Cuentas anuales consolidadas e informe de gestión consolidado del Grupo Audax Renovables, correspondientes al ejercicio cerrado a 31 de diciembre de 2025

The consolidated annual accounts of the Audax Renovables Group for the year 2025 have been drawn up by the Directors of the Parent Company in accordance with the International Financial Reporting Standards adopted by the European Union (IFRS-EU), as per the Regulations (CE) nº 1606/2002 of the European Parliament and the Council. All the accounting principles and standards and the mandatory valuation criteria, along with the Commercial Code, the Spanish Companies Act, the Stock Exchange Market Law and any other applicable commercial legislation have also been taken into consideration. The Group adopted the IFRS-EU on 31 December 2016 and applied on that date the IFRS 1 "First-time Adoption of International Financial Reporting Standards".

The consolidated annual accounts of the Audax Renovables Group have been drawn up on the basis of the financial statements of Audax Renovables, S.A. and of the companies belonging to the Group. Each company draws up its financial statements in compliance with the accounting principles of the country where it operates. The adjustments and reclassifications, which were necessary to harmonise the principles and criteria and put them in line with the IFRS-EU, have been carried out during the consolidation process. Furthermore, the accounting policies have been modified for the consolidated companies, when necessary, in order to ensure the consistency with the accounting policies adopted by the Audax Renovables Group.

The accounting policies applied for the preparation of the consolidated annual accounts coincide with those used and described in the Consolidated Annual Accounts for the year ended on 31 December 2024, except for the new IFRS-EU standards and interpretations applied from 1 January 2025.

The information set out in these consolidated annual accounts is the responsibility of the Directors of the Parent Company.

Upon their approval and publication, the following new standards, amendments and interpretations have been adopted by the European Union:

Standards adopted by the European Union

Entry into force for the fiscal years beginning

on

Amendments to IAS 21: Lack of Exchangeability

Specifies when a currency is exchangeable into another and how an entity estimates a spot rate for currencies that lack exchangeability.

01 January 2025

Amendments to IFRS 7 and IFRS 9 Classification and Measurement of Financial Instruments

Clarifies the criteria for derecognition of financial liabilities settled via electronic payment, the criteria for classification of certain financial assets, and introduces new additional disclosure requirements.

01 January 2026

Nature-dependent Electricity Contracts - Amendments to IFRS 9 and IFRS 7

In order to enable the entities to improve their disclosure of nature-dependent electricity contracts, which often are structured as Power Purchase Agreements (PPA) in their financial statements, specific amendments have been introduced to the IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures.

01 January 2026

Annual Improvements Volume 11 The purpose of these improvements is

to obtain better quality of the standards, including clarifications, simplifications, corrections and changes aimed at improving the consistency of several accounting standards.

Standards NOT adopted by the European Union (as at the date of this document)

01 January 2026

IFRS 18 Presentation and disclosure in financial statements

IFRS 19 Subsidiaries without Public Accountability

Amendments to IFRS 19 Disclosures of Subsidiaries without Public Accountability

Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Translation to a Hyperinflationary Presentation Currency

New requirements are established for the presentation and disclosure in financial statements, replacing the currently applicable IAS 1.

Specifies the disclosures, which a subsidiary may opt to apply in its financial statements.

With these amendments IFRS 19 reflects the changes in the IFRS, which shall enter into force on 1 January 2027, the date as of which IFRS 19 will become applicable.

These amendments clarify how the companies shall translate their financial statements from a hyperinflationary currency to a non-hyperinflationary currency.

16 February 2026

01 January 2027

01 January 2027

01 January 2027

The consolidated financial statements are presented in euros, which is the presentation currency of the Parent Company. The accounts included in the consolidated financial statements of each of the Group companies are measured using the currency of the main economic environment in which the company operates (functional currency) and are translated to the presentation currency of the group according to the rules outlined in Note 2.6 "Transactions in foreign currency". The Audax Group does not have

investments in entities with functional currencies without exchangeability to the presentation currency, the euro, therefore there was no impact of the amendment to IAS 21.

None of the standards, interpretations and amendments, which enter into force in the next years, has been applied early. As at the date of formulation of these consolidated financial statements the possible impacts are being analysed. The Audax Group is evaluating the impacts, which the application would have on its financial information, basically because of the changes established in IFRS 18 in the classification of the accounts of the income statement, distinguishing the operating activities from the investment activities and the financing activities and the changes in the application of hedge accounting in the long-term electricity sales contracts, where the plants sell their production to the market and, later on, there is the financial settlement for the difference between the market price and the price established in the contract.

