2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 · Group Notes 1 Key Figures Group figures (IFRS) Fiscal year 2010/11 Fiscal year 2009/10 Fiscal year 2008/09 Short fiscal

20122004 20082003 2007 20112002 2006 20102001 2005 2009

Annual Report 2010/11

10 Years of Growth and Success

2 Group Notes

Contents

Letter to Shareholders 2

Ten years of growth and success 4

Corporate Bodies 18

Supervisory Board Report 22

Corporate Governance 26

The Share 42

Consolidated Management Report of REpower Systems Group and REpower Systems AG 50

Business model and strategy 52

Research and development 61

Environment and business development 64

Company performance and earnings situation 70

Employees and responsibility 78

Risk management 82

Supplementary Report 87

Outlook 88

Other disclosures 91

Consolidated Financial Statements 96

Consolidated statement of financial position 98

Consolidated income statement 100

Consolidated statement of comprehensive income 100

Consolidated statement of cash flows 101

Consolidated statement of changes in shareholders‘ equity 102

Notes to the consolidated Financial Statements 104

Auditors Report 157

Imprint 160

1Group Notes

Key Figures

Group figures (IFRS)

Fiscal year2010/11

Fiscal year2009/10

Fiscal year2008/09

Short fiscal year2008

Fiscal year2007

Revenues k EUR 1,216,101.8 1,303,577.2 1,209,090.7 147,405.8 679,832.6

Total performance k EUR 1,275,694.6 1,330,355.3 1,220,548.7 150,162.1 678,153.2

Result from operating activities k EUR 86,023.5 98,316.0 76,898.8 3,050.9 28,202.3

Result before income taxes k EUR 80,938.2 83,850.0 76,552.6 3,414.2 29,459.1

Net income for the year k EUR 55,574.8 57,930.3 51,936.5 1,378.1 21,118.4

Total assets k EUR 1,345,899.6 1,032,624.2 928,372.3 693,513.8 688,363.5

Equity capital k EUR 518,853.9 475,971.7 408,340.0 329,117.7 326,264.6

Equity ratio % 38.6 46.1 44.0 47.0 48.43

Subscribed capital 1 EUR 9,220,179 9,199,829 9,177,039 8,993,576 8,993,576

Earnings per share (undiluted) EUR 6.31 6.34 5.75 0.16 2.43

Market capitalization* k EUR 1,328,166.8 1,200,577.7 780,048.3 1,369,991.5 1,124,197.0

Closing price* EUR 144.05 130.5 85.0 152.3 125.0

Personnel(REpower Systems Group) Number 2,456 2,097 1,775 1,246 1,160

* Xetra, last trading day

Note: In the beginning of 2008, REpower changed its fiscal year, which up until then had followed the calendar year, to the period from 1 April to 31 March of the following year. The transition period from 1 January 2008 to 31 March 2008 was a short fiscal year.

1Key Figures

Dear Shareholders, Dear Friends of the Company,

This year, we achieved an important milestone: We can look back proudly on ten years of successful corporate development! In April 2001, as four northern German wind turbine manufacturers we joined to form one company. We were equipped with: expertise, ambition and commitment. Today, a decade later, we are an internationally established provider of power station solutions – in third place in Germany and among the leaders in all core markets. Not only are we profitable, we also set benchmarks in our industry.

We have kept a firm eye on the future. The fact that we did not quite expand our business according to plan in 2010 just highlights how difficult the road has been. However, the ongoing debate con-cerning energy policy highlights that a gradual recovery is on the cards.

Given the economic environment we can be satisfied with the economic results for the past fiscal year. It is true that revenue and earnings declined due to increased competition and customer re-straint in investing which have been the two major areas of concern in Renewables Business and these factors still continue to hold the centre stage. In absolute terms, however, earnings remained on a respectable level. With revenues of 1,216.1 m EUR, we achieved EBIT of 86.0 m EUR.

With installed capacity of more than 851 megawatts, we almost achieved the same level as in the previous year. The relationship to declined earnings reflects the increasing cost pressure. Incoming orders developed extremely well: In the past year, we posted a capacity of 1,252 megawatts or a volume of almost 1.4 bn EUR to our order books. As a result, the order backlog climbed by almost 28% to 2,259 megawatts compared with the previous year.

We are delighted that new orders also include turbines for Sweden for the first time. In view of the positive signals being sent out by the Swedish government, we are expecting to see incremental demand in this market in the coming years.

Letter to Shareholders

2 Letter to Shareholders

The past year confirmed that the market appreciates our broad portfolio. The order for delivery of 48 6M turbines for Thornton Bank, the first Belgian offshore wind farm, was another significant step for us into the offshore market. The 3.XM series, now available with a hybrid tower, has been well-received by the market. And the MM100 once again showed our ability to adapt with ease to regional market requirements, in this case the North American market. Regardless of series, our tur-bines are distinguished by their capacity and quality. This is also demonstrated by the fact that we obtained unit certifications for our entire onshore turbine portfolio. This has also been the case for the REpower 6M since April.

There were also changes to the company’s management over recent months. We now have a new team on the Executive Board which will deal with the tasks ahead of us. We would like to thank our predecessors for the excellent handover. Our special thanks go to Per Hornung Pedersen. As CEO over the past years, he set the company on the right course and successfully steered our company’s operational skills.

What does the current fiscal year hold for us? Let’s begin with operations: We on the Executive Board are optimistic that there will be an increase in and earnings compared to the previous year. We will continue to achieve this growth in our core markets of Europe and North America.

In the months to come, we will also be dealing with formal matters: These include the squeeze-out to which our majority shareholder aspires and changing the company’s legal status to the European SE. However, we do believe that none of this will affect the normal course of business.

Regardless of stock-exchange listing and company name, we will continue to pursue the chosen path in the years ahead. With this goal in mind, we rely on your continued active support as partners, employees and customers. We would like to extend our sincere thanks for the confidence that you showed us over the last year.

Your Executive Board

Derrick Noe (CFO)

Matthias Schubert(CTO)

Gregor Gnädig(COO)

Andreas Nauen(CEO)

3Letter to Shareholders

From day one, there has been no doubt that the name REpower would stand for one

thing above all else: Quality. Today, in 2011, we can even state that our continuous

process of innovation has helped shape the development of an entire industry.

We’re proud of this!

It has been an eventful decade: The foundation of the company from four separate

companies, the initial public offering just a year later, our entry into new markets, our

perseverance during challenging phases, growth – and the continuous expansion of our

product range including the move offshore. What we set out to achieve has succeeded.

And we are grateful for it!

Now we are poised to enter a new phase: The sector has matured. Companies are

engaged in global competition. The pressure to be efficient is huge. However, the

opportunities that this presents are equally great. Because we firmly believe that

wind energy will become increasingly important. We will play a central role.

We look forward to it!

4 10 years REpower

Ten years of growth and success.

510 years REpower

10 years REpower6

'016

Measured beginnings. REpower commenced operations in Flughafenstraße in Hamburg

on April 1, 2001. The northern German companies Jacobs Energie Denker & Wulf, BWU

and pro+pro had previously decided to form a common alliance for the future. During

its first year, REpower set standards with the MD turbine and its intelligent platform

strategy: It is among the best-selling multi-megawatt turbines during that year.

2001/06/28 AGM votes on merger to REpower Systems Group | Autumn 2001 joint venture with Les Vents de France (later REpower S.A.S)

04-2001

Construction of the MM70 prototype. The first MM70 high-wind turbine was installed

in Bosbüll (Schleswig Holstein). It was the first 2 megawatt turbine from REpower and

reached availability of 97%. Following in its footsteps were the MM82 (2003) and the

MM92 (2005), the “bread and butter” turbines of today. These successes were founded

on the work of around 50 engineers based at the development department in Rendsburg.

A further highlight for 2002 was the introduction of the Permanent Monitoring System,

which provides round the clock remote monitoring of all REpower turbines. In addition:

REpower went public.

'02710 years REpower

2002/03/26 REpower Systems AG goes public | 2002/07/23 Australian joint venture with NOTUS

2002/12/13 Laying of the foundation stone for headquarters in Hamburg | 2002/12/20 500th turbine of MD series installed

05-2002

'038 10 years REpower

Founding of REpower UK Ltd joint venture. Together with British engineering company

Peter Brotherhood in Edinburgh, REpower founded a joint venture that subsequently

became a wholly-owned subsidiary of REpower in 2009. Since its foundation, REpower

UK has erected and sold multi-megawatt turbines in Great Britain. It also offers a full

range of services through numerous service offices nationwide. Thanks to the process

of internationalization, REpower increased its revenues contrary to the general trend

by almost 20%.

2003/04/10 First certification according to DIN EN ISO 9001 | 2003/05/28 Installation of the MM82 prototype

09-2003


Commissioning of the REpower 5M prototype. The installation of the first 5 megawatt

turbine saw REpower set a new benchmark in a wind industry that was still in its infancy.

The wind turbine erected in Brunsbüttel had a rotor diameter of 126 meters, making

it the world’s largest wind turbine at the time. In a challenging environment, REpower

successfully forged a path into new markets: For the first time, over 30 percent of

revenues were generated outside Germany. In Dongfang, REpower secured yet another

international licensing partner for the MD series.

2004/11/01 Dongfang license agreement (MD series) | 2004/12/30 Management buyout Denker & Wulf AG | November 2004 REpower Italia Srl is founded

11-2004


09-2005

Construction of the first MM92 turbines. REpower launched the second generation

of the MM series. With a swept rotor area of 6,720 square meters and hub heights of

68.5 to 100 meters, the MM92 was ideally suited for use in regions with moderate

wind speeds. Reliability and high power generation (availability: 99.94%) made the

MM92 a classic that has since achieved sales of 900 units. In the service area, the

company introduced the REpower “REguard” wind farm management system.

Spring 2005 Martifer becomes major strategic investor (19.5%) | 2005/09/19 The first MM92 turbines are installed

Autumn 2005 AREVA becomes major strategic investor (21%)

First offshore installation of the REpower 5M. On land and now also on water: In

summer 2006, REpower installed two wind turbines on the open sea for the first

time. The two REpower 5M turbines in the offshore test field “Beatrice” in the North

Sea off the coast of Scotland are supported by a lattice structure at a depth of over

40 meters. Wind turbines had never been installed in water of this depth. The 5M

was also the world’s largest offshore turbine at the time. Following two challenging

years, REpower achieved a successful turnaround in 2006.


2006/05/23 Framework agreement with EDF EN (140 x MM) | 2006/08/24 First 5M offshore installation (Beatrice)

08-2006

Foundation of REpower USA Corp. REpower completes its entry into the US market

with the foundation in Portland, Oregon of the wholly-owned subsidiary REpower

USA. It assumed the sale, project management and maintenance of the Repower 2 MW

and 3.XM class wind turbines. REpower USA subsequently relocated its head offices to

Denver, Colorado to profit from regional proximity to the growing wind industry in the

mid-west and west of the US. Work started in Bremerhaven on the construction of the

production hall for the 5M/6M offshore turbines with a production capacity of 80

turbines per annum.


04-2007

July 2007 PowerBlades is founded | 2007/03/23 Contract signed for Thornton Bank phase I | 2007/06/01 Suzlon becomes majority shareholder (87.1%)

2007/12/11 Inauguration of production hall in Bremerhaven | 2007/12/17 REpower Systems Inc. (Canada) is founded

2007/12/20 Framework agreement for over 690 MW with EDF EN

Construction of the REpower 3.XM prototype. Specially designed for lower wind

speeds: In the final quarter of 2008, REpower installed the first 3.XM turbine in the

Südermarsch wind farm in Schleswig Holstein – thus combining the benefits of

proven REpower power plant technology from the 2 and 5 megawatt class. The series

was well received in the European market in particular. The first installation of the

3.2M114, a turbine specially designed for areas with low wind speeds, is planned for

2011. Also planned are hub heights of 143 meters.


Spring 2008 RETC is founded | 2008/04/29 Topping-out ceremony PowerBlades production hall in Bremerhaven

2008/11/24 Supply contract is concluded for alpha ventus

12-2008

Installation of the first REpower 6M turbines. In March 2009, REpower completed

construction of three REpower 6M turbines on the German/Danish border. With a

rated output of six megawatts and a rotor diameter of 126 meters, the turbines were

among the world’s largest. The turbines were developed by Repower engineers for

subsequent offshore use and were manufactured in the Bremerhaven production

facility. REpower concluded a framework agreement with RWE for the installation

of 250 REpower 5M or 6M offshore turbines.

'0914

2009/02/18 Conclusion of the framework agreement RWE Innogy (250 x 5M/6M) | 2009/03/31 Revenues exceed the billion mark

2009/07/15 Contract is signed for Ormonde (30 x 5M) | 2009/11/16 Installation of alpha ventus is finalized

2009/11/26 Framework agreement EDF EN/RES Canada (954 MW)

03-2009

10 years REpower

Inauguration of the TechCenter in Osterrönfeld. In August 2010, the Prime Minister

of Schleswig Holstein inaugurated the new TechCenter in Osterrönfeld, in Rendsburg-

Eckernförde County. The research and technology complex covers a floor space of

11,700 square meters and gives the workforce a modern working environment. The

TechCenter also combines the development activities of the three previous locations

of Rendsburg, Büdelsdorf and Husum. An additional area of responsibility of the

Osterrönfeld location is the organization of the worldwide service operation and the

maintenance of onshore and offshore turbines.


2010/02/01 Signing of the Nordsee Ost contract (48 x 6M) | 2010/03/31 Fiscal year 2009/10: Record in sales and earnings

2010/06/29 1 GW of installed capacity in France | Autumn 2010 REpower Scandinavia AB (Sweden) is founded

2010/10/26 Launch of the new MM100 turbine | 2010/11/25 Signing of Thornton Bank phase II & III contract (48 x 6M)

08-2010

REpower remains in a phase of major change. The two largest orders in the company’s

history: In January, REpower and the St. Laurent Energies consortium signed a contract

to supply 150 wind turbines with a total output of 300 megawatts. The turbines for

the Lac Alfred wind farm in the Canadian province of Québec are due to go online by

2013. This was followed in April by a framework agreement with the juwi Group in

Rhineland Palatinate for up to 240 wind turbines with a total output of up to 720

megawatts. The turbines are set to be constructed between 2011 and 2014.


2011/01/17 Signing of the Saint-Laurent Energies consortium contract (300 MW) | 2011/04/07 Framework agreement with juwi (240 x 3.XM turbines)

2011/05/03 Contract with EDF for 110 MW in Canada

1710 years REpower

We have grown successfully over the past ten years. We want to continue along this

path during the years ahead. In doing so, we are prepared for intensified competition.

Lean processes allow us to sail “close to the wind” and operate in close proximity to

our markets. In so doing, we will maintain the strengths that have enabled us to grow:

We focus on quality. – It provides security. Our turbines are designed to deliver at

least 20 years of peak performance to our customers. We create the conditions for

this by ensuring the highest production quality standards. This gives our customers

peace of mind.

We focus on service. – It keeps us in touch. We know our turbines better than anyone.

As part of our maintenance services, we apply this know-how to the life cycle of the

turbines to give our customers a further performance guarantee.

We focus on technology. – It guarantees progress. Our customers are used to the fact

that we are always among the first to introduce new developments. A reputation of

this type is not only an obligation, it also pays off. And our customers know this.

We focus on a broad product range. – It opens up markets. Our turbines can cope

with all relevant site conditions today. This allows us to meet virtually every requirement.

Come to us for the right solution.

How do we tap into the future?

Executive Board

Corporate Bodies

Matthias Schubert

Born in 1960 in Düsseldorf (Germany), Chief Technolo-gical Officer (CTO), Member of the Executive Board since the formation of the com-pany in 2001, responsible for Technology and Innova-tion, Product Development, Licenses and Intellectual Property, Maintenance and Service, Sales and Project Sup port and Quality Assurance

Andreas Nauen

Born in 1964 in Krefeld (Germany), Chief Executive Officer (CEO), Member of the Executive Board since July 2010, responsible for Corporate Communica-tions, Marketing and Sales, Support for Large Clients, Contract Risk Management, Personnel, Health & Safety, Business Development, Government Relations, Cor-porate Strategy and Busi-ness Unit Offshore

Gregor Gnädig

Born in 1959 in Ettenheim (Germany), Member of the Executive Board for Pro-duction, Purchasing and Logistics (COO), Member of the Executive Board since October 2010, responsible for Purchasing, Production, Rotor Blade Production, Ma terials Administration and Logistics, Project Manage-ment, Corporate Process Organization and Quality Management, Facility Ex-pansion and Management

Derrick Noe

Born in 1957 in Meerbusch (Germany), Chief Financial Officer (CFO), Member of the Executive Board since February 2010, responsible for Finance and Accounting, Treasury, Group and Sub-sidiary Controlling, Legal, Risk Management and In-ternal Audit, Investor Rela-tions, Project Financing, Informa tion Technology and Data Protection as well as for the area of Group Tax Optimization and Financial Governance

(from left to right)

Corporate Bodies18

Corporate Bodies 19

Supervisory Board

Tulsi R. Tanti

Chairman of the Supervisory Board, member of the Super-visory Board since June 2007

Kirtikant J. Vagadia Member of the Supervisory Board since August 2008

Dr. Christof M. Fritzen Deputy Chairman of the Supervisory Board, member of the Supervisory Board since August 2008

Roland Fischer Member of the Supervisory Board since October 2010, employee representative

Girish R. Tanti Member of the Supervisory Board since August 2008

Thomas Rex Member of the Supervisory Board since October 2010, employee representative

(from left to right)

Corporate Bodies20

Corporate Bodies 21

Supervisory Board Report

Supervisory Board Report2222

Supervisory Board Report

Supervisory Board Report 2323

24

In the fiscal year 2010/2011, the Supervisory Board of REpower Systems AG actively monitored the work of the Company’s Executive Board and offered ongoing advice. This was based on the exten-sive written and verbal reports by the Executive Board. In addition, the Chairman of the Supervisory Board regularly interacted with the Chairman of the Executive Board. As a result, the Supervisory Board was kept well informed of the position of the Company and the Group as a whole, particularly with regard to business policies, corporate planning including financial, investment and personnel planning, business performance and results, risk management, the work of Internal Audit and the legal department, as well as corporate compliance.

Where approval of the Supervisory Board was required due to provisions in law, the Articles of As-sociation or internal regulations, the Supervisory Board, in some cases with preparatory work by the appropriate committees, examined the submitted proposals and passed the necessary resolutions. The Supervisory Board was involved in all decisions of key importance to the company.

The Supervisory Board convened six times in the 2010/11 fiscal year. Four meetings were held in person and two meetings were held by means of telephone conference. In addition, the Supervisory Board resolved pressing matters on seven occasions by way of written resolutions.

The Supervisory Board’s advisory work focused primarily on the strategy, business activities and results of the Company and the Group. During its meeting in May 2010, the Supervisory Board discussed the annual and consolidated financial statements for the fiscal year 2009/10, the joint management report and the audit reports, adopted a new Board Compensation Policy, approved the Executive Board members’ annual bonus and targets and discussed the proposals to the Annual General Meeting. The Supervisory Board meeting in June dealt with topics for the Annual General Meeting, mutual agreement on bringing forward the date for Mr. Andreas Nauen to take up the du-ties of the Company’s CEO to 1 July 2011 (originally planned for 1 October 2011) and various organi-sational initiatives. In its September meeting, the Supervisory Board appointed Mr. Gregor Gnädig as a new Executive Board member and resolved the transformation of the Company from a German Stock Cooperation (Aktiengesellschaft, AG) into a European Company (Societas Europaea, SE). The Supervisory Board meeting in October was a constitutive meeting following the reelection of all shareholder representatives by the Annual General Meeting on 25 October 2010 and the election of Thomas Rex and Roland Fischer as employee representatives. In that meeting Mr. T.R. Tanti was ap-pointed as Chairman of the Supervisory Board and Dr. C.M. Fritzen was appointed as Vice-Chairman. The Supervisory Board also formed an Audit Committee, to be chaired by Dr. C.M. Fritzen, and a Strategic and Investment Committee, a Personnel Committee and a Nomination Committee, all to be chaired by Mr T.R. Tanti. During this meeting, the Supervisory Board also discussed the organisation of the Annual General Meeting that had previously been concluded, the financial results for the first six months of fiscal year 2010 /11 and the extension of production to Asia. The Supervisory Board was also concerned with the further shaping of the company’s corporate governance principles, tak-ing into account the amendments to the German Corporate Governance Code. In January 2011, the Executive Board and the Supervisory Board issued a new declaration of conformity in accordance with § 161 of the German Stock Corporation Act, which is available on the website www.repower.de.

The attendance of meetings by members of the Supervisory Board was consistently high, and none of the members of the Supervisory Board attended fewer than half of the meetings. The members of the Executive Board participated regularly in meetings of the Supervisory Board.

In the fiscal year 2010/11, the Personnel Committee met four times to discuss compensation and appointments of Executive Board members. The Audit Committee met four times and regularly reviewed the interim and annual financial statements, risk management reports, internal audit and legal department reports as well as the implementation of Internal Control Systems. The Strategy and Investment Committee met nine times (in person or by telephone) and discussed in particular the position of the Company and the Group in a changing market environment. The Nomination Committee met one time to discuss the nomination of the Supervisory Board members for election by the Annual General Meeting.

24 Supervisory Board Report

25

Under the supervision of the Audit Committee and the Supervisory Board, the Executive Board has established a new web-based Risk Management System. Its design and application is suited to iden-tify all major risks in the Company and to ensure continued monitoring. Risk management reports have already been created under the new system and presented to the Audit Committee and the Supervisory Board. The Company is currently working on reviewing and completing the Internal Control System (ICS), which, after integration with the Risk Management System, will ensure active management of the Company’s risks.

On the basis of a prior examination conducted by the Audit Committee, the Supervisory Board ex-amined the REpower Systems AG annual financial statements, the consolidated financial statements, the joint management report for the fiscal year 2010/11 and the report on relations with affiliated companies according to § 312 of the German Stock Corporation Act (“dependency report”) as well as the proposal of the Executive Board for the appropriation of net profit. Ernst & Young GmbH Wirt-schaftsprüfungsgesellschaft, the auditors appointed by the 2010 Annual General Meeting, audited the Company’s 2010 /11 annual financial statements and the Group’s consolidated financial state-ments including the joint management report, as well as the dependency report in consultation with the Company’s accounting department, and provided these with unqualified audit opinions. The auditors issued the following unqualified audit option pursuant to § 312 para. 3 German Stock Corporation Act on the dependency report:

“Based on our examination and evaluation required by law, we confirm that 1. The factual statements in the report is correct, 2. The Company’s services were not inappropriately high or, if so, disadvan-tages were compensated for the transactions listed in the report.”

The documents to be examined and the audit reports by the auditor were promptly passed on to the members of the Supervisory Board. The auditor attended the accounts audit meetings of the Audit Committee on 9 and 31 May 2011 and the accounts meeting of the Supervisory Board on 31 May 2011 and reported on the main results of the audit.

The Supervisory Board examined the documents mentioned above and noted its approval for the auditor’s reports. Following the prior audit by the Audit Committee and its own audit, the results of which concur with the auditor’s reports, the Supervisory Board does not raise any objections to the annual and consolidated financial statements. The dependency report describes, in the view of the Supervisory Board, a correct and comprehensive picture of the relations to affiliated companies. The Supervisory Board therefore does not raise any objections to the dependency report presented.

The Supervisory Board approved the annual financial statements of REpower Systems AG and the consolidated financial statements of the REpower Systems Group in the accounts meeting of the Supervisory Board on 31 May 2011 as well as in a successive resolution on 22 June 2011. The annual financial statements were thereby adopted. The Supervisory Board concurs with the proposal of the Executive Board for the appropriation of net profit.

The Supervisory Board would like to thank all employees of the REpower Group across the world, the company management and retired members of the Executive Board Mr. Kristensen and Mr. Pedersen for their achievements and contribution in the fiscal year 2010/11.

Hamburg, June 2011

Tulsi R. Tanti– Chairman of the Supervisory Board –

25Supervisory Board Report

Corporate Governance

26 Corporate Governance

27Corporate Governance

28

REpower Systems AG considers itself subject to the principles of value-oriented corporate manage-ment and monitoring. REpower Systems AG has a strong commitment to efficient cooperation between the Executive Board and Supervisory Board, promoting shareholder interests and open and transparent communication between management and investors. The key principles of the German Corporate Governance Code (“DCGK”) have therefore been applied in practice across the Company for some time.

In the following, the Executive Board and the Supervisory Board report on corporate governance at Repower Systems AG in line with Section 3.10 of the German Corporate Governance Code. As part of the Company’s Management Report, this report contains the Corporate Governance State-ment according to Section 289a of the German Commercial Code (HGB) and the Remuneration Report on the remuneration of the Executive Board and Supervisory Board according to Sections 4.2.5 and 5.4.6 of the German Corporate Governance Code.

Corporate Governance Statement

In accordance with Section 289a Paragraph 2 of the German Commercial Code (HGB), the Cor-porate Governance Statement contains the Declaration of Conformity, relevant information on Corporate Governance Practices and a description of the working methods of the Executive Board and Supervisory Board.

