Neoen Jules GmbH

Neoen Jules

Paris

Konzernabschluss zum Geschäftsjahr vom 01.01.2017 bis zum 31.12.2017

This is a translation into English of the statutory auditors' report on the consolidated financial statements of the Company issued in French and it is provided solely for the convenience of English speaking users.

This statutory auditors' report includes information required by European regulation and French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group presented in the management report.

This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

Statutory Auditor's report on the consolidated financial statements

Year ended December 31, 2017

To the Neoen shareholders,

Opinion

In compliance with the engagement entrusted to us by your annual general meeting, we have audited the accompanying consolidated financial statements of Neoen for the year ended December 31, 2017.

In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as of December 31, 2017 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

Audit Framework

We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the "Statutory Auditors' Responsibilities for the Audit of the Consolidated Financial Statements" section of our report.

Independence

We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2017 to the issue date of our report and specifically we did not provide any prohibited non-audit services referred to in the French Code of ethics (code de déontologie) for statutory auditors.

Justification of our assessments

In accordance with the requirements of Articies L.823-9 and R.823-7 of the French Commercial Code (code de commerce) relating to the justification of our assessments, we inform you that, in our professional judgment, the most significant assessments performed by us focused an the appropriateness of the accounting policies applied and the reasonableness of accounting estimates male, as well as the overall presentation of the consolidated financial statements.

These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion an specific items of the consolidated financial statements.

Verification of the Information Pertaining to the Group Presented in the Management Report

As required by law, we have also verified in accordance with professional standards applicable in France the information pertaining to the Group presented in the Chairman's management report.

We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.

The consolidated financial statements have been approved by the Chairman.

Statutory Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is rot a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As specified in Article L. 823-10-1 of the French Commercial Code, our statutory audit does not include assurance on the viability of the Company or the quality of management of the affairs of the Company.

As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:

CONSOLIDATED FINANCIAL STATEMENTS

31 December 2017

CONTENTS

CONTENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE INCOME STATEMENT

NOTES TO THE BALANCE SHEET

ADDITIONAL NOTES TO THE FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The statement of comprehensive income presents net income for the period as well as income and expenses for the period recognised directly in equity under IFRS.

CONSOLIDATED BALANCE SHEET

assets

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Neoen Group develops and operates power plants to generate electricity and heat from renewable energies (wind, solar, biomass), as well as energy storage facilities.

With over 1.5 GW of projects in operation and under construction (including 237 MW under management) and more than 1.3 GW of projects secured at 31 December 2017, Neoen is currently the number one independent producer of renewable energy in France. Neoen continues to grow, with a pipeline of projects under development representing more than 2.8 GW.

The Group operates in Europe, the Middle East, Africa, Australia arid the Americas.

Neoen is a simplified joint-stock company (société par actions simplifiée - SAS) registered and domiciled in France. Its registered Office is located at 4 rue Euler, 75008 Paris.

The basis of preparation for these consolidated financial statements is described in note 2 "Accounting policies".

The financial statements are presented in thousands of euros. They were authorized for issue by the Chairman an 22 May 2018 and approved by the Shareholders' Meeting of 29 May 2018.

1. Key events

Development

The Group saw robust expansion in the Americas during the year, with projects secured in three countries, enabling Neoen to confirm the region as its third avenue for development after EMEA and Australia.

Australia became the Group's top region in terms of secured MW, underlining Neoen's successful international expansion. The Group was also awarded:

Neoen continues to strengthen its position in France, with pricing secured for:

The related development costs are capitalised in intangible assets (note 10).

Construction

In Australia, construction work began an three solar parks in the state of New South Wales. This follows a successful bid in the 2016 ARENA (Australian Renewable Energy Agency) tender and represents a total of 131 MW. In December, construction work began an Coleambally, a 189 MW solar park. A power purchase agreement (PPA) was signed with a private operator concerning 132 MW of the park.

In France in October, construction work began an a 6.8 MW solar project combining solar photovoltaics and concentrated solar power (CPV). Construction work began in August an three wind farms resulting from the Group% organic growth, representing a total of 43 MW (Chassepain, Pays Chaumontais and Champs d'Amour).

In Zambia in December 2017, construction work began an the 55 MW Bangweulu project awarded to the Group in 2016 as part of the African World Bank's Scaling Solar programme. The facility will be built in partnership with First Solar and is expected to be commissioned before the end of 2018.

Construction projects have a material Impact an growth in the Graup's property, plant and equipment, disclosed in rote 11.

Financing

In April, Neoen strengthened its partnership with KfW IPEX-Bank and Caisse d'Epargne Provence Alpes Corse (CEPAC), securing financing for 18 French wind farm and solar projects of €270 million.

On 14 December, Neoen issued a €245 million "green bond" in three currencies (EUR, AUD and USD) to finance projects in different industries and countries generating 1.8 GW. An agreement was reached with AMP Capital, an investment manager headquartered in Sydney. The portfolio comprises 42 onshore wind and solar projects in Australia, South America and France, which are either in Operation, under construction or in the final development stage. This mezzanine financing will allow Neoen to commit new financial resources to projects around the world.

In December, Neoen closed the financing for its solar park in Zambia with the Enternational Finance Corporation (IFC) a member of the World Bank group and the Overseas Private Investment Corporation (OPIC), the state-owned development finance Institution in the United States. This project represents a total investment of USD 60 million, including USD 39 million financed by the IFC and OPIC.

Note 21 contains details of financing arranged during the period.

Operations

In Australia, Neoen and Tesla were awarded the contract to build the world's largest lithium-ion battery at the Hornsdale wind farm. This 100 MW battery was commissioned an 1 December 2017.