The changes in hedge accounting of the long-term electricity sales contracts will allow to avoid the impact of inefficiencies created by the difficulty in establishing the highly probable sales in the renewable generation facilities. These amendments shall be applied prospectively, allowing to rectify the existing designations (without discontinuance) for the years following 1 January 2026, as Audax has not opted for early application of this standard amendment.

The consolidated annual accounts present fairly the consolidated net equity and the consolidated financial position of the Audax Renovables Group at 31 December 2025, and the consolidated results of its operations, the changes in the consolidated statement of comprehensive income, changes in consolidated net equity and consolidated cash flows that have taken place in the Audax Renovables Group in the year then ended.

The information set out in these consolidated annual accounts is the responsibility of the Directors of the Parent Company, Audax Renovables, S.A.

The Consolidated annual accounts have been prepared according to the principle of historical cost, with the exception of derivative financial instruments, financial assets at fair value with changes in comprehensive income and financial assets at fair value with changes in other comprehensive income.

The consolidated annual accounts present, for comparative purposes, with each heading of the consolidated balance sheet, the consolidated income statement, the consolidated statement of changes in net equity, the consolidated statement of cash flows, and of the notes to the consolidated annual accounts, together with the figures for the year 2025, the figures for the previous year, which were included in consolidated annual accounts for the year 2024 and which were approved by the General Meeting of Shareholders of 19 June 2025.

So as to determine the information that needs to be broken down in the consolidated notes for each of the different accounting items, the Group has considered its relative importance in relation to the current consolidated annual accounts for the year 2025 and 2024.

1. Consolidation methods

   The consolidated companies are listed in Appendix I to these consolidated annual accounts. In its consolidation the Group has applied the full consolidation method to the subsidiary companies and the equity method to its associates and joint ventures.

   • Full consolidation method Subsidiary Companies:

     Subsidiary companies are consolidated beginning on the date of the transfer of control, and are excluded from consolidation on the date from which the control is no longer exercised. Audax is considered to exercise control over an entity when it has direct or indirect power over the subsidiary, is exposed to its variable income, or has the rights which allow it to manage important activities of the subsidiary.

     The subsidiary companies have been fully consolidated, and all their assets, liabilities, income, expenses and cash flows have been integrated in the consolidated annual accounts after making the respective adjustments and de-recognitions for intra-group operations. Appendix I sets out the list of companies consolidated by this method.

     The consolidation process eliminates the transactions, balances and unrealised gains between Group companies. The unrealised losses are eliminated, unless the transactions provide proof of an impairment loss of the asset transferred.

     The acquisition method is used to book the acquisition of subsidiaries. The cost of acquisition is the fair value of the assets handed over, the net equity instruments issued and the liabilities incurred or assumed on the swap date. Any contingent consideration to be transferred by the Group is recognised at its fair value at the acquisition date. Subsequent variations to the fair value of contingent consideration which are considered to be an asset or liability are recognised in accordance with IFRS 9 in net income or as a change in other global net income. Any contingent consideration which is classified as net equity is not revalued and its subsequent payment is booked in net equity. The costs directly attributable to the acquisition are booked directly in the income statement.

     The results of subsidiary companies acquired or sold during the year are integrated into consolidated profit or loss, respectively, from and to the effective date of the transaction.

     Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair value at the acquisition date. For each business combination, the Group may opt to recognise any non-controlling interest in the acquired company at its fair value or at the proportional part of the recognised amounts of the subsidiary's identifiable net assets corresponding to the non-controlling interest.

     The participation of third parties in net equity and the net income of the group companies is presented under "Non-controlling interests" on the consolidated balance sheet and under "Net income attributable to non-controlling interest" in the consolidated income statement. In the case of acquisition of minority interests, the overprice paid in relation to the net book value is recognised directly in net equity.

     Transactions with non-controlling interests which do not result in a loss of control are recognised as net equity transactions, i.e. as transactions with the owners in their capacity as owners. The difference between the fair value of the amount paid and the corresponding acquired proportion of the book value of the subsidiary's net assets is recorded in net equity. Gains or losses from disposals of non-controlling interests are also recorded in net equity.