Declaration of Conformity

In accordance with Article 161 of the German Stock Corporation Act, the Executive Board and Supervisory Board of a listed company must declare each year that the company has complied and will comply in future with the recommendations of the Government Commission on the Ger-man Corporate Governance Code, or which recommendations have not been or will not be applied.

The Executive Board and the Supervisory Board of REpower Systems AG discussed compliance with the recommendations of the German Corporate Governance Code in their meetings on January 24, 2011 and January 31, 2011 and submitted the following joint declaration of compliance:

“Since the release of last year’s declaration of compliance in January 2010, REpower Systems AG has complied and will in future comply with the recommendations of the German Corporate Governance Code Government Commission,” as amended on June 18, 2009 and May 26, 2010, except for the following deviations as explained below.

Section 2.3.3 Sentence 2 (postal vote)

The Company’s Articles of Association do not provide the option of a postal vote. In view of the Company’s shareholder structure and its low free float, the Executive Board and the Supervisory Board believe that the administrative expense connected with approval for a postal vote would outweigh the benefits provided by this instrument. The Company offers its shareholders the possibil-ity of appointing a Company-nominated proxy to exercise their voting rights upon their instructions before and during the Annual General Meeting. The additional option of a postal vote would not make it especially easier for shareholders to exercise their legal rights. Therefore, the Executive Board and the Supervisory Board currently do not consider it useful to introduce a postal vote and will refrain from doing so until further notice.


29

Section 3.8.2 Paragraph 2 (deductible for D&O insurance)

The D&O insurance for the Company’s Executive Board and Supervisory Board did not provide for a deductible for the members of the Supervisory Board with respect to the legal transition ruling up to June 30, 2010. The Company has complied with the recommendation since the adjustment of the insurance contract effective July 1, 2010.

Section 4.2.3 Paragraph 4 (limitation of compensation payments)

In case of an early termination of the position as a member of the Executive Board without good cause, the resigning member of the Executive Board receives compensation for which a contractual cap has existed since April 1, 2010 for all members of the Executive Board. While this cap rules out the possibility that corresponding payments (including fringe benefits) will compensate more than the remaining term of the relevant contracts, payments may exceed the value of two years’ com-pensation in exceptional cases. The Supervisory Board considers this regulation to be adequate in view of the fact that the terms of the Executive Board members’ contracts are generally three years.

Section 4.2.3 Paragraph 6 (information regarding the remuneration system of the Executive Board)

The basic principles of the remuneration system and changes to it have been explained and will be explained in future at the Annual General Meetings of the Company by the Chairman of the Annual General Meeting. In order to ensure explanations in German, this is not necessarily the Chairman of the Supervisory Board.

Section 5.4.1 Paragraph 2 Sentence 2 (composition of the Supervisory Board)

The Supervisory Board focuses on the professional and personal qualifications of candidates pro-posed for election to the Annual General Meeting in order to ensure that the Executive Board is efficiently monitored and advised in the best interests of the Company. With regard to proposed candidates, the Supervisory Board will endeavor to obtain suitable female candidates and will re-view candidate proposals carefully. However, in view of the small size of the Supervisory Board, the Supervisory Board currently does not wish to set fixed quotas for female members for the time being.

Section 5.4.6 (compensation of Supervisory Board members)

The remuneration of Supervisory Board members of REpower Systems AG comprises a fixed compo-nent and a variable, success-oriented component. According to the current Articles of Association, the position as Chairman or Vice-Chairman of the Supervisory Board is considered in respect to re-muneration. In contrast, the position as chairman of a committee or the membership in a committee is disregarded. The Executive Board and the Supervisory Board of REpower Systems AG are of the opinion that the additional amount of work arising from the membership in committees is compen-sated by the remuneration of the Supervisory Board members in its existing form.”

Hamburg, January 31, 2011

REpower Systems AGThe Executive Board The Supervisory Board”

The Declaration of Conformity has been made permanently available to the shareholders on REpower Systems AG’s website at www.repower.de.



Corporate Governance Practices

Sustainability

REpower views itself as a company with a long-term orientation whose lasting success is guaranteed only if it can fulfill the expectations that society as a whole places on it. The sustainability triangle featuring three parameters – economic strength, social responsibility, and environmental responsi-bility – therefore symbolizes the environment in which all of REpower’s business processes are con-ducted. The Company’s objective is to create a high level of value-added in all of the Group’s units in line with the interests of shareholders, business partners, employees, and the public, and therefore to increase the value of the Company as a whole.

More information on the Company’s strategy for sustainable growth can be found in the Guiding Principles of REpower Systems AG and in the Sustainability Report, both of which are available on the Company’s Internet site www.repower.de.

Compliance

REpower considers compliance with the law and internal guidelines as an essential basis for success-ful business and sustainable growth. As in previous years, the Company has taken appropriate mea-sures to ensure that its employees’ conduct complies with legal requirements at all times and that its internal regulations are followed, as well as measures to minimize compliance-related risks. Consultants were used in individual cases.

In order to underline the importance of corporate compliance and with the aim of combining ex-isting compliance structures and developing an integrated compliance system, the Executive Board appointed a Head Compliance Officer in September 2009, who reports directly to the Chief Executive Officer. In May 2010, a Compliance Committee was established and in July 2010 an external report was submitted on topics related to compliance at REpower Systems AG and its subsidiaries. New compliance principles and a new code of conduct are being developed for employees.

Risk Management

REpower attaches great importance to Group-wide risk management. The Company-specific report-ing and control systems are continuously further developed and adapted to the changing overall conditions. The Company implemented a new web-based risk management system in fiscal year 2009 /10. This became fully effective during the year under review and is of valuable help to the Executive Board. Please refer to the section “Risk Management” in the Consolidated Management Report of this Annual Report for more detailed information on the internal control system and the accounting-related risk management system.

Reporting and Audit

The Company prepares its consolidated financial statements and interim reports in accordance with International Financial Reporting Standards (IFRS). Financial reporting according to inter-nationally recognized accounting standards ensures the required transparency of business trans-actions. The single-entity financial statements of REpower Systems AG are prepared in accordance with the German Commercial Code (HGB). The single-entity and consolidated financial statements are audited by an independent auditor elected by the Annual General Meeting.


Corporate Communication

REpower Systems AG issues a detailed report each quarter on net assets, financial position, results of operations and business development. In addition, the Company makes use of various media to keep shareholders and the interested public informed, largely via the Internet. Information that could have a significant influence on the share price is disclosed in ad hoc notifications. REpower provides its shareholders and interested members of the public with financial reports, ad hoc notifi cations, press releases, its financial calendar and other important information on its Company website at www.repower.de.

Directors’ Dealings

Pursuant to Section 15a German Securities Trading Act (WpHG), the members of the Executive Board and of the Supervisory Board are legally obliged to promptly disclose the acquisition or sale of REpower Systems AG shares to the Company. This obligation applies also to related parties of such persons. REpower Systems AG received no such disclosures in fiscal year 2010/2011.

Neither the Executive Board nor the Supervisory Board held shares subject to disclosure on the balance sheet date in accordance with Section 6.6 DCGK.

Working Methods of the Supervisory Board

As a German stock corporation domiciled in Hamburg, REpower Systems AG is governed by the provisions of the German Stock Corporation Act and its Articles of Association. Like all German stock corporations, REpower Systems AG has a dual administrative structure, consisting of the Execu tive Board and the Supervisory Board. There is a strict division between the Executive Board and the Supervisory Board in terms of both members and organization, with the implementation of management and supervision functions being performed independently. Shareholders exercise their rights, especially their voting rights, at the Annual General Meeting. The Annual General Meeting decides matters assigned to it by law as well as certain measures of material importance to the Company.

In the Annual General Meeting of October 25, 2010, it was decided to change the Company’s legal form to that of a Societas Europaea (SE). However, this had not become effective as of the balance sheet date. After taking effect, the Company will basically retain the dual administrative structure with certain amendments.

Executive Board

In the dual administrative system of REpower Systems AG, the Executive Board assumes responsi-bility for managing the Company and conducting its business. It also represents it in transactions with third parties. The members of the Executive Board are appointed by the Supervisory Board. The separation of personnel between the Executive Board and the Supervisory Board is ensured because members of the Executive Board cannot be members of the Supervisory Board at the same time.


At the end of fiscal year 2010/11, the Executive Board of REpower Systems AG existed of four mem-bers: a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), a Chief Technical Officer (CTO) and a Chief Operating Officer (COO). During the fiscal year, the Executive Board of the Company included another member, the Chief Market Officer (CMO). However, at present there are no plans to fill this position again. The current composition of the Executive Board is presented in the sec-tion “Corporate Bodies” of this Annual Report. The individual responsibilities of the members are laid down in a Schedule of Responsibilities. All members of the Executive Board are required to act at all times in the best interests of the Company and to increase the value of the Company on a sustainable basis. As a general rule, members of the Executive Board should not be older than 60 at the time of their appointment.

The Executive Board develops the strategic focus and targets of the Company and of the REpower Group, agrees them with the Supervisory Board and implements the business strategy. It is re-sponsible for annual and mid-term planning, determining the budget, allocating resources and manage ment capacities, deciding on and implementing individual business measures and transac-tions as well as ensuring adequate risk management and monitoring operating management and the management of subsidiaries and affiliated companies. Certain transactions and measures require that the Executive Board receive prior approval from the Supervisory Board.

The Executive Board makes its decisions at Executive Board meetings that take place on a regular basis as well as using modern telecommunications in individual cases. Resolutions are generally adopted with a simple majority. In the event of a tie, the vote from the Chairman of the Executive Board is decisive. However, the Chairman of the Executive Board does not have the power to veto resolutions made by the Executive Board. The future Articles of Association of the Company in the SE legal form also state that resolutions of the Executive Board cannot be passed against the wishes of the CEO and the CFO, and links the Executive Board’s capacity to pass resolutions with the participation of the CEO or the CFO.

The Executive Board submits regular and comprehensive reports to the Supervisory Board on all issues relevant to the Company concerning planning, business development, the financial and earnings situation, the risk situation and risk management as well as compliance, corporate strategy and its implementation.

The Executive Board members disclose potential conflicts of interest without delay to the Super-visory Board. Sideline activities, outside REpower Systems, require the approval of the Supervisory Board. The Company has concluded a D&O insurance policy for the members of the Executive Board that contains a deductible in the amount required by law.

Supervisory Board

The Supervisory Board is responsible for monitoring and advising the Executive Board. It consists of six members, two thirds of whom are elected by the Annual General Meeting and one third of whom are elected by Company employees. After the Company’s change of legal form to SE becomes effective, the Supervisory Board will continue to consist of six members. Two of these members will be appointed by the Annual General Meeting as proposed by employees.


The Supervisory Board set the following targets for its composition during its meeting on January 31, 2011 in accordance with Section 5.4.1 DCGK:

“In view of

its own size (six members, of which four shareholder representative and two are worker representatives),

the area of business in which the Company operates, the size and orientation of the Company, the scope of the Company’s international activities, the Company’s stock exchange listing and its current shareholder structure,

the Supervisory Board of REpower Systems AG strives to attain the following specific targets with respect to its composition. The targets for Points (1) to (4) must always be attained. The quota targets for Points (5) to (7) are subject to the availability of suitably qualified candidates at the time they are required.

(1) The members of the Supervisory Board should jointly have the knowledge, abilities and pro-fessional experience required in order to fulfill their tasks properly. The individual knowledge, abilities and experience of the individual members of the Supervisory Board should complement each other such that sufficient professional expertise is available at all times for the Supervisory Board work as such and every important segment of the Company in order to ensure the profes-sional and efficient monitoring of, and advice for, the Executive Board.

(2) The Supervisory Board should consist of at least one member who is independent in the meaning of Section 100 Paragraph 5 AktG and Section 5.4.2 Paragraph 2 DCGK and has knowledge of accounting or auditing.

(3) The Supervisory Board should not include any member who holds an executive body or advisory position with key competitors of the Company or the Group (except the major shareholder).

(4) The Supervisory Board should not include more than two former members of the Executive Board.

(5) As a rule, the Supervisory Board should include at least one member who is particularly well qualified with respect to the Company’s international activities.

(6) The Supervisory Board strives to attain an appropriate quota of women in the medium to long term.

(7) As a general rule, only candidates who are younger than 70 should be proposed for election to the Supervisory Board.

The targets and quota targets can be fulfilled by both shareholder representatives and worker representatives. Therefore, the Supervisory Board expressly welcomes election candidates which would fulfill the quota target for worker representatives in the Supervisory Board. The Supervisory Board regularly reviews the targets and quota targets. In addition to the targets mentioned above, the Supervisory Board will always keep in mind the best interests of the Company when preparing and approving candidate proposals to the Annual General Meeting for election of Supervisory Board members.”


The Supervisory Board is of the opinion that at any given time its members jointly have the abili-ties, professional knowledge and experience required in order to carry out its tasks properly. The current composition of the Supervisory Board is presented in the section “Corporate Bodies” of this Annual Report.

The Supervisory Board must be directly involved by the Executive Board in any decisions of fun-damental importance to the Company. It advises the Executive Board on the strategic focus of the Company and monitors the Executive Board’s management of the Company. The Executive Board regularly informs the Supervisory Board on all important topics of corporate management and business management. The Chairman of the Supervisory Board is in close contact with the Chairman of the Executive Board and liaises with him on upcoming key decisions. The Supervisory Board reviews and approves the budget planning and the financing framework of the Company. It also reviews and approves the single-entity and consolidated financial statements of REpower Systems AG and of the Group, taking into consideration the auditor’s reports. Certain transactions laid down in the Supervisory Board by-laws require its prior approval.

The Supervisory Board takes its decisions in regular meetings and in individual cases outside such meetings. The Chairman of the Supervisory Board coordinates the work of the committees and chairs the meetings of the Supervisory Board. Resolutions are adopted by a majority of votes cast unless otherwise required by law.

The Supervisory Board members disclose potential conflicts of interest without delay to the Super visory Board. There were no conflicts of interest in the year under review. When concluding a contract between the Company and a member of the Supervisory Board pursuant to Section 114 AktG, the respective member of the Supervisory Board abstains from voting. There were no such contracts in the year under review. The Company has concluded a D&O insurance policy for the members of the Supervisory Board that will contain a deductible in the amount recommended by the German Corporate Governance Code with effect as of July 1, 2010.

Please refer to the Supervisory Board Report of this Annual Report for details of the Supervisory Board’s work in the year under review.

The Supervisory Board has formed the following committees from amongst its members:

Audit Committee

The current members of the Audit Committee are Dr. Christof Maria Fritzen (Chairman), Kirtikant Vagadia and Roland Fischer. The Chairman is Dr. Fritzen, an independent financial expert in the meaning of Section100 Paragraph 5 and Section 107 Paragraph 4 AktG and Section 5.3.2. DCGK. Its tasks include examining Company accounting as well as the single-entity and consolidated fi-nancial statements, the joint management and Group management report and the proposal for the appropriation of REpower Systems AG’s net profits, all prepared by the Executive Board, as well as examining the consolidated quarterly financial statements and interim management reports prepared according to IFRS and the dependency report.

Based on the auditor’s report on the auditing of the annual financial statements and the joint management report for REpower Systems AG and the Group, the Audit Committee devises pro-posals for the approval of the annual and consolidated financial statements by the Supervisory Board. The Audit Committee is also responsible for the relations between the Company and the auditor. The Committee prepares the Supervisory Board decision on its proposal to the Annual General Meeting for the election of an auditor. It prepares the audit mandate to be awarded to the auditor elected at the Annual General Meeting, suggests issues to focus on in the audit and decides on the remuneration of the auditor for audit and non-audit services.


The Audit Committee also deals with the internal control system of the Company as well as pro-cedures for risk measurement, risk control and risk management.

Personnel Committee

The Personnel Committee is currently composed of Supervisory Board members Tulsi R. Tanti (Chairman), Kirtikant Vagadia and Girish Tanti. The Personnel Committee prepares the decisions of the Supervisory Board on Executive Board issues in the broader sense, including long-term suc-cession planning and makes recommendations to the Supervisory Board. This includes preparing and recommending service agreements with Executive Board members, proposing a remuneration system for the Executive Board members and preparing its regular review by the Supervisory Board, preparing the by-laws and a Schedule of Responsibilities for the Executive Board.

Strategy and Investment Committee

The Strategy and Investment Committee is concerned with both overall business strategy and the alignment of the Company as well as planned investments. The Executive Board reports to the committee on the current situation and business development of the Company on a regular basis. The Strategy and Investment Committee examines and assesses the reports prepared by the Executive Board and then presents the results of this review to the Supervisory Board. It submits recommendations for the Supervisory Board’s decisions on approving Executive Board transactions and measures requiring approval and makes decisions in some specified cases instead of the Supervisory Board. The Committee is currently composed of Tulsi R. Tanti (Chairman), Girish Tanti and Kirtikant Vagadia.

Nomination Committee

The Nomination Committee makes preparations for electing shareholder representatives to the Supervisory Board. It suggests suitable candidates to the Supervisory Board for its proposed can-didate at the Annual General Meeting for the election of shareholder Supervisory Board members. The Committee is composed of Tulsi R. Tanti (Chairman), Dr. Christof Maria Fritzen and Girish Tanti.

Shareholders and the Annual General Meeting

The shareholders exercise their rights, especially their voting rights, at the Annual General Meeting. The ordinary Annual General Meeting takes place annually in the first eight months of each fiscal year. The Annual General Meeting resolves on the appropriation of net profit and on the discharge of the members of the Executive Board and of the Supervisory Board for the preceding fiscal year and elects the auditors for the current fiscal year. It elects the Supervisory Board members who are not elected by the employees. The Annual General Meeting also decides matters assigned to it by law, such as capital measures, changes to the Articles of Association and intercompany agree-ments. At the Annual General Meeting, each share grants one vote. The Company assists share-holders in exercising their voting rights by offering the services of a voting representative who votes according to the shareholder’s instructions. Shareholders are free to attend the meeting in person or to authorize a proxy of their choice.

The invitation to the Annual General Meeting, the agenda and all reports and information on in-dividual items of the agenda as well as general information on the Annual General Meeting, the voting results, the speech of the Chief Executive Officer and the Articles of Association of the Company are available on the website of REpower Systems AG: www.repower.de.


Remuneration Report for Executive Board and Supervisory Board

As required by applicable statutory law and in accordance with the recommendations made in the German Corporate Governance Code (DCGK), this remuneration report describes the remuneration system for members of the Executive Board and the Supervisory Board of REpower Systems AG. It also provides a detailed and individualized overview of the total remuneration received by the mem-bers of the Supervisory Board and Executive Board in fiscal year 2010/11. The Remuneration Report forms an integral part of the joint management report for the Company and the Group.

Executive Board

The remuneration of the Executive Board is based on the statutory requirements following the adoption of the Act on the Appropriateness of Executive Board Remuneration (VorstAG) on August 5, 2009. The remuneration system promotes sustainable and long-term growth for the Company. It has applied to all members of the Executive Board since the beginning of fiscal year 2010 /2011. Remuneration of the members of the Executive Board is composed of a fixed base salary and two variable components: the performance-linked index (PLI) and the long-term performance-linked index (LPLI).

For purposes of calculating the PLI, the short-term component, the actual performance of each Executive Board member in a particular fiscal year is measured against individual financial or other targets. The details of these targets and their weighting are set by the Supervisory Board in consultation with the individual Executive Board members on a year-by-year basis. The PLI for any particular fiscal year can be capped a maximum amount of 50 % of the fixed annual based salary for the CEO Andreas Nauen. The PLI ranges from 35 % of the fixed annual based salary (if targets are achieved at a rate of 80%) to 45 % (if targets are achieved at a rate of 100%) and finally the maximum of 50 % of the fixed annual based salary (if targets are achieved at a rate of 110 % or more). For the remaining members of the Executive Board the PLI is capped at a maximum amount of 30 % of the fixed annual base salary. The PLI ranges from 20% of the fixed base salary p.a. (if targets are achieved at a rate of 80%) to 25% (if targets are achieved at a rate of 100%) and finally the maximum of 30% of the fixed base salary p.a. (if targets are achieved at a rate of 110% or more). There is no entitlement for any member of the Executive Board to receive a PLI if targets are achieved at a rate of below 80%. Payment of the PLI is made on an annual basis.

For purposes of calculating the LPLI, the long-term component, the actual performance of each Executive Board member over the entire term in office is measured against individual long-term targets, which reflect different functions and responsibilities within the Executive Board and all of which promote the successful and sustainable future development of REpower Systems AG. The long-term targets contractually specified by the Supervisory Board in conjunction with the re-spective Management Board member prior to the commencement of the relevant term comprise certain ambitious achievements in terms of promoting the strategic development of the Company, e.g. with respect to developing a global market share, obtaining new strategically significant cus-tomers, optimizing financial performance, global tax and production efficiency as well as the deli-very chain. The LPLI varies in accordance with the individual appointment terms and is capped at maximum amounts in relation to the individual fixed base salaries.


In the case of Mr. Nauen, who has been appointed for a term up to June 30, 2013 the LPLI ranges from 140 % of the fixed base salary p.a. (if targets were met at a rate of 80%) to 165 % (if targets were met at a rate of 100%) and finally to a maximum of 180% of the fixed base salary p.a. (if targets were met at a rate of 120% or more). In the case of Mr. Schubert, Mr. Noe and Mr. Gnädig, who were appointed for a term up to March 31, 2013 or September 30, 2013 respectively (Mr. Gnädig), the LPLI ranges from 50% of the fixed base salary p.a. (if targets were met at a rate of 80%) to 80% (if targets were met at a rate of 100%) and finally to a maximum of 110% of the fixed base salary p.a. (if targets were met at a rate of 120% or more). There is no entitlement to re-ceive the LPLI if targets are achieved at a rate of below 80%. Payment of the LPLI is made after expi-ry of the individual appointment term. The Supervisory Board may, in its sole discretion, resolve that an individual Executive Board member shall receive an extra payment of up to 10% of the LPLI.

Moreover, the Executive Board members are in principle eligible to participate in stock option plans or similar schemes of the Company, if and to the extent so determined by the competent corporate bodies in accordance with applicable law.

In addition, all Executive Board members are entitled to an adequate company car for business and private use. Moreover, individual Executive Board members are entitled to receive capped allo wances with regard to housing and relocation costs, expenses for personal tax and legal advice and personal health insurance as well as schooling fees for children. The Company has accident and D&O insurance for the Executive Board members, in the latter case providing for the statu-tory deductible.

Individual Executive Board members also still have the option, but not the obligation, to have parts of their respective fixed base salary transferred directly to an externally funded pension scheme of their choice.

In the event that the corporate appointment of an Executive Board member is validly revoked prior to the end of the relevant appointment term, whilst the termination of the service agree-ment for good cause is not justified, then the engagement terminates after expiry of the statu-tory notice period pursuant to Section 622 Paragraph 1 BGB. This is the only situation in which the service agreements stipulate that Executive Board members are entitled to receive a one-time severance payment of 80% of their applicable fixed base salary which would otherwise have been paid until the expiry of the contractual term. This remuneration system does not provide for other severance payments in the event of a premature termination of the engagement. No severance payments are provided in the event of a change of control.


The actual remuneration paid to the Executive Board members in fiscal year 2010 /11 was calculated and determined on this basis for the members of the Executive Board. The following table provides a detailed overview of the different remuneration components for the individual Executive Board members in fiscal year 2010 /11:

Name Fixed base salary

Variableremuneration 4

Other payments 5

Non-cash benefits 6

Total compensation

EUR EUR EUR EUR EURAndreas Nauen 337,500.00 0.00 280,000.00 12,659.40 630,159.40Derrick Noe 430,000.00 0.00 50,000.00 11,053.80 491,053.80Matthias Schubert 325,000.00 0.00 0.00 12,411.84 337,411.84Gregor Gnädig 1 210,000.00 0.00 152,500.00 6,584.40 369,084.40Per HornungPedersen 2 430,000.00 0.00 530,000.00 15,767.05 975,767.05Lars RytterKristensen 3 132,500.00 0.00 417,659.04 6,676.80 556,835.84Total 1,865,000.00 0.00 1,430,159.04 65,153.29 3,360,312.33

1 Gregor Gnädig joined REpower Systems AG on October 1, 20102 Per Hornung Pedersen left REpower Systems AG on March 31, 2011.3 Lars Rytter Kristensen left REpower Systems AG on September 30, 2010.4 Variable remuneration will be paid following submission of the approved annual financial statements in fiscal year

2011/12. The amount may differ from the values presented here.5 Including severance payments, compensation for non-compete undertakings, one-time extra payments, allowances for

housing or relocation costs, allowances for expenses incurred for personal tax or legal advice advisors or reimbursements of schooling fees and for costs for children, in each case as applicable.

6 Non-cash benefits e.g. for private use of company car.

The Company has commitments under a provident fund for the member of the Executive Board Matthias Schubert. This relates to defined contribution obligations that are financed by way of a corresponding agreement on the waiver of salary in connection with the grant of a commitment for provident fund benefits. The monthly contribution amounts to 5 k EUR for Matthias Schubert. The premiums are not included as part of the fixed remuneration. In addition, commitments under a provident fund existed for Lars Rytter Kristensen in the previous year. He left the company in the reporting period.

