indicates a broader industry trend towards sustainability.

Our German Subsidiaries

The Elevion Group in Germany, part of Elevion Group B.V., controlled by Elevion GmbH and Elevion Energy & Engineering Solutions GmbH is one of the market leaders in building energy solutions, green energy and energy for industry.

Building Energy Solutions

Rudolf Fritz GmbH (Rudolf Fritz) was founded in 1919. Building on its core competence in electrical and data technology, the company offers complete services at numerous locations in Germany in the areas of measurement and testing technology, automation technology, drive and conveyor technology, high-voltage switchgear, test bench systems as well as technical building equipment and technical building management. The company is also a specialist in the repair of electrical and electromechanical aircraft components. Rudolf Fritz is represented in Koblenz by the traditional Elektro Thomas branch.

ETS Efficient Technical Solutions GmbH (ETS) As a comprehensive service provider of technical building services, ETS offers a complete range of services including concept design, planning, construction, maintenance and repair using specialist expertise from a single source.

In addition to the core focus of building services, ETS offers services in special sectors such as test benches, energy technology and automation technology. ETS is internationally represented in China and Hungary.

The founding of Eberlein Elektrotechnik in 1921 was the first step in a successful company history. Today, D-I-E Elektro AG (EAG) unites several traditional companies under one roof - such as the Berlin-based company Altmann & Böhning, founded in 1937. Since then, EAG has steadily expanded its range of services. Today, the company offers comprehensive electrical, building and automation technology from a single source at eight locations in Germany - from Hamburg to Munich - from planning and optimization to implementation and maintenance.

Since its foundation in 1999, EAB Elektroanlagenbau GmbH Rhein/Main (EAB) has consistently optimized its range of services in electrical engineering at the highest level and today occupies a leading market position in the Rhine-Main area in Germany.

Founded in Essen in 1946, Elektro-Decker GmbH (Elektro-Decker) has developed into one of the largest electrical engineering companies in the Ruhr area. The range of services, from planning to implementation, includes electrical and energy technology, data, communication and security technology, technical building management as well as service and maintenance as part of the technical building equipment. With its subsidiary H&R Elektromontagen GmbH (Essen), Elektro-Decker is expanding its existing service portfolio to include industrial maintenance and repair as well as I&C technology.

En.plus GmbH (En.plus) stands for complex tasks in the technical equipment of buildings and industrial plants. All building technology trades are processed, it also works as a technical general contractor.

IBP Ingenieure GmbH (IBP) Founded in 1999, the IBP engineering office is a powerful and flexible consultant for building owners and architects. In the field of energy and building services engineering, it develops sustainable concepts and plans for projects in the areas of health, science, social, commercial and residential - for new buildings, conversions or existing renovations.

As an owner-managed engineering firm, Peil und Partner Ingenieure GmbH (PPI) is centrally located in the heart of Berlin Founded in 1993, the company is an established partner in the field of energy-efficient, economical and sustainable supply technology. In holistic planning, PPI implements complete engineering services for the technical equipment of buildings and energy centers across all service phases in a targeted manner. Exciting and varied projects throughout Germany are managed both in the field of electrical engineering and in the areas of heating, sanitary, cooling and ventilation technology.

AMPRO Medientechnik (AMPRO) is a leading company for security sound reinforcement and ProSound solutions in the Rhine-Main area. AMPRO has been an authorized Dynacord and Electrovoice specialist dealer since 1983 and therefore has a wealth of experience. With their public address systems, they provide security in schools, train stations, office buildings and soccer stadiums, among other places.

The Alexander Ochs Group (Ochs Group) is one of the region's leading medium-sized providers of heating, air conditioning, ventilation and sanitary technology (HVAC) and focuses on the entire energy management of buildings. As a full-service provider, the group takes on the planning, consulting, installation and maintenance of HVAC systems.

Pantegra Ingenieure GmbH (Pantegra) provides planning services in the field of technical building equipment. The range of services includes the analysis, conceptual design, planning, implementation and evaluation of supply and energy technology systems.

Green Energy

BELECTRIC GmbH (BELECTRIC) together with other BELECTRIC entities in the UK, Italy, Israel and France is one of Europe's leading companies in the development, construction and operation of ground-mounted solar power plants. The Germany based company was founded in 2001 and has developed into an international company with more than 500 employees in six different countries since. To date, BELECTRIC has installed over 500 PV systems with a total installed capacity of more than 4.6 GWp worldwide. Whether floating PV, hybrid plants or agrivoltaics BELECTRIC harnesses its worldwide experience and transfers it into various cutting edge solar technologies. As one of the world's largest O&M service providers, the solar energy specialist also takes care of operation and maintenance for a capacity of 2.1 GWp of PV plants.

Gespa GmbH (Gespa) offers rooftop solar systems and electric vehicle charging infrastructure for customers from trade, industry, municipalities and private households.

The company takes care of the financing as well as the entire project development and, after installation, the operational management and maintenance of the technical systems.

Energy for Industry

Hermos AG (Hermos) is an international group of companies active in the fields of automation and information processing. The core competences of Hermos are automation and integration solutions for machines and plants in the areas of industry, plants & buildings, energy, environment, and track & trace and switchgear, for which it develops and implements the best possible solutions. These solutions are based on Hermos's own software platform FIS, as well as self-developed RFID components.

Hermos Schaltanlagen GmbH (Hermos Schaltanlagen) deals with the production and servicing of switchgears. With over 40 years of project experience, a production and usable area of more than 16,500 m ² and around 220 employees, the service portfolio ranges from power distributors and UL-certified switchgears to complex control cabinets for mechanical and plant engineering for all industries.

Elektro Hofmockel (Hofmockel) is a provider of customized automation solutions in the field of water and wastewater technology for municipal and industrial plants. Hofmockel was founded in 1962 and is a medium-sized company based in Rohr, a municipality in the central Franconian district of Roth. Owner-managed in the second generation, the company is now being continued by Hermos as a wholly owned subsidiary as part of a planned company succession.

GWE Wärme- und Energietechnik GmbH (GWE) has been successfully operating as a specialist planner for heat and energy technology on the German market for 35 years. As an independent planning and engineering office, it deals with the technical and energy-related issues of energy conversion and distribution. The focus is on efficient energy supply solutions for industry with a focus on energy centers.

Since October 2023, the former Kofler Energies Energieeffizienz GmbH operates under the new name Entract Energy GmbH (Entract). The primary goal of this rebranding is to strengthen the company's focus on energy efficiency services within the group's "Energy for Industry" business area. Entract is an established energy partner for customers from the manufacturing industry and the medium-sized real estate sector. Considering the constantly growing legal requirements, customers are accompanied by individually customized services on their way to climate-neutral energy production.

The SERCOO Group, headquartered in Lingen, is one of the leading German providers of services for operators of biogas plants and combined heat and power plants as well as the repair of engines and other plant components. As a full-service provider, the group of companies covers the entire value chain for the operation of biogas plants and combined heat and power plants. The company also specializes in the repair and maintenance of large diesel and gas-powered engines as well as compressors, pumps and gearboxes for a wide range of industrial sectors and their conversion to alternative fuels. Its customers are primarily agricultural businesses, local authorities, energy suppliers, engine manufacturers and companies in the rail, transportation and other industrial sectors. The group consist of following companies:

MT Energy Service GmbH (MT Energy) and Brandt focusing on biogas industry. MT Energy meets all maintenance requirements for its biogas plants. Brandt specializes in biogas plant insertion systems as well as metal construction and repair of agricultural machinery and motor vehicles. SERCOO ENERGY GmbH (SERCOO ENERGY) is a combined heat and power (CHP) full-service provider which is capable of configuration and installation of CHP. DTS provides regular maintenance, on-site engine overhauls and troubleshooting, and masters difficult challenges, including performance optimization. Brücker + Essing provides services for ships engines and stationary installations and diesel and gas engines including all rotating plant components such as compressors, pumps and gearboxes. MWB Power is well known company ensuring global services of marine diesel engines, trucks and railway diesel engines.

Green Energy Efficiency GmbH (GEE) is based in Magdeburg. The company specializes in the development, planning, installation and operation of digitalization solutions for buildings. The company also offers corresponding hardware and software solutions to real estate owners and service providers. The service portfolio also includes consulting on efficient and climate-neutral energy supply with the necessary technologies

Poland

The Polish economy is gradually rebounding from the slowdown experienced during difficult years.

In 2023, the inflation rate was also declining, and interest rate levels stabilized. An influx of grants from EU programs is anticipated, which should stimulate the investment process.

Economic Situation in the Building Energy Solutions Segment

The year 2023 posed significant challenges for the construction industry, marked by escalating labor costs, material price hikes, and dwindling demand, alongside increased expenses for servicing debt and financing. Fortunately, the last quarter of the year witnessed a recovery, particularly in the residential construction sector. October saw a record number of new construction and building permits, signaling a positive trend for industry.

However, the construction sector must grapple with the task of adapting to the mounting significance of environmental and social considerations. Increasingly, the industry is obligated to meet new standards and requirements aligned with ESG principles.

Economic Situation in the Green Energy Segment

In 2023, professional power plants continued to represent the largest share of electricity production in Poland.

Regarding green energy, wind farms contributed over 15% to energy production, while other renewables accounted for over 2%. Following the surge in renewable energy sources during 2022, numerous companies emerged to offer photovoltaic and heat pumps. However, many of these firms had to cease operations in 2023 due to a decline in market orders caused by oversaturation as Polish consumers were less inclined to invest into it.

Economic Situation in the Energy for Industry Segment

The district heating industry, just like the energy industry, faces ambitious challenges posed by the economic and political situation on the one hand, and by the EU's requirements for ambitious climate targets on the other. In the coming years, there will be significant investments related to the continuation of the energy transition process in the EU. Generally, the Energy for Industry segment was rather stable during the past year 2023. We can observe increased interest in PV systems, but some of the big new projects were limited by distribution system operators. However, companies are more and more aware of energy transformation and ESG priorities, what can be a trigger to increase this segment in upcoming years.

Our Polish Subsidiaries

The Elevion Group provides services through Metrolog, Euroklimat, TRIM-TECH and OEM Energy Sp. z o.o. (OEM Energy).

METROLOG Sp. z o.o. (Metrolog) is one of the leading manufacturers of compact heat substations on the Polish Energy for industry market and offers the comprehensive implementation of investments in the field of thermal energy, as well as the construction of water treatment plants. Based on the experience gained, it offers energy-saving and ecological, safety- and function-oriented solutions. As part of its production, service and trading activities, the company carries out investments throughout the country and in selected European markets.

Euroklimat Sp. z o.o. (Euroklimat) is a leading company with an established position in the Polish market, operating in the construction sector as a supplier of large civil engineering general contracts for HVAC (heating, ventilation and air conditioning) and electrical installations. Euroklimat works mainly according to the "Design and Build" formula, offering customers professional and reliable service at every stage of the investment - from offer to design, execution, warranty and post-warranty service.

Elevion Group has acquired the TRiM-TECH Technika Instalacji Sp. z o.o (TRiM-TECH) in Poland as of November 2023. TRiM-TECH is a dynamic company specializing in comprehensive design services in the field of sanitary installations. The company has been operating in the market since 2006, but its roots go back several years to when a group of experienced specialists decided to join forces and establish the company. TRiM-TECH focuses primarily on designing and installing sanitary and technical installations.

OEM Energy Sp. z o.o. (OEM Energy) is a general distributor of renewable energy systems (RES) and has been offering products and services related to renewable energy sources across Poland since 2012. OEM Energy cooperates with the best manufacturers in the renewable energy sector and has exclusive rights to KBB solar collectors and Kronoterm heat pumps in Poland. OEM Energy is the general distributor of Joule stainless steel tanks, Kyoto photovoltaic modules, Fronius inverters and tech brand controllers.

Other markets

In Italy, GDP experienced growth in 2023. Core inflation peaked at the beginning of the year and subsequently declined, although internal pressures that impeded its descent remain.

Additionally, nearly 4.9 GW of new renewable electricity production plants, predominantly photovoltaic plants, were commissioned in 2023. Furthermore, Italian government backed the production of bioenergy from agri-photovoltaic during the same year.

In Italy, the Elevion Group is represented by inewa with its headquarters in South Tyrol. It focuses on a wide range of energy services - from planning and consulting to subsequent operation and maintenance. inewa also operates 6 biogas units - BUDRIO GFE 312 SOCIETA' AGRICOLA S.R.L.(Budrio), AxE Societa agricola SRl (AxE), B.T.C. Societa agricola SRl (BTC), Societa' Agricola Falgas S.r.l. (Falgas) and DEF. Societa agricola SRl (DEF).

This year, Elevion Group successfully completed the acquisition of the biogas plants of the agri-company Fattorie Novella Sentieri (Novella Sentieri). The acquisition of these additional plants is part of the expansion of Elevion Group in green energy sector in Italy.

Despite facing challenges such as high inflation and rising electricity prices, The Austrian economy showed resilience. In 2023, the energy industry in Austria continued its robust efforts towards decarbonizing building heating, mirroring the efforts of the previous year. The primary focus remains on reducing energy consumption and transitioning heating systems to renewable sources by 2040.

In 2023, Photovoltaics remains the fastest-growing segment within the renewable energy sector, and Austria is on track to meet its 2030 target of 13 GWp.

Three subsidiaries of the Elevion Group operate in Austria, namely Synecotec GmbH, Moser & Partner Ingenieurbüro GmbH and Wagner Consult GmbH (IWC).