The second (102 MW) and third (112 MW) tranches of the Hornsdale wind farm project were commissioned in June and December, respectively.

In France, the Osière (14 MW) and Vailée aux Grillons (11 MW) wind farms were commissioned during the year.

In El Salvador, the 101 MW Providencia solar plant began operating in April.

Changes in sales of energy described in note 1 reflect the facilities commissioned in the period.

Neoen increased its Base of assets in operation by 461 MW, to 1,101 MW controlled or under management at 31 December 2017.

M&A

On 10 February 2017, the Group sold its stake in GenSun to Ponticelli et Frères (note 18).

During the year the Company acquired Centrale Photovoltaïque de Mer, Neoen Wind HoldCo 1 (Bulgana project) and FieldFare 2 (La Puna project). These transactions are recognised in intangible assets and enable Neoen to purchase projects under development or for which pricing has been secured. The intangible assets are amortised an a straight-line basis over the estimated useful lives of the power plants to which they relate (note 10).

2. Accounting policies

The Neoen Group's financial statements for the year ended 31 December 2017 include:

a. Standards

The Group's consolidated financial statements for the year ended 31 December 2017 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union at 31 December 2017 and available at:

The accounting policies applied for the preparation of the 2017 consolidated financial statements are identical to those used by the Group to prepare the consolidated financial statements for the year ended 31 December 2016, with the exception of the new standards and amendments listed below.

Standards, interpretations and standard amendments of mandatory application as from 1 January 2017

These standards and amendments did not have a material impact an the Group's consolidated financial statements.

Standards, interpretations arid amendments already published by the IASB and endorsed or in the process of being endorsed by the European Union, but not of mandatory application at 31 December 2017

The Group decided not to early adopt these standards, interpretations and amendments.

The Group is currently analysing the impacts and practical consequences of applying IFRS 9, IFRS 15 and IFRS 16.

IFRS 15 and IFRS 9 are effective for reporting periods beginning on or after 1 January 2018. The main impacts of these standards as currently estimated by the Group are described below.

The Group set up a working group to analyse a sample of contracts and identity the impact of applying IFRS 15 on revenue recognition.

Work in this area is ongoing and the Group is also currently deciding which transition method to adopt. The final decision will be made once the impact assessments are complete.

The Group set up a working group to manage its transition to IFRS 9. The classification and measurement, and impairment chapters of the new standard are not expected to have a material impact on the Group's financial statements.

Neoen is currently analysing the Impacts of the hedge accounting requirements in IFRS 9 and of the clarification contained in the discussions that led to IFRS 9 concerning the treatment of changes in liabilities.

IFRS 16, Leases is applicable for reporting periods beginning on or after 1 January 2019.

Under IFRS 16, which will replace IAS 17 and the related interpretations, most leases will be recognised on a lessee's balance sheet according to a single framework in the form of a right-of-use asset and a lease liability (lessees will no longer be permitted to classify operating leases separately from finance leases). The Group has begun to prepare for IFRS 16, with leases of land particularly affected. It is currently analysing the impacts of the new standard an its financial statements and has not yet decided an its transition method.

b. Comparison between reporting periods

Besides a change in estimates relating to useful lives of assets (see below), the Group's accounting methods and financial statement presentation in 2017 remained the same as in 2016.

Further to developments in the renewable energy sector, Neoen now considers that a market exists beyond the termination of PPAs. The Group commissioned a study from an independent party on the technical capacities of power plants. As a result of the study, it revised the useful lives of its wind and solar assets, increasing them to 25 years from 15 years and 20 years, respectively, previously.

In accordance with IAS 18, the impact of extending these useful lives (representing a change in accounting estimate) are accounted for on a prospective basis: depreciation/amortisation in 2017 was calculated based on the carrying amount at 1 January 2017 and the asset's residual useful life at that date.

The quantified impacts an the consolidated financial statements at 31 December are as follows:

c. Estimates and assumptions

To prepare the Neoen Group's financial statements, management makes estimates whenever items included in the financial statements cannot be accurately measured. Management reviews its estimates and assessments regularly to take into account past experience and other factors deemed relevant in light of economic conditions. Accordingly, the amounts in future financial statements may differ from current estimates.

The main items impacted by estimates and assumptions at 31 December 2017 are:

d. Consolidation methods

Subsidiaries that are controlled within the meaning of IFRS 10, Consolidated Financial Statements, are fully consolidated regardless of the Group's equity interest. Control results from power over an entity, exposure to variable returns from its involvement in the entity, and the ability to use its power to influence the amount of these returns.

In accordance with IFRS 11, Joint Arrangements, the Group accounts for joint arrangements (agreements in which Neoen has joint control with one or more other parties) using the equity method. Neoen has joint control over a partnership when decisions about the relevant activities require the unanimous consent of Neoen and the other parties sharing control.

The equity method of accounting is applied to associates over which the Group has significant influence but net control. The equity method consists in recording the net assets and net income of a company based on the interest held by the parent company in the capital and, where applicable, any related goodwill.

All inter-company balances and transactions are eliminated on consolidation. The list of subsidiaries, joint ventures and associates is provided in note 33.

e. Revenue

Revenue represents the fair value of the consideration received or receivable in exchange for goods or services sold in the course of the Group's ordinary activities, Revenue is calculated net of any discounts and rebates and less any inter-company sales. No revenue is recognised when there is material uncertainty as to the recoverable nature of the consideration due.

Revenue consists mainly of sales of energy, green certificates and services.