Lars Rytter Kristensen, who left on September 30, 2010, received the fixed salary outstanding to the end of his normal term at the end of March 2012. The Company paid Lars Rytter Kristensen an amount of 405,159 EUR as compensation for early termination of his contract. This included the pro rata variable remuneration to which he was entitled and settlement of his residual holiday entitlement. The amounts were paid in full in the period under review.


Per Hornung Pedersen, who left on March 31, 2011 received the fixed salary outstanding to the end of his normal term at the end of March 2012. The Company paid Per Hornung Pedersen an amount of 500,000 EUR as compensation for early termination of his contract. This included the pro rata variable remuneration to which his was entitled and settlement of his residual holiday entitlement. The amounts were paid in full in the period under review.

Individual members of the Executive Board take part in the Company’s share option programs. The possibility to subsequently exercise the stock options was linked to the achievement of certain per-formance targets. In order to achieve the performance target for the 2008 option program, the EBIT margin had to amount to at least 6.3 % in fiscal year 2008 /2009 or at least 8.4 % in fiscal year 2009 /2010. A maximum of 50 % of the option rights can be exercised following the end of the legal qualifying period of two years after issue prescribed, another 25 % can be exercised three years after issue and a further 25 % four years after issue. All option rights must be exercised no later than five years after issue. Each option issued in the 2008 stock option plan allows the holder to purchase one share of REpower Systems AG at the price of 165.0 EUR. No stock options were granted to individual Executive Board members in fiscal year 2010 /11.

The following table shows the overall number of outstanding stock options per individual Execu-tive Board member as at March 31, 2011 and the relevant tranche under which a stock option was granted and the applicable exercise price:

Name Share option program 2007

Share option program 2008

Total stock options on

March 31, 2011

NumberExercise

price NumberExercise

priceEUR EUR

Andreas Nauen 1 0 0.00 0 0.00 0Per Hornung Pedersen 2 0 0.00 8,000 165.00 8,000Matthias Schubert 14,000 112.20 6,000 165.00 20,000Lars Rytter Kristensen 3 0 0.00 6,000 165.00 6,000Derrick Noe 0 0.00 0 0.00 0Gregor Gnädig 4 0 0.00 0 0.00 0

1 Andreas Nauen joined REpower Systems AG on July 1, 2010.2 Per Hornung Pedersen left REpower Systems AG on March 31, 2011.3 Lars Rytter Kristensen left REpower Systems AG on September 30, 2010.4 Gregor Gnädig joined REpower Systems AG on October 1, 2010.

Further information on share options issued and their current value can be found under Note 4.6.2 of the Notes to the Consolidated Financial Statements.


Supervisory Board

The German stock corporation law provides that Supervisory Board members may only receive remuneration for their activities if such remuneration is explicitly provided for in the relevant Ar-ticles of Association or approved by the Annual General Meeting. The remuneration has to be in reasonable proportion to the Supervisory Board members’ duties and the situation of the Company.

Under Section 12 of the Articles of Association, each Supervisory Board member, in addition to a reimbursement of expenses, is entitled to a fixed remuneration of 15,000 EUR per complete fiscal year (of twelve months). Moreover, the members of the Supervisory Board have claim to variable compensation of 1,000 EUR for each full percentage point by which the consolidated earnings margin before taxes and interest (EBIT margin) determined under IFRS has increased compared with the previous year. The variable remuneration may be capped at an amount of 20,000 EUR per fiscal year. The Chairman of the Supervisory Board is entitled to receive twice the aforementioned remuneration, the Deputy Chairman of the Supervisory Board is entitled to receive one and a half times such remuneration. If sales tax is payable on this remuneration, the Company shall reim-burse each Supervisory Board member this amount.

The following table provides a detailed overview of the remuneration payable to the individual Supervisory Board members for fiscal year 2010 /11:

Name Fixedremuneration

Variableremuneration

Totalremuneration

EUR EUR EURTulsi R. Tanti 30,000.00 0.00 30,000.00Dr. Christof M. Fritzen 22,500.00 0.00 22,500.00Girish R. Tanti 15,000.00 0.00 15,000.00Kirtikant J. Vagadia 15,000.00 0.00 15,000.00Alf Trede (until 10-2010) 8,750.00 0.00 8,750.00Kai Trede (until 10-2010) 8,750.00 0.00 8,750.00Thomas Rex (since 10-2010) 6,250.00 0.00 6,250.00Roland Fischer (since 10-2010) 6,250.00 0.00 6,250.00TOTAL 112,500.00 0.00 112,500.00

41

The Share

42 The Share

43The Share

44 The Share

The price performance of the REpower Systems AG share was mixed in 2010, before recovering sig-nificantly in the current calendar year. In comparison with the previous year’s reporting date (EUR 130.50 on March 31, 2010), the stock rose by 10.4 % (EUR 144.05).

At the beginning of April 2011, our majority shareholder provided notification that it owned more than 95 % of the voting rights in the capital of REpower. Via its Netherlands-based subsidiary, AE-Rotor Holding B.V, the Indian Suzlon Group requested the exclusion of minority shareholders against a suitable cash settlement. The squeeze out will be voted upon in the REpower Systems AG Annual General Meeting of Shareholders, which takes place in Hamburg on August 30, 2011.

Share price and performance

Stock price chart (April 1, 2010–March 31, 2011)

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45The Share

Share development – after a volatile performance, return to the level of the benchmark index – the TecDAX

Given the general economic recovery and the stabilization on financial markets, the REpower Systems AG share rice recovered overall in the last 15 months. The price performance reflected sentiment on the stock markets. As a result of the heavy debt of individual European states and the resulting measures taken by the EU governments, the financial markets reacted nervously in the first half of 2010. At the same time, the general economy appeared to be little affected. Asian markets continued to develop at great speed and the European economies also expanded – albeit at a lower level and to a variable degree. Accordingly, the financial markets calmed and the trend on stock exchanges moved back into positive territory.

During 2010, the DAX, the main German share index, rose by 16 % to 6,914 points. The DAX moved somewhat uneasily into the first quarter of 2011, but maintained the level with a slightly upward trend (April 11, 2011: 7,200 points). Our reference index, the TecDAX, rose during 2010 by 4 % to 850 points. In the first quarter of 2011, it increased sharply and was trading at around 930 points in the middle of April.

The REpower share started the financial year on the electronic transaction system Xetra at EUR 127.85 and increased during the year by 12.7% to reach EUR 144.05 on March 31, 2011. It expe-rienced a high level of volatility. After a drop in May and an interim recovery in July, the market price fell significantly in August and reached its annual low of EUR 97.00 in the second half of the month. Even though the level of fluctuation was greater, it still moved in line with the trend on international stock markets.

In the fall, a positive trend emerged, with the result that the market price began to recover again gradually and in February reached almost the level as at the start of the fiscal year. Since the second half of March, the price level has been positive. In mid April the stock was trading at approximately EUR 144.

Shareholder structure – principal shareholder increases state and aims for squeeze out

On April 4, 2011, AE-Rotor Holding B.V. informed REpower Systems AG it held more than 95 % of the share capital, which at the time of the notification totaled EUR 9.220.179. AE-Rotor Holding B.V. thus holds and controls 448,357 REpower Systems AG shares directly and 8,325,421 shares indirectly via the following subsidiaries:

SE Drive Technik, Bochum; Suzlon Windenergie GmbH, Bochum; RPW Investments SGPS, S.A., Vilar der Pinheiro, Portugal.

The shares of REpower Systems AG held by the above companies are attributed to AE-Rotor Holding B.V, as per Section 327a Paragraph 2 in connection with Section 16 Paragraph 4 AktG

At the same time, AE-Rotor Holding B.V stated that as per Section 327a Paragraph Abs. 1 AktG, at the Annual General Meeting of REpower Systems AG, it wanted to resolve the transfer of the shares of the remaining shareholders (minority shareholders) to AE-Rotor Holding B.V against a suitable cash settlement.

46 The Share

Payment of a dividend of EUR 1.50 per share

The Supervisory Board and Executive Board propose to the Annual General Meeting that a divi-dend of EUR 1.50 per share to the shareholders of the company for the last fiscal year 2010 /2011.

Share reference data

Stock market segment Prime StandardTicker symbol RPWStock exchanges Frankfurt (regulated market)

and in the OTC markets: Berlin, Hamburg, Stuttgart, Düsseldorf, and Munich

Fiscal year April 1–March 31Securities identification number (WKN) 617703International Securities Identification Number (ISIN) DE0006177033Share type No-par value ordinary bearer sharesInitial listing March 26, 2002Membership of indices Prime All Share, Technology All Share, CDAXMost recent capital measures Share capital increase by EUR 20,350

in the framework of the employee share option plans of 2005, 2006 and 2007

Share capital as at March 31, 2010 in EUR 9,220,179Market capitalization as at March 31, 2010 in EUR 1,328,166,785Designated sponsors HSBC Trinkaus & Burkhardt,

Close Brothers Seydler Bank AG

Share performance data (on Xetra) 2010/11 2009/10

Closing price on March 31 (EUR) 144.05 130.50Annual high (EUR) 144.05 148.65 Annual low (EUR) 97.00 82.05 Annual average price (EUR) 119.26 112.06Average trading volume (shares) 2,962 3,246Earnings per share – undiluted (EUR) 6.31 6.34

47The Share

Capital market communications

Prompt and comprehensive information to capital market participants

The dialogue with the shareholders and other capital market participants is of great importance to REpower. In the framework of its investor relations activities, we aim to provide transparent, prompt and comprehensive information regarding all events of relevant to the capital markets. Our communications are geared, in particular, at shareholders, analysts, economic journalists and shareholder associations.

During the reporting period, the Executive Board and investor relations team were in regular exchange with current and potential investors in Germany and abroad. To this end, we attended conferences and roadshows of relevance to the sector. At these events we informed participants were in detail on the strategy and business performance of our company. Last year, our roadshow activities took us to Frankfurt, London and Zurich. Furthermore, the Executive Board attended investor conferences in New York and Washington.

Each quarter, the Executive Board informed the public of the latest business developments in international telephone conferences. In the corresponding interim reports, the figures were also explained in detail. In order that information is as up-to-date as possible, we make all information required by law or which is relevant from a material viewpoint available on our website.

With respect to the intended squeeze out, we anticipate increased information requirements on the part of our shareholders and the public. The investor relations team is prepared for this and is happy to answer any relevant questions directly.

Financial calendar

Publication of Annual Report for 2010 /11 June 7, 2011Press and Analyst Conference 2010 /11, Frankfurt a. M. June 7, 2011Interim report on the results of the first quarter of 2011/12, telephone conference August 12, 2011

Annual General Meeting, Hamburg August 30, 2011 Interim report on the results of the first six months of 2011/12, telephone conference November 14, 2011 Interim report on the results of the first nine months of 2011/12, telephone conference

February 14, 2012

48 The Share

Coverage: Analysts evaluate shares

In the previous fiscal year, our share was monitored by three analyst financial institutions: HSBC Trinkaus&Burkhardt, Barclays Capital and Goldman Sachs. Ardour Capital discontinued coverage in the previous fiscal year.

Date Target (EUR) Recommendation

Barclays Capital 2010 / 05 /28 120 2-Equal WeightBarclays Capital 2010 / 06/04 120 2-Equal WeightGoldman Sachs 2010 / 08/12 165 BuyHSBC Trinkaus & Burkhardt 2010 / 08 115 NeutralGoldman Sachs 2010 / 11/09 125 NeutralBarclays Capital 2010 / 01/03 120 2-Equal WeightBarclays Capital 2011/ 01/11 120 2-Equal WeightGoldman Sachs 2011/ 02/02 115 NeutralGoldman Sachs 2011/ 02/08 115 NeutralBarclays Capital 2011/ 02/09 113 2-Equal Weight

Annual General Meeting of Shareholders 2010 resolved change in legal structure

The Annual General Meeting of REpower Systems AG took place on October 25, 2010 at the Hotel Hafen Hamburg with 93.9 % of the voting capital represented. The shareholders approved the proposals of the Executive Board on all agenda items. The consolidated and annual financial statements were approved and the actions of the Executive Board and Supervisory Board were approved. Other motions put to the vote were the payment of a dividend of EUR 1.57 per share for the fiscal year 2009 /10 and the election of a new auditor for the annual and consolidated financial statements 2010 /11.

In particular, the Annual General Meeting agreed to the change in legal structure, proposed by the Executive Board and Supervisory Board, from an Aktiengesellschaft (AG) into a European company, also known as a Societas Europaea (SE). The company change of legal status will presumably be successfully concluded by mid of June 2011 with the new legal firm being entered into the register of companies. It is to take account of the increasing international alignment of the REpower Group. REpower Systems SE will continue to have its headquarters and administrative center in Hamburg.

Further items on the agenda were the authorization of the company to acquire and use own shares, the annulment of the previous authorization and creation of a new authorization to issue bonds with warrants and/or convertible bonds, income bonds and/or profit-sharing rights, approval for the conclusion of a controlling and profit transfer agreement between REpower Systems AG and REpower Systems GmbH and the abolition of the existing authorized capital and creation of new authorized capital.

49The Share

Overall, the 2010/11 fiscal year was a satisfactory one for REpower. It is true to say that both revenues and earnings for 2010 fell slightly short of the previous year due to the investment restraint that currently characterizes our market. On the other hand, however, we reported incoming orders at the previous year’s level with orders of 1,252 megawatts and a volume of almost 1.4 bn EUR. The order backlog increased considerably by almost 28 % to 2,259 megawatts. Added to this was a framework agreement with a volume of up to 720 megawatts at the beginning of the new fiscal year. Relevant orders came mainly from Canada, Belgium and Germany during the reporting year. We also entered the Swedish market. Given the order book and the current market situation, allow the Group to have a positive forecast for the ongoing fiscal year.

Although the development of operating activities was characterized by restraint, REpower generated revenues of 1,216.1 m EUR in 2010/2011 (previous year: 1,303.6 million EUR). Total operating performance fell by 4.1% to 1,275.7 (previous year: 1,330.4 million EUR). The result from operating activities was 86.0 m EUR following 98.3 m EUR in the previous year. At 6.7 %, the EBIT margin was slightly down on the previous year (7.4 %).

The company continues to have a stable balance sheet: Thanks in particular to the increase in non-current assets, total assets as per reporting date again rose by approximately 30 % from 1.0 bn EUR to 1.3 bn EUR. The equity ratio fell from 46.1% to 38.6 %. The main reason for the decline is the 313.3 m EUR increase in total assets, caused by the sharp rise in current assets and current, non- interest-bearing liabilities. With liquidity exceeding 320 m EUR, our Group has great economic scope.

In terms of products, we added to our portfolio in both the 3.XM and the MM series. Our offshore turbines have proven to be hugely successful in operation. Another success was obtaining unit certificates for our onshore turbines in accordance with the technical requirements of the Renewable Energy Act (EEG) and the System Service Ordinance (SDLWindV). This made REpower the first wind turbine manufacturer to have received unlimited unit certificates (EZE) for its onshore turbines.

The current economic situation and the resulting political discussions are creating good conditions for positive business development. We are expecting to increase our earnings in the current fiscal year again compared with 2010/11. To achieve this, we will continue to process our core markets in Europe and abroad as well as opening up new markets, if necessary.

Consolidated Management Report of REpower Systems Group and REpower Systems AG

50 Management Report

51Management Report

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Business Model and StrategyREpower is positioning itself as an international manufacturer of high-quality wind turbines in what is currently a dynamic energy market. The market is and will continue to be characterized by heavy competition. REpower responds to this situation with active marketing activities and increased cost and process efficiency. We will further leverage on our core strengths of: Product portfolio, product quality, technological skill and service.

Corporate Structure

Development, manufacture, sales and maintenance of wind turbines

REpower Systems AG is an international solution provider of both onshore and offshore wind power plants. With a broad range of wind turbines covering all relevant wind and location con-ditions, the company is assuming a position as technological leader. Building on this strength, REpower intends to continue processing its existing core markets in future while strategically developing new markets. We consider not only the onshore market but also the offshore market to be very important.

REpower Systems AG is headquartered in Hamburg. The administrative center is in City Nord, in the north of the city. As per the reporting date, the total number of employees was 2,456, with 629 outside Germany.

REpower operates globally, with an export rate of more than 77% (installed and delivered tur-bines in fiscal year 2010/11). Although the core markets are Europe and North America, the Group also operates in Asia and Australia. REpower maintains partnerships in all relevant wind locations.

In terms of new installations, REpower Systems AG increased its market share in Germany from 8.8 % to 10.3 % in 2010. This made REpower the third largest manufacturer of wind turbines in Germany in 2010 as in the previous year.

In 2010, the company achieved a worldwide market share of 2 % following 3.4 % in 2009, thus falling from 10th to 12th place in the rankings of the largest international wind turbine manufac-turers. It is worth mentioning that global market shares are influenced by the massive installation volumes of wind turbines of Chinese manufacturers which however are mainly active in their domestic markets. On the other hand, foreign companies can hardly participate at the growing Chinese market.

Management Report

53Management Report

Product portfolio satisfies broad demand profile

The product portfolio is comprised of three series of wind turbines with rated output of 1.8 to 6.15 megawatts (MW) and rotor diameters ranging between 70 and 126 meters. The MM series was launched in 2002 with the MM70 (rated output of 2 megawatts, rotor diameter of 70 meters) and expanded in subsequent years to include further turbines (MM82, MM92). In fall 2010, MM100 with a rotor diameter of 100 meters and a rated output of 1.8 MW was added to the portfolio. The turbine was designed specifically for the North American 60Hz market. With the MM series, REpower became the first wind turbine manufacturer to obtain an unlimited unit cer-tificate as defined by the System Service Ordinance (SDL WindV) during the reporting period.. This certifies full compliance with the strict German grid requirements and guarantees customers the highest possible feed-in tariffs.

The 3.XM series was added to the onshore portfolio in 2008: The REpower 3.4M104 with rated output of 3.37 megawatts and rotor diameter of 104 meters and the REpower 3.2M114 with rated output of 3.17 MW and rotor diameter of 114 meters are worthy successors to the successful and reliable technology of previous series. Both types of turbine are available in a number of versions with different hub heights between 80 and 143 meters and guarantee high-level operating effi-ciency even at low-wind locations. The three-megawatt versions are also available with a hybrid tower design: Pre-fabricated cement tower segments connected with steel tower elements were used for hub heights exceeding 100 meters.

The 5M and 6M onshore/offshore turbines are a further addition to the turbine portfolio in the multi-megawatt class. With rated output of 5,075 kilowatts and rotor diameter of 126.5 meters, the 5M is one of the world’s largest and highest performing wind turbines. With rated output of 6.15 MW, the REpower 6M is the technological successor to the 5M as well as being suited for use in deep waters.

With the exception of 1.5 MW technology (MD type series) which is now exclusively sold through licensing, the company manufacturers these turbines itself, building and commissioning them in line with customer specifications.

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The current portfolio consists of the following products:

Turbine type Rated power Rotor diameter Hub height Certification

6,150 kW 126.0 m

Offshore ~ 85.0–95.0 m

(site specific)

Onshore 100.0 m, 117.0 m

Offshore IEC Class IB,

REpower S Classes,

Onshore IEC Class IB / IIA

5,075 kW 126.0 m

Offshore ~ 85.0–95.0 m

(site specific)

Onshore117.0 m

Offshore IEC Class IB,

REpower S Classes,

Onshore IEC Class IB / IIA

3,170 kW 114.0 m

93.0 m

123.0 m hybrid tower,

143.0 m hybrid tower (in 2012)

IEC Class IIIA

3,370 kW 104.0 m

80.0 m, 93.0 m,

100.0 m

128 m hybrid tower

IEC Class IB/IIA / IIIA

1,800 kW 100.0 m 80.0 m (2012)

REpower S Class, IEC IIIA

annual wind, IEC IIA

extreme wind

2,050 kW 92.5 m68.5 m, 80.0 m,

100.0 mUp to IEC Class IIA

2,050 kW 82.0 m

59.0 m, 69.0 m, 80.0 m,

100.0 m

Up to IEC Class IA

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All series and turbines are based on the proven REpower technology, achieving top values in terms of energy production, dependability and grid compatibility. This high-quality power genera-tion technology makes extremely economical operation possible over the entire useful life. Since commencing operations in 2001, REpower Systems Group has erected over 2,700 turbines with total output of over 5,000 MW.

Services cover the entire value creation chain

REpower gradually built up its range of services in the years after it was founded. As a result of the low vertical integration, the company is extremely flexible. This means that in terms of opera-tions the company can react very quickly to market changes. Knowledge and experience accu-mulated at the various stations along the value creation chain are bundled and distributed back to the departments through regular contact. This ensures that new insights quickly flow into our products and services, enhancing quality.

Key portfolio components include “maintenance and service”

In addition to design, manufacture, sales and construction, REpower offers customers a broad range of individually tailored service and maintenance options. This highlights our aim to en-sure that our turbines are consistently available in the long term. We connect every turbine for which we provide service and maintenance into the Permanent Monitoring System (PMS). This is an electronic remote monitoring system that monitors all turbines – onshore and offshore – 24 hours a day, 365 days a year. At the same time, we check all turbines every six hours and collect es-sential operating data such as performance, electricity output, availability, status lists and tempera-tures in a database. This allows comprehensive fault analysis if necessary. Our emergency service is also available 24 hours a day to deal with exceptional faults. However, the objective is to avoid urgent call-outs and to carry out necessary maintenance work in the context of planned operations.

With our maintenance and service, we offer our customers comprehensive support for their wind turbines. The customers themselves decide which services they wish to receive. This customized service concept has proven successful: REpower is in a leading competitive position due to the particularly high level of technical availability afforded. The well established international service network allows efficient maintenance in the case of malfunction of a wind turbine. This regionali-zation concept means that the time required to reach a wind turbine in need of maintenance in Germany is no longer than one hour.

The German Wind Energy Association (BWE) performs an annual service survey for the German market in order to determine the level of satisfaction among wind farm operators with the services provided by established wind turbine manufacturers and dependent companies on the market. Regular services as well as maintenance and repairs are evaluated. Among the established manu-facturers, REpower Systems AG moved up to second place in 2010 with the overall grade of 2.65. In the previous year, the company was still in fourth place with an overall grade of 3.06.

Management Report


Production chiefly in Europe

A large number of the onshore REpower wind turbines are produced in Germany: This includes the manufacture of nacelles for the MM series the port city of Husum in Northern Germany. Another production location for nacelles of the 2-megawatt class is in the town of Trampe in Brandenburg, near Berlin. The production facilities for the series production of REpower 5M/6M offshore wind turbines, the 3.4M104 and rotor blades are located in Bremerhaven. The company PowerBlades GmbH located in Bremerhaven is a joint venture founded in 2007 by REpower and FVT Beteiligungs- & Verwaltungs GmbH, Lemwerder (a subsidiary of the SGL Group).

Outside Germany, REpower produces nacelles and hubs in the Portuguese town of Oliveira de Frades. In February 2011, REpower acquired the 50 % share held by Martifer in the 50:50 joint venture, REpower Portugal Sistemas Eólicos S.A. founded by the two companies in 2005. Since then, REpower Portugal has been a wholly owned subsidiary of REpower Systems AG. REpower Portugal’s area of business includes manufacturing, erecting and marketing wind turbines of the 2-megawatt class.

REpower also produces rotor blades in the Vagos (Portugal) via its investment RiaBlades, a wholly owned subsidiary of the Portuguese tender consortium Ventinveste SA, that was founded in 2007 by REpower and other companies including Galp Power and the Martifer Group as part of a tendering procedure. The management of RiaBlades is subject to the Portuguese rotor blade manufacturer PowerBlades S.A. which was founded in 2007 as a joint venture between REpower Systems AG and Martifer Group. At that time REpower owned 90% of the rotor blade manufac-turer. At the beginning of 2011 REpower acquired Martifer’s 10 percent share and since then is the sole owner of the company.

Cost-cutting measures introduced

In view of the price and margin pressure, REpower introduced extensive cost-cutting measures and implemented corresponding programs with it suppliers during the reporting period. Addi-tional cost advantages are to be gained, chiefly through purchasing components in Asia, i.e. China and India in particular. To begin with, the company will make use of existing established suppliers with suitable production sites in Asia.

There are also plans to produce complete nacelles in Asia. Turbines produced in Asia are to be initially supplied to Australia, New Zealand and the USA.

Marketing: Global presence thanks to a broad network of branches and partners

The branches in Europe, America, Asia and Australia are responsible for marketing. REpower has European distribution subsidiaries in the UK (Edinburgh), Spain (Madrid), France (Paris), Italy (Milan) Portugal (Oliveira de Frades) and Sweden (Västerås). Outside Europe, the company has distribution subsidiaries in the USA (Denver), Canada (Montréal and Toronto), China (Beijing) and Australia (Melbourne).