SYNECOTEC GmbH (Synecotec) offers the design, planning, execution, maintenance and servicing of ESCO projects completely from one source. It is an energy consulting and service company that accompanies its customers through all project phases. In addition to its core business, photovoltaic and heat pump systems, SYNECOTEC implements economical solutions for clean and sustainable supply through close networking with research institutions. With the incorporation of Elektrotechnik Huber, SYNECOTEC expanded its existing portfolio to include electrical engineering.

Moser & Partner Ingenieurbüro GmbH (MPI) designs, plans and advises investors, builders and architects and develops optimized solutions for the indoor climate, production, lighting and safety requirements for projects - including room climate simulation. The conceptual design and planning of sustainable energy supply concepts for entire neighborhoods is another successful pillar of MPI.

Wagner Consult GmbH (IWC), based near Innsbruck/ Austria was founded 1974 and is an engineering office specialized on the topics of wastewater treatment & energy efficiency solutions. Experienced engineers are guiding customers through the planning, construction and operation of state of the art, carbon-neutral solutions for water treatment.

Romania experienced the slowdown in economic growth in 2023, attributed to factors such as high inflation restricting purchasing power, stringent credit conditions, and reduced demand for products in foreign markets.

However, the Romanian construction market gained momentum during this period, with notable surge driven primarily by public projects. The civil engineering segment witnessed the most significant increase, followed by the residential sector, while the non-residential building sector exhibited the weakest performance.

In Romania, the Elevion Group provides ESCO services through High-Tech Clima S.A. (HTC). This is a leading company in the Romanian market in the field of HVAC systems (heating, ventilation and air conditioning) and electrical installation works for owners of commercial facilities. It also operates as an industrial supplier in production facilities, logistics parks, business offices, buildings and shopping centers.

The Dutch photovoltaic market encountered difficulties in 2023. Discussions revolved around the net metering scheme and the establishment of feed-in charges for solar panels by the power company. Furthermore, grid congestion remains a significant issue in the Netherlands. Much of the country lacked the capability to expand feed-in capacity, resulting in a decline in requests for solar panels. However, this situation also presented opportunities for the sale of battery systems.

The Elevion Group is present in the Netherlands through Zonnenpanelen op het dak Group (ZOHD Group), which provides services in the field of rooftop photovoltaic systems and battery storage services.

113+ LOCATIONS, 12+ COUNTRIES

We operate over 12 countries and 127 locations.

Elevion Group operates on 12+ European markets through 60+ highly specialized independent Companies, but with the financial strength of an international group.

Business Review and Outlook

Business Overview

The Group continued its robust growth both organically and inorganically. In that year, Elevion expanded through acquisition of nine companies, further complementing its value chain and strengthening its competences and capacities.

Elevion Group is operating in 3 business segments: Building Energy Solutions, Green Energy, and Energy for Industry. Despite continuing global disruptions, we leveraged these trends to provide customers with tailor-made solutions for decarbonization and energy cost saving. Even with an alleviating situation in the energy markets, the demand for our energy solutions remained strong. This is reflected in the Group ́s strong order backlog, creating a robust basis for performance in 2024.

In light of the European objective to cut off dependence on Russian fossil fuels and increase the share of the renewable energy sector, Elevion Group companies have contributed to ensuring energy security across Europe. This was achieved, for example, by building hundreds of MW of large-scale photovoltaic parks and entering into project of 26 MW cogeneration units for the TAL (Transalpine Pipeline, TAL) pipeline in Italy in November 2023.

Elevion Group companies have contributed to ensuring energy security across Europe

Building Energy Solutions

To further strengthen our regional position in the Building Energy Solutions segment, we acquired the German Ochs Group in 2023, a leading company offering complex portfolio of technical building services, including facility management.

In the second half of the year 2023, Rudolf Fritz finished the large project of construction of the new logistical park for VGP Munich.

Rudolf Fritz is also involved in the construction of the new battery cell production facility for VW AG at the Salzgitter site. Among other things, Rudolf Fritz is responsible for the 0.4 kV lighting technology.

In cooperation with Unibail-Rodamco-Westfield Germany, ETS, a provider of design, planning, execution, maintenance and servicing, is finishing air conditioning at the new "Überseequartier" project in Hamburg.

ETS has also won with its subsidiary ETS Kft. a tender in Kecskemeth Hungary for new energy center in the new electric vehicle production plant. The first electric vehicle should roll off the new product line by September 2025.

EAB is finishing its work in the project of prestigious "KREISLER" building in the Frankfurt train station district with electrical equipment.

EAG continues in the construction of a rehabilitation center for Waldkliniken Eisenberg. The company is responsible for the technical facilities. Among other things, the company EAG in cooperation with the company En.Plus has won a tender in the project of the construction of a new heart center in University Hospital Magdeburg. EAG is responsible for low-voltage technology and En.Plus is responsible for HVAC technology in this project.

Revenues by country (kEUR)

Elektro-Decker has proved its position as one of the largest electrical engineering companies in the Ruhr area. In cooperation with ETS, the companies were awarded the contract for the new Stadtsparkasse Solingen building. With the planned new building, the Sparkasse is also making an important contribution to the positive development of the city center. The ventilation technology is being provided by ETS, whereas Elektro-Decker is responsible for high- and low-voltage technology.

Restructuring of the engineering segment in Germany was successfully implemented in 2023:

Euroklimat in year 2023, due to excellent sales performance, achieved historical results of 45% increase of revenue compared to the year 2022.

Euroklimat has provided HVAC and electrical services mainly for their industrial clients. Euroklimat also acquired the company TRIM-TECH in Q4 2023, which became a member of Elevion Group. The company is providing design services in the segment of technical equipment of buildings and it will strenghten the position of Elevion Group on the Polish market.

HTC: The National Cathedral in Bucharest, the tallest and largest Eastern Orthodox church building by volume and by area in the world, is the most significant project for mechanical and electrical HVAC installations. The Romanian subsidiary extended its operations with new projects and the development of new capabilities in the field of electrical installation work, allowing it to offer a wider range of services to its customers. The first complete electrical installation project started in Q3 2023.

MPI will be building on the successful HVAC planning project for giant pharma company Merck and finalize the Königshof hotel in Munich. Among others, MPI has also finalized big planning projects like Hilton Hotel Munich Airport and LabCampus Munich.

Green Energy

In 2023, BELECTRIC expanded its presence in its core markets of Germany, the United Kingdom, the Netherlands and Israel. In Germany, the company signed contracts for five large-scale solar farms with a total installed capacity of more than 300 (MWp). After returning to the United Kingdom as an EPC (Engineering, Procurement, Construction) service provider, BELECTRIC sealed deals for five projects with a total capacity of 180 MWp, including battery storage solutions of about 120 MWh.

Furthermore, during 2023, decision was made to create portfolio of photovoltaic and battery projects on the balance sheet of Elevion Group. For that purpose, company BELECTRIC Greenvest was established and 2 projects were under construction, Deubach, with installed capacity of 48.6 MWp, and Reddehausen, with installed capacity of 7.6 MWp. Projects will be delivering green energy in Q1 2024.

In the Dutch market, BELECTRIC expanded its business relationship with a strategic partner, resulting in nine joint projects with a total installed capacity of almost 150 MWp. In Israel, the company remains at the forefront of this rapidly growing industry. However, the war, which started in October 2023, took a toll on BELECTRIC's business in the country, affecting both employees and construction sites alike. Nevertheless, the company managed to exceed its targets. In 2023, BELECTRIC also made its return to the Italian market as an EPC service provider and entered the project development of battery storage projects. Throughout the year, BELECTRIC had more than 40 solar farms with a total capacity of 1.1 GWp under construction.

OEM Energy, due to the political situation and delays in EU funds allocation in Poland, was below planned sales level of the renewable products. The company however continued its work on developing its own premium heat pump products Varmero, which should be introduced into the Polish market in 2024.

ZOHD Group (rebranded to Energy Shift) well managed to ramp up energy storage solution capabilities and became one of the leading C&I batteries providers on the market, in addition to photovoltaic.

Italian inewa continued to expand its bioenergy portfolio with the acquisition of 2 biogas units - Quinzano d'Oglio and Capella Cantone (Novella Sentieri), with capacity of 1 MW each. Unfortunately, extreme climate conditions impacted the biogas plant's results in 2023. Additionally, rooftop photovoltaic portfolio was continuously developed.

In Austria, SYNECOTEC significantly expanded its operations by incorporating the installation of heat pumps, battery storage and charging stations. Given the considerable appeal of these segments within the current Austrian market landscape, the company aims to actively pursue these initiatives in 2024. In the upcoming year, SYNECOTEC is to execute the installation of an 800 kWp photovoltaic system including a 550 kWh battery storage at the southern slope of the Zwölferhorn cable car mountain station in Salzburg. Furthermore, SYNECOTEC expanded its presence on the German market and commissioned more than 700 kWp in Germany.

Energy for Industry

In 2023, Elevion Group has entered into the project of several high-efficiency cogeneration units in Northern Italy. The project consists of the construction and operation of seven cogeneration units at four locations with an installed capacity of more than 26 MWe. The units will be installed along the SIOT-TAL (Transalpine Pipeline, TAL) oil pipeline and potentially can be fueled by biomethane in the future.

Energy for Industry also strengthens its presence in Italy in cooperation with Federal Mogul. Elevion Group invested in trigeneration equipment (1 MWe + 0,8 MW cold), and rooftop photovoltaic (1 MWp), including roof renovation and asbestos removal as a part of energy performance contract.

To help with the implementation of the new strategy, Kofler Group rebranded to Entract and Pantegra. The management team was also strengthened by hiring top experts from the segment. Due to the increasing importance of energy transition in the real estate segment in Germany, Elevion partnered with industry experts to create the GEE platform to introduce a new product focused on balancing energy management & buildings.

In Q2 2023, there was a successful acquisition of SERCOO Group, a leading German holding company covering the entire value chain of biogas, combined heat and power plants, engines and rotating equipment. With more than 350 employees, the companies in the SERCOO Group offer service portfolio for more sustainability, efficiency and cost effectiveness in decentralized energy supply, the automotive and transport sector, industry and trade.

Hermos has successfully acquired further orders for RFID products for various industries (for example, production of microchips) and track & trace devices in the tobacco industry. Hermos also widened its decarbonization offer in both building and industry solutions by adapting its market-leading FIS system to support companies on their path to carbon neutrality. Furthermore, the company acquired Hofmockel, a local leader in automation and water treatment. Hermos has been active with the Scandinavian Tobacco Group since 2022, equipping and retrofitting approximately 50 production lines for tobacco end products (cigarillo, cigar, snus) to comply with tobacco laws in accordance with EU TPD III.

GWE struggled with the disruptive effects of degasification and shifted its focus towards holistic concepts for CO ₂ reduction measures. As a planner of decarbonization solutions for industrial customers, GWE has expanded its portfolio to include energy consulting and consulting in the real estate sector.

Metrolog has successfully increased the share of sales in the water treatment segment, replacing sales from the cogeneration segment, which is still struggling in terms of current situation caused by the war in Ukraine.

Group Outlook

Elevion Group aims to become a decarbonization leader in European market and realizes strategic initiatives across the group to achieve this objective in all segments. Looking from a group-level perspective, in 2024, organic growth will be strengthened and will contribute even more significantly to growth ambitions, especially in Germany and Italy.

The Group expects further increases in personnel numbers due to anticipated revenue growth, both organically and inorganically. In the area of human resources, several initiatives are expected to secure competent personnel at all levels of operations and talent attraction and retention. Specific initiatives will focus on attracting blue-collar workers across specialized professions. by incentivizing international mobility across Europe or globally. As the Group operates in a people-driven business, these activities should secure a strong base for growth and, together with other business initiatives, pave the way to becoming the European decarbonization leader.

The year 2024 is expected to further promote the Green Energy segment. Market conditions in this segment are anticipated to be primarily influenced by lower, yet still volatile, levels of commodity prices and grid development issues. Therefore, a focus within the Green Energy segment will be also on development energy storage solutions, encompassing both utility-scale and behind-the-meter options. From a market perspective, utility-scale projects are especially anticipated to be developed in Germany, the UK and the Netherlands. Considering increased market volatility, significant emphasis will also be placed on the ability to provide market flexibility. The portfolio of owned assets will also be expanded to include biogas and biomethane power plants, which provide an additional source of market flexibility and contribute to the further decarbonization of the electricity and gas segments. In 2024, the Elevion Group also aims to further strengthen the ramp-up of operations in the Spanish market and enhance operations in the UK market.

The Building Energy Solutions segment will particularly face the slowdown of new constructions in Poland and anticipated economic downturn in Germany. The Elevion Group has already secured contracts for a very high proportion of our expected revenues in this segment, which places it in a very stable position despite these developments. This stability is further complemented by the fact that European decarbonization objectives can only be achieved through significant measures in the energy efficiency of buildings, which is also embedded in EU and local legislation related to energy efficiency. Considering the requirements for the effective use of energy in buildings, digitalization and sustainability emerge as the most important topics that open new opportunities for the construction industry. Therefore, we expect overall another strong years however performance among individual markets can vary. among

In the Energy for Industry segment, we expect a positive impact from various decarbonization governmental efforts and supporting schemes. The macroeconomic development will strengthen the demand for the contracting business in the Energy for Industry solution, as clients in such an environment are reluctant to realize significant investments yet still needed to decarbonize their operations. Thus, the group will further increase its asset-heavy portfolio in areas such as CHP units and heat pumps, both in industrial and real estate applications. An additional focus of the Group in this segment will be on the integration of its competencies from individual highly specialized companies, developing tailor-made digitalized solutions for complex real estate projects.