Sales of energy comprise sales of electricity and steam produced by production units and sold either to Operators (in accordance with contracts and at prices approved by decree or through tenders), or on the market or over-the-Counter to private parties. Revenue is recognised based on the amount of electricity generated and fed into the network during the period.

Sales of green certificates are booked in other income when the energy conferring entitlement to the certificates is produced.

Sales of services consist of development or maintenance services which are recognised when the services are rendered.

f. Other non-recurring operating income and expenses

This caption includes material amounts of non-recurring operating income and expenses which, by definition or owing to their extraordinary nature, may distort the Interpretation of the Group's recurring operating performance. Such items may include:

g. Business combinations

In accordance with IFRS 3 as amended, business combinations are accounted for using the acquisition method. Under this method, assets acquired as well as liabilities and contingent liabilities assumed are measured at fair value. Goodwill represents the difference between the purchase price paid for the business combination and the amount of identifiable assets and liabilities acquired net of liabilities and contingent liabilities assumed. It is provisionally determined on acquisition and reviewed within a period of 12 months from the acquisition date. Goodwill is not amortised and is subject to impairment tests.

In accordance with IFRS 3 as amended:

For each business combination, the Group can measure non-controlling interests either at fair value or at its share in the acquiree's net identifiable assets as measured at fair value at the acquisition date. The Group decides on the method it will use to account for non-controlling interests on a case-by-case basis.

h. Intangible assets

The main intangible assets recognised by the Group relate to costs incurred to develop renewable energy plants.

Direct and indirect, external or internal development costs are capitalised as soon as the success of the corresponding projects becomes probable.

Development costs are capitalised in accordance with IAS 38, intangible assets.

The main criteria for capitalisation are:

The Group considers that these criteria are met when a project enters its portfolio, i.e., when contractual factors and technical studies indicate that the feasibility of the project is probable.

When the conditions for the recognition of an asset generated internally are not met, development costs are expensed in the period in which they occurred.

Capitalisation of the costs associated with these projects ceases when the plant is commissioned.

If a project is discontinued, the associated development costs are expensed and presented in "Other non-recurring operating income and expenses".

It the Group considers that the probability of success has decreased, the development costs are impaired and included in "Non-recurring operating depreciation, amortisation and provisions"

The Group identifies development costs relating to "Studies" and those relating to "Operations", based on the percentage completion of the project at the year-end. The "Operations" phase includes the construction and operation of the plants.

After the project is commissioned, amortisation is calculated on a straight-line basis over the useful life of the underlying asset.

Intangible assets are amortised on a straight-line basis over their estimated useful lives.

The Group's main intangible asset categories and their useful lives are listed below.

i. Property, plant and equipment

Property, plant and equipment is carried at acquisition cost in accordance with IAS 16, Property, Plant and Equipment. Property, plant and equipment acquired in business combinations is recognised at fair value.

Borrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset up to commissioning.

Depreciation is calculated from the date the assets are commissioned and is recognised over the assets' estimated useful lives using the straight-line method, as follows:

^* The Group considers that power plants have e useful life of 25 years but may adopt shorter useful lives in light of technical, regulatory or contractual constraints.

Depreciation, useful lives and residual values are reviewed at the end of each reporting period and adjusted where appropriate.

Production assets in progress relate to plants under construction. An asset is identified from the date construction costs are incurred until the date the plants are commissioned.

j. Leases

In accordance with IAS 17, Leases, assets held under finance leases are recognised as assets when the lease agreements transfer substantially all of the risks and rewards of ownership of these assets to the lessee. Assets held under these contracts are depreciated over their useful life or, if shorter, over the term of the relevant lease.

Lease agreements not considered as finance leases are recognised as operating leases and only lease payments are expensed in income.

k. Impairment of assets

In accordance with IAS 36, Impairment of Assets, the Group also regularly reviews whether there is any evidence that intangible assets and property, plant and equipment with finite useful lives are impaired. If such evidence exists, the Group performs an impairment test to assess whether the carrying amount of the asset exceeds its recoverable amount, defined as the higher of fair value less costs to sell and value in use.

Most fixed assets relate to production assets (plants under development or construction or in operation). These assets have a finite useful life and are subject to impairment tests whenever there is evidence that they may be impaired.

In the course of the Group's activities, only projects with adequate initial profitability are built and operated. In so far as, in the absence of any production incidents, the resources generated by the project can be reliably estimated, the risk of failing to achieve the expected cash flows is low.

The value in use of an asset is generally assessed by discounting the future cash flows produced by the asset Assets that do not generate largely independent cash flows are grouped into cash-generating units (CGUs). The Group considers each project to be a CGU.

Data used to perform impairment tests based an discounted cash flows is taken from the business plans drawn up for the relevant projects and covering the term of the Power sales agreements. The underlying assumptions are revised at the test date.

l. Inventories

Inventories mainly comprise work-in-progress related to development activities as well as wood for the biomass plant.

Inventories are stated at the lower of cost price and net realisable value.

m. Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments that are considered highly liquid, convertible to known amounts of cash and subject to an insignificant risk of change in value in regard to the criteria set out in IAS 7, Statement of Cash Flows.

Overdrafts are excluded from cash and cash equivalents and are shown within current borrowings.

n. Financial assets

Financial assets consist of operating receivables, security deposits related to financing agreements, term deposits, loans, non-consolidated investments, short-term Investments and cash equivalents and derivative Instruments with a positive market value.

The following methods are applied to financial assets:

o. Financial liabilities

Financial liabilities include borrowings, operating liabilities and derivative instruments with a negative market value.

Borrowings are initially recognised at their original fair value less directly attributable transaction costs.