57Management Report

Establishment of a subsidiary for the domestic market

REpower Systems GmbH is an independent company founded on October 1, 2010 that focuses on processing the core markets of Germany and Austria. REpower Systems GmbH is headquartered in Hamburg and bundles onshore wind turbine marketing, project management and service for both markets. The new company has approximately 200 employees recruited from REpower AG. In founding REpower Systems GmbH, REpower is aiming to strengthen its position in Germany and Austria on a long-term basis. Faster decision-making channels and improved transparency are to help the company respond more flexibly to customer wishes.

Development activities in Osterrönfeld (Schleswig-Holstein)

Since the spring of 2010, REpower has conducted development activities in a newly built, cutting-edge facility in Osterrönfeld, located in Rendsburg-Eckernförde County in the German state of Schleswig-Holstein. The location provides technical support as well as service for the company units and customers. The Permanent Monitoring System (PMS) department has also been located in Osterrönfeld since May 2010: The department is responsible for remote monitoring of the global turbine fleet.

Another component of the REpower development center is the facility in Osnabrück. The en-gineering office, which is located here, works in close coordination with REpower engineers in Osterrönfeld, particular with regard to load and dynamic simulation of REpower wind turbines.

Goals and strategy

Positioning as an international technology and quality provider

Today, wind energy is a key component of the energy mix. Recent events in Fukushima/Japan have focused attention once again on the topic of renewable energies. The market for wind energy cur-rently enjoys a high level of growth in the industrial nations as well as in the emerging economies.

Given this increased interest and increasingly advanced technology, the current installation trend is towards large, high-output wind farms. At the same time, the market is characterized by in-creasing competition which goes hand in hand with growing price pressure. In addition to demand for onshore turbines, demand for offshore turbines is also set to increase – even if this area requires an extremely high level of investment for operators. All in all, we assume that the wind power market is on the threshold of the next level of industrialization. The surging pressure for supply from Asia will not only increase competition but also accelerate development of the market as a whole – in terms of both volume and technology.

While remaining mindful of the high price pressure, REpower is positioning itself in this environment as a provider of technology and quality for a broad portfolio of onshore and offshore wind turbines capable of providing top-quality support for wind turbines over their entire life cycle. The principal elements of this positioning are:


System integration: REpower specializes in solutions for the entire lifecycle of a wind turbine. The solutions are tailored as necessary.

Quality: REpower solutions are always of the highest quality. This extends to turbine output and reliability, as well as process aspects such as delivery times and support.

Technology leadership: Continuous research and development contribute to and consolidate REpower‘ s technology leadership. This in turn ensures the company’s ability to provide the highest performing turbines in terms of energy efficiency and reliability.

Vision: Growth in the core markets, deliberate expansion into new markets

In the coming years, REpower’s aims to consolidate its position among the leading manufacturers of wind turbines as a provider of premium products. To remain competitive in a rapidly growing market with intensifying price competition, the company is integrating a growth component into its strategy: REpower also is pursuing the expansion of market share in relevant regions around the world.

Europe and North America continue to be REpower’s core markets. The company is also focusing on the offshore turbine business:

Core market Europe: REpower generates the most organic growth in Germany, France, the UK and Italy. Thanks to successful new turbine installations, the company intends in future to expand progressively the network of countries in the European domestic market. The newly founded REpower Systems GmbH, which commenced operations in October 2010, is to support future sales in the domestic market of Germany as well as Austria.

Demand in the European market has been steady at solid rates, and in most countries the politi-cal framework is now very favorable. In the years ahead, REpower intends to continue expanding to achieve a position among leaders in the European market.

Core market North America: REpower considers the US and Canadian markets to be the most promising growth region outside Europe. One of the world’s largest wind power markets, the US is now growing very fast; this is not expected to change for the next several years. The Canadian market is just picking up on wind power. For the North America region, our goal is to grow our market share significantly in the next years.

Core market Offshore: In our view, sea-based wind turbines represent the third particularly attractive market. REpower enjoys a major technology advantage over most competitors in this area, which we intend to capitalize on.

In addition to the core markets defined, REpower is open to further regional expansion options. The current discussions related to energy policy could lead in the short or medium term to attractive options not only in Germany but also in other countries.

59Management Report

Corporate Management

Company looks at earning power taking into account capital commitment

Successful corporate management requires a clear strategic alignment and the use of metrics for gauging the effectiveness of actions taken. At REpower, operational and strategic decisions are primarily made on the basis of profitability forecasting, factoring in the income statement, the liquidity position and established balance sheet ratios. The three core metrics followed are:

Revenue (as growth indicator) EBIT and EBIT margin (as earnings metrics) Net working capital (as a measure of capital commitment in operating liquidity)

The Executive Board and division managers regularly meet to discuss the company’s goals, strategy and progress towards goal attainment.

Management and Supervision

Traditional distribution of tasks between Executive Board and Supervisory Board

REpower has a dual management and supervisory structure. The Executive Board sets out corporate strategy and goals. It is also responsible for ensuring their implementation. As the second corporate body, the Supervisory Board regularly advises the Executive Board and constantly monitors its activity. As per reporting date, the Supervisory Board comprised six members.

Information on the interaction between the Executive Board and the Supervisory Board, the work of the committees as well as other issues related to company management and Corporate Governance can be found in the Corporate Governance part of the annual report.

Changes to the Executive Board

During the period under review, the company reorganized responsibilities on the Executive Board. On July 1, 2010, Andreas Nauen became CEO of REpower Systems AG. As Chairman of the Executive Board, he is responsible for business policy guidelines, corporate strategy, issues relating to the Supervisory Board and the area of corporate compliance. Andreas Nauen’s responsibilities also in-clude the areas of communications, personnel and health & safety. In addition, he is in charge of the activities of the offshore business unit.

On July 1, 2010, the former CEO Per Hornung Pedersen assumed the newly created position of Chief Market Officer in which he was responsible until resigning his Executive Board mandate on March 31, 2011 for marketing and sales, support for large customers, contract risk management and government relations. Per Hornung Pedersen left the company on March 31, 2011. Per Hornung Pedersen’s tasks were assumed by CEO Andreas Nauen. Following Per Hornung Pedersen’s departure, the Executive Board was reduced to four members as per April 1, 2011.

With effect from October 1, 2010, Gregor Gnädig took up the Executive Board role of Chief Operating Officer (COO). Gregor Gnädig replaced Lars Rytter Kristensen, who left the company on September 30, 2010. As Chief Supply Chain Officer (CSCO), Lars Rytter Kristensen had previously been respon-sible for areas such as purchasing, materials management, logistics and production. Gregor Gnädig is to continue with the optimization of the process chain at the company initiated by his predecessor.

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Non-financial performance metrics

REpower: Organic growth, connected with the market

Besides economic performance, REpower’s success depends considerably on non-financial factors. In the past, we repeatedly benefited from the fact that our structures and processes (internal) as well as our business contacts and markets (external) developed organically. This kept operating risks at a manageable level and gave us a high level of credibility in our dealings with customers. The contacts that we have established over the years are sustainable and assist us in expanding our business. This creates a stable basis for our business.

Focus: A key service but, as such, the entire value creation chain

REpower is focused exclusively on the business of wind turbines. This gives our organization a dis-tinct profile in the market. Having entered the market early, REpower has accumulated extensive expertise. Because of these factors, REpower today serves customers along the entire value creation chain. Processes are inter-coordinated and established.

Technology and quality focus: High standards make us reliable for customers

Since the beginning, REpower has been all about technology and quality. That is why we regularly commit major financial resources to research and development. Our aim is to develop further our products on an ongoing basis and to generate innovations. We aim to distinguish ourselves from our competitors through our superior performance. Proof of our performance can be seen in the energy efficiency of our turbines and our pioneering role in offshore technology. This kind of performance justifies the trust placed in us by our customers and will gain us the trust of new partners.

Patents and licenses: Protected knowledge that gives us the edge

We also conduct basic research in collaboration with our partners in our own facilities. This enables us to achieve the competitive edge again and again. Since it was founded, REpower has filed for 620 international patents for its developments within 153 different patent categories. Our inno-vative capability makes us highly flexible, affording tremendous developmental market potential.

REpower utilizes a portion of its technological edge in awarding licenses to international wind turbine manufacturers. Upon concluding a licensing agreement, the licensee receives all relevant documentation and information it requires to construct its own REpower wind turbine. Licensees also receive training from REpower personnel on turbine construction. Thus far most licenses have been for the REpower MD series and its predecessor models.

Stable customer structure: Long-standing relationships and renowned customers

We have gradually built up our customer base over years of market activity. Our experience shows that first customers repeatedly place follow-up orders. Very large customers have also been attracted recently. These include major international utilities such as RWE Innogy, Vattenfall, E.ON, EDF, Enel and Electrabel. These are important references for us that make it much easier to approach big new customers. An additional benefit of large customers is the high likelihood of repeat orders.

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Management and employees: Growth drivers and guarantors of performance

REpower’s management has lot of experience in the sector and is very familiar with the interna-tional markets, where it acts confidently in terms of operations and strategy. The employees also perform to a high level within our functional structures. We give them active support with per-sonnel services geared to the individual. REpower regularly checks and reviews the processes and structures. This ensures that our employees can contribute their skills and abilities to the best effect for the company.

Research and Development

Development work smoothes the way for the company’s success in the future

The success of REpower Systems Group depends largely on our its development capacity. REpower is positioned in the market as a quality and technology leader. Over the years, we have consistently done justice to this claim with our innovative developments. In addition to the development of new, highly efficient product lines, research and development efforts focus on ongoing optimization of existing products, services and key components such as rotor blades. Our continuous R&D work also bore fruit in 2010.

3.XM series portfolio expanded

In April 2010, REpower presented two new series 3.XM variants at the European Wind Energy Conference and Exhibition (EWEC) in Warsaw. This means that series 3.XM includes two different turbine types: The REpower 3.4M104 turbine with a rotor diameter of 104 meters and rated out-put of 3.37 megawatts introduced in 2008. It is now available with three different hub heights: REpower now offers a 128-meter hybrid concrete and steel tower in addition to the two steel tower versions with hub heights of 80, 93 and 100 meters respectively. This turbine can also be deployed optimally in lower wind speed areas and in hilly or forested terrain. The first two three-megawatt turbines with 128-meter hybrid towers were erected at the end of 2010.

In fall 2010, we made a second version available, the REpower 3.2M114 with a rotor diameter of 114 meters. With rated output of 3.17 MW the turbine with its rotor surface of more than 10,000 square meters can boost power generation at low-wind locations by as much as 10% versus the 3.4M104. The proprietary RE 55.8 rotor blade developed by REpower Systems AG is used with this product.

In March of this year, we presented a type 3.2M114 turbine with a hub height of 143 meters at the EWEA Annual Event in Brussels. With its rotor diameter of 114 meters and rated output of 3.17 megawatts (MW), the turbine is particularly suited to low-wind locations. The construction uses the economical hybrid tower type of construction with concrete and steel. The manufacturing principle also makes it extremely easy to dismantle.

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MM100: Product adapted for the American market

In November 2010, we presented a new MM series wind turbine, the REpower MM100, at the Ca-nadian wind power trade fair, CanWEA. The turbine was specially adapted for the North American market and a 60 hertz version will be available in future with a hub height of 80 meters and rated output of 1.80 megawatts. The REpower MM100 is to be used in particular in regions with low wind speeds and, with an extended rotor diameter of 100 meters, will increase the energy output. The first pilot turbines are set to be installed by the end of this year.

Unit certificate for all onshore turbines

In February 2011, REpower received a unit certificate from GL Renewables Certification for new 3.4M104 turbines. The certificate confirms that the wind turbine (production unit) meets the technical requirements of the Renewable Energy Act (EEG) and the System Service Ordinance (SDLWindV) beyond June 30, 2011. As a result, REpower was the first wind turbine manufac-turer to have received unlimited unit certificates (EZE) for its onshore turbines. In addition to the 3.4M104, the MM82 and MM92 were also certified last year. New 3.2M114 turbines are initially subject to prototype rules and are expected to receive unit certificates by the end of 2011. The SDLWindV currently does not include certification of turbines installed offshore.

The System Service Ordinance (SDLWindV), which came into effect in July 2009, sets out extensive technical and operational requirements for wind farms in Germany. The ordinance is intended to increase the security and stability of Germany’s electricity grids, even with a high proportion of wind energy in the grid. Technological development is also being driven forward in this area. The ordinance also provides a system service bonus intended to offset the cost of more complex turbine technology, additional expenses involved in planning activities and engineering services and expenses for refitting and assessing/certifying wind farms.

The certifications confirm that the technical system utilized by REpower conforms to the exten-sive technical and operational requirements under the Renewable Energy Act (EEG) and the System Service Ordinance (SDLWindV) that went into effect last year in Germany.

The economic benefit of the certificate was reaped for the first time in August 2010 when the wind farm in Dithmarschen county (Schleswig-Holstein) was constructed: In one of the largest repowering projects in the region, 29 older turbines were replaced with 15 high-performance multi-megawatt turbines of the MM series. The total output of the Kronprinzenkoog wind farm was almost tripled as a result. The project was the first REpower wind farm to receive a turbine certificate under the System Service Ordinance (SDLWindV).

Offshore skills consolidated: 5M and 6M turbines achieve high-level technical availability

Over the past years, REpower gained a level of skills with respect to offshore turbines that sets us apart from the majority of competitors. The REpower 5M turbines in the Thornton Bank wind farm (Belgium) have been in operation since mid-2009 and produce top values in the key per-formance indicators. The availability of the six REpower turbines exceeds 97%. This puts them on the same level as onshore turbines despite the adverse service conditions in the open ocean.

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In order to allow utilization of REpower’s proprietary control unit, REguard Control B, also in series 5M turbines and to meet the stricter grid connection requirements, seven of the existing onshore wind turbines have now been converted to use the new control unit. All turbines are running in automated mode. In future all 5M turbines will be equipped with the REguard Control B unit. For example, the entire Ormonde project that is currently realised in the Irish Sea, is being supplied with REguard Control B.

The three REpower 6M test and reference turbines on the German-Danish border run reliably in automatic mode. The extensive measurements of the electrical properties and the output curve are almost complete. Further measurements will follow in order to qualify second source suppli-ers. The 6M’s guaranteed output curve was 100% confirmed and the unit certificate, necessary for obtaining the SDL bonus in Germany, has also been awarded. Moreover, negotiations are being held on constructing additional 6M turbines at onshore test locations to gain further experience operating what is currently the most profitable wind turbine for the offshore market in prepara-tion for large-scale offshore projects.

In April 2010, REpower in conjunction with Deutsche Offshore-Testfeld und Infrastruktur-GmbH (DOTI) and other project partners commissioned the first German offshore windfarm, alpha ven-tus. Six of the 12 wind turbines constructed at the offshore test field are turbines of the 5M type, with a rated output of 5 MW each. The REpower turbines at the alpha ventus wind farm have so far achieved excellent results in operation.

The REpower proprietary rotor blade for the 6M (RE61.5) is entering the final phase of development: Validation on site. PowerBlades GmbH,will commence series production in the next few months.

Basic research via the Renewable Energy Technology Center (RETC)

A second mainstay of our research work has been the 50:50 joint venture, Renewable Energy Technology Center GmbH (RETC), founded in 2008 in Hamburg by REpower and SE Drive Technik (a subsidiary of REpower’s main shareholder Suzlon). The purpose of the RETC is to bundle resources in the area of research and technical training and to promote cooperation with universities, etc. The RETC is active in basic research, innovation, training, validation and technical processes.

With regard to training, the RETC Academy offers a training series for qualification as a Certified Project Manager in conjunction with the Biberach Technology and Business Academy. This educa-tional course can be officially completed by taking an examination at the University of Siegen and is offered to other interested companies as well as to REpower and Suzlon employees.

Research and development expenditure

During the 2010/11 reporting year, the company spent 36.9 m EUR (previous year: 25.6 m EUR) on research and development. During the reporting period, license revenues amounted to 7,5 m EUR (previous year: 8.6 m EUR), approximately 0.6% of the Group’s total revenues.

Management Report


Environment and business development

In 2010 and the first quarter of 2011, the global economy was showing sings of recovery. At the same time, the market for wind turbines in 2010 continued to struggle with delay effects with the result that manufacturers failed to benefit to the extent expected from the improvement in the economy. By concluding important international contracts in the second half of the fiscal year, REpower reported good incoming orders overall. Nevertheless, the company’s income statement contains a 6.7% decline in revenues for the fiscal year. Since the conditions for further positive development are good, the Executive Board’s forecast for the revenues and earnings in the coming year is positive. This still depends on the economic situation remaining stable.

Economic and industry developments

Development of the gross domestic product 2009 2010 2011

in % in % in %

USA –2.4 2.8 3.1Eurozone –4.1 1.7 1.6Germany –5.0 1.7 1.7China 8.6 10.3 10.0India 5.7 8.8 9.0World economy total –1.0 4.8 4.3

Source: IfW Kiel

Global economic recovery increasingly stable in 2010

In the second half of 2009, the global economy picked up momentum again to stabilize its upward trend in 2010. Following the 1% decline in value creation in 2009, economic performance rose worldwide by 4.8 %. This meant that the recovery was considerably faster than expected. Important drives of the overall economic recovery were production and trade in the developing and emerging nations. Countries such as China (+10.3 %) and India (+8.8 %) continued to pursue their dynamic growth path of previous years.

Growth was significantly less dynamic in the industrialized countries. However, they too achieved a turnaround and reported positive figures following the sharp decline in 2009. Production in the US grew more rapidly (+2.8%) than in the euro zone (+1.7%). Overall, any analysis of the performance figures in the industrialized nations must take into account the fact that growth there was also temporarily supported by monetary and economic measures and, in some cases, still is. The situation within Europe varied in 2010: While the economy developed to a stable plus in Germany (+1.7%), countries such as Greece and Portugal struggled with a severe recession.

The upturn in the global economy accelerated slightly at the start of 2011. However, according to the Institute for the World Economy (IfW) in Kiel, a number factors suggest that the global economic upturn is set to lose momentum slightly this year: In the emerging countries there are stability risks from the strong economy which the governments are countering with restrictive measures.

65Management Report

In the industrialized economies, consolidation measures arising from financial policy and the re-duction of the degree of expansion related to monetary policy have a slowing effect. In the short term, the increase in oil prices is also expected to curb global economic expansion noticeably. Rising raw material and energy prices are also likely to have a curbing effect on the economy. According to the IfW, the economic recovery in Germany is so advanced that utilization of production capaci-ties in the economy as a whole will return to normal this year. In this case, the Institute expects capacity utilization to increase even if the speed of expansion declines slightly. Two thirds of con-tinuing upturn in 2011 is expected to be sustained by domestic demand. Economic performance in Germany is likely to increase by 1.6% in 2012. There will be a deceleration because the expansive momentum from exports will weaken to some extent and endogenous forces within Germany will curb the economy or, at least, reduce the rate at which it grows. These mainly include a slight clouding of the monetary situation and reduced profit margins.

Price performance to normalize by 2010, clear increase at the start of 2011

According to the Federal Office of Statistics, the annual inflation rate in Germany was 1.1% in 2010, which was considerably higher than the previous year (0.4%). Nevertheless, it was still significantly lower than the inflation rate in most years. The threshold value of 2% key to mone-tary policy was not overshot in the annual average or in the individual months. The prices rose sharply at the end of the year: By December, the inflation rate was as high as 1.7%. The price development continued with this tendency into 2011.

The trend was similar in the euro zone: In March 2011, the annual inflation rate in the euro zone was 2.6%. The present increase reflects the higher commodity prices according to the Harmonized Index of Consumer Prices (HICP). The price pressure resulting from the sharp increase in energy and food prices is also evident in the earlier stages of the production process. The European Central Bank (ECB) does not expect the increased inflation rate to lead to second round effects in wage and price-setting behavior. For this reason, no broad-based inflation pressure is expected in the medium term.

Labor market: Germany continues to recover, rates high in European crisis countries

As the economy recovered in 2010, so did the labor market: Between February 2010 and February 2011, the employment rate in Germany rose by 1.3% to approximately 40.25 million people. This meant that 500,000 more people were in employment than in the same month of 2010. The un-employment rate was 7.9% in February compared with 8.6% in the previous year. The Federal Employment Agency’s own index (BA-X), an indicator for labor demand, also recorded a positive trend. This puts Germany in an excellent position compared with other countries. The unemploy-ment rate in the EU was 9.5% at the beginning of the year; this rate is heavily influenced by the situation in countries such as Spain, Greece, Ireland and the Baltic States. The unemployment rate in the US was 9.0%.

66

Export: German exports up by 18.5% in 2010

In 2010, Germany exported goods to the value of 951.9 bn EUR and imported goods to the value of 797.6 bn EUR. As a result, German exports rose by 18.5% and imports by 20.0% against 2009. Foreign trade closed 2010 with a surplus of 154.3 bn EUR (2009: +138.7 bn EUR.). The export sur-plus rose by 11.2% compared with the previous year. In 2010, goods to the value of 570.6 bn EUR were imported into European Union member states goods to the value of 503.8 bn EUR were ex-ported. Compared with 2009, imports into the EU states rose by 14.0% while exports from these countries rose by 17.5%.

Significant fluctuations in exchange rates, low interest rates

There was considerable fluctuation in the exchange rate for the euro in 2010: After a drop in the first six months, the euro gained considerably against the US dollar until the beginning of November when it dipped slightly again. By March 2011, the euro had made up most of its exchange losses. The reasons for the fluctuations were the assessments of the viability of finances in some euro zone countries and the publication of unexpectedly weak figures for the US economy. The common currency rose against the US dollar by a total of 6.2% from November 30, 2010 to March 2, 2011 and the latest USD/EUR exchange rate was 4.2% above its average price in 2010.

In April 2011, the European Central Bank (ECB) decided to raise the key interest rates by 25 basis points, after it had been kept at a historically low value for almost two years. The reasons are the upward risks to price stability identified in the economic analysis.

Energy prices increase in line with economic recovery

Electricity prices rose in recent quarters in line with the economic recovery and the associated increased consumption. While the EEX baseload price – the average price measured quarterly for baseload electricity on the European Energy Exchange in Leipzig – was still 3.876 cents/kilowatt hour (ct/kWh) in the final quarter of 2009, it rose steadily in the course of 2010 and reached the 5.185 cent/kilowatt hour mark in the first quarter of 2011. As a result, the electricity price is still considerably lower than in January 2009, at 5.712 ct/kWh.

EEX Baseload Price

Quarterly price in ct / kWh

1. Quarter 2010 4.1022. Quarter 2010 4.1523. Quarter 2010 4.3814. Quarter 2010 5.1491. Quarter 2011 5.185

Source: http://kwk-infozentrum.info

Management Report


Wind power capacity rose worldwide in 2010 by 22%, slight decline in growth rate

The economic and financial crisis of 2009 led to numerous projects on the wind power market be-ing postponed. Nevertheless, there was another sharp increase in the number of new installations: According to the Global Wind Energy Council (GWEC), 35.8 gigawatts of new output were installed last year. Total output therefore rose by 22.6% from 158.5 gigawatts in 2009 to 194.4 gigawatts. The new installations were connected with an investment volume of 47.3 bn EUR. In relation to the amount of newly installed output, growth fell for the first time in 20 years, i.e. by 7%. For the first time, growth of newly installed output was driven by countries other than the tradi-tional markets of Europe and the US. China was the main growth driver in 2010 which, with output of 16.5 gigawatts, accounted for almost 50% of growth. Positive developments in countries like India (2.1 gigawatts), Brazil (326 megawatts), Mexico (316 megawatts) and also in North African countries signal that demand from new markets will increase in the future.

In 2010, there was a significant decline in the growth rate in the US, traditionally one of the strongest markets. New installations fell by 50% to 5 gigawatts compared with 2009. Neverthe-less, USA continued to be the most important market alongside China. Together, the two countries accounted for more than 60% of newly installed output. Compared with the USA, the decline in Europe was moderate. Here, newly installed output amounted to more than 9 gigawatts in 2010.

Country MW %

China 16,500 46.1USA 5,115 14.3India 2,139 6.0Spain 1,516 4.2Germany 1,493 4.2France 1,086 3.0UK 962 2.7Italy 948 2.6Canada 690 1.9Sweden 603 1.7Top 10 total 31,052 86.3Rest of World 4,750 13.3World total 35,802 100.0

Source: GWEC, Global Wind Report, Annual Market Update 2010

Country MW %

China 42,287 21.8USA 40,180 20.7Germany 27,214 14.0Spain 20,676 10.6India 13,065 6.7Italy 5,797 3.0France 5,660 2.9UK 5,204 2.7Canada 4,009 2.1Denmark 3,752 1.9Top 10 total 167,844 86.3Rest of World 26,546 13.7World total 194,390 100.0

Source: GWEC, Global Wind Report, Annual Market Update 2010

Top 10 cumulative capacity 2010

USA

India

France

UK

Denmark

Canada

Spain

China

Rest of World

Germany

Italy

Top 10 annual installed capacity 2010

ChinaUSA

GermanyRest of World

SchwedenCanada

Spain

ItalyUK

India

France

Europe: Level of new installations fell by 10%

According to the European Wind Energy Association (EWEA) capacity of 9.3 gigawatts was installed in Europe in 2010, i.e. 10% less than in 2009. This meant investments of 12.7 bn EUR. The wind power share in total installed energy output was 17%. As a result, wind power accounted for the second largest installation volume following gas (28.3 GW and 51% share).