     In order to account for an acquisition of assets which does not meet the definition of a business combination under IFRS 3, an analysis is carried out for the purpose of finding out whether the integrated set of acquired activities and assets constitutes a business. In order to be considered as such, it is necessary that it should contain at least one input and one substantial process which, together, contribute significantly to the capacity of manufacturing goods.

     - Equity accounting method Associated companies

     The equity accounting method has been used to consolidate the associates. These are companies in which the Group usually has a direct or indirect stake of between 20% and 50% of share capital.

     A significant influence is understood to exist when the Group has a stake in the associate and can intervene in the decisions regarding the associate's financial and operating policies but does not exercise control or joint control.

     Investments in associates are recorded using equity accounting method. The share in the gains or losses after the acquisition of an associate is recognised in the consolidated income statement and the share in the net equity movements after acquisition is recognised in reserves.

     If the stake in an associate is reduced but a significant influence on its management is maintained, only the stake in proportion to the amounts previously recognised in other global net income are reclassified to net income when this is appropriate.

     Dilution gains and losses generated in investments in associates are recognised in the consolidated income statement.

     An investor will stop applying the equity accounting method from the date on which it stops having a significant influence on an associate's management. If a significant influence on the associate's management is lost, the investor will value the investment which it holds in the former associate at fair value.

     The determination of the existence of control in certain transactions of purchase of investee companies requires occasionally that certain relevant criteria and judgments be applied.

2. Changes in the consolidation scope and business combinations

   Appendix I includes the companies in which Audax Renovables, S.A. has a direct or indirect shareholding, and which have been included in the consolidation scope as at 31 December 2025 and 2024.

   Below there is a specification of the main transactions carried out which involved significant changes in the consolidation scope:

   • Transactions in the year 2025:

     On 10 January 2025 the company Unieléctrica Energía, S.A. Acquired the remaining 75.1% of shares of the company Alcanzia Energía, S.L. for the amount of EUR 1, and thus became the sole shareholder of the Company and a member of the Audax Group. Alcanzia Energía, S.L. is a Spanish company engaged in electricity and gas retailing, with household and business clients in Spain. The Group estimates that this transaction meets the requirements to be considered a business combination (IFRS 3).

     The information on the business combination cost, fair value of the acquired net assets and of the excess of acquired net assets over the combination cost is as follows:

     EUR thousand

     Cost of business combination -

     Amount paid -

     Fair value of acquired net assets (17,493)

     Goodwill (17,493)

     Although the Group purchased the shares at €1, the Group had granted loans to that company for the amount of EUR 24,216 thousand. As a consequence of the integration of Alcanzia Energía S.L. into the Group, the account of other non-current financial assets is reduced by the amount of these loans.

     The following table shows the amounts of the assets and liabilities recognised at fair value at the date of the business combination and previous carrying amounts:

     	Book value at takeover	Fair value at takeover
     Intangible assets	13	6,077
     Tangible assets	22	26
     Other non-current financial assets	1,510	3,524
     Deferred tax assets	-	3,416
     Trade and other receivables	2,680	2,676
     Cash and equivalents	1,204	1,204
     Total assets	5,429	16,923
     Non-current liabilities	226	226
     Deferred tax liabilities	-	2,020
     Current liabilities	26,674	26,674
     Trade and other payables	5,496	5,496
     Total liabilities	32,396	34,416
     Total acquired net assets	(26,967)	(17,493)

     In accordance with the provisions of IFRS 3 the Group shall measure the final effect of a business combination within a period of twelve months. As at the date of formulation of these financial statements, the allocation process is considered definitive, coinciding with the allocation carried out as at 31 December 2025.

     The most important factors that led to the recognition of consolidation goodwill were the expected synergies from the combination of business operations, which were integrated in the transaction, new opportunities of growth arising from that transaction and the workforce. The goodwill recognised as a consequence of the transaction is not tax-deductible.

     Due to the acquisition date (January 2025), the Group has integrated the entirety of the income and revenue for the year with regard to this company. The sales figure, which this Company has integrated into the Group, amounts to EUR 27,177 thousand, at the same time that the company individually obtained a profit of EUR 63 thousand.

     On 23 January 2025 Unieléctrica acquires also from a third party the remaining 25% of shares of Masqluz 2020, S.L., thus becoming also the sole shareholder. This transaction involved a decrease of the Non-controlling Interests of EUR 1,090 thousand and a negative impact on reserves of EUR 1,353 thousand.