At each reporting date, borrowings are measured at amortised cost using the effective interest rate method and are broken down into:

In accordance with IAS 23, Borrowing Costs, borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset should be included in the cost of that asset.

p. Derivative financial instruments

Derivative instruments are used by the Group to hedge interest rate risk an loans contracted at floating interest rates.

The Group may also use derivatives contracted for currency hedging purposes to reduce its exposure to currency fluctuations.

In accordance with IAS 32, Financial Instruments: Presentation and IAS 39, Financial Instruments: Recognition and Measurement, derivatives with a positive market value are reporied as assets and these with a negative market value are recognised as liabilities. When not treated for accounting purposes as cash flow hedging Instruments, changes in the fair value of these Instruments are recognised in income. The effective portion of changes in the fair value of Instruments classified as cash flow hedges for accounting purposes is recognised in other comprehensive income to be subsequently reclassified to income, while the ineffective portion is taken to income.

q. Employee benefits

Employee benefits include defined contribution plans and defined benefit plans.

Defined contribution plans are post-employment schemes under which the Group pays fixed contributions to various social security organisations. Contributions are paid in exchange for services rendered by the employees during the financial year and are expensed as incurred.

Defined benefit plans guarantee employees additional benefits such as retirement indemnities. These guaranteed additional benefits represent a future commitment for the Group which is quantified. The provision is calculated by estimating the amount of benefits that employees have accumulated in exchange for services rendered during the current and prior years.

Given the average age of Group employees, no liability has been recognised for employee benefits since these are not material.

r. Provisions

Provisions are recognised when:

Provisions are measured in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets on the basis of the most probable estimate of the expense required to settle the obligation. When the effect of the time value of money is significant, the amount of the provision is discounted.

Where no reliable estimate can be made, the liability cannot be recognised (contingent liability).

Provision for dismantling obligations

When the Group has a legal or contractual obligation to dismantle a plant, it recognises a provision for its dismantling Obligation against a "dismantling asset". The cost of this obligation is regularly estimated based on independent valuations. In the event of a significant change in the estimate leading to an increase in the provision, the net value of the dismantling asset is also increased. If the change in estimate leads to a decrease in the provision, the Group recognises an impairment loss against the asset.

s. Income tax and other tax payables

Income tax

Income tax includes the current tax expense (benefit) and the deferred tax expense (benefit), calculated in accordance with tax legislation in force in the countries where the income is taxable. Current and deferred taxes are generally recognised in income or equity to match the underlying transaction.

The current tax expense (benefit) is the estimated amount of tax due an taxable income for the period, determined using the tax rates adopted at the reporting date. Deferred taxes result from temporary differences between the carrying amount of assets and liabilities and their tax basis. However, no deferred taxes are recognised for temporary differences generated by:

Deferred tax assets and liabilities are measured at the expected tax rate for the year in which the asset will be realised or the liability settled and which were enacted at the reporting date. In the event of a change in tax rates, deferred taxes are adjusted to the new applicable rate and the adjustment is charged to the income statement unless it relates to an underlying item recognised in equity, in particular fair value gains and losses on hedging Instruments.

Deferred tax assets are only recognised if it is probable that the Group will generate future taxable income against which said deferred taxes can be utilised.

Deferred taxes are reviewed at each reporting date, notably to reflect changes in tax law and the probability that deductible temporary differences will be recovered, A deferred tax asset is recognised only to the extent that it is probable that the Group will have sufficient future taxable income against which this asset can be utilised in the foreseeable future, or will have deferred tax liabilities with matching maturities.

Other tax payables

In France, the 2010 Finance Law introduced the Contribution Economique Territoriale (CET) (Territorial Economic Contribution) in lieu of the Taxe Professionelle (Business Tax). The CET comprises two new contributions: the Cotisation Foncière des Entreprises (CFE), or Corporate Real Estate Tax, and the Cotisation sur la Valeur Ajoutée des Entreprises (CVAE), or Corporate Value Added Tax. For the years presented, the Group recognised the CFE tax in operating income under "Duties, taxes and similar payments" and considered that the CVAE tax fell within the scope of IAS 12, income Taxes.

t. Non-current assets held for sale and discontinued operations

IFRS 5, Non-current Assets Held for Sale and discontinued Operations, requires the separate recognition and presentation of assets and disposal groups held for sale, and discontinued operations sold or in the process of being sold, Non-current assets or disposal groups and any directly associated liabilities are considered as held for sale if it is highly probable that the carrying amount will be recovered mainly through a sale rather than through continuing use. Assets held for sale are measured and recognised at the lower of carrying amount and fair value less costs to sell. Depreciation of these assets ceases once they are recognised as assets (or disposal groups) held for sale. They are shown on a separate line of the Group's balance sheet, and prior periods are not restated.

An Operation is a component of the Group that has identifiable cash flows and that represents a separate major line of business or geographic area of operations.

In accordance with IFRS 5, the "Net income (loss) from discontinued operations" line in the income statement includes net-of-tax income and expenses arising on discontinued operations or assets held for sale.

u. Share-based payments

In accordance with IFRS 2, Share-based Payment, the fair value of options and free share grants is assessed using methods that are appropriate in light of their characteristics, and is recognised in payroll costs over the rights vesting period.

Share subscription options with no share price performance condition are valued using the Black-Scholes model.

The fair value of share subscription options at the grant date is recognised as an expense over the vesting period, depending on the probability that these options will be exercised before they lapse, with a corresponding increase in consolidated reserves.

The fair value of free share grant plans is assessed based on the last share capital increase, taking into consideration the absence of dividend payments during the vesting period and the lock-up period. The expense is recognised over the vesting period with a corresponding increase in consolidated reserves.