To summarize, in 2024, Elevion Group expects to further solidify the position as the leading player in the European decarbonization market, offering high added value for our shareholders.

Financial Review

Group's Order Backlog

Total order backlog remained stable with total of 1,262 mEUR as at 31 Dec. 2023 compared to last year (2022: 1,226 mEUR). The order backlog for next year (2024) provides solid basis for expected robust performance but in some countries cooling down of economy is already apparent (e.g., Poland) as we see general market pressures on project margins.

The order backlog is defined as the project value for the next three years that remains to be completed (based on IFRS) and has been agreed with the customer in a binding manner. The order backlog in relevant segments can be executed over several years due to long-term character of the projects. Splitting of the order backlog into individual years is based on linear interpolation depending on the projected end of the project.

Order backlog per country

Order backlog per business segment

Order backlog per business segment and year of completion

Order backlog per type of revenue recognition

Group's Overall Performance

In the table below, the Group reports non-GAAP key performance indicators, such as EBITDA, adjusted EBITDA or adjusted net income. Their definition is included into Glossary section and reconciliation of adjustments (non-operating items) is included in Chapter 26 of the Consolidated Financial Statements.

The Group's consolidated revenues amounted to 1,243,222 kEUR in 2023 (2022: 899,258 kEUR), representing a year-over-year increase of 38.2%. The increase in revenues was achieved through double digit growth across all three operating segments.

Green Energy grew by 71.4% primarily due to increased demand for solar projects of the BELECTRIC Group. Energy for Industry increased its revenue by 34.4% compared to last year due to acquisitions of SERCOO Group and Hofmockel. Building Energy Solutions also experienced exceptional 28.8% growth driven primarily by German entities (such as ETS, Rudolf Fritz and EAB) and Polish Euroklimat due to increased volume of projects under realization.

Adjusted EBITDA showed robust growth at 73,885 kEUR (2022: 57,181 kEUR), corresponding to year-over-year increase of 29.2%. This is driven by increased revenues across all operating segments, as well as new acquisitions.

Non-operating items reflected in EBITDA of 4,465 kEUR are primarily due diligence and SPA costs related to M&A activity (such as SERCOO Group, Project X etc).

The Group's adjusted net income amounted to 9,852 kEUR in 2023 (2022: 18,942 kEUR), representing year-over-year decline of 48.0%. The net income has been negatively impacted by derivative losses of BELECTRIC, as well as its increased tax expense related to solar projects and negative results of tax audits related to pre-acquisition period. Another impact is revaluation of non-controlling interest options, which were remeasured upwards due to very good results of the relevant entities. The adjustments to net income, in addition to the EBITDA relevant items mentioned above, include amortization of newly identified intangibles from acquisitions (including the related deferred tax impact), which are non-operating in nature and are not cash relevant.

Cash flow from operations amounted to 15,603 kEUR (2022: 36,931 kEUR), representing a 57.8% year-over-year decline. The main drivers for such decrease are continuous internal development of photovoltaic plants within the BELECTRIC Group resulting into increased net working capital needs, as well as execution of projects that were pre-financed in 2022 (that had positive impact on cash flow from operations in 2022) and also general deterioration of prepayment ratios in the projects due to higher interest rate environment. As a result, the cash conversion ratio, defined as adjusted EBITDA divided by cash flow from operations, fell to 22.5% in 2023 (2022: 66.7%).

The split between organic EBITDA and inorganic EBITDA (related to acquisitions effected in 2023) is shown in the table below, including the annualized normalized results of such acquisitions for 2023 and 2022, respectively. The inorganic EBITDA impact of 10,140 kEUR in 2023 relates to acquisitions of the SERCOO Group, Hofmockel, Ochs Group, Project X, Falgas, TRIM-TECH and GESPA.

Building Energy Solutions (BES)

Revenues amounted to 740,688 kEUR in 2023 (2022: 575,076 kEUR), representing significant year-over-year growth of 28.8%. The strong revenue growth comes in particular from Germany (especially ETS, Rudolf Fritz and EAB) and Polish Euroklimat.

Adjusted EBITDA grew considerably to 51,595 kEUR (2022: 35,695 kEUR), constituting year-over-year growth of 44.5%. Absolute adjusted EBITDA growth is attributable not only to topline growth but also to improved adjusted EBITDA margin of 7.0% (2022: 6.2%). The improved EBITDA margin is driven mainly by Euroklimat and German companies, with higher level of revenues leading to accelerated absorption of overheads of the relevant entities, but is also attributable to increased margins on executed projects.

Green Energy (GE)

Revenues amounted to 323,346 kEUR in 2023 (2022: 188,646 kEUR), representing significant year-over-year growth of 71.4%. This growth is attributable primarily to higher project volume executed by BELECTRIC Group.

Adjusted EBITDA amounted to 7.240 kEUR in 2023 (2022: 13,298 kEUR), with the adjusted EBITDA margin dropping to 2.2% (2022: 7,0%). Adjusted EBITDA decrease is primarily driven by the intragroup transfer of Deubach/Reddehausen projects of the BELECTRIC Group and elimination of the related gross margin. Without this intercompany elimination, adjusted EBITDA of the Green Energy segment would amount to 18,398 kEUR (and adjusted EBITDA margin to 5.0%) in 2023. Furthermore, the adjusted EBITDA of the Green Energy segment has been negatively impacted by Italian operations, which were subject to restructuring in 2023.

Energy for Industry (EfI)

Revenues amounted to 185,610 kEUR in 2023

(2022: 138,098 kEUR), representing year-over-year growth of 34.4%, driven by acquisitions of SERCOO Group and Electro Hofmockel, but also attributable to solid organic growth of Hermos.

Adjusted EBITDA improved to 22,445 kEUR

(2022: 11,101 kEUR), constituting year-over-year growth of 102.2%, whilst the adjusted EBITDA margin increased to 12.1% (2022: 8.0%), primarily attributable to inclusion of SERCOO Group as a higher margin business.

Social Aspects and Ethics

Culture and Behavior

At Elevion Group B.V., we strive to create a positive work environment that fosters collaboration, innovation and respect. Last year, we continued to develop this culture through various initiatives:

Diversity Support: In each country where we operate, we aimed to respect and support local cultures and values. Our initiatives were designed to be tailored to the local context and the needs of employees.

Regular Communication: We sought to strengthen open communication between management and employees in all our locations to ensure that various voices were heard and mutual feedback was encouraged.

Team Collaboration: We believe that strong team relationships are the foundation of successful business. Our local teams had the flexibility to decide on activities and programs that best support teamwork and engagement.

Employee Care

The health and well-being of our employees are our top priorities. In 2023, we endeavored to ensure that our employees were well cared for in the various countries where we operate:

Flexible Benefits: Based on surveys and feedback, we tailored our benefits to meet the needs and expectations of employees in each region.

Mental Health Support: In response to increasing awareness of mental health, we strengthened our employee support programs and collaborated with local care providers in various locations.

Development Opportunities: Our regional teams had the freedom to design and implement development programs and educational opportunities that best suited the needs and cultures of individual countries.

Employee Satisfaction

Measuring employee satisfaction and responding to their needs are keys to maintaining engagement and productivity. Within our locations, we conducted employee satisfaction surveys and acted upon the findings:

Satisfaction Surveys: We regularly conducted employee satisfaction surveys to identify what works well and what can be improved.

Individual Approach: In each location, we sought to identify individual needs and interests of employees and tailor our strategies and programs accordingly.

Education and Training

Developing the skills and knowledge of our employees is crucial for our long-term sustainability. In 2023, we focused on various ways to support education and development:

Regional Training: In each country, we offered training and development programs designed to be relevant to the local work environment and business needs.

Career Development Support: Our employees had access to career development programs to help them grow and develop in their roles.

Emphasis on Digital Skills: With increasing digitization, we emphasized the development of digital skills and technological literacy for all employees.

Gender Equality

At Elevion Group B.V., we strive to promote equality and inclusivity in the workplace across all countries where we operate:

More than 6,000 projects are successfully executed by our subsidiaries year after year.

The experienced and well-proven network creates a fast and efficient connection between all subsidiaries of the Elevion Group for every customer solution.

6000+ Projects

ESG in Elevion Group

As a leading energy service company, the Elevion Group actively drives Europeanenergy transformation to an environmentally sound and sustainable society within the scope of the EU Green Deal. Elevion Group is supporting its partners and clients in decarbonization to achieve carbon neutrality while maintaining and enhancing their competitiveness.

The commitment of the Elevion Group is aligned and intertwined with the vision of CEZ Group, which has published its VISION 2030-Clean Energy of Tomorrow strategy, with a significantfocus on ESG (Environmental, Social, Governance) strategies.

The Elevion Group and its subsidiaries are responding to pressure from customers, investors, markets and competitors by maintaining and expanding high sustainability standards. ESG is crucial in the eyes of the management. Through the application of ESG standards across our business activities, the Elevion Group is pursuing opportunities for sustainable development within our business strategies. In 2023, Elevion Group continued with its consolidated ESG reporting covering 5 key strategic areas:

1. Green energy

2. Innovative solutions

3. GHG emissions

4. Sustainable procurement

5. Skilled & diverse workforce

This management report was approved for issuance by the Board of Directors on 25 Oct. 2024.

Financial Part

Consolidated Financial Statements

prepared in accordance with the International Financial Reporting Standards, as adopted by European Union as at 31 Dec. 2023

Consolidated Balance Sheet
as at 31 Dec. 2023

kEUR

Consolidated Income Statement
for the year ended on 31 Dec. 2023

kEUR

Non-GAAP KPIs

The Group uses the following non-GAAP KPIs to assess its performance. The adjustments (non-operating items) are further dealt with in Section 26.

kEUR

Consolidated Statement of Changes in Equity
for the year ended on 31 Dec. 2023

Consolidated Cash Flow Statement
for the year ended on 31 Dec. 2023

kEUR

Notes to Consolidated Financial Statements as at 31 Dec. 2023

1. Identification of the Entity

Elevion Group B.V. (the "Parent Company") and its consolidated subsidiaries (the "Group Companies" and together the "Group") are European leaders in offering energy efficiency solutions to customers and are present mainly in Germany, Poland, Italy and the Netherlands, as well as in Israel.

Elevion Group B.V. is a private limited liability company (in Dutch besloten vennootschap) incorporated and domiciled in the Netherlands, entered into the Netherlands Chamber of Commerce under number 65782267. The address of its registered office is Herikerberweg 157, 1101CN Amsterdam, the Netherlands.

The sole shareholder is CEZ Holdings B.V., with registered office in Herikerberweg 157, 1101CN Amsterdam, the Netherlands. The Parent Company is part of the ČEZ Group, with the ultimate shareholder ČEZ, a. s., with registered office in Duhová 1444/2, 140 00 Prague, Czech Republic, a company is listed on the stock exchange.

2. Accounting Policies

2.1. Basis of Compiling

The consolidated financial statements of the Group for the reporting period ended on 31 Dec. 2023 were compiled according to the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), as well as the interpretations by the IFRS Interpretations Committee and its predecessor, the Standing Interpretations Committee (SIC).

The reporting period of the Group and its Group Companies corresponds to the calendar year.

The amounts in the statements do not always match the actual amounts due to rounding differences. The amounts herein are rounded off to the nearest thousand of EUR, unless stated otherwise.

Use of judgement and estimates

Compiling the financial statements in accordance with the IFRS requires the management to make certain judgements and estimates, as well as assumptions having an impact on the accounting principles and measurement of assets, liabilities, revenue and expenses, as well as on disclosures. Actual outcomes may differ from these estimates, judgements and assumptions. Estimates and assumptions are subject to regular review by the Group.

Changes in estimates are recognised in the period when the change occurs or in future periods, if the change affects both the current period and future periods. The Group makes significant estimates when determining contract assets and contract liabilities, as well as the recoverability of accounts receivable (see Chapters 10 (Trade Receivables) and 13 (Contract Assets/Liabilities).

A description of key assumptions for significant estimates is included in the relevant note sections.

The accounting principles described herein have been applied consistently for all periods that are presented in the consolidated financial statements, unless otherwise indicated.

2.2. Changes in Accounting Policies

Adoption of new IFRS standards in 2023

The accounting policies adopted are consistent with those of the previous financial year, except for as follows. The Group has adopted the following new or amended standards and interpretations endorsed by the EU as of 1 Jan. 2023:

The Group, in the jurisdictions in which the Group operates, will obligatorily apply the international tax reform - model rules of BEPS Pillar Two for the period from January 1, 2024, at the earliest. The expected impact of the top-up tax from this tax reform on the Group is not significant at the time of the preparation of these financial statements.

The Group does not expect early adoption of any of the above-mentioned improvements or amendments.

2.3. Scope of Consolidation

Subsidiaries (IFRS 10 - Consolidated Financial Statements): The consolidated financial statements include the accounts of the Parent Company and the companies in which the Parent Company has a direct or indirect controlling interest. A controlling interest exists when the investor has power over the business, or when it has rights to or is exposed to variable returns from its involvement with the investment and has the ability to affect those returns through its power over the investment.

Acquired companies are fully consolidated from the convenience date, which is either the end (or the beginning) of the month in which the acquisition occurs (i.e., meaning not from the actual acquisition date). Similarly, divested companies are fully consolidated up to and including the convenience date.

Intragroup receivables, liabilities, revenue and expenses are eliminated in their entirety in the consolidated financial statements. Unrealised gains/losses from intragroup transactions are also eliminated in their entirety.