     On 26 March 2025 the Dutch company Audax Renewables Nederland B.V. set up a company named Audax Energy Trade Nederland, B.V., also engaged in energy retailing.

     On 19 May 2025 Audax Renovables, S.A. set up a company named Power Telco Services, SL., engaged in telecommunications.

     On 26 May 2025 Audax Renovables, S.A. acquired 100% of shares of the company Limago Energía Solar, S.L. from the company Excelsior Times, S.L. Limago Energía Solar, S.L., in its turn, is the owner of 100% of shares of the company SPG Gestora Yechar, S.L., which is engaged in photovoltaic energy generation. As a consequence of this acquisition, SPG Gestora Yechar, S.L also becomes part of the Audax Group. The total amount payable for this transaction is EUR 17,149 thousand, including the price paid for the shares in the amount of EUR 7,599 thousand as well as the acquisition of debts and borrowings of these companies.

     Due to the type of the transaction and of the acquired company, this operation has not been considered as a business combination, because of not meeting the requirements of IFRS 3 for that purpose. Instead, they were registered as asset acquisition transactions.

     On 30 June 2025 an official document was signed, by which a merger by absorption was approved between Eryx Investment 2017, S.L. (acquired company) and Audax Renovables, S.A. (acquiring company). Since 100% of the shares of the acquired company were owned by the acquiring company, the transaction did not have any impact on the consolidated financial statements. The main activity of Eryx Investment 2017, S.L. involved the shareholding of other companies, and it was the owner of 100% of shares of Unieléctrica Energía S.L.

     Appendix I includes the companies in which Audax Renovables, S.A. has a direct or indirect shareholding, and which were included in the consolidation scope as at 31 December 2025.

     The changes in the consolidation scope explained in this section shall be taken into account for the purpose of comparability of the consolidated financial statements.

   • Transactions in the year 2024:

     On 29 April 2024 an official document was signed, by which a merger by absorption was approved between Generación Ibérica, S.L. (acquired company) and Audax Renovables, S.A. (acquiring company). Since 100% of the shares of the acquired company were owned by the acquiring company, the transaction did not have any significant impact on the consolidated financial statements. The main objects of Generación Ibérica, S.L. involve representation in the energy markets.

     On 9 July 2024 Audax Renovables acquired 100% of shares of the company Figurafi Power, S.L. for the total amount of EUR 4,373 thousand from third company Idena Solar, S.L. The main object of the acquired company involves development, construction and operation of photovoltaic power generation projects. The Group considered that the transaction did not fall under the IFRS-3 requirements to be classified as a business combination and recognised it as asset acquisition.

     On 10 October 2024 Unieléctrica Energía, S.L., a company of the Group, acquired 24.9% of shares of the company Alcanzia Energía, S.L. for the amount of EUR 1. The objects of the acquired company involve retail of electricity.

     On 30 December 2024 the Group began the process of dissolving and liquidating a Spanish company named Explotación Eólica La Pedrera, S.L.U., whose objects involved the development of a wind farm. Since the Group had already made provisions for the investments involved in this project in previous years, and considering the tax recovery of a part of the investment in this project, the Group recorded a corporate income tax gain of EUR 1,061 thousand.

     Lastly, during the year 2024 an agreement was signed adjusting upwards the price of acquisition of the non-controlling share of the company Audax Renewables Netherlands B.V. for the amount of EUR 3,000 thousand; this increase of the acquisition price was recorded in equity in the Other Reserves account.

     Appendix I features a list of the companies in which Audax Renovables, S.A. had a direct or indirect shareholding, and which were included in the consolidation scope as at 31 December 2024.

3. Homogenisation of the accounts of the companies in the consolidation scope.

The criteria applied in the homogenisation have been as follows:

• Temporary homogenisation: all the accounts of the companies in the consolidation scope are referred to as at 31 December 2025 and 2024.

• Measurement homogenisation: the measurement criteria applied by the subsidiary companies to the assets, liabilities, income and expenses coincide basically with the criteria applied by the Parent Company.

• Homogenisation for internal transactions: the amounts of the items resulting from internal transactions which do not coincide, as well as any unrecorded items, shall be identified at the level of each company of the group and adjusted accordingly to the consolidation level in order to carry out the relevant adjustments and removals.

• Aggregation homogenisation: for consolidation purposes, the necessary reclassifications have been made to adapt the structures of the subsidiary companies accounts to that of the Parent Company and to IFRS-EU.