At each reporting date, the Group assesses the probability that rights to options or free share grants will be lost before the end of the vesting period. Where applicable, the impact of revised estimates is recognised in income with a corresponding adjustment to consolidated reserves.

v. Translation methods

Presentation currency of the consolidated financial statements.

The Group's consolidated financial statements are presented in euros.

Functional currency

The functional currency of an entity is the currency of the economic environment in which it primarily operates. In most cases, the functional currency is the local currency. However, in some entities, a functional currency different from the local currency may be used provided it reflects the currency of the entity's main trading and economic environment.

Translation of foreign currency transactions

Foreign currency transactions are translated into the functional currency at the exchange rate prevailing at the transaction date. At each reporting date:

Translation of the financial statements of subsidiaries whose functional currency is not the euro

The balance sheet is translated into euros at the closing exchange rate. Income and expense items and cash flows are translated using average exchange rates. Any differences resulting from the translation of the financial statements of foreign subsidiaries are recorded under "Exchange differences on translation of foreign operations" in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign entity. They are therefore expressed in the functional currency of the entity and translated at the closing rate.

w. Operating segments

In accordance with IFRS 8, Operating Segments, segment information is presented based on the internal organisation and reporting structure used by the Group's management, Neoen uses the following breakdown for its operating segments:

Up to 31 December 2016, Neoen had an "Industrial" segment which included renewable energy construction and maintenance projects. Following the sale of the GenSun group, Neoen no longer has an "Industrial" segment.

Geographic areas are defined based on their specific economic environment and are subject to varying risks and returns. The Group's geographic areas are:

Recurring EBITDA corresponds to recurring operating income adjusted for recurring depreciation, amortisation and provisions.

x. Earnings per share

The Group applies IAS 33, Earnings per Share.

Basic earnings per share: net income for the period attributable to the Group divided by the weighted average number of ordinary shares outstanding less any treasury shares held.

Diluted earnings per share: net income for the period attributable to the Group and the weighted average number of ordinary shares outstanding used to calculate basic earnings per share are adjusted for the Impact of any potentially dilutive instruments.

3. Changes in the consolidation scope

Mer

On 16 January 2017, Neoen acquired 100% of Centrale Photovoltaïque de Mer.

Corbas 2

On 27 April 2017, Neoen acquired a further 80% stake in Centrale Solaire Corbas 2, bringing its interest in this company to 100%.

Bulgana

The Group acquired Neven Wind HoldCo 1, holding the Bulgana wind farm project in Australia.

FieldFare

Neoen acquired Argentina's FieldFare2, holding the La Puna solar project.

The above acquired entities have been accounted for as asset purchases and included in intangible assets (note 10). The purchase price of these projects less cash and cash equivalents acquired is €7.7 million.

GenSun

The Group sold its stake in GenSun on 10 February 2017 (note 18). The sale price less cash and cash equivalents transferred is €2.3 million.

Business development

As part of its development, Neoen frequently creates new companies.

NOTES TO THE INCOME STATEMENT

1. Revenue

Revenue breaks down as follows:

The significant increase in revenue from the production of wind power sterns mostly from the commissioning in 2017 of two further tranches of the Hornsdale project in Australia with a total capacity of 214 MW, and of the Vallée aux Grillons and Osière projects in France representing a total capacity of 25 MW.

The increase in revenue from the production of photovoltaic electricity primarily reflects the commissioning of the 100.8 MW Providencia plants in El Salvador.

The decrease in revenue from the production of biomass electricity is attributable to the Commentry biomass facility, where production was stopped for several months owing to technical incidents.

The "Sales of electricity - storage" line reflects Neoen's commissioning of the world's largest lithium-ion battery supplied by Tesla at Hornsdale in Australia in December 2017 (100 MW).

Other income mostly comprises sales of green certificates in Australia.

2. Purchases of goods

Purchases of goods in 2017 correspond to purchases of wood to operate the Commentry biomass plant.

3. External charges and payroll costs

These expenses are mainly composed of production asset operating expenses (rent, insurance, maintenance, etc.) and other expenses which are not directly allocated to projects.

The increase in maintenance and repairs is due to the increase in the number of plants in operation.

Other external charges include:

The increase in payroll costs is in line with the growth in staff numbers, which increased to a full-time equivalent of 134 at 31 December 2017 from 111 one year earlier.

4. Other recurring operating income and expenses

Other operating income and expenses break down as follows:

Other recurring operating income mainly consists of compensation for loss in revenue following the delayed commissioning of the Parkes, Griffith and Dubbo projects in Australia, as well as amortisation of the non-refundable portion of the grant received in connection with the DeGrussa project.

5. Recurring operating depreciation, amortisation and provisions

The increase in the depreciation/amortisation of production assets is primarily due to plants commissioned since 2016.

6. Other non-recurring income and expenses

Capitalised development costs which the Group no longer considers meet the criteria for capitalisation set out in IAS 38 owing to new circumstances, are reclassified in other non-recurring operating expenses in the period.

In 2017, the Group sold GenSun. In 2016, the Group sold three rooftop solar plants, the Alizay biomass project and its stake in Neoen Marine. The Group streamlined its project portfolio by selling smaller solar facilities and its offshore wind farm activities. The Group's business model is to operate the plants it develops over the long term and not to sell them.

In 2017, other income and expenses mainly comprise penalties charged by Adisseo following incidents at the Commentry plant during the period. In 2016, in addition to the penalties already charged by Adisseo, the Group charged Areva penalties in connection with the construction of the Commentry biomass project.