Associates (IAS 28 - Investments in Associates and Joint Ventures): Companies in which the entity exercises a significant but not a controlling influence (which is presumed in cases when the Group's holding is between 20% and 50% of the voting rights), are reported as associated companies and are consolidated based on the equity method.

The Group currently does not have any associates or joint ventures.

Joint Arrangements (IFRS 11 - Joint Arrangements): A joint arrangement is an arrangement in which two or more parties have joint control. The joint arrangement may be either a joint operation or a joint venture. A joint arrangement that is not structured through the formation of a separate company is a joint operation. Contracting projects executed in cooperation with external contracting companies, with joint and several liability - such as consortiums (ARGE) in Germany - are reported by the Group as joint operations. If the co-owners of the joint arrangement only have rights to the net assets of the arrangement, it is a joint venture. Classification of a joint arrangement is dependent on its legal form, the terms of the contractual arrangement between the co-owners, and other circumstances.

The revenue, costs, assets and liabilities of the joint operation are included in the consolidated financial statements according to the Group's interest in the joint operation. On the other hand, the equity method is used for joint ventures when compiling the consolidated financial statements. The Group currently does not have any joint ventures.

2.4. Presentation of Financial Statements (IAS 1)

Financial statements are presented in line with the requirements of IAS 1 (Presentation of Financial Statements).

Income statement

Items recognised as revenue are: project and service revenue, sale of goods and other operating revenue. Revenue from the sale of fixed assets is recognised on a net basis, i.e., the sale price is netted against the carrying amount of the asset. Cost of sales includes direct and directly attributable conversion costs (cost of internal labour and cost of external subcontractors/materials). Also included is depreciation on directly attributable machinery and equipment used in project management/implementation.

Selling and administrative expenses include general administrative expenses, costs of the procurement/logistics department and selling/marketing expenses, as well as depreciation of property, machinery and equipment insofar used in selling and administrative processes. Goodwill/intangible asset impairment losses are also reported as part of the selling and administrative expenses.

Financial income includes interest income, dividends and other financial items. Financial expense includes interest expenses and other financial items, such as cost of bank/insurance guarantees. The change in fair value of derivatives and net amount of exchange rate differences are recognised either as financial income or financial expense.

Comprehensive income

Other comprehensive income includes translation differences, remeasurement related to pension-linked assets and tax on these items.

Statement of financial position

Assets

Assets are divided between current assets and non-current assets. Current assets are expected to be realised within 12 months after the reporting period or realised in the entity's normal operating cycle. The operating cycle includes the period from the signing of a contracting project until the project is finally inspected and invoiced. Since the Group executes large contracting projects over several periods, the operating cycle criterion means that many more assets (in particular contract assets) are designated as current assets than if only taking into consideration the criterion of 12 months.

Cash and cash equivalents comprise all cash or other assets that are readily convertible into cash (with maturities less than 90 days).

Equity

The Group's equity is allocated between share capital, reserves, retained earnings/loss and non-controlling interests.

Liabilities

Liabilities are divided between current liabilities and non-current liabilities. Current liabilities are expected to be realised within 12 months after the reporting period or realised in the entity's normal operating cycle. The operating cycle includes the period from the signing of a contracting project until the project is finally inspected and invoiced. Since the Group executes large contracting projects over several periods, the operating cycle criterion means that many more liabilities (in particular contract liabilities) are designated as current liabilities than if only taking into consideration the criterion of 12 months.

2.5. Business Combinations (IFRS 3)

Business combinations, which are mergers and acquisitions of separate entities or operations, are accounted for in line with the requirements of IFRS 3. If the acquisition does not constitute a business, IFRS 3 is not applied, meaning the acquisition cost is allocated to the individual identifiable assets and liabilities based on their fair values on the acquisition date, without recognizing goodwill or any related deferred tax asset/tax liability resulting from the acquisition.

Acquisitions of businesses are recognised according to the purchase method of accounting, meaning the cost of the acquisition is attributable to the fair value of existing/newly identified acquired identifiable tangible/intangible assets decreased by the fair value of liabilities and contingent liabilities assumed. The difference between the cost of acquisition and the fair value of net assets (including contingent liabilities) is represented by goodwill. If non-controlling interests remain after the acquisition, goodwill is normally calculated based only on the fair value method, i.e., its fair value incorporates the part attributable to the Group, as well as to the non-controlling interest. Transaction costs relating to business combinations are expensed immediately.

Contingent consideration, such as earn-out, is recognised on the acquisition (convenience) date at fair value. The fair value of contingent consideration is determined based on present value of future cash flows, which the Group expects to pay in connection with the acquisition of the subsidiary, and is assessed internally by the management. The amount of the payment depends on the future financial results of the acquired company. If there is a subsequent change in the amount of the contingent consideration, the remeasurement is taken into profit or loss as financial income or expense. Goodwill is attributed to cash-generating units and measured at cost less accumulated impairment losses, whereas the impairment tests are carried out annually in accordance with IAS 36.

2.6. The Effect of Changes in Foreign Exchange Rates (IAS 21)

The functional currency of the Group is EUR and is derived from the currency of the primary economic environment inherent in the Group's operating activity. EUR is also the reporting currency of the Group and hence the financial reports are also presented in this currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured and reported using that functional currency.

Foreign currency transactions

Foreign currency transactions are translated into the functional currency at the exchange rate effective on the transaction date. Monetary assets and liabilities in foreign currency are translated to the functional currency at the exchange rate effective at the end of the reporting period. Exchange rate differences arising through remeasurement are recognised in profit or loss.

Non-monetary assets and liabilities recognised at historic cost are translated at the exchange rate effective on the transaction date.

Group Companies

Assets and liabilities in Group Companies, including goodwill and newly identified intangibles, are translated to EUR at the exchange rate effective at the end of reporting period. Revenue and expenses, as well as the cash flow statement, are translated to EUR at the average exchange rate.

Translation differences arising in connection with a foreign net investment and on borrowings are recognised in equity in other comprehensive income. When divesting a Group Company, the related accumulated translation differences are transferred to the Group's profit or loss.

2.7. Revenues from Contracts with Customers (IFRS 15)

Revenues from contracts with customers are recognised in line with the requirements of IFRS 15, the core principles of which are delivered in a five-step model framework.

Step one is to identify the contract with a customer. Two or more contracts should be combined if they are economically dependent and entered into at the same time. A contract modification exists if the parties agree on the extension of the existing scope and/or price, unless the added goods or services are distinct and reflect standalone prices for the additional goods or services, thus constituting a separate contract.

Step two involves identifying the separate performance obligations in the contract. A performance obligation is a promise to the customer to either transfer the goods or service (or bundle of goods or services) that are distinct, or a series of distinct goods or services that are essentially the same and follow the same pattern for transfer to the customer.

The goods or service are distinct if the customer can benefit from the goods or service on its own or in conjunction with other readily available resources, and the entity's promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract. The Group's customer contracts usually do not require categorisation into two or more performance obligations, but additional orders are quite common. However, in most cases the added goods or service are not distinct, thus constituting a single performance obligation and reported as being a part of the existing contract.

Step three involves determination of the transaction price. The transaction price includes the fixed agreed price and variable consideration such as contingent considerations, soft claims, price concessions, performance bonuses and penalties. Additional contingent claims towards the customer must be either approved in writing/orally or follow from customary business practice/legal framework.

In step four, the transaction price is allocated to the separate performance obligations in the contract if more than one obligation exists. If the contract includes a significant financing component, the transaction price is to be adjusted for the effect of the time value of money.

Step five deals with revenue recognition as control is passed, which can happen (i) over time or (ii) at a point in time, when the customer gains control of the asset.

Revenue recognized at a point in time is from the overall Group's perspective deemed immaterial compared to revenue recognized over time. Revenue recognized at a point in time is recognized in line with the standard, usually once the goods (e.g., PV panels or heat nodes) are sold and delivered to the customers without installation (if not agreed with the customer otherwise) and the entity is entitled for the consideration.

Revenue is realised over time if one of the following criteria is met: (i) the customer simultaneously receives and consumes the benefits (e.g., typical for services, such as operation and maintenance), (ii) the entity's performance creates or enhances the asset controlled by the customer (e.g., typical for the Group's contract projects in electrical and mechanical engineering), or (iii) the entity does not create an asset with an alternative use to the entity and the entity has the enforceable right to payment for performance completed to date - this is typical for turnkey (EPC = engineering, procurement, construction) projects for cogeneration units, photovoltaics, heat pumps etc. on the conditions (i) the asset is tailor-made to customer needs and (ii) advance payments are received from customer for milestones achieved. Revenues realized over time are most common in the group and applicable to projects and services the Group undertakes.

The disclosures relevant for revenues from contracts with customers are included in Chapters 10 (Trade Receivables), 13 (Contract Assets/Liabilities) and 29 (Segment Information).

The Group uses the cost-to-cost method (so called input method) to determine the stage of completion of the contract activity, if revenue is realised over time. The input method has been selected by the Group over output method as more appropriate for revenue recognition as in project/service contracts it might be difficult to ascertain the value that has been transferred to the customer.

If none of the above-said criteria are met, the obligation is fulfilled at a point in time. Factors that may indicate the point in time at which control passes include the following: the entity has a present right to payment for the asset, the customer a legal title to the asset, the entity has transferred physical possession of the asset, the customer has the material risks and rewards associated with ownership of the asset or the customer has accepted the asset.

The breakdown of the transaction price allocated to the unsatisfied or partially satisfied performance obligations as at the end of 2023 to be recognized as revenue in following periods is included in Chapter 13 on Contract Assets/Liabilities. The breakdown of revenues realized at a point in time versus over time is shown in Chapter 28 Segment Information.

Contract costs

Costs incurred to fulfil a contract (such as projects/services where revenues are realized over time) are recognised as an asset if and only if all of the following criteria are met: (i) the costs relate directly to a contract (or a specific anticipated contract), (ii) the costs generate or enhance the resources of the entity that will be used in satisfying performance obligations in the future, (iii) the costs are expected to be recovered. These include costs such as direct labour (both internal and subcontractors), direct materials and directly attributable overheads such as depreciation of tools, equipment or production plant, directly attributable transportation costs, etc. The incremental costs related to obtaining a contract are recognised as an asset only if the entity expects to have those expenses covered. The above costs are reported under the rows Contract assets and Contract liabilities (net of advances received/prepayments).

The following costs are capitalised into contract costs:

a. Direct labour (salaries of employees directly providing services to customer), including directly attributable personnel overheads (e.g., site supervision), if specifically charged to clients

b. Costs of external subcontractors

c. Direct materials

d. Other gross margin items such as

Contract asset/liabilities

A contract liability is presented in the statement of financial position where a customer has paid an amount of consideration prior to the entity performing by transferring the related goods or service to the customer. On the other hand, where the entity has performed by transferring the goods or service to the customer and the customer has not yet paid the related consideration, a contract asset is presented in the statement of financial position.

Construction contracts often allow for invoicing in advance (through partial invoices) based on the agreed milestones. To this extent, the Group Company has an enforceable right to be compensated for work completed to date. Once an amount has been invoiced, a trade receivable is recognised (also for partial invoices).

Loss contracts are expensed immediately and provisions for losses are made for the remaining work to be done and recognised in accordance with IAS 37.

The contract assets, similarly to trade receivables, are subject to expected loss provisioning as per IFRS 9.

2.8. Property, Plant and Equipment (IAS 16)

Property, plant and equipment can be recognised as assets only if it is probable that future economic benefits from them will flow to the Group and the cost of the assets can be reliably calculated. Property, plant and equipment are recognised at cost less accumulated depreciation and any impairment losses, i.e., the cost model as per IAS 16 is applied. Impairment losses are subject to the requirements of IAS 36.

Cost includes the historical acquisition or production costs in case of self-created assets, plus expenses directly attributable to the asset in order to bring it to the location and condition to be used in the intended manner. Direct expenses related to a self-created asset (which is applicable to the Group's self-created photovoltaic plants, heat pumps, cogeneration units, etc.) includes the internal cost of architects, engineers or constructors, cost of subcontractors or cost of materials. Examples of directly attributable expenses are delivery and handling costs, costs of installation, advisory and legal services, cost of project calculations, and the estimated cost of dismantling and removing the asset and restoring the site (whereas a corresponding provision for dismantling is reflected as a liability in such cases).

External borrowing costs on qualifying assets (i.e., assets that take a substantial period of time to get ready for their intended use or sale) are included in the cost of property, plant and equipment produced in line with IAS 23 (Borrowing Costs) in the Group's consolidated statement of financial position (if applicable). Any government grants or subsidies decrease the cost of the asset.

The Elevion Group depreciates the cost of property, plant and equipment less their residual value using the straight-line method over the estimated useful life. Each part of an item of property, plant and equipment that is significant in relation to the total amount of the asset is recognised and depreciated separately. The estimated useful life of property, plant and equipment is determined as follows:

2.9. Intangible Assets, including Research and Development (IAS 38)

Intangible assets are identifiable non-monetary assets without physical substance. For recognition as an intangible asset, whether purchased or self-created, it is necessary that it be probable that future economic benefits attributable to the asset will flow to the entity and that the cost can be reliably calculated.

Goodwill arising upon acquisition of companies is recognised in accordance with the rules of IFRS 3. It is not amortised, but tested annually for impairment as required by IAS 36 (Impairment of Assets).

Intangible assets other than goodwill are recognised at cost minus accumulated amortisation and impairment losses subject to the requirements of IAS 36.