The assets included in intangible assets are measured at cost, which may be the acquisition price or the production cost, less the relevant accumulated amortisation (calculated based on its useful life) and possible impairment losses, if applicable.

The depreciable amount of an intangible asset of limited useful life is distributed on a regular basis throughout its useful life. The amortisation charge of each period is recognised in the profit or loss for the year.

1. Goodwill

   Goodwill represents the surplus, on the acquisition date, of the costs of the business combination over the fair value of the share in the net identifiable assets of the acquired company. The goodwill related to the acquisitions of subsidiaries is included under intangible assets and that related to acquisitions of associates is included under investments consolidated by equity accounting.

   The goodwill is only recognised when it was acquired against payment and corresponds to the future economic profits arising from the assets which could not be identified individually and recognised separately.

   Prior to the entry into force of the International Financial Reporting Standards, and as per IFRS 1, goodwill arising from the acquisitions before 1 January 2004 was recorded in the amount recognised as such in the consolidated annual accounts at 31 December 2003 prepared under Spanish accounting principles.

   Any goodwill coming from the acquisition of a company whose functional currency is not the Euro, will be valued in that distinct currency. The Euro conversion will take place on the balance sheet date.

   Apart from investigating the existence of any impairment sign, the goodwill and intangible assets are examined at least annually for the purpose of discovering any loss due to impairment.

   In order to analyse its recoverability, the goodwill is assigned to those cash-generating units (or groups of cash-generating units) which are benefited by the synergies of the business combination.

2. Computer software

   Computer software purchased and developed by the company itself, including the cost of the development of websites, is recognised correspondingly to the fulfilment of the conditions established for the development expenses. The maintenance cost of computer software is expensed as incurred.

   Licenses for computer software acquired from third parties are capitalised on the basis of the costs incurred to acquire and prepare them for a specific program use.

   The Group reviews the residual value, the useful life and the depreciation method of the intangible assets at the end of each year. The changes to the initially established criteria are recognised as a change in the accounting estimate.

   The expenses related to the maintenance of computer software are recognised as cost when incurred. Cost related directly to the production of unique and identifiable software controlled by the Company, and when it is probable that it will generate economic profit exceeding the cost during more than one year, is recognised as intangible asset. Direct costs include staff costs of software developers and a suitable percentage of general costs.

   These costs are amortised by straight-line amortisation during its estimated useful life.

3. Trademarks and Client portfolio Trademarks

   Trademarks are mainly the ones acquired through business combinations referred to in the previous paragraph. Some trademarks were considered, by the independent expert who carried out its measurement at fair value, to have indefinite useful life, as there is no estimable limit to the period in which the asset will generate cash inflows, whereas others are amortised depending on their estimated useful life, mainly 10 years. In this regard, the main trademarks owned by the Group correspond to the business combination of the company Eryx Investments 2017, S.L. carried out in 2018, which included the trademarks of Unielectrica Energía, S.L. and its subsidiaries.

   Client portfolio

   Client portfolio corresponds primarily to those acquired through business combination in the year 2017 of the company Audax Netherlands B.V., of the company Eryx Investments 2017, S.L. (Unieléctrica Group) during the year 2018, of the company in Hungary in 2020. Moreover, in 2025 a client portfolio was acquired through the business combination of Alcanzia Energia S.L. (Note 2).

   For the purpose of valuation of customer relations, the earnings method (MEEM) was used. The value of the assets is estimated by the sum of future "excess earnings" discounted at present value, less charges for contributory assets.

   These client portfolios are amortised by the straight-line amortisation method during their useful life which is estimated to be between 2 and 12 years and is determined according to the drop ratio based on historical data.

4. Lease right-of-use assets

   In accordance with IFRS 16, the right-of-use assets are recognised on the lease commencement date.

   The cost of the right-of-use asset includes the amount of the measurement at recognition of the lease liability, any lease payment made on or before the commencement date, less the incentives received, the initial direct costs incurred in lease, and the estimated cost to be incurred in dismantling and restoring the asset.

   After the initial recognition, the right-of-use asset is measured at cost less accumulated amortisation and impairment loss. The amortisation of the right-of-use asset begins on the lease commencement date and is carried out over the useful life of the underlying asset or the lease term if the latter is shorter. If the ownership is transferred to the lessee or when it is quite certain that the lessee will exercise the purchase option, the amortisation is recorded over the useful life of the asset.