Non-recurring operating depreciation, amortisation and provisions reflect net impairment of development costs for €1.5 million, along with the impairment of studies relating to offshore wind development activities for €1.5 million.

7. Net financial expense

The net financial expense mainly corresponds to interest charges on loans granted to finance production assets and on corporate loans.

The increase in the cost of debt reflects the increase in the number of plants financed. Interest charges on corporate loans represent €1.3 million.

Other financial income and expenses mostly comprise fees on deposits and guarantees as well as fees relating to refinancing. The changes in this caption result from charges in the fair value of a derivative (+€3.3 million) considered to be an ineffective hedge. This derivative is now accounted for as a hedging Instrument with changes in fair value recognised in equity (reserves).

8. Income tax

Income tax expense breaks down as follows:

The actual income tax expense can be reconciled to the theoretical tax expense as follows:

In 2017, other income tax expenses mainly comprise a provision reversal following the overstatement of the income tax expense in 2016.

9. Goodwill

2016 goodwill was allocated to the property, plant and equipment of the projects to which it relates.

10. Intangible assets

Development costs

In 2017, the Group capitalised expenses directly attributable to the development of projects for a total amount of €18.3 million.

Previously capitalised development costs were taken to income after the corresponding projects were discontinued or sold. The related expenses represent €3.3 million. An impairment lass had been recognised against these projects in previous periods for €2.2 million.

Impairment of €3.7 million was recognised against capitalised development costs after external factors outside the Company% control decreased the probability that the projects would be successful.

The "Capitalised development costs - Studies" line amounting to €29.7 million includes €11.5 million in capitalised costs relating to projects for which pricing has been secured.

Other intangible assets

Other intangible assets include:

11. Property, plant and equipment

Production assets in-progress

Acquisitions in the period mainly concern plants under construction in 2017 and in particular:

Property, plant and equipment relating to plants that came into operation in 2017 were reclassified in production assets.

Production assets

Acquisitions in the period relate male to the Hornsdale Power Reserve project (€56 million), which was built and commissioned in 2017.

Other property, plant and equipment

These correspond primarily to land owned.

Interest capitalised in 2017 and 2016 totalled €9.5 million and €5.6 million, respectively.

Following the stoppage of production at the Commentry biomass plan( which resumed operations in late 2017, the Group carried out an impairment test. Based an the results of the impairment test, the recoverable amount remains higher than the carrying amount of the project.

The table below shows cash flows relating to the acquisition of intangible assets and property, plant and equipment:

12. Investments in associates and joint ventures

Changes in investments in associates and joint ventures are as follows:

In 2016, the €6,4 million recorded under "Change in consolidation method" solely concerns the Seixal project, which is now equity-accounted and no longer fully consolidated as in previous periods. Cash and cash equivalents at the date of the change in consolidation method amounted to €1.9 million.

In 2017, this project paid dividends to its two shareholders.

13. Non-current financial assets

Security deposits

Security deposits are linked to:

The increase in security deposits in 2017 relates mainly to the debt service reserve accounts (DSRA) set up for projects in Australia and El Salvador.

Non-consolidated investments

Non-consolidated investments comprise residual minority interests in the Cestas projects holding companies. They are measured at fair value, i.e., at the price of the last transaction when the Group disposed of its controlling interests at the end of 2014.

Loans due in more than one year

The development and construction of plants of companies not fully consolidated by the Group are financed through shareholder loans. As part of refinancing arrangements, the plants in which the Group holds a non-controlling interest (Cestas and Seixal) repaid a portion of their shareholder loans representing €8.8 million.

14. Inventories

Studies

Studies relating to the development of offshore wind operations for €1.5 million were impaired in full during the period.

Goods

The Group purchased wood and built up inventories to supply the Commentry biomass plant.

15. Trade accounts receivable

The Group sells most of the electricity produced under framework agreements with a purchase obligation (the conditions of which are specified in decrees or tender regulations).

Receivables recognised at the reporting date primarily correspond to invoices of electricity sales not yet due and to green certificates.

The increase in this caption chiefly reflects the growth in the number of plants in operation.

Given the quality of the signing parties to the electricity sales agreements, the Group considers that counterparty risk related to accounts receivable is minimal. There were no material overdue trade receivables on the balance sheet at 31 December 2017 or 31 December 2016.

16. Other current assets

Other current assets break down as follows:

At 31 December 2017, tax and employee-related receivables essentially comprise recoverable VAT on fixed asset invoices relating to the construction of the Osière and Vallée aux Grillons plants in France, and the Parkes, Coleambally and Griffith plants in Australia.

The amounts shown for trade accounts payable in debit correspond to advance payments or late delivery penalties with fixed asset suppliers.

In some specific cases, the Group is required to pay in advance for services providing access rights to land or electricity and steam networks in the operational phase, which leads to the recognition of prepaid expenses.

Other debtors mainly include escrow accounts set up as part of financing agreements and used for payment of invoices related to the construction of power plants, as well as collateral for currency and interest rate hedging for the Hornsdale III project, repaid in 2017.

17. Cash and cash equivalents

Cash and cash equivalents amounting to €260 million mainly comprise amounts drawn an the green bond (€95.9 million) ahead of Investments in new projects (see subsequent events), amounts drawn an senior debt (€76.3 million) to pay investment invoices in the context of projects, and cash resources held by Neoen SAS.

Short-term investments by the Group are entirely liquid and are risk-free.