Specific internally generated assets such as brand name, customer list, order backlog or operating licences are reflected in profit or loss. However, if they are acquired in a business combination, they are capitalised and amortised using a straight-line method over their remaining useful lives as follows:

Research expenses are recognized in profit or loss. Development costs are capitalized only after the technical and commercial feasibility of the asset for sale or use has been established. Other development expenses are reported in profit or loss.

Externally purchased software is capitalised. Internally developed software (whether for use or sale) is reflected in profit or loss until technological feasibility, probable future benefits, intent and ability to use or sell the software, and resources to complete the software are proven, and the cost can be measured reliably.

2.10. Impairment of Assets (IAS 36)

Impairment of assets is performed in line with the requirements of IAS 36, which is applicable to property, plant and equipment, intangible assets and investments in subsidiaries, associates and joint ventures. At the end of each reporting period, the Group assesses in line with the requirements of IAS 36 whether there is any internal or external indication that a relevant asset (meaning property, plant and equipment or intangible asset) may be impaired in the Group's consolidated statement of financial position. Goodwill, however, is tested for impairment annually at the reporting date or more frequently if there are external and/or internal indications that goodwill might be impaired.

The Group takes into consideration the mainly the following external factors as indication of potential impairment: changes in technological, macroeconomic, regulatory and legal conditions or increases in interest rates. On the other, the major internal factors for consideration by the Group are failure to deliver budgeted cash flows, physical damage/ obsolescence or changes in expected use. The Group also assesses whether events after the reporting date provide any indication for potential impairment.

Impairment occurs when the carrying amount of the asset is higher than its recoverable amount, which is the higher of fair value less costs of disposal and value in use.

The recoverable amount should be determined for the individual asset, if possible. If not, the recoverable amount for the asset's cash-generating unit (CGU) should be identified. The CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. For goodwill, the cash-generating unit is mainly the same as the Group's unit reporting to the Parent Company. The recoverable amount of goodwill is based on value in use, which is calculated by discounting expected future cash flows by the weighted average cost of capital (WACC). Impairment of assets attributable to a cash-generating unit is allocated first to goodwill. Afterwards, a proportionate impairment loss is applied to other assets included in the CGU.

Goodwill impairment is not reversed. Impairment losses on other assets are reversed if there has been a change in the assumptions on which the estimate of the recoverable amount was based (and only up to the carrying amount calculated should the impairment loss not have occurred).

The impairment losses are included into other operating expenses as part of profit or loss statement, whilst the reversal of impairment is recorded in other operating income.

For more details, please refer to the sections Property, plant and equipment (Chapter 3), Intangible assets (Chapter 5). and Goodwill (Chapter 6).

2.11. Biological Assets (IAS 41)

The Group grows agricultural produce as annual crops (annual or short-lived perennial grains such as corn, triticale or sorghum) in its Italian operations, which is used for biomass in biogas/biomethane plants and also sold on external markets. The agricultural produce is measured at fair value less costs of sale at the point of harvest and thereafter IAS 2 (Inventories) is applied. In practice, this means that at the reporting date, there is no agricultural produce, as the Group recognises only inventories (and not agricultural produce) and harvest has been completed by then. Given the annual or short-lived perennial character of the grains, the Group views the fair market value attributable to these biological assets at the reporting date as immaterial and no disclosures as per IAS 41 are made.

The gain or loss arising from initial recognition of agricultural produce is included in profit or loss.

2.12. Leases (IFRS 16)

The Group accounts for both operating and finance leases, whereas this distinction is relevant only from lessor's perspective.

Group as a lessee

Leases, except for leases with a term of less than 12 months or where the underlying asset is of low value, are recognised in the statement of financial position as right-of-use assets and as interest-bearing lease liabilities. The non-qualifying leases (short-term/low value) are presented in selling and administrative expenses (see Note 23).

At the inception of the lease, a right-of-use asset and a lease liability are recognised in the statement of financial position. The asset is initially measured at the amount of the lease liability plus any initial direct costs incurred.

Rights of use for property, plant and equipment are depreciated over the lease term, including an estimation of contractually agreed optional extension periods, whose exercise is deemed to be reasonably certain, as follows:

The lease liability is initially measured at the present value of the lease payments payable over the lease term, including variable lease payments depending on an index at the commencement date. As the rate implicit in the lease cannot be readily determined, the incremental borrowing rate is used to discount lease liabilities. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow, over a similar term and with similar collateral, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The Group estimates the incremental interest rate using observable inputs, such as market interest rates.

The lease modifications usually include extension of lease term or termination. The impact in such a case is mainly on statement of financial position - right-of-use assets and lease liabilities - and on specific cases with impact in P&L.

Group as a lessor

The Group leases out its tangible assets to customers (e.g., photovoltaic plants, cogeneration units, heat pumps, etc.).

The Group classifies such leases as either financial or operating leases. Operating leases are such arrangements, in which the Group does not substantively transfer all the risk and incidental rewards to ownership of an asset. This refers, for example, to cases where the Group retains the right to feed excess electricity to the grid, bears performance or other major economic risks on the underlying assets, is able to transfer the asset to the lessee at fair market value at the end of the lease term, or where multiple customers are involved.

Lease income from operating leases is recognised according to contract terms over the lease period and included as operating revenue in profit or loss.

Financial leases where the Group acts as the lessor are classified as asset - net investment in the lease - in the statement of financial position and measured at the present value of lease payments to be made over the lease term, increased by any unguaranteed residual value of the leased asset at the end of the lease. In determining the present value of net investment in the lease, the Group uses the calculated interest rate implicit in the lease.

2.13. Financial Instruments (IFRS 9, IAS 32 And IFRS 7)

Financial instruments are governed mainly by IFRS 9 (Financial Instruments) and by IAS 32 (Financial Instruments: Presentation) and IFRS 7 (Financial Instruments: Disclosures). Financial instruments are defined as contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and liabilities shall not be offset, unless a legally enforceable right for offsetting exists. Contract assets and liabilities, as well as pension obligations, do not constitute financial instruments and fall under IFRS 15, however fall under expected credit loss model based on IFRS 9.

IFRS 9 defines the following main financial instruments: (i) financial assets/liabilities measured at amortised costs, (ii) financial assets/liabilities measured at fair value through other comprehensive income and (iii) financial assets/liabilities measured at fair value through profit or loss.

A financial instrument shall be measured at amortised costs if (i) the financial instrument is held within a business model whose objective is to hold financial instruments in order to collect cash flows and (ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The Group recognizes intragroup loans (including cash pool assets/liabilities), as well as trade receivables and external loans which are carried at amortized costs.

A financial instrument should be measured at fair value through other comprehensive income if (i) the financial instrument is held within a business model whose objective is achieved both by collecting contractual cash flow and selling a financial instrument and (ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The Group does not recognize any financial instruments measured at fair value through other comprehensive income.

All other financial instruments not classified as measured at amortised costs or at fair value through other comprehensive income shall be measured at fair value through profit or loss. This category is applicable to the Group e.g., in case of FX derivatives or non-controlling interest (NCI) options.

Financial instruments are initially measured either at fair value adjusted by transaction costs, or at the transaction price in case of trade receivables (except for trade receivables with a significant financing component). Financial instruments are subsequently measured either at amortised cost, fair value through profit or loss or fair value through other comprehensive income depending on the classification of the financial instrument. The Group uses foreign exchange derivatives to hedge its foreign currency exposure (classified as financial instruments measured at fair value through profit or loss). The value changes are recognised in profit or loss in financial income/expenses, as hedge accounting is not applied.

The Group also writes put options (and receives call options) on non-controlling interests to motivate former owners as part of the acquisition process to stay in the acquired company until the share options vest. The Group uses, where applicable, the anticipated acquisition method, meaning no non-controlling interest share of net assets is recognised, and the put option is recognised instead as part of the financial liabilities measured at fair value through profit or loss. The initially recognised put option liability is subsequently remeasured to fair value at each reporting date and the remeasurement is recorded through profit or loss. The Group uses the anticipated acquisition method to the extent there is substantially symmetrical combination of call and put option, leading to high probability that the option will be realized by either party.

Impairment of financial assets

The Group applies the impairment requirement to expected credit losses on financial assets, the impairment of which falls under IFRS 9.

The Group uses a simplified approach, meaning that the lifetime expected credit loss ("ECL") allowance is applied for trade receivables, lease receivables and contract assets. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

The Group, including the Parent Company in its individual financial statements, as a general rule, use ECL Model on their financial assets measured at amortized cost, such as on cash pool receivables or intercompany loans - see Chapter 4 of Consolidated financial statements and Chapter 6 of the Parent Company's financial statements for more details. In such cases, the underlying ECL is based on PD (probability of default) ^* LGD (loss given default) ^* EAD (exposure at default) taking into the credit profile of the relevant debtors. The ECL allowance is not booked insofar as not material for the Group.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Groups compares the risk of a default of the financial instrument at the reporting date against the risk at the date of initial recognition.

The assessing this, the Group considers information about past events, current conditions and macroeconomic factors. This includes the following:

The default is defined as event where the financial asset is based as not recoverable based on continuous non-justified breach of contractual arrangements regarding payment obligations and/or internally/externally developed information that the debtor is unlikely to pay due to deteriorated credit rating.

The Groups writes off the financial instruments (assets) as a result of objective deterioration in debtor's creditworthiness when the debtors have entered into liquidation or bankruptcy proceedings unless the respective amounts may be reasonably recovered through enforcement procedures.

The Group recognises impairment in other operating expenses in profit or loss (see Section Selling and administrative expenses, operating expenses and income for more details).

The general financial risk management (including credit risk) is further described in Chapter 16 on Financial Risk Management.

2.14. Inventories

Inventories are accounted for in line with the requirements of IAS 2. They are recognised at the lower of cost and net realisable value (NRV). Cost includes expenditure arising on purchase (e.g., taxes, transport and handling) net of trade discounts received, expenditure arising on conversion (e.g., fixed and variable manufacturing overheads), and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is established either on a first-in, first-out (FIFO) basis or weighted average cost formulas. The Group deems different cost formulas as justified, given that various groups of inventories have different characteristics.

2.15. Income Taxes

Income taxes are recognised in line with IAS 12. The impact of income taxes is recognised in profit or loss unless the underlying transaction is recognised in Other comprehensive income, where the recognition follows the accounting treatment of the underlying asset.

The taxable profits (losses) of the Group are calculated in accordance with the tax laws of the countries in which the Group Companies operate and based on the prevailing local income tax rates.

Deferred tax is calculated according to the comprehensive balance sheet method based on temporary differences arising between IFRS accounting measurement and the tax values of assets and liabilities, by using the tax rate expected to be effective upon realisation of the underlying asset or settlement of the liability.

No deferred tax is calculated upon initial recognition of goodwill, but deferred tax for temporary differences relating to goodwill is recognised (e.g., if goodwill is deductible for tax purposes). No deferred tax is recorded for temporary differences on investments in Group Companies either (e.g., on withholding tax on undistributed profits), provided that the investor Parent Company is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are assessed for recoverability as at the reporting date. Deferred tax assets related to loss carry forwards are recognised only to the extent that, based on the business plans of the respective subsidiaries, it is deemed probable that the tax losses are recoverable in the foreseeable future and it is likely that they can be utilised. Deferred tax assets and liabilities of Group Companies are not offset in the balance sheet and are not discounted.

2.16. Provisions, Contingent Liabilities and Contingent Assets

Based on the requirements of IAS 37, a provision is recognised when the Group has a legal or informal obligation as the result of a past event, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount can be estimated reliably.

The Group makes provisions for warranty obligations according to construction contracts that involve a liability for the contractor to rectify errors and omissions in the warranty period. The Group also creates provisions for additional works after approval in the final inspection of the work (other than warranty costs). A provision is also created for potential disputes with customers when the requirements of IAS 37 are met.

Provisions for restructuring charges are recognised insofar as a detailed restructuring plan has been adopted and the restructuring has either been implemented or publicly announced.

Contingent assets/liabilities

Contingent liabilities are possible obligations depending on whether some uncertain future event occurs, or present obligations where payment is not probable or the amount cannot be measured reliably.

In the construction industry, security is often required by the customer in the form of an advance payment, completion or warranty guarantee from a bank or insurance company or from the Parent Company.

The issuer of the guarantee, in contrast, usually receives indemnity from the contracting entity, Parent Company or ultimate owner of the Group, ČEZ, a. s. These liabilities are not deemed contingent liabilities by the Group, as it considers the possibility of an outflow of economic resources to be remote.

Contingent assets are possible assets arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. In the construction industry, claims for additional compensation from the customer are quite common. Additional contingent claims towards customers must either be approved in writing/orally or follow from customary business practice or the legal framework in accordance with IFRS 15. It is not practicable to provide information about such additional claims, unless they are of substantial importance to the Group.

2.17. Employee Benefits

Employee benefits are recognised in line with the requirements of IAS 19. The Group offers various employment and post-employment schemes to its employees, including both defined benefits and defined contribution pension plans and other advantages.

Post-employment benefits

Contributions to defined contribution plans are recorded to profit or loss in the period as they arise.

In the defined benefit plans, the pension contribution is determined using the projected unit credit method and based on actuarial valuations carried out on an annual basis. The retirement benefit obligations recognised in the statement of financial position are shown as the present value of the obligations at the end of the reporting period less the fair value of the plan assets. Actuarial assumptions about the discount rate, wage or salary increases, inflation and life expectancy are considered.