Of the 9.3 gigawatts capacity installed in the EU countries, 8.2 gigawatts related to onshore and 883 megawatts to offshore installations. Compared with the previous year, this means that the increase in new onshore installations declined by 15% while offshore installations rose by 51%. In terms of individual countries, Spain accounted for the largest share of newly installed capacity in 2010 with 1.52 gigawatts or a share of 16%. This was followed closely by Germany with around 1.5 gigawatts. Installation data in both markets was considerably lower than in 2009: 38% in Spain and 22% in Germany. While France remained constant with 1.09 gigawatts of newly installed output, the UK declined by almost 11% with 926 megawatts. Italy also recorded declines with installed output of 948 megawatts; however, Sweden increased considerably with 603 megawatts of new output. Further increases were observed in Rumania, Poland, Portugal and Belgium.

Country %

Spain 16.0Germany 16.0France 12.0UK 10.0Italia 10.0Sweden 6.0Romania 5.0Poland 4.0Portugal 4.0Belgium 4.0Denmark 4.0Other 9.0World total 100.0

Source: EWEA, Wind in Power, 2010 European Statistics


EU member state shares for new capacity 2010

Basis: 9,295 megawatts

France

Sweden

Romania

Poland

Belgium

Portugal

Italia

Spain

Other

Germany

UK

Denmark

Germany: Some general conditions difficult

According to the German Wind Energy Association, around 1.5 gigawatts of new output was in-stalled in Germany in 2010. Compared with the value measured for the previous year, this cor-responded to a decline of as much as 22%. The German Wind Energy Association attributes the decline in new installations on the domestic market – the value fell to the 1999 level – not only to delayed effects of the financial crisis on major projects but also to uncertainty regarding grid requirements for wind turbines. According to the BWE, another obstacle was produced by the lim-ited land development rights in some German states: In some cases, height restrictions and spac-ing control caused additional obstacles.

By contrast, the area of Repowering, i.e. exchanging old turbines for new, higher-capacity tur-bines, performed positively: 116 wind turbines with a total capacity 56 megawatts were replaced by 80 turbines with 183 megawatts of capacity in 2010. According to the Association, the fact that 9,500 turbines could be repowered by 2015 leads to of 40 bn EUR. The Association sees a positive signal in the offshore development. However, the failure to attain the forecast figures also shows that this market segment has yet to acquire the desired momentum.

Situation in Japan stirs up political considerations

Over recent months, the nuclear disaster in Fukushima/Japan has stirred up political discussion among all parties with respect to power supply. In April 2011, Chancellor Angela Merkel and the Minister Presidents of the federal states announced their intention of legally anchoring wind power in Germany by the end of the summer. According to them, the goal is not only to withdraw from nuclear energy but also to re-regulate the expansion of the electric grid and, therefore, the desired growth of renewable energies. With this aim in mind, key points for the planned amend-ment to the Renewable Energy Act (EEG) are to be worked out over the next few months.

Federal Environment Minister, Norbert Röttgen, is focusing increasingly on wind power for the future expansion of renewable energies, both onshore and offshore. To this effect, he intends to ensure that a uniform planning law with identical spacing and height regulations is implemented for wind wheels throughout the whole of Germany.

69Management Report

Company performance and earnings situation

General assessment

Satisfactory business performance in view of slow market recovery

Overall, the 2010/11 fiscal year was a satisfactory one for REpower. The targets set were not achieved due to the unexpectedly slow demand on the market for wind power. Nevertheless, REpower again generated respectable revenues of 1,216.1 m EUR and operating earnings of 86.0 m EUR. At 6.7%, the EBIT margin was lower than the previous year’s level of 7.4%; on the back of high competitor activities leading to reducing prices that become a norm in the low demand scenario.. Incoming orders performed well over recent months so that the overall situation in spring 2011 indicates a positive trend.

In principle, REpower will continue to pursue the path it has mapped out during the ongoing year and aim for renewed growth following a relatively weaker year.

Orders and installed capacity

Slight decline in installed capacity

During the reporting period, the company supplied or installed capacity of 851 megawatts, a slight decline over the previous year (863 megawatts).

With a total volume of 909.8 m EUR (previous year: 1,096.8 m EUR) we again generated the by far biggest part of revenue (74.8%) selling onshore wind turbines and providing the relevant infrastruc-ture. In the Offshore segment, the revenue contribution was increased by 83.1%: It rose from 113.0 m EUR in fiscal year 2009/10 to 206.9 m EUR. The segment Maintenance and Service contributed 84.5 m EUR to the Group’s total revenue in the reporting period (previous year: 71.0 m EUR).

2010 /11 2009 / 10

m EUR m EURTotal revenue 1,216.1 1,303.6

thereof Onshore 909.8 1,096.8thereof Offshore 206.9 113.0thereof Maintenance/Service 84.5 71.0thereof other 14.9 22.8


Orders: High incoming orders in second half of fiscal year

REpower reported significant international incoming orders in the 2010/11 fiscal year. The new orders came both from the core markets as well as new countries including Sweden. The capacity from new orders was 1,252 megawatts (previous year: 1,281 megawatts). The order volume was 1.36 bn EUR compared with 1.52 bn EUR in the previous year. The relatively lower order volume compared to the ordered capacity reflects the tougher competitive situation on the market.

Germany: Restrained order situation in 2010/11

In September, we signed a contract with wind farm project developer Denker & Wulf AG based in north Germany for delivery of 22 wind turbines to Mecklenburg-West Pomerania. The REpower 3.4M104 turbines, each with 3.37 megawatts (MW) of rated output are intended for the project in Hohen Luckow south west of Rostock. The total rated output of 75 megawatts is expected to be installed by the summer of 2012. This is the first large-scale project for which REpower has constructed this type of turbine with a hub height of 128 meters and a hybrid tower consisting of concrete and steel.

At the company’s headquarters in Hamburg, we concluded a contract in November with the municipal utility HAMBURG ENERGIE for a REpower 3.4M104 wind turbine. The turbine, which has a rated output of 3.37 megawatts and a hub height of almost 100 meters is expected to be erected by the end of 2011 on the “Energy Mountain” in Georgswerder and act as a source of information about renewable energy for visitors.

Europe: Major order from Belgium, entry into Swedish market

In April 2010, REpower signed a contract with a subsidiary of the Tozzi Group in Italy for delivery of some 37 megawatts (MW) to expand the Savignano wind farm in Italy. REpower had already agreed the delivery of 31 turbines with TRE&P project companies in the previous year.

In France, we achieved a milestone regarding installed capacity in June. Since entering the market in 2002, we have erected some 500 turbines with a total output of one gigawatt. This corresponds roughly to 20% of France’s wind power capacity.

In September, we entered the market in Sweden: REpower is to supply three turbines of the MM92 type for the Klågerup wind farm in Sweden by late fall of this year. In November, we agreed a contract with the Akka Vind AB for delivery of the Kiaby wind farm close to Kristianstad with a further three MM92 turbines. This is also set to be commissioned in the fall.

71Management Report

As part of its entry to the Swedish market, REpower founded the subsidiary REpower Systems Scandinavia AB in Stockholm and opened an office in Västerås (100km west of Stockholm). The rea-son for this decision is that we see Sweden as an important future market for wind power. According to estimations from the Swedish wind power association, Svensk Vindenergi, approximately 6,000 megawatts of onshore wind power is to be installed in the country by 2020. Up to now only a very small proportion of this has been installed. With the targets set by the Swedish government for in-creasing renewable energy, the simplified planning and approval process and the joint certification market with Norway to take effect in 2012, a supportive regulatory system for wind power projects is in place. In order to secure new contacts, the REpower presented itself for the first time at VIND, the Swedish trade fair for the sector, in Gothenburg.

In November, we concluded two contracts with the UK for delivery of a total of 43 megawatts for the Withernwick and Hyndburn wind farms in the counties of Yorkshire and Lancashire. The total of 21 wind turbines of the MM82 type are to be commissioned during 2012.

In November, REpower signed a contract with the offshore project development company, C-Power, in Belgium for delivery of a total of 48 REpower 6M wind turbines.

The offshore turbines with a total output of approximately 295 MW are intended for phases 2 and 3 of Belgium’s first offshore wind farm, Thornton Bank. The installation of the first 24 tur-bines is planned for phase II in spring 2012, while a further 24 6M turbines are to be constructed by mid-2013 in phase III. A consortium consisting of seven commercial banks in conjunction with the European Investment Bank will provide approximately 900 m EUR to finance the project. The to-tal investment – including refinancing of the first project phase – will amount to some 1.3 bn EUR.

North America: Slowdown in US orders, record contract with Canada

Last year, we concluded contracts in the USA for installation of 70 megawatts: In the State of Michigan, we will be constructing nine MM92 turbines, each with a rated output of 2.05 megawatts and hub height of 100 meters by the summer of 2011 for the Stoney Corners III project. Follow-ing Stoney Corners I and II, this is the third joint project in the region between REpower and the project developer, Heritage. In December, a contract was concluded with EverPower Wind Holdings for delivery of 25 MM92 wind turbines with a total rated output of some 51 megawatts. The turbines erected on top of 80-meter high towers are expected to be commissioned in by the end of 2011 in the US States of New York, Ohio, Pennsylvania and/or Washington.

The orders from the USA also include options for the delivery of up to 155 more wind turbines of the MM class.

At the start of the 2011 calendar year, REpower reported company’s largest ever order. We con-cluded a contract with the consortium Saint-Laurent Énergies (SLE), Canada, for delivery of 150 wind turbines. The turbines have a total capacity of 300 megawatts and are intended for the Lac Alfred wind farm project in the Canadian province of Quebec. REpower will deliver, install and put into service 54 turbines of the MM82 type and 96 turbines of the MM92 type in two phases. The first 75 turbines are to be commissioned by December 2012, another 75 turbines in 2013.


Revenue and Earning Position

Total operating performance fell by 4.1% to 1,275.7 m EUR over previous year

In light of the challenging market dynamics in the previous fiscal year, revenue in the REpower Group decreased in fiscal year 2010/11 by 6.7% from 1,303.6 m EUR to 1,216.1 m EUR. After increased in-ventory changes and work performed by the entity and capitalized in comparison with the previous year, total operating performance for the fiscal year amounted to 1,275.7 (previous year: 1,330.4 m EUR). As a result, total operating performance declined by 4.1% over the previous year.

Revenues development (bn EUR)

1.4

1.2

1

0.8

0.6

0.4

0.2

0

2006 2007 2008/09 2009/10 2010/11 Year

The revenue generated in the reporting year was due to the installation of wind turbines with a total output of 851 megawatts (previous year: 863 megawatts).

Revenues are determined in accordance with the percentage of completion method (IAS 11): As a result, both completed projects and projects in work are reflected in revenues.

During the fiscal year, the company reported other operating income of 38.1 m EUR (previous year: 19.5 m EUR). This change was chiefly the result of the increased income from exchange rate differences, a compensation payment from the termination of a framework agreement as well as from an increase in carrying amount related to a company acquisition affecting net income.

Expense items: Improved cost of materials ratio, significant increase in personnel expenses

In line with the reduced total operating performance, the cost of materials, our largest expense item, also decreased compared with the previous year by almost 5.1% from 1,000.7 m EUR to 950.0 m EUR. The cost of materials ratio was again reduced: It fell from 75.2% to 74.5%. This improvement is due particularly to the renegotiation of purchase contracts in the previous fiscal year.

We recorded a significant increase in personnel expenses: These rose by around 15 % from 103.0 m EUR to 118.4 m EUR. The increase is due mainly to the increased number of employees (+ 359 employees or 17%), resulting particularly from the first-time consolidation of three companies in Portugal. The personnel expense quote in relation to the total operating performance was 9.3% (previous year: 7.7%).

73Management Report

Depreciation of property, plant and equipment and amortization of intangible assets increased from 20.7 m EUR by 6.1 m EUR to 26.8 m EUR (+29.5 %). The reason for this was the first-time, scheduled amortization connected with the investments in the TechCenter in Osterrönfeld and the production facilities in Bremerhaven made in previous years.

At 132.7 m EUR, other operating expenses were slightly higher than in the previous year (127.2 m EUR).

EBIT falls to 86.0 m EUR

Earnings before interest and taxes (EBIT) fell from 98.3 m EUR by 12.5% to 86.0 m EUR. As a result, the EBIT margin declined over the previous year (7.4%) at 6.7%. This is due to an increase in fixed costs which, despite the improved gross margin resulting from the decline in total operating per-formance and revenues, was not fully compensated for.

The financial performance improved from -16.5 m EUR to -4.7 m EUR. Financing expenses decreased with increased income on interest and similar financing income. The negative result arose mainly from guarantee fees. In the previous year, one-time expenditure of 5.93 m EUR was recorded in the context of a syndicated loan agreement concluded in the fiscal year and a high volume of utilized guarantees.

The improved financial result means that, at 80.9 m EUR, earnings before tax (EBT) was only slightly down on the previous year (83.9 m EUR).

After tax expenses of 23.3 m EUR, the Group reported consolidated net income for the year of 55.6 m EUR, slightly below the previous year’s figure of 57.9 m EUR (-4%). The tax rate is 28.8% (previous year: 30.9%).

Due to a Management Board resolution for proposed in the sale of REpower North (China) Ltd., assets and liabilities of the company are classified as held for sale. The company that was founded as a Joint Venture produces REpower wind turbines for the market North China and is disclosed in the segment onshore. Conclusion of the sale transaction is expected in February 2012.

Undiluted earnings per share decreased from 6.34 EUR to 6.31 EUR. Diluted earnings per share rose from 6.11 EUR to 6.13 EUR. The table below shows a split between coninuing and discontinued operation.

Key ratios 2010 /11 2009 /10

EBIT margin in % 6.7 7.4Gross profit margin in % 25.5 24.8Earnings per share (undiluted) in EUR 6.31 6.34

thereof from continuing operation 6.43 6.34thereof from discontinued operation -0.12 0.00

Earnings per share (undiluted) in EUR 6.13 6.11thereof from continuing operation 6.25 6.11thereof from discontinued operation -0.12 0.00


Financial position and net assets

The REpower Group showed solid figures for fiscal year 2010/10 in terms of financial position and net assets. The statement of financial position showed net assets up and a decline in the equity ratio The financial situation is good: With liquidity exceeding 320 m EUR, our Group has a wide economic scope.

Financial management

Active finance policy based on conventional principles

REpower pursues active financial management based on underlying entrepreneurial principles. The Group financing policy objectives are to secure liquidity, contain financial risks and optimize financing costs. The specific financial activities are based on operating requirements and the company’s strategic alignment.

Company has substantial financing leeway

Financing requirements primarily stem from guarantees in order to hedge advance payments and contractual obligations. As at the reporting date, available credit lines amounted to 641.2 m EUR, 100 m EUR of which represented cash credit lines and 541.2 m EUR guarantee lines. This includes an amount of 41.2 m EUR jointly backed by other lenders. The other 600 m EUR is provided as part of a syndicate credit facility granted for a period of three years.

The credit loan agreement contains common rights of termination for the lender that become valid as soon as regulated defaults occur. These violations include contracts of domination- or profit transfer agreements, the failure to comply with certain financial covenants or a change of control. With agreement concluded with financing banks a covenant breech of the syndicated credit facilities could be avoided retrospectively as per March 31, 2011.

The terms are variable and oriented to debt levels. Interest rate risks may arise from changes in the EURIBOR rate if cash credit lines are drawn on. Interest rates are thus hedged for a certain base amount.

As at March 31, 2011, credit lines of the syndicated credit facilities had been drawn on in the amount of 412.9 m EUR exclusively for sureties and guarantees.

The loans were taken out primarily for the long-term financing of investments in production facili-ties and are mostly fixed-rate: The risk arising from variable interest rates has been hedged.

Treasury monitors currency risk

Exchange rate risks arise from business operations when payment is due in foreign currency. The primary risks are in connection with the currency pairs EUR/USD, EUR/CAD, EUR/AUD and EUR/GBP.

The Treasury centrally measures and assesses risks in connection with foreign currency transactions/payments, utilizing direct reporting from the subsidiaries and business units.

75Management Report

The company conducts hedging transactions to contain these risks. Currency futures, swaps and options are utilized to hedge currencies risks arising from operating activities. Transacting or holding such contracts is not intended for trading or speculation purposes but to hedge risks from the change of raw material and purchase prices, currency exchange rates and interest rates as well as stock prices.

Asset and capital structure

Total assets rise to 1.3 bn EUR, equity ratio falls

Total assets increased in the reporting period from 1,032.6 m EUR to 1,345.9 m EUR. This was an increase of 30.3%. The change results, among other things, from an increase in liquid funds, inventories and a rise in plant, property and equipment as well as goodwill.

As a result of the positive net income for the year, equity rose considerably by 42.9 m EUR to 518.9 m EUR. As at the reporting date, the equity ratio declined by 7.5 percentage points to 38.6% (previous year: 46.1%). Despite the reduction, this continues to provide a very stabile foundation for the Group’s business.

2010 /11 2009 /10

m EUR m EURAssetsCurrent assets 1,042.7 826.8Non-current assets 272.0 205.8

Assets of disposal group of classified as held for sale 31.2 0Equity and liabilitiesShareholders‘ equity 518.9 476.0Liabilities 820.8 556.7

thereof current 718.9 480.7thereof non-current 101.9 76.0

Liabilities of disposal group of classified as held for sale 6.2 0Total assets 1,345.9 1,032.6

Assets: Slight decline in current assets as a percentage of total assets over previous year

Current assets rose by 215.9 m EUR or 26.1% from 826.8 m to 1,042.7 m EUR. The increase re-sulted from a further increase in liquid funds (+104.5 m EUR), gross amount due from customers for contract work as an asset (+25.4 m EUR) and inventories (+ 62.1 m EUR). The increase in liquid funds is due to working capital optimisation measures.


Trade accounts receivable (+9.3 m EUR) increased by 14.7% over the previous year. The reason for this is a high project realization volume in the final weeks of the fiscal year. Intragroup receivables were considerably down on the previous year (- 9.9 m EUR) as were receivables from associated companies and joint ventures (-2.3 m EUR). Other assets, including down payments to suppliers, rose again last year (+16.2 m EUR); however, they are still well below the level of 2008/09.

Current assets amounted to 77.5% of total assets (previous year: 80.1%).

Non-current assets rose significantly by 66.2 m EUR or 32.2% from 205.8 m EUR to 272.0 m EUR. The rise is due to the increase in property, plant and equipment (+29.3 m EUR) and goodwill (+31.5 m EUR). Goodwill amounting to 33.1 m EUR as per record date rose primarily as a result of the acquisition of three Portuguese companies. The first-time consolidation resulted in a preliminary value of 31.5 m EUR.

There was also a slight increase in other intangible assets (+9.1 m EUR). The figure for other finan-cial assets rose over the previous year by 1.1 m EUR. At 4.1 m EUR, the item deferred tax assets was slightly above the previous year’s level and posted a tax credit with respect to the tax base (+0.7 m EUR.)

Equity and liabilities: Current liabilities increase by 51.7%

Debt increased by 264.1 m EUR from 556.7 to 820.8 m EUR, reflecting a rise in current liabilities in particular. Current liabilities increased significantly year-on-year by 238.2 m EUR from 480.7 m EUR to 718.9 m EUR due to an improved working capital management. Driving positions were trade accounts payable which rose by 93.8 m EUR from 140.3 m EUR to 234.1 m EUR and the down payments received. These rose by 118.3 m EUR from 197.3 m EUR to 315.6 m EUR. The gross amounts due from customers for work as a liability decreased from 42.0 m EUR to 11.7 m EUR.

Provisions increased again as a result of increased warranty provisions and reached 95.7 m EUR (+ 34.5 m EUR).

Current loans grew by 11.5 m EUR due to a profit participation capital of 10.0 m EUR with a residual term ending during the year. Due to purchase price obligations of 15.0 m EUR related to the acquisi-tion of three Portuguese companies, other current liabilities also rose by 11.3 m EUR to 33.7 m EUR.

Non-current liabilities increased substantially year-on-year by 29.5 m EUR to 101.9 m EUR. The change resulted from an increase in the non-current loans (+ 7.4 m EUR), other financial liabilities (+14.9 m EUR) and deferred taxes (+13.5 m EUR). On the other hand, the burden from participation right options incurred in the previous year no longer applied.

Key economic figures

The figures utilized as metrics by REpower for assessing the asset and capital structure are still producing favorable figures, the equity ratio being 38.6%, which is still within a robust range. Debt is at a level that leaves us substantial leeway for further debt financing.

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Capital expenditure

In fiscal year 2010/11, REpower invested 72.3 m EUR in property, plant and equipment and in-tangible assets Group-wide (previous year: 49.7m EUR). In the reporting period, the major cause of the increase in property, plant and equipment as well as in intangible assets results from the acquisition of three Portuguese companies (37.7 m EUR). In addition, the company acquired rotor blade molds to the value of 11.4 m EUR during the fiscal year.

Liquidity

High liquidity

At the end of the year, the company posted liquidity of 320.4 m EUR (previous year: 215.9 m EUR). On the other hand a very small amount of interest-bearing liabilities are in place. Short-term loans amounted to 15.6 m EUR (previous year: 4.1 m EUR). As a consequence the interest paid was re-duced from 16.8 m EUR to 11.1 m EUR. Interest received increased from 3.1 m EUR to 6.5 m EUR. As such, the company continues to enjoy a good liquidity situation. In the current environment, good liquidity is critically important for our sustainable operation of business and to finance the ongoing business and future projects. It forms a core part of our required operating capital, which is the main cornerstone of staying competitive and is a prudent business practice and therefore, the need to maintain a strong cash balance.

Cashflow from operating activities resulted in an inflow of 190.6 m EUR (previous year: 119.3 m EUR). Capital expenditure increased from 49.7 m EUR to 72.3 m EUR and was more than covered by the operating cashflow. An outflow of 15.2 m EUR resulted from financing activities mainly caused by the dividend payment (14.4 m EUR). In the previous year the inflow from financing activities amounted to 31.7 m EUR, which was amongst others due to 32.8 m EUR proceeds borrowings.

Employees and responsibilityThe success of a technology and service-oriented company such as REpower depends in particular on the skill and commitment of its employees. For this reason, professional personnel manage-ment is very important to us. As we wish to operate dynamically in a fast-moving market, we are looking for the best people in the industry. Last year again we took a number of measures to enhance recruitment.

Personnel

HR concepts are characterized by internationalism and levels of individual responsibility

In an international company like REpower, it is not only an employee’s professional strengths that are promoted but also their intercultural skills. Their activities also require flexibility and positive attitudes such as the courage to act independently. This means that all employees are exposed to high requirements during their working day. As a result of the high competitive pressure, the organi-zational procedures in our company are subject to constant review. They are regularly adjusted to changes in framework conditions. Job profiles are individually coordinated to one another, meaning that every single employee is important for the correct functioning of the whole.


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Given such requirements, a corporate culture that is connected to our value system is a par-ticularly important basis for the company’s success. Our corporate philosophy is largely based on responsible and autonomous management within a framework of considerable decision-making leeway for every individual.

Number of employees

The number of employees at REpower grew considerably in the fiscal year. Including the interns, stu-dents and trainees, at March 31, 2011 the company employed 2,456 staff members worldwide, 359 or roughly 17% more than in the previous year. This growth resulted primarily from the first-time consolidation of Portuguese subsidiaries (141 employees). The number of employees at our German parent company REpower Systems AG was 1,354 at the reporting date. This figure does not include the 206 employees of REpower Systems GmbH founded on October 1, 2010. The company’s fully consolidated subsidiaries employed 1,225 people; 629 of these worked in foreign subsidiaries.

Development total number of employees in the group

3,000

2,500

2,000

1,500

1,000

500

0

2006 2007 2008/09 2009/10 2010/11 Year

Last year trainees accounted for 4.2% of staff at REpower Systems AG (previous year: 4.1%). This represents 57 individuals.

Last year, we also gave a large number of interns and students opportunities to learn about our company. It is thus evident that we not only do more than most to fulfill our responsibility to create opportunities for young people entering the job market, but also do our best to discover young talent people at an early stage and to commit them to our company.

Of particular note are the excellent final grades achieved by our trainees. REpower has received awards for special services to professional training from the Chamber of Trade and Industry in Kiel. In order to give our trainees the best chances of establishing their professional careers on comple-tion of their training, REpower extended its guaranteed employment offer from 6 to 12 months. During their training, we already offer trainees a view of the bigger picture. A group of trainees from Trampe was given the opportunity to visit their colleagues in the Edinburgh branch and to provide hands-on support. Both teams enjoyed the visit and hope to repeat it in the near future.