   The recognition exemption is applied in leases where the underlying asset is of low value (less than EUR 4,000) and short term (lease term of 12 months or less). In these cases, the lease payments are recognised as operating expenses applying the straight-line method over the lease term.

5. Other intangible assets and licences

   The amounts recorded for intangible assets correspond to their acquisition cost less accumulated amortisation, which begins when the asset is available for use, and valuation adjustments due to impairment, if applicable. Primarily, they originate in business combinations measured at fair value.

   These assets arise mainly from measuring at fair value, in business combinations or company acquisitions, certain milestones in the development and implementation of, for example, power generation plants, such as obtaining permits and authorisations granted by official bodies for the construction of a power plant. Own work capitalised (basically staff costs) for property, plant and equipment when the requirements of IAS 38 are met is also included. These intangible assets are amortised on a straight-line basis over the plant's useful life, which begins when the assets are put into operation, and that is when the dismantling or restoring costs, if applicable, begin to be registered.

   The net book value of the intangible assets is tested for possible impairment if certain events or changes indicate that their net book value cannot be recovered. In the case of intangible assets from business combinations possible impairment is measured additionally every year.

6. Business combinations

   The Group accounts for business combinations using the acquisition method when the control is transferred to the Group in accordance with IFRS 3. The acquisition date is the date on which the Group obtains control over the acquired business.

   The cost of the business combination is determined by the aggregation of:

   • The fair value of the transferred assets on the acquisition date, the liabilities incurred or assumed and the equity instruments emitted.

   • The fair value of any of the contingent considerations depends on the future events or the compliance with the predetermined conditions.

     -​

     Costs related with the emission of equity instruments or financial liabilities exchanged for the acquired assets are not part of the combination costs.

     Additionally, fees paid to legal advisors or other professionals that have intervened in the combination, and the expenses generated internally with the same nature, are not considered part of the combination costs. Instead, these costs are directly attributed to the income statement.

     If the business combination is done in different stages, in such a way that before the acquisition date (obtaining the effective control) it already existed an investment, goodwill or the negative difference will be obtained by computing the difference between:

   • The cost of the business combination, plus the fair value on the acquisition date of any previous share of the acquiring company in the acquired company, and

   • The value of the identifiable acquired assets minus the liabilities assumed, determined according to what was indicated previously.

Any profit or loss incurred as a consequence of the valuation at fair value on the date in which effective control is obtained over the shares of the acquired company, will be recognized in the consolidated income statement. If the investment has been valued previously according to its fair value, the valuation adjustments pending to be included in the year's result will be transferred into the income statement. On the other hand, it is presumed that the cost of the business combination is the best reference point to estimate the fair value on the acquisition date of any previously issued share.

If the combination difference happened to be negative, it would be registered in the consolidated income statement as an income.

If at the closing date of the year in which the combination takes place the valuation processes needed to apply the acquisition method described above had not been concluded, this accounting entry would be considered provisional, thus future adjustments on the provisional values would be allowed during the period it took to acquire the required information, which under no circumstances can be more than a year. The effects of the adjustments done during this period will be accounted for retroactively, modifying the comparative information if needed.

The subsequent changes in the fair value of the contingent consideration will be adjusted against results, unless such consideration has been classified as net equity in which case its further changes on fair value will not be recognized.

If after taking the efficient control sales transactions take place or subsidiary shares are bought without losing it, the impact of these transactions without changes in control will be accounted as net equity and will not modify the value of the consolidated goodwill.

Property, plant and equipment are recognised at their acquisition price or cost of production minus their accumulated depreciation and accumulated recognised impairment losses. This account also includes own work capitalised (basically staff costs) for property, plant and equipment when the requirements of its recognition are met.

The provisions for dismantling, existing under contract, which are recorded upon start-up at their current value as an increase of value of the property, plant and equipment with a counter-entry under provisions (Note 13), form part of the fixed assets and are depreciated over the useful life of the power generating plant. Moreover, the provision is updated annually, with charge to the financial expenses. It is considered that the dismantling cost shall be realised at the end of the useful life of the project and its cost has been estimated using internal information as well as analyses prepared by external entities.

The assets related to dismantling or land rehabilitation are registered upon start-up of the power generation plant, which is also when the depreciation begins.

The net financial expenses, and other expenses directly attributable to property, plant and equipment, are included in the acquisition cost until they are brought into use.