The return on plan assets, except for amounts reflected in net interest income, and actuarial gains, and losses are reflected in the equity in other comprehensive income as they arise. Past service costs are recognised immediately in the income statement.

The defined benefit plans of Group Companies are organised with the insurance company, but are still deemed to be defined benefit plans under IAS 19.

Employment benefits

Short-term employee benefits are employee benefits that are due within twelve months after the end of the reporting period (mostly represented by annual employee bonuses). Short-term employee benefits are presented under current provisions (specifically bonuses, unused vacation etc.) and other liabilities (salaries).

Long-term employee benefits are employee benefits that are not due within twelve months after the end of the reporting period (mostly represented by multi-annual bonuses). Long-term employee benefits (bonuses) are presented under non-current provisions.

2.18. Operating Segments

An operating segment is defined by IFRS 8 as a component of the Group carrying out business operations, whose operating income is evaluated regularly by the entity's chief operating decision-maker and about which discrete financial information is available.

The Elevion Group's operating segments consist of the following: Building Energy Solutions, Energy for Industry, and Green Energy. The Group also discloses the Central segment, but it is not deemed an operating segment as per IFRS 8.

The Group accounts for intersegment revenues at fair value, i.e., as if the revenues were realised vis-à-vis third parties. The related intragroup profits are subsequently eliminated during the consolidation process. Acquisition goodwill and newly identified intangibles are reported in the operating segment to which they belong.

2.19. Other Relevant Reporting Framework

Cash flow statement (IAS 7)

The Group uses an indirect method to calculate cash flow, which involves the adjustment of net income with changes in the balance sheet accounts and non-cash transactions. The Group differentiates between operating, investing and financing cash flow. Interest and taxes are treated as part of the operating cash flow, whereas dividends are part of the financing cash flow.

Related party disclosures (IAS 24)

Based on the requirements of this standard, the entity shall provide information about related entities i.e., its parent and ultimate controlling entity, as well as about key management personnel compensation - see Note 26.

Events after the reporting period (IAS 10)

Events after the end of the reporting period that confirm a situation that existed at the end of the reporting period are considered when the financial reports are compiled.

The Group also discloses other events that occur after the reporting period if they are of such importance that non-disclosure would affect the ability of statement users to make proper evaluations and decisions.

The financial statements were compiled based on the going concern principle.

2.20. Going Concern

The financial statements show negative earnings after tax of EUR 6.659k, which is primarily the result of non-recurring tax impacts (refer to Note 25). The Company reported an increase in the EBIT from EUR 16.003k (31. 12. 2022) to EUR 24.044k (31. 12. 2023) driven by the organic growth in combination with increased margins realized on the projects. The Board of Directors has reviewed the Company's financial results to date of issuance of this report, and has reasonable expectation that the Company has adequate financial funding, given the current cash levels, working capital movements and the access to the cash pooling of the CEZ a.s. Group, to continue in operational existence for at least twelve months after adoption of these financial statements.

3. Property, Plant and Equipment

For details about the accounting policy related to property, plant and equipment ("PPE"), including useful life and depreciation methods, refer to Note 2.8 Accounting Policies.

Reclassification from PPE under construction to other PPE items occurs when the PPE has been brought to working condition for its intended use.

The overview of property, plant and equipment as at 31 Dec. 2023 is as follows:

The overview of property, plant and equipment as at 31 Dec. 2022 is as follows:

Property, plant and equipment saw a net increase to 143,083 kEUR as at 31 Dec. 2023 (70,245 kEUR as at 31 Dec. 2022). Such increase is predominantly driven by a ramp-up in ESCO projects (carrying amount of 42,747 kEUR as at 31 Dec. 2023 vs 18,401 kEUR as at 31 Dec. 2022), namely through additions of organic asset heavy projects in Italy (3,850 kEUR) and Austria (2,490 kEUR) (rooftop PV/cogeneration projects as part of contracting solutions for customers), as well as through the inorganic acquisition of Project X (19,455 kEUR) and Falgas (6,407 kEUR). The split of depreciation between cost of sales and operating expenses related to property, plant and equipment is detailed in below table. The depreciation is attributable to costs of sales if directly attributable to revenues.

Additional disclosure related to PPE

The Group did not capitalise any interest costs in 2023 and 2022, as qualified assets were financed internally, either through equity or intercompany loans.

4. Financial Assets

The Group's financial assets consist mainly of a cash pool receivable towards ČEZ, a. s. (related to positions denominated in PLN) and FX derivatives.

The estimated ECL on the cash pool receivable is deemed not material by the Group (and consequently not recognized in its financial statements) given its ultimate parent company, ČEZ, a. s., is quoted on stock exchange and has credit rating of A- (stable outlook) based on Standard & Poor's rating from March 2024. It is also considered Stage 1 financial asset as there was no significant increase of credit risk observed since the initial recognition.

The cash pool structure as a tool for liquidity management is described in more detail in Chapter 16 Financial Risk Management.

Other investments are mainly related to unconsolidated SPVs.

The are no financial assets that have been pledged as collateral for liabilities or contingent liabilities.

Additional disclosure related to financial assets

The maturity of financials assets is shown in table below:

The interest rates applicable to the individual financial assets are shown in the table below:

5. Intangible Assets

For more information about intangible assets including useful life and depreciation method applied, see Note 2.9 Accounting Policies.

The overview of intangible assets as at 31 Dec. 2023 is as follows:

The overview of intangible assets as at Dec. 31, 2022 is as follows:

Intangible assets increased to 146,486 kEUR as at 31 Dec. 2023 (2022: 99,511 kEUR) mainly due to new acquisitions (such as the SERCOO Group) and the related newly identified intangibles.

Development costs include in particular

Additional disclosures related to intangible assets

The split of depreciation between cost of sales and selling and administration expenses related to intangible assets is detailed below. The depreciation is attributable to costs of sales if directly attributable to revenues.

6. Goodwill

Please refer to Notes 2.5 and 2.10, respectively, in Accounting Policies regarding goodwill and its potential impairment.

Goodwill amounted to 358,263 kEUR as at 31 Dec. 2023 (2022: 300,925 kEUR). Goodwill increased mainly due to the acquisition of SERCOO Group (in total +28,916 kEUR) in the German Energy for Industry segment.

The amounts of goodwill recognised as a result of the business combinations comprise the value of expected synergies arising from the acquisitions.

Goodwill allocated to cash-generating units is as follows:

Amortisation of goodwill is usually not tax deductible in share deals, except for partnerships (such as in acquisition of Electro Hofmockel in 2023). On the other hand, it is usually tax deductible in assets deals (however, the corresponding tax asset was not activated in Falgas due to uncertainties if the company applies for status of agricultural company which is subject to special tax regime).

The recoverable amount related to goodwill is based on value in use. The amounts of goodwill are tested annually for impairment. The Group did not report any goodwill impairment losses in 2023 or 2022.

Description of selected parameters related to testing and determination of recoverable amounts:

The impairment test involves determining the recoverable amount of the cash-generating unit, which corresponds to the value in use as at 31 Dec. 2023 or as at 31 Dec. 2022, respectively.

Value in use is based on the present value of the future cash flows expected to be derived from a cash-generating unit and is internally assessed by the company's management.

Values in use are determined based on medium-term business plans. These business plans are based on the management's expectations, as well as on the anticipated future market trends and on the macroeconomic development of the respective region.

The relevant business plans were prepared in the fourth quarter of 2023. The growth rate of 1% is considered for FCFF beyond the five-year period. In some cases (asset heavy projects), finite life was considered in the business plans.

The company did not recognise any impairment of cash-generating assets in 2023 and 2022. Each cash-generating unit uses a specific discount factor based on the weighted average cost of capital (WACC). Parameters that affect the WACC are risk-free rates and loan premiums, equity market risks and the ratio between borrowed funds and equity.

The following table shows the relationship between the carrying amount and the recoverable amount for the Group's goodwill items. The recoverable amount is expressed as 100. The tests are based on an assessment of anticipated development over the next 5-year period.

^* Average revenue growth rate in the period 2023-2028.

^** Average revenue growth rate in the period 2022-2027.

7. Changes in the Group Structure

7.1. Changes in the Group Structure in 2023

The following overview summarises the cash flows related to acquisitions in 2023 (kEUR):

7.2. Acquisitions of Companies in 2023, in which the Elevion Group Gained Control

Through new acquisitions, the Elevion Group follows a strategic plan for developing decarbonised energy and generating energy savings in ESCO markets, primarily in Germany and Italy.

The Group effectuated the following acquisitions in 2023.

Building Energy Solutions

Alexander Ochs Wärmetechnik GmbH (Germany)

The Group acquired a 100% interest in Alexander Ochs Wärmetechnik GmbH and its subsidiary Bechem & Post Wärmetechnik Kundendienst GmbH (Ochs Group) with their seat in Karlsruhe and more than 160 employees. Ochs Group is one of the region's leading medium-sized suppliers in the field of heating, air-conditioning, ventilation and sanitary engineering (HVAC) and focuses on the entire energy management of buildings.

Ochs Group is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Jul. 2023.

Acquiring company: Elevion GmbH

Strategic rationale of the acquisition: To strengthen the position of the Group on the German market, ensure better coverage of the Karlsruhe region and complement the product portfolio and competencies of the Group in the HVAC segment.

The Group attributed excess of the consideration over the existing net assets to the newly identified intangibles such as customer list, order backlog and brand. The residual goodwill is formed by the skilled workforce with strong expertise in HVAC segment complementing the Group's offerings in German Building Energy Solutions.

Trim-Tech Technika Instalacji Sp. z o.o. (Poland)

The Group acquired a 100% interest in Trim-Tech Technika Instalacji Sp. z o.o. (with nearly 40 employees), based in Skórzew, which provides design services for sanitary/electrical installations segment.

Trim-Tech is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Dec. 2023.

Acquiring company: Euroklimat Sp. z o.o.

Strategic rationale of the acquisition: To ensure design services for Euroklimat, which currently uses subcontractors, complement the product portfolio and improve know-how in relevant segments.

The Group attributed excess of the consideration over the existing net assets to the newly identified intangibles such as customer list, order backlog, brand and non-compete. The residual goodwill is formed by the skilled workforce with strong expertise in sanitary/electrical installation segment complementing the Group's offerings in Polish Building Energy Solutions.

Green Energy

GESPA GmbH (Germany)

The Group acquired a 75.1% interest in GESPA GmbH with its seat in Rüsselheim and nearly 20 employees. GESPA is a service provider for rooftop photovoltaics (PV) installations, electromobility and charging infrastructure.

GESPA is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Apr. 2023.

Acquiring company: Elevion Energy & Engineering Solutions GmbH

Strategic rationale of the acquisition: To contribute to the Group's decarbonisation efforts as PV is essential part of strategy and gain experienced team with relevant know-how in rooftop PV which is the market the Group wants to focus in Germany.

The Group attributed excess of the consideration over the existing net assets to the newly identified intangibles such as customer list, order backlog and brand. The residual goodwill is formed by the skilled workforce with unique photovoltaic know-how, which the Group intends to further use in the German rooftop solar market.

Falgas s.r.l. (Italy)

The Group acquired an 85% interest in Falgas S.r.l., which owns and operates two biogas plants (each of 1MWe) in Quinzano d'Oglio (Brescia region) and Capella Cantone (Cremona region).

Falgas S.r.l. is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Nov. 2023.

As a part of this transaction, the Group also disposed of the non-controlling interest of 15% in Societa' Agricola BTC to the sellers of Falgas. See Note 7.3.

Acquiring company: inewa S.r.l.

Strategic rationale of the acquisition: To enlarge the portfolio of already owned and operated biogas plants in Italy.

The intent is to upgrade to biomethane plants to produce renewable natural gas as part of the Group's decarbonisation efforts. The acquisition of this biogas plant should create operational synergies with other biogas plants of the Group and, after the upgrade, might boost offerings of biomethane to the Group's customers.

The majority of the consideration in excess of the existing net assets was attributed to the newly identified intangible, a licence to generate electricity. The residual goodwill can be largely attributable to the option of producing biomethane in the future.

Although there is a combination of put/call option written over the non-controlling interest (NCI), the Group did not recognize financial liability (but rather NCI) for this transaction compared to standard approach - see Accounting Policies Chapter 2.13 - given the put option is restricted and hence not symmetrical with call option.

Energy for Industry

Hofmockel Group (Germany)

The Group acquired a 100% interest in Elektro Hofmockel GmbH & Co. Elektroanlagen KG and Elektro Hofmockel Verwaltungsgesellschaft mbH (Hofmockel Group) with its seat in Rohr and 80 employees. Hofmockel Group offers automation solutions, electrical systems and control system construction for municipal and industrial wastewater companies.

Hofmockel Group is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 May 2023.

Acquiring company: Hermos AG

Strategic rationale of the acquisition: To strengthen the Group's position in automation of the water/wastewater solutions segment on the German market. Potential synergies with Wagner Consult and the companies from Hermos Group.

The Group attributed excess of the consideration over the existing net assets to the newly identified intangibles such as customer list, order backlog, and brand. The residual goodwill is formed by the skilled workforce with strong expertise in automation of the water/wastewater solutions complementing the service offerings of the Hermos Group.

SERCOO Group (Germany)

The Group acquired a 100% interest in SERCOO Group GmbH and its subsidiaries MT Energy Service GmbH, Brandt GmbH, SERCOO Energy GmbH, Deutsche Technik Service GmbH, Bücker & Essing GmbH and MWB Power GmbH. SERCOO Group has its seat in Lingen with more than 300 employees. SERCOO Group operates in the maintenance and repair of biogas plants, cogeneration units, gas and diesel engines and rotating equipment.