Personnel development

Qualification: Offers were largely accepted again in 2010/11

Our personnel policy focuses on identifying potential as well as promoting performance and development. In the year under review, 1,819 employees (previous year: 1,893) in and outside Germany were offered continuing education seminars on occupational health and safety, train-ing in new areas, products/contracts, technology, IT/SAP, foreign languages managerial/work techniques and processes. This meant a total of 9,709 people attended training courses. The continuing education offering is regularly updated and expanded to future requirements and the results of annual employee appraisal meetings. Information on the standard continuing education program is posted on the intranet and available to all staff members.

Junior Management Program

Our first new Junior Management Program (JUMP) was successfully completed in the summer of 2010. The analysis of the program showed that only a few points in the planned continuation of the program need to be optimized. A particular highlight was one group’s final participation in the MARGA Business Simulation at Schloss Gracht.

Specialist careers

The focus of the specialist career is to develop talented young people and to commit specialists to our company. REpower thus offers its employees an alternative to the conventional management career. Specialists are the drivers of growth at REpower in the strategically important areas and, as such, contribute to securing our competitive position.

Specialist levels have been defined similar to management levels. The nomination process has been initiated and the first specialists will be appointed at the start of the next fiscal year.

Talent Management

Last year, our worldwide continuous talent management was launched, focusing on management positions. The discussion of development and successor scenarios during talent conferences is the basis for filling key functions in future, successor planning and manager development. The conferences were chaired by the Executive Board and managers from our HR Business Partners.

REpension PLAN: Pension plan model

The attractiveness of our pension solutions is highlighted by the increase in the number of people insured from 374 to 417 employees as per March 31, 2011. This corresponds to 11% growth.


Workplace safety and health: REpower is also certified in accordance withinternational standards

In addition to DIN EN ISO 9001 certification customary in Germany, REpower also holds inter-nationally recognized Safety Certificate Contractor (SCC) certification. SCC certification means that independent auditors from the Bureau Veritas Group have verified REpower’s compliance with stringent SCC requirements concerning health and safety at work, labor law protection, accident prevention and working conditions. Requirements for obtaining certification include all employees of the applicant business receiving annual instruction from the company’s health and safety officer.

During fiscal year 2010/11, there were a total of 41 (previous year: 35) workplace accidents. The sickness rate remained constant at 3.3% in the past fiscal year. (previous year: 3.3%)

Core values and corporate culture

The 5 Ps for a successful future

To operate successfully as a company even under challenging conditions, it is important to have a clear orientation for our common activities. Common values are the key to success.

The new REpower values were worked out last year by an international work group led by Human Resources: The 5 Ps. Employees from different areas and management levels developed a basic framework for the five values. The corporate values were then the subject of intensive discussions with the Executive Board and finally approved. The result is five values formulated in English for an international audience. These are Passion, Pride, Partnership, People and Performance and Safety.

Passion: We are passionately committed to wind power and the environment. We believe in what we do and are happy to be making optimum use of natural resources.

Pride: We are proud of being able to offer our customers added value in the form of excellent products and services. We work tirelessly on becoming better.

Partnership: Partnership is a key component of our understanding of values. We deal openly with one another on the basis of communication. In close collaboration with our stakeholders, we are always open to new ideas for supporting our partners and customers.

People: Our employees represent our company in the wider world. Our work is characterized by mutual respect, trust and openness. This allows us to grow together. We promote our talents, provide transparent feedback and support commitment.

Performance & Safety: Our aim is to move forward and to assert ourselves among the com-petition. With this goal in mind, our commitment is unconditional, without however neglecting safety aspects. We provide appropriate solutions and actively make use of opportunities. Our organization rewards responsible behavior and performance.

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It is essential for the viability of corporate values that employees be involved in the process of developing them, active discussion with employees and actual implementation of the values. This is why Value Days have been held, starting with the German locations, in which the Executive Board presented the values and employees dealt with the values in workshops.

Values incorporated into the executive role model

Our values are the expression of our individual corporate culture and should form a leitmotiv for the basic understanding of all employees.

If our values are to be accepted, they must be implemented by our management team. Therefore, one key point was to anchor them in our executive role model.

For us, responsibility is an indispensable benchmark: We wish to be perceived as a company that acts responsibly and can be measured according to how it deals with specific everyday matters.

REpower is regarded by students as one of the 100 most popular employers

REpower has been ranked among the 100 most attractive employers for the first time. According to a survey into favored employers conducted among students of engineering sciences by Berlin-based consultants, Trendence, REpower is ranked no. 70. This result reflects the company’s strengths: Innovative products, specialist expertise and the strong commitment of our employees, creative and development opportunities – also on an international level.

Risk Management

Risk management system

REpower Systems AG operates in an environment featuring a host of opportunities and risks that could affect the company as external factors or could actually arise from business activities.

Opportunities arise for REpower Systems AG in particular from increased interest in renewable ener-gies as well as the planned withdrawal from nuclear energy following the tragic events in Japan. REpower Systems AG expects considerable growth momentum in the future, particularly as a result of the extensive political support for renewable energy. The development of new geographical markets and offshore energy also presents additional opportunities for REpower Systems AG, as do the further development of the product portfolio and maintaining technological leadership.

Running a business requires taking risks, commensurate with the opportunities at hand. REpower Systems AG has implemented a risk early warning system in line with Section 91 (2) AktG. This allows systematic and structured recording, documentation, analysis and addressing of risks and counter-measures for minimizing the risks.

As part of Group-wide risk management at REpower Systems AG, all material risks pertaining to the current and the following fiscal years are identified and assessed as to the potential damage amount of resulting financial impact and likelihood of occurrence in the course of quarterly risk invento-ries. The assessment of financial impact is measured in terms of EBIT or liquidity. REpower Systems AG has outlined binding risk policies to ensure proper, forward-looking risk management, and pro-duced detailed training documentation for employees. These are regularly reviewed to ensure they are up-to-date.


Operating units have general responsibility for the early identification and management of risks pertaining to their specific areas. A risk owner is assigned to each risk, who is responsible for monitoring that risk. This individual is also responsible for monitoring any established leading indi cators and taking steps to contain and document risks. The risk owner must also ensure that the measures are implemented. Thorough risk monitoring is ensured along the value creation chain. A two-level process is in place for documenting and releasing documented risks before for-warding to Risk Management for further analysis and review.

REpower Systems AG’s internal binding risk policies to ensure proper risk management specify that unexpected risks must be reported immediately to the Executive Board regardless of the regular quarterly reporting dates.

Central Risk Management regularly reports in detail to the Executive Board and Supervisory Board Audit Committee on risks affecting any area of the Group, and on changes in REpower Systems AG’s risk situation and any countermeasures taken.

In fiscal year 2010/11, the risk management system was audited for the first time by an external auditor with respect to its efficiency and effectiveness in order to ensure compliance with the German Accounting Law Modernization Act (BilMoG). The audit gave rise to no objections.

Discussion of specific risks

For better manageability, risks identified are categorized into specific risk categories. The sequence in which risks are discussed has no bearing on the potential extent of financial impact or likelihood of occurrence. Strategic and economic risks

REpower Systems AG sees particular strategic risk-related challenges in connection with the competitive environment, especially with respect to remaining competitive, the appearance of new competitors in the market and the launch of new products by competitors. These also include the risks associated with entry into new geographical markets or areas of business as well as the overall development of the global economy.

Despite the positive progress made by individual economies, the general situation remains uncer-tain. This results in ongoing lending restraint. As a result of the euro crisis and the consolidation of state budgets together with the associated cost-cutting requirements aiming at reducing high levels of national debt, it is possible that individual or several countries will be more restrained about achieving climate goals. There is also a risk of increased protectionism.

The nuclear disaster in Japan can lead German politicians to commit themselves to withdrawal from nuclear energy. While this may lead to a resurgence of demand for renewable energies to satisfy energy demand on the one hand, the capital for investment in renewable energy may be capped on the other hand as a result of the amounts required.

Business-related risks include sales risks. These arise particularly due to the risk of postponement of individual projects by customers of REpower Systems AG. Overcapacities and intensive price pres-sure continue to result in increased price pressure on the market. REpower Systems AG counters this risk in particular by maintaining technological leadership and concentrating on the quality of its products.

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REpower Systems AG is not owner of the word and picture mark “REPOWER” but has the right to make use of both marks based on and within the framework of a fixed-term license agreement until the end of 2012.

The same applies for affiliated companies disposing of the right of utilization for the brand resulting from correspondent sub license contracts.

Preparations of rebranding are currently underway. REpower committed itself to search for brand alternatives intensively within the last contract year 2012 and to reduce the utilization of the brand REPOWER accordingly already within the year 2012.

Financial risks

Financial risks having a direct impact the financial situation of REpower Systems AG. For example, cash flows in foreign currencies create foreign a currency risk, which is managed centrally by the Treasury in accordance with internal policies. Hedging transactions may be concluded to contain foreign currency risk resulting from underlying exposures.

Given the uncertainty as to the economic outlook there is additionally a risk of interest rates rising. Interest rate hedging transactions are also conducted in accordance with internal guidelines speci-fied to manage this risk.

Other significant financial risks to a company include credit, default and liquidity risk. A credit review process is in place for managing credit and default risk, which is always conducted by Sales prior to concluding agreements and at other times during the customer relationship. The creditworthiness of customers and guarantors is reviewed as a means of containing default risk, also to assess the adequacy of any collateral provided.

The risk of being unable to meet current or future payment obligations, or of only being able to do so under changed conditions, is known as the liquidity risk. This is centrally managed by the REpower Systems AG Treasury department. This risk may arise in particular from mismatches be-tween payment collections and payment obligations. Rolling liquidity planning is used to manage this risk. Here, the Group companies report their expected payments and receipts over the short to medium term. The liquidity situation is thus constantly reviewed and is also reported on to the Executive Board every week.

All credit lines and loans are monitored by the lender in relation to metrics like EBITDA, equity and debt levels. Financing in place can only be withdrawn for extraordinary reasons, including failure to meet such financial targets.

Technological risks

The development of new technologies and optimization of existing technologies are inherently bound up with considerable potential risks. If development requirements of the market or individual customers cannot be implemented, this may lead to a market launch being delayed and, therefore, drive up development costs. Extensive testing and simulation is conducted to manage this risk. If the development of the offshore market fails to meet expectations, the financial position, results of ope rations and business development of REpower Systems AG may be significantly affected.


Intensive research and development efforts are conducted to mitigate the risk of losing technology leadership. In addition, patents held by others may limit developmental options.

There is also the risk of defective purchased components creating production defects in entire series. A number of measures are in place to counter this risk: Careful monitoring of production by Quality Control, extensive warranty agreements with suppliers and insurance coverage featuring an appropriate deductible.

REpower Systems AG manages technological risks in connection with promised performance by obtaining coverage under insurance contracts featuring an appropriate deductible.

Supply chain risks

Supply chain risks consist of procurement risks and production risks. Since the situation on the procurement markets remains relaxed in line with developments in the global economy, there is currently no fear of supply shortages. However, there continues to be a risk of overstocking with individual components as a result of purchase commitments under long-term framework agree-ments. Intensive negotiations are being held with the individual suppliers to minimize this risk.

Fluctuating commodity prices affect the financial and earnings situation of REpower Systems AG, as they can have a negative impact on the prices for individual purchased components. There is also a general risk of supplier default. This risk is controlled by Purchasing with a detailed supplier management system that takes various factors such as the individual supplier’s financial situation into account.

In relation to components manufactured by only certain manufacturers, there is a risk of dependency on individual suppliers. REpower Systems AG is responding to this risk by increasing in-house pro-duction. REpower Systems AG has frounded the joint venture PowerBlades GmbH to produce rotor blades. In August 2008, the Bremerhaven plant commenced production of rotor blades; in addition, with the acquisition of REpower Portugal, we dispose of further capacities for rotor blade production.

Operational risks

The main risks classified by REpower Systems AG as operational pertain to operating structures and processes, including staff and IT infrastructure-related risks. Surging business volume has necessitated the implementation of revised staffing structures at REpower Systems AG in all areas, with positions to be filled by qualified, skilled personnel. There is thus a staffing risk on all levels. A loss of expertise due to employee turnover cannot be ruled out, particularly with regard to certain key positions.

To minimize risks connected with IT system failures REpower Systems AG again implemented numer-ous security measures in fiscal year 2010/11 (including firewalls, antivirus software and authoriza-tion rules). REpower Systems AG is working steadily on IT processes supporting internal structures.

The weather additionally poses a risk to installation activity, particularly offshore, potentially hampering operations.

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Legal and regulatory risks

The international character of REpower Systems AG’s business entails legal risks in various countries with differing legislation and specifications, which naturally relate in particular to legal court and out-of-court claims from third parties as well as, for example, to contractual relationships with customers and suppliers and to general legal developments.

Appropriate steps have been taken to manage litigation risks in coordination with the relevant departments. REpower Systems AG creates provisions for legal disputes if the obligations arising from them are likely to take effect and the amount of the obligations can be determined to a sufficiently accurate degree. However, it is possible that provisions formed for pending cases may prove to be inadequate and that, as a result, considerable additional expenses may be in-curred due to final judgments in some of these cases. This also applies to legal disputes for which REpower Systems AG sees no need to establish provisions.

The outcome of legal disputes can never be absolutely predicted, as this is the nature of litigation.

The company does not at this time view any ongoing litigation as having a material influence on earnings going forward in view of allocated provisions and insurance held.

Various legislative changes, both national and (non-) European, could also affect the financial situation, earnings or net assets of REpower Systems AG. Among other things, these include changes to legislation affecting renewable energies subsidies and feed-in tariffs. Since REpower Systems AG operates internationally, this also applies to legislative changes outside Germany. This could lead accordingly to changes in demand.

General assessment

Regular assessment of REpower Systems AG‘s risks situation includes examination of the potential overall impact of all individual risks in combination. To our knowledge, REpower Systems AG is not at this time exposed to risks directly or indirectly jeopardizing the company as a going concern, either individually or in combination.

Internal control system and risk management system concerning the financial reporting process (Information pursuant to the Sections 289 (5) and 315 (2) No. 5 of the German Commercial Code (HGB) and Explanatory Report)

The objective of the internal accounting control system at REpower Systems AG is to avoid the risk of material misstatements in accounting, to identify significant incorrect assessments and to ensure compliance with the relevant accounting regulations.

This involves Group-wide standardized accounting policies as well as regular performance and documentation of preventative and exploratory audits.

The plausibility of project calculations is also regularly reviewed. Ongoing calculation means that the development of project costs can be precisely monitored at the time of creation. Suitable organi zational measures such as separation of functions and control review, regular analysis of key figures by Controlling, and procedural instructions (i.e. account assignment manual, inventory procedures) ensure proper preparation of financial reporting. A standardized procedure is guaran-teed by a number of Group-wide specifications and guidelines.


Internal Audit regularly reviews the effectiveness of the internal control system and strict adher-ence with such procedures as control review, separation of functions and authorization rules. The Executive Board and Supervisory Board Audit Committee are notified regularly of material review/audit findings.

The effectiveness of the defined checks carried out by the Internal Control System is reviewed annu-ally by Internal Audit in order to meet the requirements of the German Accounting Law Moderniza-tion Act (BilMoG). During 2010/11 fiscal year, REpower Systems AG also initiated a review of the report prepared by the Internal Audit department on the internal control system by an external auditor in respect to the methodology and the efficiency and effectiveness of the tests implemented by the Internal Audit department. The review did not raise any objections.

Supplementary Report

Starting the new fiscal year with record order

In April 2011, REpower concluded a framework agreement with the juwi Group in Wörrstadt, Rhineland Palatinate, for delivery, construction and maintenance of up to 240 wind turbines. The agreement has a term to the end of 2013 and mainly includes latest generation three-megawatt turbines. With a potential total output of up to 720 MW, the order is the largest onshore frame-work agreement REpower has ever obtained in Europe. Juwi intends to install around 180 turbines in Germany and approximately 60 wind turbines in other European countries. Most of the turbines used will be the REpower 3.4M104 and 3.2M114 types with hub heights between 123 meters and 143 meters, as well as turbines from the MM series with 2.05 MW rated output. The wind turbines would be installed and commissioned between the second half of 2011 and 2014.

AE-Rotor Holding B.V. applies for exclusion of minority shareholders

On April 4, AE-Rotor Holding B.V. informed REpower Systems AG that it held more than 95% of the Company’s share capital. At the same time, AE-Rotor Holding B.V requested that as per Section 327a Paragraph 1 AktG, the Annual General Meeting of REpower Systems AG should resolve to transfer the transfer the shares of the remaining shareholders (minority shareholders) to AE-Rotor Holding B.V against a suitable cash settlement. In accordance with the request, the resolution should be made at the company’s next Annual General Meeting.

Approval of this application for a squeeze out by the Annual General Meeting as well as the sub-sequent procedure would mean delisting for REpower.

Unlimited unit certificate also for 6M

In April, REpower received a unit certificate for new 6M turbines from GL Renewables Certification. The SDLWindV currently does not include certification of wind power turbines installed offshore. However, since the turbine is also used by REpower for onshore projects, it was important for our company to receive an unlimited certificate for this type of turbine. With the certificate for the 6M, the most powerful turbine in our portfolio, REpower can submit unlimited certificates for all series types for the German market.

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Outlook

Expected development of the overall economic environment

Stable recovery of the global economy, including Germany

The global economy in spring 2011 continues its recovery, thanks in particular to momentum in emerging countries. Germany, too, is experiencing a sharp upturn. This is the assessment con-tained in the current joint diagnosis from the Institute for Economic Research (Ifo) in Munich, the Institute for the World Economy (IfW) in Kiel, the Halle Institute for Economic Research and the Rhineland-Westphalia Institute for Economic Research in Essen. The institutes expect gross domestic product to increase this year by 2.8% and by 2.0% next year. An unemployment rate of 6.9% and 6.5% is expected for 2011 and 2012, respectively. The forces of recovery will gradually shift their focus in inland demand. Wages will rise as a result of the recovery; at 2.4% in 2011 and 2.0% in 2012, inflation will be relatively high. Government net borrowing/lending will decline in 2011 to 1.7% and to 0.9% in 2012 in relation to the nominal gross domestic product.

Europe shows solid economic situation

The increase in real GDP is likely to accelerate again in the first quarter before slowing down later in the year (0.5% in Q1 2011, 0.4% in Q2 and Q3). Investments will rise sharply in the first quar-ter of 2011 thanks to a weather-related increase in construction investment. However, these will decline in the following quarters due to a drop in foreign demand. The fiscal policy measures in some countries and the relatively high inflation rate will have a negative impact on the available income.

According to the institutes, the risks originate outside Germany. If the increasing unrest in the Arab world led to an oil shortage or an escalation of the European debt and confidence crisis, this could have a considerable impact on the economy. Economic policy should continue to focus on consolidation and work towards improving the European stabilization mechanism.

There is likely to be further growth of industrial production (1.2% in the first and 0.7% in each of the second and third quarters), as surveys suggest improved production prospects. In February, the business climate in the sector rose to a ten-year high. In Germany, it reached an exceptional level. The processing industry in particular showed signs permanent recovery.

Inflation rose slightly due to the oil price increase and amounted to 2.6% in the first quarter. Assuming the oil price fluctuates around 113 USD and the exchange rate around 1.38 USD per euro during the forecast period, the inflation rate could remain stable at 2.6% in the second and third quarters of the year.

The key inflation rate is likely to stabilize at 1.2% in the following quarters. The three institutes explained that although rising energy prices were increasingly reflected in the key rate, the weak wage development and the existing overcapacities prevented the key rate from climbing further.


Price development risks

According to the ECB, there are risks with respect to the medium-term prospects for price develop-ment. For example, energy prices may continue to rise due not least to the political tensions in North Africa and the Middle East. It is also possible that the sharp economic growth in the emerging econ-omies and the currently good liquidity situation could give rise to further increases in commodity prices. The efforts of the industrialized countries to further consolidate their budgets, e.g. through indirect taxes and administered prices, could also lead to greater price increases.

Market for wind power about to return to stable growth rates

Following a difficult 2010, the market for wind turbines is picking up again in 2011. This is evi-denced by the increase in incoming orders in the second half of last year. The research institute, MAKE Consulting, issued the following forecast for medium-term development:

Market development and outlook 2009–2016 CAGR

2010–2016MW 2009e 2010e 2011 e 2012 e 2013 e 2014 e 2015 e 2016 e

Americas 11,339 7,344 9,189 12,897 12,165 14,313 15,372 14,930 13 %

Europe 9,971 9,664 10,369 12,728 14,768 16,211 17,675 18,140 11%

Asia/Pacific 11,395 16,658 20,035 21,427 24,200 26,280 29,672 30,470 11%

Rest of World 149 331 425 1,100 1,465 1,500 1,340 1,057 75 %

World total 32,854 33,995 40,018 48,152 52,598 58,304 64,059 64,597 11%

Year-on-year growth 28 % 3 % 18 % 20 % 9 % 11% 10 % 1%

Source: MAKE Consulting, Q1 2011 Market Outlook Update

Development in Germany

For calendar year 2011 the wind industry expects a stronger growth compared to 2010: The German Wind Energy Association (BWE) and the German Engineering Association (VDMA) forecast 2,100 megawatts of annual installed capacity in 2011, thereof 1,800 megawatts onshore and 300 mega-watts offshore.

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Generally, offshore wind power is developing positively. However, the great technological require-ments and, above all, the high level of investment are slowing the rate of implementation.

The discussion about harmonizing support systems for renewable energies is regarded by the German Wind Energy Association as an obstacle to further successful expansion of renewable energies. The reason is that uncertainty may arise on the sales markets. It makes sense initially to fully implement the EU guidelines that have been adopted.

Business outlook for the Company and the Group

In the coming years, REpower aims to consolidate its position among the leading manufacturers of wind turbines as a provider of premium products. Europe and North America will continue to be REpower’s core markets. The current discussions relating to energy policy could also lead in the short to medium term to attractive options for expanding into countries in which the company does not currently operate.

Over recent months, the nuclear disaster in Fukushima (Japan) has stirred up political discussion among all parties, particularly in Germany, with respect to power supply. The key points of an amendment to the Renewable Energy Act (EEG) are to be worked out over the coming months. Federal Environment Minister, Norbert Röttgen, is focusing increasingly on wind power for the future expansion of renewable energies, both onshore and offshore. This provides us, as a leading technology company, with the already highlighted opportunity to grow in the offshore area within the medium to long term. Thanks to our extensive product portfolio and our renowned high level of quality, we also have the right product offering for the onshore market when it returns to growth.

Excess capacity on the wind energy market remains high, which is expected in the short term to lead to further pressure on prices and margins for onshore wind turbines in 2011. For this reason, the Executive Board commenced extensive cost-cutting measures during the last fiscal year, e.g. more cost-effective procurement of components from Asia. In order to increase international competitiveness, the company also intends to invest in additional production facilities outside Germany. As part of this strategy, REpower recently acquired the remaining 10% of shares held by the Martifer Group in the PowerBlades joint venture. REpower, which had previously held 90% of shares in the Portuguese rotor blade manufacturer, is now the sole owner. REpower Systems AG has also acquired Martifer’s 50% stake in the REpower Portugal joint venture set up in 2005 and is now investigating options for establishing a production site in Asia.

On the basis of the current order backlog and taking into account existing framework agreements, REpower expects significant growth sales and earnings for fiscal year 2011/2012. In our view, we will gain market share on our core markets as a result. We will achieve this by strengthening our activities outside Europe and by strengthening our global strong sales organization. For fiscal year 2012/13 management also expects further considerable growth of sales and earnings.

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Other disclosures


Full information on the subject of corporate governance is provided in the section “Corporate Governance” of the Annual Report 2010/11.

Corporate Governance Statement

The Corporate Governance statement pursuant to §289a HGB is an integral part of the Combined management’s discussion and analysis. It is presented within the section “Corporate Governance,” included in the Annual Report for the fiscal year 2010/11 which is also available on the company´s website www.repower.de.

Remuneration Report

A description of the system of remuneration and the individualized details of the remuneration of the Executive Board and Supervisory Board are shown in the Remuneration Report in the section “Corporate Governance” of the Annual Report 2010/11. That report is also a constituent part of the Management Report.

REpower Systems AG annual financial statements

The following information relates to the figures of the single-entity financial statements of the parent company REpower Systems AG, in line with the German Commercial Code (HGB).

Net assets

In the reporting period, total assets decreased from 1,380.3 m EUR as of the end of fiscal year 2009/10 to 1,202.9 m EUR.

Within current assets, that fell in the reporting period by 220.3 m EUR, trade receivables increased by 15.1 m EUR from 56.0 m EUR to 71.1 m EUR. Liquid assets also saw a strong increase from 196.7 m EUR to 301.5 m EUR. With 209.3 m EUR, non-current assets increased significantly compared to the previous year (168.0 m EUR).

On the liabilities side of the balance sheet, equity amounted to 396.2 m EUR as per the balance sheet date (previous year: 395.8 m EUR). Due to the increase in total assets, the equity ratio rose by 4.2% from 28.7% to 32.9% year-on-year.

Revenue and earnings situation

In the reporting year, the revenue of the parent company calculated according to the German Commercial Code (HGB) amounted to 1,048.7 m EUR and was therefore at the same level as the previous year (1,048.8 m EUR).