18. Non-current assets or disposal groups held for sale

At 31 December 2016, non-current assets or disposal groups held for sale, recognised in accordance with IFRS 5, related to the industrial operations of the GenSun group. These companies were sold in 2017. The industrial business was shown as follows at 31 December 2016:

The classification of non-current assets or disposal groups held for sale and discontinued operations breaks down as follows:

19. Equity

Movements affecting the Neoen Group's equity in 2016 and 2017 are detailed in the consolidated statement of changes in shareholder's equity. At 31 December 2017, the fully paid-up share capital comprised 107,964,140 shares each with a par value of €1.

The Group owns 10,000 treasury shares.

In 2017, the parent company carried out capital increases for €3.1 million (including €2 million in capital and €1.1 million in share premiums).

During the period, non-controlling interests carried out capital increases in fully consolidated projects for €8.4 million.

Share capital, reserves and share premiums

At 31 December 2017, the fully paid-up share capital comprised 107,964,140 shares each with a par value of €1 The Group owns 10,000 treasury shares.

Changes in the Group's equity during the period are set out below:

Share subscription option plan

In 2017, the Chairman granted 1,800,410 share subscription options with a strike price of €3. The vesting period is three years and the plans will expire five years from the grant date.

The fair value of the share subscription option plan granted in 2017 is €968 thousand. This amount is recognised as an expense over the vesting period through a corresponding increase in equity. An expense of €230 thousand was recognised in the 2017 income statement in this respect.

The Group based the value of these plans on the following assumptions:

Free share plan

On 23 December 2016, following the authorisation of the Appointments and Remuneration Committee meeting of 20 December 2016 and the General Shareholders' Meeting of 23 December 2016, the Chairman decided to grant 217,175 free shares each with a par value of €1 to employees of the Group. The free shares vest at the end of a vesting period of at least one year and only if the conditions set by the Chairman in the plan are met.

Non-controlling interests

20. Provisions

Provision movements break down as follows:

Other movements mostly relate to the provision for dismantling obligations recognised against production assets in Operation.

This provision totals €4.8 million at 31 December 2017.

21. Borrowings

In 2017, total debt was €1,403 million, an increase of €579 million on end 2016.

a. Analysis by type

Bank loans - financing of production assets

The Group finances a significant portion of its Investments through long-term debt without recourse to the parent company ("Project Finance"). In 2017, new financing of this type concerned the HWF3, Osière, Vallée aux Grillons and Champs d'Amour wind farms, as well as the Parkes, Griffith and Dubbo solar plants.

Bond financing of projects - non-current

In December, Neoen issued a €245 million "green band' in three currencies (EUR, AUD and USD) to finance 42 projects in different countries generating 1.6 GW. The financing for the green band was set up on 14 December with AMP Capital. Amounts drawn on this bond in 2017 totalled €144.9 million.

Minority investors and other

Other borrowings consist mainly of the shareholder loans held by Neoen SAS and shareholder loans held by minority investors in Biomasse de Commentry.

Corporate financing - current

The Group has access to several short-term bank credit lines.

b. Breakdown of borrowings by interest rate

Borrowings break down by interest rate as follows:

In principle, project financing at floating interest rates is generally hedged for at least 75% of the total amount. Hedging instruments are measured at fair value.

c. Breakdown of borrowing repayments by maturity

The breakdown by maturity of total undiscounted borrowing repayments (including principal repayments and the payment of accrued interest) is as follows:

d. Breakdown of movements in borrowings

Other changes reflect the recognition of a liability against a lang-term right to use a network in Australia for €7.4 million and the reclassification from assets of a derivative financial instrument for €0.2 million.

22. Derivative financial instruments

To hedge against changes in interest rates on loans contracted to finance its production plants, Neoen uses interest rate swaps (see note 28.a). At 31 December 2017, cash flow hedge accounting was applied to these derivatives. Interest flows related to these interest rate swaps will be recognised in income over the term of the financing in line with interest expenses on the hedged loan.

In 2017, a loss of €4.5 million was recognised in other comprehensive income in respect of changes in fair value of cash flow hedging derivatives, and an amount of €4.1 million was reclassified to income.

23. Deferred tax

The table below shows the origin of deferred tax assets and liabilities an the balance sheet:

The change in deferred tax breaks down as follows:

Tax loss carryforwards generated in 2017 for which a deferred tax asset was not recognised amount to €7 million.

24. Trade accounts payable

Trade accounts payable break down as follows:

The "Payable to fixed asset suppliers" line corresponds to invoices not yet due which were received at the end of the period for projects under construction.

25. Other current liabilities

a. Tax and employee-related liabilities

Tax liabilities consist mainly of VAT liabilities an invoices issued at the end of the year.

Employee-related liabilities correspond mostly to provisions for bonuses, annual leave and the corresponding social security charges.

b. Other current liabilities

Deferred income consists mainly of Investment grants received from ARENA for the DeGrussa, Parkes, Griffith and Dubbo Solar Hub projects in Australia. These grants are recognised over the term of the corresponding project.

Other liabilities mainly relate to earn-out payments on acquisitions of intangible assets (see note 10).

c. Working capital

Working capital as shown in the cash flow statement breaks down as follows:

26. Financial assets and liabilities measured at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined based an observable market data providing the most reliable evidence of a financial instrument's fair value.

For swaps and loans, fair value is determined based an contractual cash flows discounted at market interest rates. The fair value of trade accounts payable and trade accounts receivable corresponds to the balance sheet carrying amount, as the impact of discounting Future cash flows is not material.

The tables below present by category the Group's assets and liabilities measured at fair value, pursuant to the amendment to IFRS 7, Financial Instruments: Disclosures.