SERCOO Group is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Sep. 2023.

Acquiring company: Elevion Energy & Engineering Solutions GmbH

Strategic rationale of the acquisition: To strengthen the Group's position in the industrial energy, biogas and combined heat and power (CHP) segments, extend the service portfolio and acquire know-how and personnel capacities with high expertise in the maintenance segment of biogas plants and cogeneration units.

The Group attributed excess of the consideration over the existing net assets also to the newly identified intangibles such as customer list, order backlog and brand. The residual goodwill is formed by the skilled workforce with unique expertise in maintenance and repair of biogas units, cogeneration units and diesel engines complementing the service offerings of the Group, which might also roll out this business outside Germany.

Project X S.r.l. (Italy)

The Group acquired a 70% interest in Project X S.r.l. (with an option to acquire additional 30%), which will build, own and operate 7 high efficiency CHP plants with an aggregate capacity of c. 26 MW in four locations in Northern Italy. CHP plants will deliver electricity and heat for the Transalpine Pipeline. (TAL).

Project X is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Dec. 2023.

Acquiring company: Inewa S.r.l.

Strategic rationale of the acquisition: To contribute to enlarge asset heavy portfolio within the Group and increase energy self-sufficiency of Central European countries.

The majority of the consideration in excess of the existing net assets includes contractually secured revenues based on tolling agreement (order backlog), with residual goodwill forming only immaterial part of such excess. The goodwill is attributable mainly to potential contractual upsides not reflected in order backlog.

As there is substantially symmetrical combination of put/call option written over the non-controlling interest (NCI), the Group reports financial liability instead of NCI for this transaction - see Accounting Policies Chapter 2.13.

The following table presents the current best estimate of the fair value of acquired identifiable assets and liabilities as at the date of the acquisition:

The fair values of acquired identifiable assets and liabilities and the purchase considerations have been stated finally.

There was no contingent liability that was not recognised, because its fair value cannot be reliably measured.

If the acquisitions had taken place at the beginning of the year 2023, net income for the Elevion Group as at 31 Dec. 2023 would have been -7,817 kEUR and the revenues from continuing operations would have been 1,307,213 kEUR.

From the acquisition date, the contribution of newly acquired subsidiaries to the Group's 2023 consolidated profit or loss is as follows:

The contingent consideration recognised as at the acquisition date (discounted) and an estimate of the range of outcomes (undiscounted) is as follows:

The contingent consideration (earn-outs) is usually based on pre-defined EBITDA, which is to be achieved by the target company in the future 1-3 years. The mechanism usually has a cap and floor for ratio achieved EBITDA/target EBITDA (mostly ranging between 70-130%). In most cases, the movement between 2022 and 2023 is attributable to payment of the earn out liability, except for Belectric, where there was also significant downward remeasurement of the contingent liability related to EBITDA targets. Also, the contingent liability related to GESPA was remeasured to zero at the end of 2023 due to failure to achieve EBITDA targets in 2023. We note that the time value of money was not considered by the recalculation of contingent considerations in several immaterial transactions (Moser & Partner Ingenieurburo and FEA).

The Group did not identify any transactions recognised separately from business acquisitions.

7.3. Disposals in 2023

In addition to 2023 acquisitions stated in 7.2, the Group also disposed a minority stake of 15% in Societa Agricola BTC in 2023 to the sellers of Falgas as part of the overall transaction arrangement. The aim of the transaction is to promote mutual strategic cooperation and secure provision of long-term services to the respective biogas plants.

As there is no put option in the shareholder agreement, the Group recognized non-controlling interest (NCI) in its consolidated financial statements with respect to this transaction.

7.4. Changes in the Group Structure in 2022

The following overview summarises the cash flows related to acquisitions in 2022 (kEUR):

7.5. Acquisitions of Companies in 2022, in which the Elevion Group Gained Control

The Group effectuated the following acquisitions in 2022.

Building Energy Solutions

AMPRO Group (Germany)

The Group acquired a 100% interest in AMPRO Medientechnik GmbH and Ampro Projektmanagement GmbH (with its seat in Eppstein and nearly 20 employees), which provides services in protection systems and building acoustics.

AMPRO Group is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Nov. 2022.

Acquiring company: EAB Elektroanlagenbau GmbH Rhein/Main (EAB) Strategic rationale of the acquisition: To complement the product portfolio and competencies of the Group in technical building equipment for building acoustic systems in Germany. The target company has about 40 years of experience in the relevant market and its know-how and relevant employees provide a nice fit with EAB.

The goodwill is mainly formed by skilled personnel and management of the company, including the relevant expertise, with a plan to increase product offerings to Group's customers in building protection and acoustic systems.

Wagner Consult (Austria)

The Group acquired a 100% interest in DI Wagner ZT-GmbH (with 9 employees), based in Absam, which provides services in water treatment.

Wagner Consult is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Jul. 2022.

Acquiring company: Elevion Österreich Holding Strategic rationale of the acquisition: To strengthen the product portfolio of the Group in Austria and entry into water treatment business with well-proven experts in water infrastructure and wastewater cleaning. Due to the immaterial size of the transaction, the whole difference between fair value of contingent consideration and fair value of net assets was attributed to goodwill. The goodwill thus includes also the customer list and order backlog but is also attributable to the skilled workforce (mainly engineers) and unique know-how in the water treatment business.

Green Energy

Societa' Agricola BTC (Italy)

The Group acquired a 100% interest in Societa Agricola BTC SRL, which owns and operates a biogas plant in Castelverde (near Cremona, Italy).

Societa Agricola BTC is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Aug. 2022.

Acquiring company: inewa S.r.l.

Strategic rationale of the acquisition: To enlarge the portfolio of already owned and operated biogas plants in Italy.

The intent is to upgrade to a biomethane plant to produce renewable natural gas based on the mid-term strategy as part of the Group's decarbonisation efforts. The acquisition of this biogas plant should create operational synergies with other biogas plants of the Group and, after the upgrade, will boost offerings of biomethane to the Group's customers.

The majority of the consideration in excess of the existing net assets was attributed to the newly identified intangible, a licence to generate electricity. The remaining goodwill can be largely attributable to the option of producing biomethane in the future.

Energy for Industry

Hermos Signaltechnik (Germany)

The Group acquired a 100% interest in Hermos Signaltechnik GmbH, based in Neufahrn bei Freising (with 12 employees), which provides services in instrumentation and control engineering.

Hermos Signaltechnik is consolidated into the Group's financial statements as of the acquisition date for IFRS purposes, namely 1 Feb. 2022.

Acquiring company: Hermos AG

Strategic rationale of the acquisition: To complement the product portfolio and competencies of Hermos Group. The Group expects that the demand for modernisation and development of railway lines will be significant in the future in Germany.

The goodwill is immaterial from the Group's perspective and is mainly attributable to skilled personnel and know-how in the railway sector.

The following table presents the current best estimate of the fair value of acquired identifiable assets and liabilities as at the date of the acquisitions:

The fair values of acquired identifiable assets and liabilities and the purchase considerations have been stated finally.

There was no contingent liability that was not recognised, because its fair value cannot be reliably measured.

If the acquisitions had taken place at the beginning of the year 2022, net income for the Elevion Group as at 31 Dec. 2022 would have been 4,340 kEUR and the revenues from continuing operations would have been 902,927 kEUR.

From the acquisition date, the contribution of newly acquired subsidiaries to the Group's 2022 consolidated profit or loss is as follows:

8. Investments in Subsidiaries

The consolidated financial statements of the Elevion Group include the financial figures of Elevion Group B.V. and its subsidiaries listed in the following table:

Used abbreviations:

9. Cash and Cash Equivalents

Cash and cash equivalents consist of cash and available funds at banks and equivalent financial institutions. Cash and cash equivalents amounted to 59,649 kEUR as at 31 Dec. 2023 (2022: 41,930 kEUR).

The Elevion Group had no short-term investments.

The increase of cash is attributable to the new acquisitions not yet constituting part of the Group's cash pool (Ochs Group, SERCOO Group, Hofmockel - in total +10,914k EUR), as well as increased cash in BELECTRIC Israel (+3,917 kEUR), which is not part of the cash pool.

10. Trade Receivables

The overview of trade receivables as at 31 Dec. 2023 and 2022 is as follows:

At 31 Dec. 2023 and 2022, the ageing structure of receivables (net of impairment losses) is as follows:

Net trade receivables decreased to 139,109 kEUR as at 31 Dec. 2023 (2022: 143,159 kEUR) primarily due to settling of some old cases under litigation where the receivables were overdue for more than one year, as well as increased impairment loss allowances related to ongoing litigations.

We expect all the acquired receivables to be materially collectible. For the acquired receivables which are less likely to be collectible, the best estimate related to expected credit losses was made in the opening balance sheet of the respective company.

The expected credit losses stood at 32,823 kEUR as at 31 Dec. 2023 (2022: 28,377 kEUR). As at 31 Dec. 2023, of the total impairment losses, 316 kEUR constitute expected credit losses based on a collective assessment basis according to IFRS 9 (2022: 624 kEUR) and the remainder is represented by an individual assessment basis. The individual assessment is related mainly to active litigations (both court and out-of-court) in relevant entities. The adequacy of these impairment losses is continuously assessed by the managements of the relevant entities and reviewed by external legal counsel.

The overwhelming majority of trade receivables due in over one year is also related to the above-stated active litigations (mainly in the Group Companies ETS, Rudolf Fritz, Decker and KEI), and they are deemed recoverable by the managements of the relevant Group Companies.

The credit risk management, including additional information on approach to expected credit losses, are dealt with in Chapter 16 on Financial Risk Management.

The overview of movements in impairment losses related to trade receivables was as follows:

11. Inventories

For Accounting Policies, please refer to Note 2.14.

The overview of inventories as at 31 Dec. 2023 and 2022 is as follows:

Inventories increased to 79,249 kEUR as at 31 Dec. 2023 (2022: 65,129 kEUR) mainly due to acquisition of the SERCOO Group (+10,379 kEUR).

Additional disclosures related to inventories:

12. Other Assets

The overview of other assets as at 31 Dec. 2023 and 2022 is as follows:

The increased taxes and fees are attributable mainly to VAT receivables related to intragroup transfers of the Deubach and Reddehausen projects. Other short-term receivables are usually connected to supplier bonuses, which can be used against future material deliveries. Therefore, given the nature of other assets, the Group does not apply the expected credit losses approach.

13. Contract Assets/Liabilities

Please refer to Note 2.7 of Accounting Policies for details regarding contract assets and contract liabilities, which are recorded as follows on the Group's statement of financial position.

The breakdown of contract assets is set out below:

The breakdown of contract liabilities is detailed below:

The overall combined position of contract assets and contract liabilities stood at 85,609 kEUR as at 31 Dec. 2023 (2022: 22,703 kEUR). The increase in net position was driven primarily by (i) the German Building Energy Solutions segment and is related to execution of projects in 2023 where large prepayment was received already in prior periods (e.g., in ETS Germany where net contract position increased by +13,465 kEUR), (ii) as well as increased construction activity of BELECTRIC Germany (where net contract position increased by +51,809k EUR).

Assets arising from expenses to obtain or complete a contract with a customer are included in contract assets and amount to 0 kEUR as at 31 Dec. 2023 and 31 Dec. 2022.

Wherever commercially feasible, the Group aims at requesting advance payment from the customer before the commencement of the project to cover cash outflows at the beginning of the project. The payments are subsequently requested from the customers on a regular basis as per agreed work statements with the customer or when reaching a certain project milestone, usually with payment terms of 30 days.

The Group generally considers contract with a customer to be one performance obligation as it is seen as a single commercial objective due to the nature and scope of services provided to the customers. The single commercial objective in the Group's view is the fact that none of the goods or services promised to the customer are viable on their own, only the whole scope of services/goods provided in the contract is an operational asset, in that it can, for example, produce some commodity (heat/electricity production by installed combined heat and power units, also known as CHP), reduce the customer's expenses or CO ₂ footprint or enable other assets to operate properly (e.g., installation of new ventilation/ heating solution in an office building). Such one performance obligation contracts are dominantly recognised over time due to the nature of the services/goods being transferred to the customers. Revenue recognised at a point in time is rather rare and deemed immaterial from the Group's overall perspective compared to revenue recognised over time.

The Group generally has two types of variable considerations - (a) soft and (b) hard claims. Soft claims are recognised in such cases when there are cost overruns, such as delays on the construction site or planning deficiencies caused by the customer. These claims are recognised by the Group only if approved by the customer or follows from customary business practise. Hard claims are cases when the Group can demonstrably evidence additional work (such as additional installations) and the amount additionally claimed is substantially obvious - e.g., directly requested by the customer. Hard claims must be either approved in writing/orally or follow from customary business practice/legal framework.

The Group assesses significant financing components in its contracts. This usually arises when the Group receives prepayment from the customer at the beginning of the project without yet providing any performance obligation to the customer. The Group applies an appropriate discount rate to such prepayments and the discount is unwound into profit or loss as a financial expense as the project progresses.

The Group provides services and delivers goods within its three segments: Building Energy Solutions, Green Energy and Energy for Industry.

Examples of Building Energy Solutions products are:

Examples of Green Energy products are:

Examples of Energy for Industry products are:

As part of the project business, the Group may be asked to provide performance bonds, advance payment bonds and/or warranty bonds as part of securing obligations towards its customers.