The distribution of revenue by operations is as follows:

2010 /11 2009 /10

m EUR m EURRevenue from wind turbines 952.7 956.5Revenue from Service and Maintenance 84.9 71.0Other 11.1 21.4Total revenue 1,048.7 1,048.8

The result from operating activities for the REpower Systems AG parent company calculated according to the German Commercial Code declined from 63.9 m EUR to 24.7 m EUR in fiscal year 2010/11. After deduction of the negative net financial result of -7.3 m EUR, earnings from ordinary business activities amounted to 17.4 m EUR (previous year: The company generated a net profit of 13.0 m EUR (previous year: 32.0 m EUR).

The EBIT margin was 2.1% (previous year: 5.1%) related to the overall performance. The cost of materials ratio was slightly higher than the level of the previous year at 82.9% (previous year: 81.1%). The staff costs ratio was 5.5%, compared to 5.9% in fiscal year 2009/09.

Financial situation

As per the balance sheet date, liquid funds significantly increased due to an improved working capi-tal management: They rose from 196.7 m EUR to 301.5 m EUR. For details of financing activities and hedging, we refer you to the presentation in the Group management report.

Risks and chances

The performance of REpower Systems AG is mainly liable to the same risks and chances as for REpower Group. The risks are described in the section “Risk management”.

Outlook

For fiscal year 2010/11, REpower Systems AG expects further positive development of its business. Further details can be found in the section “Business outlook for the Company and the Group.”

93Management Report

Disclosures per Section 289 (4) and Section 315 (4)

German Commercial Code (HGB)

The Company’s share capital is 9,220,179 EUR. Share capital consists of 9,220,179 shares. The company‘s shares are bearer shares. The share type, dividend coupons and renewal certificates are determined by the Executive Board with Supervisory Board approval. Shareholders’ claim to securitization of their shares is disallowed. The company may combine individual shares into share certificates securitizing multiple shares (global shares).

The start date of dividend entitlement for new shares issued may be determined at variance to Section 60 (2) sentence 3 of the Stock Corporation Act.

With the approval of the Supervisory Board, the share capital of the company may be increased by issuing new shares against cash or non-cash contributions on one or several occasions until October 25, 2015 by up to 4,599,914.00 EUR (Authorized Capital). Share capital has also been contingently increased by up to 4,227,267.00 EUR by issue of up to 4,227,267 new bearer shares (Contingent Capital 2010). The contingent capital increase is only to be carried out in the event of the issue of an option or convertible bond, income bonds and/or profit sharing rights with option or convertible bond rights and/or obligations.

The Executive Board is authorized to increase the share capital contingently by a nominal amount of up to 341,960 EUR (previous year: 372,647 EUR) in the context of share option plans. The reduction results from utilization of contingent capital in fiscal year 2010/11 in the amount of 1,750 EUR as part of the 2005 share option program, in the amount of 3,700 EUR as part of the 2006 share option program, and in the amount of 14,900 EUR as part of the 2007 share option program. Up to 140,000 option rights were issued as part of the 2008 share option program; due to expiry/forfeiture, there are 127,939 option rights as at the reporting date.

The provisions of the German Stock Corporation Act govern the appointment and dismissal of Executive Board members and amendments to the Articles of Association.

AE-Rotor Holding B.V., a subsidiary of Suzlon Energy Ltd, informed REpower Systems AG on April 4, 2011 that it held more than 95% of the Company’s share capital. AE-Rotor Holding B.V. currently holds and controls 448,357 REpower Systems AG shares directly and 8,325,421 shares indirectly via the following subsidiaries:

SE Drive Technik, Bochum; Suzlon Windenergie GmbH, Bochum; RPW Investments SGPS, S.A., Vilar der Pinheiro, Portugal.

The shares of REpower Systems AG held by the above companies are attributed to AE-Rotor Holding B.V., as per Section 327a Paragraph 2 in connection with Section 16 (4) AktG.


Closing statement on the report on relations with affiliated companiesWe hereby declare that the Company received appropriate compensation in every transaction listed in the report on relations with affiliated companies in view of the circumstances known to the Executive Board at the time the transactions were conducted. We furthermore declare that REpower Systems AG has neither conducted nor omitted to perform other transactions or actions subject to disclosure.

95Management Report

Consolidated Financial Statements

96 Consolidated Financial Statement

Consolidated Financial Statements

Consolidated Financial Statement 97

98

Consolidated statement of financial positionAssets

Notes 2011/03/31 2010/03/31EUR EUR

Current assets 4.1Liquid funds 4.1.1 320,447,706 215,856,312Gross amount due from customers for contract work as an asset 4.1.2 199,894,621 174,499,969Trade accounts receivable 4.1.3 72,422,388 63,124,815Receivables from related parties 4.1.4 613,586 10,543,013Receivables from associates and joint ventures 4.1.5 6,470 2,267,701Inventories 4.1.6 347,205,080 285,059,228Receivables from income tax 12,716,846 2,289,696Other financial assets 4.1.7 13,328,627 22,464,479Other miscellaneous assets 4.1.7 76,066,738 50,688,591

Total current assets 1,042,702,062 826,793,805

Non-current assets 4.2Other Intangible assets 4.2.1 50,230,892 41,176,157Goodwill 33,111,575 1,628,367Property, plant and equipment 4.2.2 174,950,619 145,692,057Investments in associates and joint ventures 4.2.3 336,948 5,625,472Other financial investment 1,769,357 693,592Loans granted 4.2.4 7,161,819 6,729,484Deferred taxes 4.2.5 4,140,499 3,412,214Total other non-current assets 320,533 873,085

Total non-current assets 272,022,242 205,830,428Assets of disposal group of classified as held for sale 4.3 31,175,261 0Total assets 1,345,899,565 1,032,624,233

Consolidated Financial Statement

99

Shareholders‘ equity and liabilities

Notes 2011/03/31 2010/03/31EUR EUR

Current liabilities 4.4Short-term loans and current portion of long-term loans 4.4.1 15,614,559 4,136,795Trade accounts payable 234,084,297 140,318,146Liabilities from associates and joint ventures 162,697 1,280,154Advance payments received 4.4.2 315,558,317 197,289,782Gross amounts due from customers for contract work as a liability 11,654,487 41,960,162Provisions 4.4.3 95,724,297 61,197,121Deferred income 4.4.4 11,490,215 7,587,041Income tax liabilities 4.4.5 965,232 4,548,811Other financial liabilities 4.4.6 19,236,608 15,068,546Other miscellaneous liabilities 4.4.6 14,457,116 7,306,107

Total current liabilities 718,947,825 480,692,665

Non-current liabilities 4.5Long-term loans 4.5 50,869,988 43,486,951Capital from profit participation rights 4.4.1 0 10,000,000Deferred taxes 4.2.5 36,032,735 22,472,878Other financial liabilities 14,950,782 0

Total non-current liabilities 101,853,505 75,959,829Liabilities of disposal group of classified as held for sale 4.3 6,244,323 0

Equity capital 4.6Subscribed capital 4.6.1 9,220,179 9,199,829Additional paid-in capital 4.6.2 306,163,161 303,059,835Other reserves 3,163,575 4,531,181

Revaluation reserve 776,000 776,000Currency translation –401,919 –21,549Cash flow hedging reserve 2,789,494 3,776,730

Retained earnings 191,415,840 147,707,203Equity attributable to shareholders of the parent company 509,962,755 464,498,048Non-controlling interests 4.6.3 8,891,157 11,473,691

Total equity capital 518,853,912 475,971,739Total equity and liabilities 1,345,899,565 1,032,624,233


100

Consolidated income statement

Notes 2010/04/01–2011/03/31

2009/04/01–2010/03/31

EUR EURRevenues 5.1 1,216,101,802 1,303,577,204Changes in work in progress 35,067,813 15,445,743Work performed by the entity and capitalised 24,524,975 11,332,318Total performance 1,275,694,590 1,330,355,265

Other operating income 5.2 38,144,500 19,547,737Cost of materials / cost of purchased services –949,972,641 –1,000,725,486Personnel expenses 5.3 –118,351,152 –102,961,733Depreciation on property, plant and equipment andamortization on intangible assets –26,789,017 –20,699,017Other operating expenses 5.4 –132,702,799 –127,200,782Result from operating activities 86,023,481 98,315,984

Interest and similar financial income 5.5 6,726,475 3,143,546Interest and similar financial expenses 5.5 –11,450,928 –19,602,677Share of result from associates and joint ventures 5.5 –360,868 1,993,163Result before income taxes 80,938,160 83,850,016

Income tax expense –23,296,747 –25,919,729

Profit / loss for the year from continuing operations 57,641,413 57,930,287

Profit / loss for the year from discontinued operations –2,066,580 0

Net income for the year 55,574,833 57,930,287

Share of net income for the year attributable to non-controlling interests –2,577,534 –399,874

Continuing operations –1,635,587 0Discontinued operations – 941,947 0

Share of net income for the year attributable to shareholders of the parent company 58,152,366 58,330,161

Continuing operations 59,277,000 0Discontinued operations –1,124,633 0

Earnings per share (undiluted) 5.6 6.31 6.34Continuing operations 6.43 6.34Discontinued operations – 0.12 0

Earnings per share (diluted) 5.6 6.13 6.11Continuing operations 6.25 6.11Discontinued operations – 0.12 0

Consolidated statement of comprehensive income2010 / 04 / 01–2011/ 03 /31

2009 / 04 / 01–2010 / 03 /31

EUR EUR

Net income for the year 55,574,833 57,930,287Other income of cash flow hedges –1,382,683 –10,352,362

Deferred taxes on other income of cash flow hedges 395,447 1,366,434

Reserve of cash flow hedges –987,236 –8,985,928Currency translation –380,370 143,800

Other comprehensive income –1,367,606 –8,842,128

Total comprehensive income 54,207,227 49,088,160


101

Consolidated statement of cash flows

Notes 2010/04/01–2011/03/31

2009/04/01–2010/03/31

EUR EURCash flow from operating activities 10Profit before income taxes from continuing operations 80,938,160 83,850,016Adjustments for:

Depreciation on property, plant and equipment, amortiza-tion on intangible assets and write-offs on financial assets 26,789,017 20,699,017Write-down of loans granted 0 2,849,287Profit / loss from associates and joint ventures –360,868 1,993,163Interest income –6,726,475 –3,143,546Interest expenses 11,450,928 16,753,390Increase /decrease in provisions 35,176,073 37,785,347Profit / loss from sales of property, plant and equipment, intangibles and other long-term assets 376,606 –1,426,974Change in working capital 75,856,693 27,493,911Interest received 6,501,475 3,143,546Interest paid –11,090,928 –16,753,390Income tax paid –22,416,345 –17,409,619Other non-cash income and expenses –5,861,307 –36,583,276

Cash flow from operating activities 190,633,029 119,250,872

Cash flow from investing activities 10Cash receipts from sales of property, plant and equipment, intangibles and other long-term assets 3,777,337 4,921,911Cash payments for the purchase of intangible assets –20,625,022 –11,171,950Cash payments from purchase of property, plant and equipment and other long-term assets

–51,695,829 –38,502,385

Acquisition of subsidiary 1,976,033 11,020,000Cash payments to acquire equity of associates and joint ventures 270,800 –334,743Cash flow from investing activities –66,296,681 –34,067,167

Cash flow from financing activities 10Cash proceeds from issueing shares 1,858,010 2,233,119Cash payments issued to shareholders of the parent company (dividend distribution) –14,443,730 0Cash repayments of amounts borrowed 0 –3,259,933Cash proceeds from borrowings –2,616,963 32,772,149Cash flow from financing activities –15,202,683 31,745,335Cash flow from discontinued operations –9,478,842 0

Increase /decrease in cash and cash equivalents 99,654,823 116,929,040

Exchange rate related change in cash and cash equivalents –81,569 0

Cash and cash equivalents at the beginning of the period 211,719,517 94,790,477Cash and cash equivalents at the end of the period 311,292,771 211,719,517

Liquid funds 10 320,447,706 215,856,312Cash displayed in „Assets of disposal group of classified as held for sale“ 6,459,624 0Short-term bank liabilities 10 –15,614,559 –4,136,795Cash and cash equivalents at the end of the period 10 311,292,771 211,719,517


102

Consolidated statement of changes in equity

Subscribed capital

Additional paid-in capital

Currencytranslation

Cash flow hedge reserve

Revaluationreserve

Retained earnings

Equity attributable

to shareholders of the parent

company

Non-controlling interests

Total equity

EUR EUR EUR EUR EUR EUR EUR EUR EURBalance at 2009/04/01 9,177,039 297,185,061 –165,349 12,762,658 0 89,377,041 408,336,450 3,565 408,340,015Capital increase of executed but not yet registered employee stock option programme 22,790 2,210,329 2,233,119 2,233,119Stock option plans 3,423,445 3,423,445 3,423,445Capital increase 2,450,000 2,450,000Change in the consolidated group 241,000 776,000 1,017,000 9,420,000 10,437,000Net result for the year 58,330,162 58,330,162 –399,874 57,930,288Other income 143,800 –10,352,362 –10,208,562 –10,208,562Deferred taxes on other income 1,366,434 1,366,434 1,366,434Group result 143,800 –8,985,928 58,330,162 49,488,034 –399,874 49,088,160

Balance at 2010/03/31 9,199,829 303,059,835 –21,549 3,776,730 776,000 147,707,203 464,498,048 11,473,691 475,971,739

Balance at 2010/04/01 9,199,829 303,059,835 –21,549 3,776,730 776,000 147,707,203 464,498,048 11,473,691 475,971,739Capital increase of executed but not yet registered employee stock option programme 20,350 1,825,173 1,845,523 1,845,523Stock option plans 1,278,153 1,278,153 1,278,153Distribution dividends FY 2009/10 –14,443,730 –14,443,730 –14,443,730Change in the consolidated group 0 –5,000 –5,000Net result for the year 58,152,367 58,152,367 –2,577,534 55,574,833Other income –1,382,683 –1,382,683 –1,382,683Deferred taxes on other income 395,447 395,447 395,447Currency translation –380,370 –380,370 –380,370Group result –380,370 –987,236 58,152,367 56,784,761 –2,577,534 54,207,227

Balance at 2011/03/31 9,220,179 306,163,161 –401,919 2,789,494 776,000 191,415,840 509,962,755 8,891,157 518,853,912


103

Consolidated statement of changes in equity

Subscribed capital

Additional paid-in capital

Currencytranslation

Cash flow hedge reserve

Revaluationreserve

Retained earnings

Equity attributable

to shareholders of the parent

company

Non-controlling interests

Total equity

EUR EUR EUR EUR EUR EUR EUR EUR EURBalance at 2009/04/01 9,177,039 297,185,061 –165,349 12,762,658 0 89,377,041 408,336,450 3,565 408,340,015Capital increase of executed but not yet registered employee stock option programme 22,790 2,210,329 2,233,119 2,233,119Stock option plans 3,423,445 3,423,445 3,423,445Capital increase 2,450,000 2,450,000Change in the consolidated group 241,000 776,000 1,017,000 9,420,000 10,437,000Net result for the year 58,330,162 58,330,162 –399,874 57,930,288Other income 143,800 –10,352,362 –10,208,562 –10,208,562Deferred taxes on other income 1,366,434 1,366,434 1,366,434Group result 143,800 –8,985,928 58,330,162 49,488,034 –399,874 49,088,160

Balance at 2010/03/31 9,199,829 303,059,835 –21,549 3,776,730 776,000 147,707,203 464,498,048 11,473,691 475,971,739

Balance at 2010/04/01 9,199,829 303,059,835 –21,549 3,776,730 776,000 147,707,203 464,498,048 11,473,691 475,971,739Capital increase of executed but not yet registered employee stock option programme 20,350 1,825,173 1,845,523 1,845,523Stock option plans 1,278,153 1,278,153 1,278,153Distribution dividends FY 2009/10 –14,443,730 –14,443,730 –14,443,730Change in the consolidated group 0 –5,000 –5,000Net result for the year 58,152,367 58,152,367 –2,577,534 55,574,833Other income –1,382,683 –1,382,683 –1,382,683Deferred taxes on other income 395,447 395,447 395,447Currency translation –380,370 –380,370 –380,370Group result –380,370 –987,236 58,152,367 56,784,761 –2,577,534 54,207,227

Balance at 2011/03/31 9,220,179 306,163,161 –401,919 2,789,494 776,000 191,415,840 509,962,755 8,891,157 518,853,912


104 Group Notes

Notes to the consolidated financial statements to the financial year 2010/11

1 Introduction

The REpower Systems Group with REpower Systems AG, Überseering 10, 22297 Hamburg, Federal Republic of Germany, as its listed parent company, operates in the area of manufacturing and selling wind energy turbines as well as developing and providing turnkey wind farms.

REpower Systems AG has an obligation to prepare consolidated financial statements for the fiscal year ended March 31, 2011. The consolidated financial statements for the year ended March 31, 2011 were prepared in accordance with section 315a (1) of the German Commercial Code in conjunction with section 4 of Regulation (EC) no. 01606/2002 of the European Parliament and of the Council dated July 19, 2002 concerning the adoption of international accounting standards in the currently valid version of the International Financial Reporting Standards (IFRS) as applicable in the European Union. The IFRSs comprise the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) published by the International Accounting Standards Board (IASB), and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and its predecessor, the Standing Interpretations Committee (SIC). The require-ments of the IFRSs have been met in full and result in a true and fair view of the net assets, financial position and results of operations of the REpower Systems Group.

The consolidated financial statements of the Company and the combined management report of the Company and the Group are published in the electronic Federal Gazette (Bundesanzeiger).

Individual items of the consolidated statement of financial position and the income statement have been summarized to improve the clarity of presentation. These items are explained in the notes. The consolidated financial statements are pre-pared with the euro as the functional currency. The income statement is broken down according to the nature of expense method. Unless otherwise stated, all figures are accurate to the nearest thousand (kEUR) using commercial rounding.

The company carried out the option of displaying a statement of comprehensive income according to IAS 1 in the way that the income statement is presented as a separate part of the annual accounts. The consolidated financial statements are prepared on the basis of assets and liabilities recognized at amortized cost. This does not include derivative financial instruments, which are carried at fair value as at the balance sheet date.

105Group Notes

2 Consolidation2.1 Principles of consolidation

These consolidated financial statements include all significant German and foreign subsidiaries over whose financial and business policies REpower Systems AG has direct or indirect control.

Capital consolidation of subsidiaries is performed in line with the purchase method. In this process, the cost of the shares acquired is offset against the fair value of the net assets of the subsidiary attributable to the parent company at the time of acquisition. Any positive difference resulting from company acquisitions is recognized as goodwill. Any negative differ-ences resulting from capital consolidation at the acquisition date are expensed immediately following a repeated review of the fair values of the assets and liabilities. Goodwill is examined for impairment at least annually in subsequent periods and amortized to the lower recoverable amount as required. Hidden reserves and charges disclosed as a result of the fair value measurement of the assets and liabilities on initial consolidation are carried, amortized or realized in subsequent periods in line with the development of the assets and liabilities. Expenses and income, intragroup transactions and receivables and liabilities between the companies included in consolidation were eliminated in accordance with IAS 27.

In the event that REpower acquires control of a company through a business combination achieved in stages, the equity interest previously held by REpower in the company shall be determined as the fair value at the time of the acquisition and the resulting profit or loss shall be recognized on the income statement.

Companies which the company manages jointly with other partners and associated companies over which the Group can exert a significant influence on financial and business policy but which it cannot control are included at equity in the consoli-dated financial statements. The principles of full consolidation are applied in determining goodwill and the fair value of assets and liabilities. Recognition at equity is based on the IFRS financial statements of the respective companies at the Group reporting date. Losses from associates which exceed the carrying amount of the investment or other non-current receivables from financing of these companies are not recognized as long as there is no obligation to make supplementary payments. Significant intragroup transactions were eliminated.

Companies are withdrawn from the scope of consolidation at the date on which shares in those companies are sold or the Group can no longer control those companies. As part of deconsolidation, the pro rata assets and liabilities allocated to the Group are eliminated at the amortized Group carrying amounts, including any goodwill. The difference between the net assets sold and the proceeds from the disposal of the shares is recognized in income in the consolidated income state-ment. The income and expenses incurred from the beginning of the respective fiscal year until the deconsolidation date are recognized in the consolidated income statement.

The financial statements of REpower Systems AG and the subsidiaries, associates and joint ventures included in consolidation are prepared in accordance with uniform accounting policies. The financial statements of companies included in consolida-tion are prepared as at the REpower Systems AG reporting date. The consolidated international companies prepare their financial statements in their functional currency. At the balance sheet date, the assets and liabilities of these subsidiaries are translated into the reporting currency of the REpower Group (euro) at the closing rate. Income and expenses are translated at the weighted average rate for fiscal year, provided this is not inappropriate due to significant fluctuations in exchange rates. Equity components are translated at the corresponding historical rate on the date of their occurrence. Translation differences are recognized in equity as a separate equity component. If Group companies are removed from the scope of consolidation, the corresponding currency translation differences are derecognized and taken to profit or loss.

106 Group Notes

2.2 Scope of consolidation2.2.1 Fully consolidated companies

The consolidated group includes REpower Systems AG as well as the following German and international companies which are fully consolidated in the consolidated financial statements:

Project companies Share in %REpower Betriebs- und Beteiligungs GmbH, Rendsburg 100.00REpower Windpark Betriebs GmbH, Hamburg 100.00REpower Investitions- & Projektierungs GmbH & Co. KG, Rendsburg 100.00Windpark Blockland GmbH & Co. KG, Hamburg 100.00

Production and service companiesWEL Windenergie Logistik GmbH, Schloß Holte-Stukenbrock 100.00PowerBlades GmbH, Bremerhaven 51.00REpower Systems GmbH, Hamburg 100.00REpower North (China) Ltd., Baotou, PR China 54.42PowerBlades S.A., Vagos, Portugal 100.00Ventipower S.A., Oliveira de Frades, Portugal 3.00RiaBlades S.A., Vagos, Portugal 3.00

Sales companiesREpower Espana S.L., Madrid, Spain 100.00REpower S.A.S., Courbevoie, France 100.00REpower Italia SRL., Milan, Italy 100.00REpower Australia Pty Ltd., Melbourne, Australia 100.00REpower Wind Systems Trading Inc., Beijing, PR China 100.00REpower USA Corp., Denver, U.S.A. 100.00REpower Systems Inc., Montreal, Canada 100.00REpower Benelux b.v.b.a., Ostend, Belgium 100.00REpower UK Ltd., Edinburgh, United Kingdom 100.00Rep Ventures Portugal S.A., Porto, Portugal 100.00REpower Systems Polska Sp.z o.o, Warsaw, Poland 100.00REpower Portugal Sistemas Eólicos S.A., Oliveira de Frades, Portugal 100.00REpower Systems Scandinavia AB, Stockholm, Sweden 100.00REpower Diekat S.A., Athens, Greece (in liquidation) 60.00

The equity interest in REpower Portugal Sistemas Eólicos S.A., serving as a sales company with the aim of developing the sales market and the after sales business in Portugal, was increased from the previous 50% to 100% in the context of an acquisition. The increase in the stake and consequent acquisition of control took place on February 3, 2011. The company was fully consolidated for the first time, as of February 28, 2011.

As part of the purchase agreement for the remaining shares in REpower Portugal Sistemas Eólicos S.A., changes to the articles of association were additionally negotiated with regard to RiaBlades S.A. and Ventipower S.A. As a result of the restructuring, REpower Systems AG also acquired control over these two companies on February 3, 2011 and consolidated them for the first time as of February 28, 2011. The new contractual structure leads to the fact that non-controlling inter-ests are recognized in the balance sheet because of subsequent share transfers agreed. RiaBlades S.A. serves as a produc-tion company of rotor blades for REpower’s wind turbines. In addition to the sale of wind turbines and their installation, Ventipower S.A. also assumes the continuing management of projects until final acceptance by the customer.

107Group Notes

The inclusion of the assets and liabilities acquired in the consolidated financial statements of REpower AG takes place as part of a provisional accounting treatment. The determination of the purchase price at the time the consolidated financial statements are prepared is not yet final either. Because of the complexity of the transaction and the amount of time that determination of a final purchase price allocation requires, it was impossible at the time the consolidated financial statements were prepared to calculate sufficiently reliable fair values for the assets and liabilities acquired. Accordingly, the difference resulting from the provisional allocation of the purchase price will be recognized in full as goodwill for the present. With a purchase price of 35,897 k EUR and provisionally calculated equity of 4,414 k EUR, this produces provisionally calculated goodwill of 31,483 k EUR for the REpower Portugal Sistemas Eólicos S.A., RiaBlades S.A. and Ventipower S.A. group of companies In addition to a fixed price component of 15,100 k EUR, the purchase price consists of a variable purchase price component, which was taken into account at 9,848 k EUR. The fixed price will be paid in cash and through the assumption of existing loans of the companies to former shareholders. The variable price components (undiscounted) can amount to a maximum of 11 m EUR and a minimum of 6 million EUR. The variable price components are based on the attainment of operational targets and on the financial situation of the individual compa-nies. Present business planning indicates that the variable purchase price components will be paid in the medium-term.