The costs of extension, modernisation or improvement of property, plant and equipment are capitalised only when they represent an increase in their capacity, productivity or a lengthening of their useful life, and as long as it is possible to know or estimate the carrying value of the assets that are written off inventories when replaced.

The costs of major repairs are capitalised and depreciated over their estimated useful lives while recurrent maintenance expenses are taken to income statement during the year in which they are incurred.

The depreciation of property, plant and equipment, except for land, which is not depreciated, is calculated on a straight-line basis according to their estimated useful lives, taking into account ordinary wear and tear. The estimated useful lives are as follows:

Depreciation begins at the moment of making operative the element belonging to property, plant and equipment.

The residual value and useful life of assets are reviewed, and adjusted if needed, at each consolidated balance sheet date.

When the book value of an asset is greater than its estimated recoverable value, it is immediately written down to the recoverable value.

The profit and loss on the sale of property, plant and equipment is calculated by comparing the income obtained from the sale against book value and then taken to the income statement.

The Group applies the method of assessing the existence of indications which might imply possible impairment of non-financial assets subject to amortisation or depreciation, in order to verify if the carrying amount of said assets exceeds the recoverable amount.

Moreover, regardless of whether there are any indications of impairment, the Group examines at least once a year the possible impairment that could affect the goodwill and the intangible assets of indefinite useful life, as well as intangible assets that are not yet available for use.

The recoverable amount of an asset is whichever is higher between its fair value less costs of disposal or its value in use. The value in use of an asset is determined according to the future cash flows expected to be derived from the use of the asset, the expectations about possible variations in the amount or timing of those future cash flows, the time value of money, the price for bearing the uncertainty inherent in the asset and other factors that market participants would reflect in pricing the future cash flows related to the asset.

Negative differences resulting from the comparison between the carrying amount and the recoverable amount of the assets are recognised in profit and loss.

The recoverable amount must be calculated for an individual asset, unless the asset does not generate cash inflows which are largely independent of cash inflows from other assets or groups of assets. If this is the case, the recoverable amount is determined for the CGU (Cash-Generating Unit) to which it belongs.

Impairment loss of a CGU initially reduces the goodwill allocated to that CGU and, later on, to the other assets of the CGU pro rata the carrying amount of each one of the assets, with the limit for each one of them of whichever is the higher between its fair value less cost of sale or other disposal, its value in use, and zero.

A CGU may contain a right-of-use asset and a lease liability. In the impairment test a liability is recognised when the recoverable amount of the CGU is determined, if it is supposed that in the case of owning the CGU the buyer should assume the lease liability. In such case the procedure is as follows:

• If the recoverable amount is determined using the value in use, the value of the lease liability is considered in the value of the assets undergoing the test as well as in its value in use; without considering the outflows of cash connected with the lease contracts in the cash flows of the test, but reducing directly the value in use by the book value of the lease liabilities.

• If the recoverable amount is determined using the fair value less costs to sell, the value of the lease liability is considered in the value of the tested assets; and the recoverable amount is determined as the result of the sale of the assets of the CGU and the liabilities connected with the right of use.

  The Group assesses, based on internal and external information sources, at each balance sheet date, whether there is an indication that an impairment loss recognised in previous years does not exist anymore or may have decreased. Reversal of impairment loss for goodwill is not possible. Impairment loss for the rest of assets may be only reversed if there has been a change in the estimates used to determine the recoverable amount of the asset.

  The main indications which the Group takes into account in order to check the existence of impairment are the following:

  • Recurring losses in the CGUs;

  • Actual net cash flows, or results, deriving from the exploitation of the asset, significantly lower than estimated;

  • Negative change in one of the key assumptions on which the cash flows forecasts are based: production, prices, number of clients, discount rates, gross margins, etc.;

  • Significant changes with unfavourable effect for the Group, which occurred during the year or are expected to occur in immediate future, in the form or manner in which the asset is used or is expected to be used, such as, for example, plans to interrupt or restructure the business activity to which the asset belongs, or plans to dispose of the asset;

  • Identification of unforeseen contingent liabilities in the CGUs subject to valuation, unforeseen significant sanctions or failure to meet certain ratios related to financial liabilities.

Reversal of the impairment loss is recognised in the profit or loss. However, the increased carrying amount due to reversal should not be more than what its depreciated historical cost would have been if the impairment had not been recognised.