The Group had total of 1,207,643 kEUR of unsatisfied or partially unsatisfied performance obligations as at 31 Dec. 2023 (based on projects recognised over time) (2022: 1,067,164 kEUR). Reconciliation of unsatisfied or partially unsatisfied performance obligations and order backlog disclosed earlier as part of the annual report is below.

The Group expects to satisfy fully these performance obligations (related to projects recognised over time) in the amount of 992,678 kEUR in 2024, 155,071 kEUR in 2025 and 59,894 kEUR in 2026 respectively.

The Group applies expected credit losses approach on contract assets. For more information, please refer to Chapter 16 on Financial Risk Management.

14. Equity and Other Comprehensive Income

Equity in the Group is distributed between equity attributable to equity holders (shareholders) and non-controlling interests (minority interests).

Non-controlling interests account for 0.3% of total equity as at 31 Dec. 2023. Equity changed during the 2023 reporting period as follows:

The capital increase of 125,309 kEUR (through paid-in capital) is related to the financing of acquisitions (such as SERCOO Group or Project X) and organic projects.

Details regarding equity attributable to shareholders are as follows:

Equity attributable to shareholders is allocated as follows

Breakdown of reserves

The decrease in translation reserves consist of accumulated translation differences from the translation of financial statements for foreign operations and the increase is attributable mainly to the appreciation of PLN.

Movement in translation reserve

The reserve for revaluation was decreased by remeasurement of defined-benefit pension plans in other comprehensive income in the amount of 228 kEUR in 2023.

Movement in reserve for revaluation of net defined benefit liability

15. Financial Liabilities

The financial liabilities of the Group are detailed below:

The loans to affiliated companies (namely towards CEZ MH B.V.) are related to historical acquisitions in the German Building Energy Solutions segment.

The cash pool liability of the Group towards ČEZ, a. s., reported as at 31 Dec 2023 (which was cash pool asset as at 31 Dec 2022) is mainly related to increased construction activity of the BELECTRIC Group, as well as higher net working capital requirements of the German Building Energy Solutions segment (and relates to positions in EUR).

Bank loans are mainly related to the project financing of biogas plants in Italy (at a total of 4,131 kEUR as at 31 Dec. 2023 and 5,631 kEUR as at 31 Dec. 2022), whereas the respective biogas assets and related land are pledged to the benefit of the financing bank (see Section 3 for more details). The increase in bank loans liability is also attributable to bank financing of the newly acquired Project X (in the total of 11,629 kEUR), where the asset is also pledged.

Option liabilities are related to non-controlling interests where combinations of put and call options for former owners or managers exist (see Accounting Policies in Note 2.13 for more details). The year-over-year increase is primarily attributable to option remeasurement in Elevion Deutschland Holding and Euroklimat due to improved EBITDA results in 2023, as well as to newly acquired Project X.

The contingent consideration (earn-out liability) is accounted in line with the Accounting Policies detailed in Note 2.5. The increase in this liability is mainly attributable to newly acquired companies in 2023 (Ochs Group and Hofmockel) - (please refer to Section 7 for more details).

The tables below present maturity and interest rate analysis of derivative and non-derivative financial liabilities:

16. Financial Risk Management

The Group is exposed to a variety of financial risks: mainly foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Group's overall risk management aims at reducing potential adverse effects on the Group's financial performance at reasonable costs. The Group uses derivative financial instruments and operating strategies to mitigate certain risks.

The cash pool leader is the Parent Company and the Group Companies are participants. Excess liquidity (if any) is pooled into ČEZ, a. s., which in turn covers potential cash shortfalls. Each new subsidiary is usually added to the cash pool structure (unless not practicable).

The Group aims to systematically assess financial risks and uses risk management models in cooperation with ČEZ. Instead of avoiding risk, the Group aimed at risk identification and management.

Financial risk management is carried out by the Group's treasury department in cooperation with ČEZ's treasury and risk departments. Selected written principles for the management in particular of credit risk in long-term contracts are in place or for foreign exchange risk management.

Market risk

The Group has identified two main sources of market risk: (a) Foreign exchange risk and (b) Interest rate risk.

a) Foreign exchange risk

Foreign exchange rate risk means that the Group's profit or loss and statement of financial position may be negatively impacted by fluctuations in exchange rates. This risk can be split into transactional and translational risk.

The transactional risk arises when foreign currency outflows and inflows are not matched. In the Group, operations are usually of a local character and project revenues and costs are usually denominated in the same currency. When this is not the case, the exposure and risk management is further described below.

The translational risk arises when a company's equities, assets, liabilities, or income are negatively impacted as a result of exchange rate changes compared to EUR. The Group has decided not to hedge net investments in foreign subsidiaries.

Exposure to foreign exchange risk: The Group operates mainly in the Eurozone but is, to some extent, exposed to translational foreign exchange risks arising from various currency exposures, primarily with respect to the Polish zloty (PLN), due to its material Polish operations and, after the acquisition of BELECTRIC Group, also Israeli shekel (ILS), due to the acquired Israeli subsidiary. In terms of transactional risk, the Group, primarily through BELECTRIC Group, is mainly exposed also to the American dollar (USD), due to the purchase of photovoltaics panels denominated in this currency, and to the British Pound (GBP) due to projects carried out in the United Kingdom.

Foreign exchange risk management: Group Companies use FX forward contracts (with the counterparty to the derivative contract being ČEZ, a. s.) and, prospectively, also may use FX options to manage the transactional foreign exchange risk. The Group's treasury department is responsible, in close coordination with local entities and ČEZ's treasury department, for managing the material foreign currency exposures and for effectuating the adequate hedges. Currency exposures arising from the net assets of the Group's operations in Poland are, to some extent, managed through a cash pooling structure denominated in PLN.

Foreign exchange risk sensitivity: The table below show sensitivities of the foreign currencies to which Group is primarily exposed with respect to their average daily volatility.

kEUR

b) Interest rate risk

Interest rate risk arises when interest rate movements will have adverse impact on the Group's cash flow (cash flow risk) or fair value of financial assets and liabilities (fair value interest rate risk).

Exposure to interest rate risk: Financial debt at variable rates exposes the Group to interest rate risk. All external capital expenditure loans from banking institutions are at fixed rates, except for the loan related to Societa' Agricola DEF and Project X. There are no external net working capital loans at the end of the reporting period. Acquisition loans from ČEZ affiliates (towards CEZ MH B.V.) are at fixed rates. The Group is thus mainly exposed to variable rates only on its EUR and PLN cash pool liability towards ČEZ, a. s. Due to the intragroup nature of this exposure, the Group, in cooperation with the treasury department of ČEZ, a. s., decided not to hedge this exposure.

Interest rate risk management: The Group manages the costs of interest using fixed and variable rate debt, and, in limited cases, uses also interest-related derivatives (Project X).

Interest rate risk sensitivity: If the average EUR interest rates (EURIBOR/EUROBID) had been 100 basis points higher/lower as at the reporting date, other conditions being equal, pre-tax profit for the year would have been 675 kEUR higher/lower (2022: 124 kEUR higher/lower). If the average PLN interest rates (WIBOR/WIBID) had been 100 basis points higher/lower as at the reporting date, other conditions being equal, pre-tax profit for the year would have been 134 kEUR higher/lower (2022: 20 kEUR higher/lower). If the average RON interest rates (ROBOR/ROBID) had been 100 basis points higher/lower as at the reporting date, other conditions being equal, pre-tax profit for the year would have been 40 kEUR higher/lower (2022: 30 kEUR higher/lower).

Credit risk

kEUR

Exposures to credit risk: Credit risk arises from trade receivables and contract assets, as well as from future receivables in contracting projects (lease receivables). The lease receivables are presented under trade receivables by the Group in its statement of financial position due to their immaterial character. The Group measures the loss allowance at an amount equal to lifetime expected credit losses and presents the loss amount separately in its statement of profit or loss, including contracts containing a significant financing component.

The Group uses the rebuttable presumption that credit risk has increased significantly since initial recognition, to the extent that contractual payments are more than 30 days past due. In such case, the receivables are assessed individually and loss allowance reflects unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information. Please note that individual assessment can also occur for trade receivables which are less than 30 days past due (or for contract assets) in conjunction with collective assessment basis - see below.

The Group uses a collective assessment basis using provision matrix for receivables which are less than 30 days past due. The Group uses flat allowance of 0.1% for receivables which are not yet past due (as well as for contract assets) and, for trade receivables less than 30 days past due, flat allowance of 1%. It should be, however, noted that past due positions in trade receivables are usually not related to the credit risk of the customer, but rather to disputes with the customer regarding the scope and quality of the work or additional claims, hence individual assessment basis materially prevails. Please refer to the section on trade receivables (see Note 10) with more quantitative details on the individual and collective assessment of trade receivables where prevalence of individual assessment over collective assessment is apparent.

The overview of expected credit losses based on collective assessment per maturity for trade receivables/contract assets is shown in the below table. As of 2023, the Group applies also collective allowance approach on contract assets.

The part of the Group's operations related to design and/or build projects entails only moderate credit exposure, since these projects are financed progressively to the extent possible (through advances, prepayments or partial milestone invoices). In addition, this part of the Group's operations exhibits high diversification thanks to a large number of projects of various sizes and types of customers (also to a great extent from the public sector). In the design and/or built projects, the Group also uses credit insurance to protect itself from credit risk. The amount of the insurance depends on the type of invoicing (payment terms, invoicing periods, etc.), but at least the open position should be insured. The decision for a hedge and its amount is incumbent on the subsidiaries.

However, credit risk plays an important role in the contracting of so-called asset-heavy projects. The Group effectively invests into fixed asset (such as the photovoltaic plant, cogeneration unit or heat pump) normally operated for the customer in exchange for a series of future payments with a duration between 3-15 years. The Group Company is thus exposed to long-term customer credit risk, however, it tries to mitigate such risk through various safety mechanisms, e.g., the Group is, in most cases, entitled to dismantle the asset or feed the electricity into the grid instead of the customer in case of customer default, hence the credit risk is mitigated.

Credit risk management: The Group's credit risk policy ensures that projects are executed only for customers with a sound credit risk rating (which is checked with renowned credit agencies) and/or the credit risk is managed through advance payments from customers (for instance in design and/or build projects) or credit insurance. The Group also has a written policy in place for contracting projects, which monitors and places limitations on committed capital.

Liquidity risk

Liquidity risk is defined as the risk that the Group will not be able meet its payment obligations due to lack of liquidity and inability to get external financing.

The Group does not have a public rating, however it is part of one of the strongest European utility group. ČEZ, a. s., has a public rating with Moody's (Baa1, stable outlook) and S&P (A-, stable outlook).

The maturity analysis is presented in the Section 15 on Financial liabilities.

Liquidity risk management: Liquidity risk is primarily managed through regular cash flow forecasting. The Group treasury monitors forecasted liquidity requirements of the Group Companies to ensure sufficient cash to meet their operational needs.

At the end of 2021, the Group implemented a cash pool with the aim of efficiently utilizing cash as part of liquidity management across the whole Group and reducing non-operational cash/debt exposure towards ČEZ, a. s.

The cash pool leader is the Parent Company and the Group Companies are participants. Excess liquidity (if any) is pooled into ČEZ, a. s., which in turn covers potential cash shortfalls. Each new subsidiary is usually added to the cash pool structure (unless not practicable). The cash pool effectively replaced the intragroup net working capital facilities towards ČEZ, a. s., which were in place prior implementation of cash pool and thus it also represents source of short-term financing.

Capital expenditure (CAPEX) - both organic and inorganic - is financed through equity contributions and/or intragroup debt from CEZ Group, alternatively through project financing organised through external financing institutions. CAPEX for the growth of the Elevion Group has been defined as part of the 5-year business plan to ČEZ, a. s.

Liquidity risk exposure: Please refer below on selected indicators related to liquidity. They are in line with industry standards.

kEUR

Fair value

There are three different levels for establishing fair value. The first level uses the official price quotation in an active market for identical financial instruments. The second level uses quoted prices in active markets for similar assets and liabilities or prices in non-active markets for identical assets and liabilities. The third level uses input data not observable in the market.

The fair value of put options written over non-controlling interests is determined based on contractual agreements in line with the relevant shareholder agreement. The strike price of the options is usually calculated based on defined formula in the relevant shareholder agreement. Generally, it is calculated as a multiple of budgeted EBITDA (or average of EBITDAs for multiple years) prior to the year when the option can be exercised for the first time by the non-controlling shareholder, and further adjusted as stated in the respective shareholder agreements (e.g., for net debt or net working capital). The budget of all the companies is updated annually and serves as a basis for revaluation of the fair value of relevant strike prices. Fair value of put options written over non-controlling interests is discounted based on expected timeframes of their exercise.

The fair value of contingent considerations (earn-out liabilities) is determined based on contractual agreements with sellers. These usually define specific EBITDA targets to be achieved usually with pre-set floors and caps. Duration of contingent considerations is typically up to three consecutive years after acquisition with defined timeline of settlements based on which the contingent consideration is discounted.

The table below show classification of financial instruments, including related hierarchy level.

Assets - 31 Dec. 2023

Assets - 31 Dec. 2022

Liabilities - 31 Dec. 2023

Liabilities - 31 Dec. 2022

For financial instruments measured at fair value, the carrying amount recognized at statement of financial positions equals the fair value.

Significance of financial instruments for the Group's statement of financial position

The following table shows the carrying amount and fair value of financial instruments by category, as well as a reconciliation with total assets and liabilities in the statement of financial position.

Assets