Classification levels under the fair value hierarchy are as follows:

ADDITIONAL NOTES TO THE FINANCIAL STATEMENTS

27. Segment reporting

Following the sale of the GenSun group, Neoen no longer has an "Industrie" segment.

28. Risk management

a. Interest rate risk

The Neoen Group is exposed to market risks through its investing activities. This exposure is mainly related to fluctuations in interest rates an its project-related debt.

Interest rate risk is hedged using over-the counter Instruments contracted with leading counterparties.

The Group's risk management policy aims to line and manage fluctuations in interest rates and their impact an the income statement and future cash flows.

b. Foreign exchange risk

Foreign exchange risk arises an operating transactions in foreign currencies which are increasing as the Group continues to expand internationally. To mitigate any foreign exchange risk an its operating assets, the Group always finances its assets in its functional currency.

c. Counterparty risk

Given the large number of suppliers and subcontractors with which it does business, counterparty insolvency would not have a material impact on the Group's operations.

Given the quality of the signing parties to electricity sales agreements, the Group considers that the counterparty risk related to its trade accounts receivable is not material.

The Neoen Group invests its cash and cash equivalents and enters into interest rate agreements with leading financial institutions.

d. Liquidity risk

At 31 December 2017 and 31 December 2016, the Group's liquidity position is as follows:

The difference compared to note 17 reflects bank facilities totalling €0.3 million.

e. Risks related to regulatory changes

Since the Group sells electricity under agreements in which prices are regulated by the countries in which the Group operates, it is exposed to the risk of regulatory changes. As such, any changes in energy pricing are likely to have a material impact an the Group's financial statements.

However, Neoen's multi-sector and multi-country strategy minimises this risk by reducing the Group's exposure to a particular technology or country.

29. Off-Balance sheet commitments

a. Off-balance sheet commitments given

Commitments given in connection with financing activities

Guarantees given to suppliers

The Group may give guarantees to its suppliers in connection with the construction of its production assets.

Leases

These consist mainly of leases signed in the context of projects.

Other commitments given

In the context of operating its production assets, the Group enters into maintenance agreements that may span several years. The related services are expensed in the year in which they are provided.

Commitments given in connection with financing activities

Assets pledged as collateral

The Group may pledge shares and advances an shareholder loans in connection with borrowings taken out to finance its projects. Some assets are also pledged as collateral to guarantee the repayment of bank borrowings.

b. Off-Balance sheet commitments received

Commitments received in connection with operating activities

Energy purchase commitments received

In most cases when an electricity production unit is built, the company carrying the project and which will operate the plant enters into a long-term energy supply contract. The Group receives purchase commitments for periods of 15 to 20 years. Commitments are measured based on production volumes estimated by the Group over the term of the purchase agreement and on sales prices excluding inflation.

Commitments received in connection with financing activities

Credit lines granted for projects

At 31 December 2017, the Group had received commitments to finance its projects and operations for an amount of €215.8 million, which remained undrawn.

Corporate credit lines granted

The Group holds short-term credit lines for its own needs.

30. Related parties

Neoen carried out transactions with Impala, its subsidiary Eiffel Investissement group and BPI France, which have been identified as related parties for the Group.

Expenses relating to related parties primarily concern management fees, rent invoiced in respect of the Company's head office, and interest on guarantees granted. Amounts payable to related parties reflect financing.

Neoen's financial statements are fully consolidated in the financial statements of Impala, which owns 54.77% of its share capital. Transactions with Impala and its subsidiaries or BPI France were carried out at arm's length.

Related party transactions broke down as follows in 2017 and 2016:

31. Executive remuneration

Executives are the members of the Group's Management Committee.

32. Subsequent events

Bulgana project: financial close and launch of construction work

The Bulgana project consists of a 194 MW wind farm and a 20 MW battery. The battery will supply electricity to greenhouses to be built by Australia's Nectar Farms. The rest of the output will be sold to the government of the state of Victoria as part of a 15-year PPA.

The total cost of the project is estimated at AUD 350 million. In addition to Neoen's own funds, it will be financed through a long-term project loan from KfW IPEX-Bank, Société Générale (SocGen) and KDB (Korea Development Bank).

Construction work launched in France

In the first quarter of 2018, construction work began on the Lugos (11.9 MW) and Bram (4.8 MW) solar projects awarded during the CRE 3 call for tenders, and on Cap Decouverte 4 bis (5 MW), the project awarded during the CRE 4.1 tendering process.

In February 2018, construction work began on the 16 MW wind farm project Auxois Sud II.

Commissioning

In Australia, operations began at the Griffith (35.9 MW) and Parkes (65.9 MW) solar farms in April 2018.

In France, the 8.8 MW Champs d'Amour wind farm began operating in January 2018.

33. Consolidation scope

Neoen Jules GmbH (formerly Neoen Phoenix GmbH) and Neoen Mistral Gmbh - facilitation of disclosures pursuant to Article 264, paragraph 3, of the German Commercial Code (HGB).

In 2017, Neoen Jules GmbH and Neoen Mistral Gmbh availed themselves of the exemption clause set out in Article 264, paragraph 3, of the German Commercial Code (HGB) concerning the preparation of notes to financial statements and a management report and the publication of annual financial statements.

Gesellschafterversammlung/Shareholders' meeting

der/of the NEOEN Jules GmbH, Feldmannstraße 121, 66119 Saarbrücken
vertreten durch/represented by Xavier Barbaro

Beschluss/Decision

Gesellschafterversammlung/Shareholders' meeting

der/of the NEOEN Mistral GmbH, Feldmannstraße 121, 66119 Saarbrücken
vertreten durch/represented by Xavier Barbaro

Beschluss/Decision