The following overview provides a summary of the purchase price paid for the acquisition and the values of the assets and assumed liabilities, which were taken over on the acquisition date.

2011/02/03 k EUR

Purchase priceFixed price 15,100Contingent consideration 9,848Total consideration 24,948Fair value of equity interests held before the acquisition 10,949Purchase price 35,897

2011/02/03 k EUR

Provisionally calculated amounts of the assets and liabilities acquired

Cash and cash equivalents 2,270Property, plant and equipment 36,919Intangible assets 2Inventories 7,859Financial investments 1,029Trade accounts receivable and other receivables 26,339Trade accounts payable and other liabilities –23,732Loans payable –46,347Deferred taxes 75Provisionally calculated net assets 4,414

Provisionally calculated goodwill 31,483

The provisionally calculated goodwill was allocated to the cash generating unit “Onshore”.

It is not expected that part of the goodwill recognized will be deductible for income tax purposes.

Because of the remeasurement of the non-controlling interest of 50% in the equity of REpower Portugal Sistemas Eólicos S.A. held before the acquisition at fair value, the Group recognized a profit of 5,667 k EUR. This profit is recognized in the income statement as at March 31, 2011 under other operating income.

108 Group Notes

Since February 28, 2011, this Portuguese group has contributed 291 k EUR to the revenues recognized in the income statement of the REpower Group. Simultaneously, a loss of 653 k EUR was taken into account for the same period.

If the group had been consolidated as of April 1, 2010, revenues of 18,946 k EUR and a loss of –8,408 k EUR would have been recognized in the income statement for the Group. These particulars are before elimination of inter-company expenses and income.

Furthermore, REpower Systems AG has increased its shares in PowerBlades S.A. by 10% to 100%.

REpower Systems Polska Sp.z o.o, Warsaw, Poland and REpower Systems Scandinavia AB, Stockholm, Sweden, were founded in September 2010 as service companies for REpower wind turbines to manage activities on the local wind industry markets. The companies have been operating since October 1, 2010.

The wind farm Meckel/Gilzem GmbH & Co. KG was sold successfully in March 2011. This resulted in proceeds from the disposal of 13.8 m EUR.

2.2.2 Joint ventures and associates

The following material joint ventures and associates are recognized at equity in the consolidated financial statements:

Group interest in nominal capital

2011/03/31 2010/03/31in % in %

RETC Renewable Energy Technology Centre GmbH, Hamburg, Germany 50.00 50.00

RETC Renewable Energy Technology Centre GmbH (RETC) is a joint venture between REpower Systems AG, Hamburg and Suzlon Energy Ltd, India. The objective of this joint venture is to combine future resources in research and technical development and to cooperate strategically. Through RETC, an international center will be developed with a focus on research, innovation, training, validation and technical processes.

Detailed information on these joint ventures and associates can be found in the list of shareholdings.

3 Accounting policies

The accounting policies applied in the consolidated financial statements for fiscal year 2010/11 were adjusted to reflect the new standards, as stated in note 3.20.

In addition, personnel and material costs for non-current assets produced and used by the company itself are recognized under the item “Company-produced additions to plant and equipment” which until now had been reported under and were deducted from personnel expenses. In order to better present the earnings situation, these expenses will be reported under the item “Company-produced additions to plant and equipment” on the income statement. The previous year was adjusted accordingly what lead to an increase of the Positions “Company-produced additions to plant and equipment” and “Personnel expenses” of 5,814 k EUR.

3.1 Liquid funds

Liquid funds consist primarily of bank balances and are carried at their nominal amount. Amounts in foreign currency are translated at the reporting date.

109Group Notes

3.2 Receivables and other financial assets

Trade receivables, intragroup receivables, receivables from project companies and other primary financial assets allocated to the loans and receivables category are carried at fair value plus transaction costs on initial recognition. Subsequent measurement is at amortized cost using the effective interest rate method. Risks of default are taken into account by way of appropriate valuation allowances, which are determined on the basis of empirical values and individual risk assessments. Concrete cases of default result in the derecognition of the receivables affected. Valuation allowances on trade receivables are reported in an allowance account. The decision as to whether a default risk is recognized via an allowance account or in the form of a direct write-down of the carrying amount of the receivable depends on the reliability of the assessment of the risk situation. An impairment loss is recognized when the carrying amount of a financial asset is higher than the present value of the expected future cash flow.

Impairment is tested at each balance sheet date and on an ongoing basis throughout the year. Objective evidence of im-pairment is identified on the basis of the following triggers, among other things:

Significant financial difficulty of the obligor; The lender granting a concession to the borrower for economic or legal reasons relating to the borrower’s financial

difficulty; Likely insolvency or need for restructuring on the part of the borrower; Disappearance of an active market for the financial asset due to financial difficulties.

3.3 Inventories

Inventories comprise raw materials and supplies and work in progress. Raw materials and supplies are carried at the lower of cost or net realizable value. Work in progress is measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price less the estimated costs of completion. The cost of inventories is calculated using the weighted average cost formula and comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. In addition to material and production overheads, manufacturing costs comprise overheads attributable within the meaning of IAS 2, but not financing costs.

3.4 Property, plant and equipment

Property, plant and equipment is carried at cost and depreciated on a straight-line basis over their economic life. Cost includes all expenses for purchasing the assets, insofar as these can be reliably calculated or estimated. The manufacturing costs of internally generated equipment comprise direct costs as well as attributable overheads.

The assessment of depreciation is based on the following estimated useful lives:

Useful lifein years

Buildings 25 –50Technical equipment and machinery 5 –12Office and operating equipment 3–14

Assets with a cost of 1,000 EUR or less are depreciated over a useful life of four years.

3.5 Intangible assets

Acquired intangible assets are measured at cost and amortized on a straight-line basis over the respective useful life.

Research costs are recognized as expenses. Development costs for future products and other internally generated intangible assets are capitalized at cost, provided that the manufacture of these products is likely to generate an economic benefit for the REpower Systems Group. In the event that the requirements for capitalization are not satisfied, expenses are recognized directly in income in the year in which they occur.

110 Group Notes

Capitalized development costs comprise all direct costs and overheads attributable to the development process. Development costs that account for customer specific production orders are recorded in capitalized orders. Financing costs are not capi-talized. Amortization is recognized on the basis of volume or on a straight-line basis.

If the sales volume can be estimated with reasonable assurance, amortization is recognized on the basis of volume as the ratio of wind turbines recognized in revenue to the total forecast sales volume. In the case of non-quantity-related devel-opment costs, amortization is recognized on a straight-line basis from the start of production for the expected product lifetime of the developed models.

The following useful lives were applied:

Useful lifein years

Capitalised development costs 5*Licences, software 3

* Years or according to quantity

3.6 Impairment of property, plant and equipment and intangible assets

REpower Systems AG performs impairment testing for items of property, plant and equipment and intangible assets.

In accordance with IAS 36, annual goodwill impairment testing is performed at the level of the reporting units (cash-gener-ating units) to which goodwill is also allocated in the Group’s internal reporting system (impairment-only approach). These reporting units generally correspond to the individual Group companies. The recoverable amount is calculated on the basis of the value in use. Value in use is calculated on the basis of the budget for 2011/12 and the next two years. This allows the future cash flows from the respective cash-generating unit to be estimated. The discount rate is calculated using the WACC (weighted average cost of capital) approach. The beta factor applied in the calculation and the ratio of the fair value of equity to debt were determined by reference to a corresponding peer group.

No impairment losses were recognized in fiscal year 2010/11, as the recoverable amount was greater than the carrying amount of the assets of the respective cash-generating units plus the carrying amount of the corresponding goodwill.

Impairment is recognized for other intangible assets and property, plant and equipment if certain events or developments result in the carrying amount of the asset no longer being covered by the expected proceeds of disposal or the discounted net cash flows from continued use. If the recoverable amount of individual assets cannot be calculated, the cash flow is calculated for the next highest group of assets for which such a cash flow can be calculated. Impairment losses are reversed if the reasons for their recognition no longer apply in subsequent periods.

Impairment cannot be reversed in excess of the carrying amount that would have applied if no impairment had been rec-ognized. Goodwill impairment will not be reversed.

3.7 Non-current assets held for sale and discontinued operations

Non-current assets held for sale are classified as held for sale, if their carrying amount will, in essence, be received through a sale and the sale is highly likely. They are measured at the lower of their carrying amount and fair value less costs to sell, if their carrying amount will be received principally through a sale rather than continuing use.

Major discontinued business units and regions are shown separately in the income statement and the statement of financial position. In this financial statement the activities of REpower North (China) are displayed as a discontinued operation.

111Group Notes

3.8 Loans granted

Loans granted which are allocated to the loans and receivables category are carried at fair value on initial recognition. Subsequent measurement is at amortized cost using the effective interest rate method.

3.9 Share options

Share options granted to members of the Executive Board and senior managers are recognized in the consolidated financial statements in accordance with IFRS 2. Share options grant subscription rights to new Company shares from contingent capital. Transactions to be fulfilled by issuing shares are measured at fair value on the grant date. The fair value of share options on the grant date is determined by an external assessor using a binomial model. The expense calculated in this manner is distributed on a straight-line basis over the period in which the options can be exercised and is recognized di-rectly in income with effect on the net income for the year. Correspondingly the counter-effect is reflected in additional paid-in capital.

3.10 Provisions

Provisions are recognized in accordance with IAS 37. This relates to legal or financial obligations for which settlement is likely to result in an outflow of financial resources and whose amount can be reliably estimated.

Warranty provisions are recognized both for known individual risks and for general risks. Specific technical warranty risks can be individually quantified by comprehensive documentation and are taken into consideration in the form of individual provisions. The economic risk and the level of provisioning are evaluated on an ongoing basis in coordination with the technical departments, taking existing risks into account.

Provisions are recognized for general risks on the basis of experience. The system for recognizing general warranty provisions is as follows: for turbines erected, provisions are recognized for the anticipated actual costs per year of the warranty for the entire contractual warranty period. The actual costs are determined on the basis of past experience and reviewed on an ongoing basis. The uncertainties involved mean that the actual costs, and hence the amount of the provisions, may differ.

Non-current provisions are discounted.

3.11 Pensions and similar obligations Plans for pensions and similar obligations are measured in accordance with IAS 19 “Employee Benefits”. Pension provisions are measured using the projected unit credit method.

REpower Systems AG has granted a pension commitment in the form of a defined contribution plan. If the benefits payable under the insurance policy are the same as the benefits payable under the obligation, the fair value of the asset is deemed to be the same as that of the obligation in accordance with IAS 19.104, meaning that such items are not included in the consolidated statement of financial position or the income statement.

3.12 Liabilities

Trade accounts payable are measured at amortized cost using the effective interest rate method.

3.13 Revenue recognition

Revenue includes all revenues from the sale of wind energy turbines, license revenues, electricity revenues and revenues from service and maintenance contracts.

112 Group Notes

Revenue recognition according to percentage of completion method (IAS 11)

Revenue from the sale of wind turbines in particular includes the production, delivery and installation of wind turbines. For these construction contracts the percentage of completion method (POC) is applied in accordance with IAS 11. Prerequisites are that at the balance sheet date a specific legally effective customer order exists and that the outcome of the order as well as the expected total costs can be reliably estimated on the basis of Group cost accounting.

In the majority of cases, the percentage of completion is calculated using the cost-to-cost method, under which the fixed contract revenue is compared with the contract costs, with only those costs relating directly to the service rendered taken into account. Borrowing costs are recognized as an expense. These construction contracts are recognized under the balance sheet item „Gross amount due from customers for contract work as an asset and liability”. Advance payments received for contracts are deducted directly from future receivables from construction contracts.

In individual cases where a reliable estimate of the full construction contract is not possible, the zero profit method is applied, with no profit margin recognized in calculating the percentage of completion until reliable information becomes available.

Customer orders for the production, delivery and installation of wind turbines are generally considered to be completed with commissioning of the wind turbines respectively the handing over of the wind farm to the customer. As long as no installation is agreed upon the contract is considered to be completed when the risks and benefits are transferred to the buyer and payment is probable.

Contract costs are monitored by Controlling. The forecast costs and the results of project controlling, which are used to determine the percentage of completion and the proportionate contribution margins, are significant assumptions in the measurement of contracts. As these assumptions are subject to uncertainty, the actual contract costs and contribution margins may be higher or lower than forecast when the final project invoice is prepared.

Revenue recognition according to transfer of risk (IAS 18)

To a limited degree REpower Systems sells single components of wind turbines. In these cases revenue is recognized in ac-cordance with IAS 18 at the point of time when the risks and benefits are transferred to the buyer and payment is probable.

Revenues from licenses, maintenance contracts, electricity and the sale of spare parts are recognized in accordance with IAS 18.

License revenues are generated from volume-based licenses.

In accordance with IAS 18, revenues from service and maintenance contracts are realized insofar as the respective services have been rendered; advance payments are deferred.

3.14 Income tax expense

REpower Systems AG recognizes current taxes when they are caused in the amount due. Deferred taxes are recognized according to the liability method, under which deferred tax assets and deferred tax liabilities are recognized with future tax effects arising as a result of differences between the carrying amount of the assets and liabilities in the IFRS finan-cial statements and the tax base. The effects of changes in the tax rate on deferred taxes are recognized in income in the period in which the legislation mandating the change is substantially passed. However, the effects of changes in tax rates on items recognized in other operating income or directly in equity are also taken directly to equity. If it does not appear sufficiently likely that deferred tax assets will be realized in future, they are not recognized or their carrying amount is adjusted accordingly. In accordance with the requirements of IAS 12, deferred tax assets and deferred tax liabilities have been offset.

113Group Notes

3.15 Borrowing costs

If borrowing costs cannot be allocated to qualifying assets in accordance with IAS 23, they are expensed and not included in cost.

3.16 Government grants (investment subsidies)

Government grants are recognized depending on the nature of the subsidized expenses. Insofar as subsidies relate to capitalized assets, the grants received serve to reduce the cost of the subsidized assets. Grants provided as an expenditure allowance are recognized in the income statement of the fiscal year in which the subsidized expenses are incurred.

3.17 Transactions in foreign currencies

Each entity within the Group determines its functional currency. The items contained in the financial statements of each entity are measured using this functional currency. Foreign currency transactions are first translated at the spot exchange rate between the functional currency and the foreign currency on the transaction date. Foreign currency monetary assets and liabilities are translated into the functional currency at the closing rate. All exchange differences are recognized in the net result for the period. Non-monetary items measured at historical cost in a foreign currency are translated at the applicable exchange rate on the transaction date. Non-monetary items measured at fair value in a foreign currency are translated at the applicable exchange rate on the date on which their fair value was determined.

3.18 Financial instruments

As a matter of principle, financial instruments are recognized as soon as a REpower Group company becomes a party to a financial instrument. Financial assets are recognized on delivery, i.e. the date of order fulfillment. Derivative financial instru-ments are recognized at the trade date. Financial assets and financial liabilities are generally reported separately; they are only offset if the reporting entity has a right to offset and the intention to settle on a net basis.

Financial instruments consist of cash and cash equivalents, receivables, equity instruments held in other companies (i.e. shares in project corporations) and other financial assets as well as financial liabilities and loans, insofar as these relate to a contract. The initial recognition of financial assets is at fair value plus directly attributable transaction costs, insofar as the financial assets are not recognized at fair value through profit and loss. Subsequent measurement is at fair value or amortized cost using the effective interest rate, depending on the allocation of the individual financial instruments to the IAS 39 categories.

Financial liabilities are carried at fair value less transaction costs on initial recognition and at amortized cost using the effective interest rate method in subsequent measurement.

Financial assets are derecognized if the rights to the cash flows resulting from the assets have expired or substantially all of the risks have been transferred to a third party such that the criteria for derecognition are met. Financial liabilities are derecognized if the relevant obligations have expired or been cancelled.

Derivative financial instruments are employed to hedge foreign exchange and interest rate risks. Derivative financial instru-ments are carried at fair value. The recognition of changes in the fair value of derivative financial instruments depends on whether these instruments are deployed as hedging instruments and the conditions for hedge accounting in accordance with IAS 39 are met.

If these conditions are not met despite the existence of a hedging relationship, the derivative financial instruments are allocated to the category “at fair value through profit and loss” and the changes in fair value are recognized directly in income. The effective portion of the change in the fair value of a derivative financial instrument which was classified as a hedging instrument and which meets the definition of a cash flow hedge is recognized directly in total other shareholders’ equity, taking into account the associated tax effects. The ineffective portion is recognized in the income statement. The effective portion is only recognized in income if the hedged item is also recognized in income.

114 Group Notes

The fair values of financial assets recognized in the consolidated statement of financial position generally correspond to their market prices. If these are not available by reference to an active market, the relevant assets are measured using standard market procedures (valuation models) based on instrument-specific market parameters.

The fair values of cash and cash equivalents and other current primary financial instruments correspond to their carrying amounts at the respective reporting date.

The fair values of non-current receivables and other assets and non-current provisions and liabilities are determined on the basis of the expected cash flow based on the reference interest rates at the balance sheet date. The fair value of derivative financial instruments corresponds to their market value and may be either positive or negative. If no market value is available, the fair value is calculated using present value and option pricing models. Where possible, the relevant market prices and interest rates observed at the balance sheet date are applied as input parameters for these models.

There were no reclassifications of financial instruments to other categories in fiscal years 2009/10 or 2010/11 (IFRS 7.12).

Under certain conditions, financial assets and financial liabilities falling within the scope of IAS 39 can be irrevocably allocated to the “fair value option” sub-category on initial recognition. The REpower Group has not exercised the fair value option for any financial assets or financial liabilities.

3.19 Use of assumptions

The preparation of these consolidated financial statements requires the Group’s management to make estimates and assumptions that form the basis for the value of assets and liabilities, contingent liabilities and other financial obliga-tions as at the balance sheet date and revenue and expenses in the fiscal year. Key estimates and assumptions relate to impairment tests (see note 4.2), warranty provisions (see note 4.4.3), the measurement of share options (see note 4.6.2), the realization of revenue according to the percentage-of-completion method (see note 4.1.2) and the value of deferred tax assets (see note 4.2.5). The actual circumstances may differ from these assumptions. Changes in current economic conditions and other events may also have a material impact on the actual figures.

3.20 New accounting standards and their application

Financial reporting at REpower Systems AG in accordance with the IFRSs is based on the IASB accounting standards adopted by the European Commission in the context of the endorsement process for the European Union, in accord-ance with Regulation (EC) no. 1606/2002 in conjunction with section 315a (1) of the German Commercial Code (HGB). The new IFRSs and amendments to existing IFRSs published by the IASB are mandatory only following a corresponding resolution by the Commission as part of the endorsement process.

The following standards were required to be applied for the first time in fiscal year 2010/11:

In June 2009, the IASB published amendments to IFRS 2 “Group internal share-based payments with cash settlement”. It presents the accounting for share-based payments with cash settlement in the Group. It is not relevant which entity within the Group meets the corresponding obligation to the supplier or employee or whether the obligation is settled in shares or cash. The amended IFRS 2 supersedes IFRIC 8 and IFRIC 11, as the guidance contained in these interpretations is now included in IFRS 2. These amendments are mandatory for fiscal years beginning on or after January 1, 2010. The amendments are irrelevant to the consolidated financial statements of REpower Systems AG.

The revised IFRS 3 “Business Combinations”, published in January 2008, contains significant changes to the application of the purchase method for business combinations. These primarily relate to the recognition of minority interests, the presentation of step acquisitions, and the treatment of contingent purchase price components and incidental costs of acquisition. In this connection, the IASB introduced amendments to IAS 27 “Consolidated and Separate Financial State-ments” which govern the accounting treatment of transactions involving shares in subsidiaries which result in a loss of control or in which the parent company retains control. The revised standards are mandatory for fiscal years beginning on or after July 1, 2009. In the year under review, acquisitions took place in Portugal, to which the revised standards were applicable. These circumstances are presented in detail in note 2.2 “Fully consolidated companies” of this report.

115Group Notes

The amendments to IAS 32 “Financial Instruments: Presentation” clarify the accounting treatment of certain rights, options and warrants when the instruments issued are not denominated in the issuer’s functional currency. The amendments are mandatory for fiscal years beginning on or after February 1, 2010. The amendment of the standard has no impact on the consolidated financial statements of REpower Systems AG.

In July 2008, the IASB published an amendment to IAS 39 “Financial Instruments: Recognition and Measurement – Eligible Hedged Items”, which contains clarification on the application of hedge accounting. This new provision is mandatory for fiscal years beginning on or after July 1, 2009. The amendments are irrelevant to the consolidated financial statements of REpower Systems AG.

IFRIC 12 “Service Concession Arrangements” was published in November 2006. The Interpretation governs the accounting for agreements where the government, as the concession provider, awards contracts for the fulfillment of government responsibilities to private companies, as the concession operator. The private company uses infrastructure, which remains under the control of the government, to fulfill these responsibilities. The private company is responsible for the construc-tion, operation and maintenance of the infrastructure. The interpretation was published in the Official Journal of the European Union on March 26, 2009 following adoption by the EU and is subsequently mandatory for fiscal years begin-ning on or after March 30, 2009. The transitional provisions also provide for retrospective application to transactions from July 1, 2009. The amendments have no impact on the consolidated financial statements of REpower Systems AG.

IFRIC 15 “Agreements for the Construction of Real Estate” was published in July 2008. It contains special provisions on construction contracts for real estate with regard to the application of IAS 11 “Construction Contracts” and IAS 18 “Revenues”. IFRIC 15 is mandatory for the first time in fiscal year 2009. Following the application of IFRIC 15, residen-tial units or houses sold before construction begins or is complete and where the buyer only has a secondary right to specify the structural elements of the units or houses will, in future, be recognized in accordance with IAS 18 rather than using the percentage-of-completion method in accordance with IAS 11. This will lead to a shift in the revenue distribution for the affected entities in subsequent fiscal years. The amendments are irrelevant to the consolidated finan-cial statements of REpower Systems AG.

IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”, which contains specific provisions on hedging and iden-tifying foreign currency risks, was also published in July 2007. According to the IASB, IFRIC 16 is mandatory for fiscal years beginning on or after October 1, 2008. According to the corresponding EU regulation, however, the effective date was set for fiscal years beginning on or after June 30, 2009. The amendments have no impact on the consolidated financial statements of REpower Systems AG.

In November 2008, IFRIC 17 “Distribution of Non-cash Assets to Owners” was published, including provisions on the measurement of non-cash distributions to shareholders. IFRIC 17 is mandatory for fiscal years beginning on or after July 1, 2009. The amendments are irrelevant to the consolidated financial statements of REpower Systems AG.

In January 2009, IFRIC published IFRIC 18 “Transfer of Assets from Customers”, which governs the accounting of assets that an entity receives from customers for use in the provision of services or the production of goods for these cus-tomers. IFRIC 18 is mandatory for fiscal years beginning on or after July 1, 2009. The amendments are irrelevant to the consolidated financial statements of REpower Systems AG.

The aim of the “Annual Improvement Project 2009” was to condense existing Standards and make them more compre-hensible. In the majority of cases, it is a case of clarifications or corrections to existing IFRSs or adjustments resulting from previous amendments to the IFRSs. The application of these improvements had no material impact on the present consolidated financial statements.

The Annual Improvement Project 2008 clarified for IFRS 5 “Non-current assets held for sale and discontinued opera-tions 2 that with regard to the classification of a held for sale subsidiary, all assets and liabilities are classified as held for sale. This applies even in cases when the company retains non-controlling interests in the former subsidiary after the sale transaction. The change is being applied prospectively. This Standard was applied in the reporting year to the recognition of the subsidiary REpower North (China) Ltd., which was classified as held for sale. The clarification did not lead to any additional change in presentation. This matter is described in detail in Section 4.3 “Non-current assets held for sale and discontinued operations.”

116 Group Notes

The following standards and interpretations published by the IASB and IFRIC are not yet mandatory because they have not yet been recognized by the EU or the date of first application has not yet been reached. Where these have already been endorsed by the EU, they have not been applied early by REpower Systems AG.

In fiscal year 2010/11, the following standards and interpretations that have already been recognized by the EU were not yet mandatory:

In November 2009, the IASB adopted IFRS 9, “Financial Instruments: Classification and Measurement – Financial Assets”. The new standard rewrites the classification and measurement requirements of financial assets and finishes the first of a total of three phases under the header “classification and measurement”, by the end of which the existing IAS 39 “Finan-cial Instruments: Recognition and Measurement” is to be abolished. Phases II (“Amortized Cost and Impairment”) and III (“Hedge Accounting”) had not been adopted at the time the financial statements were prepared. To date, it has not yet been taken up into European law. The new provisions are mandatory for fiscal years beginning on or after January 1, 2013. The impact of IFRS 9 on the net assets, financial position and results of operations and the presentation of the REpower Systems AG Group is currently being examined and will be examined on an ongoing basis.

The amendments to IFRIC 14 “Prepayments of a Minimum Funding Requirement” relate to entities that have made pre-payments to meet their minimum funding requirements. The amendment gives these entities the option of recognizing the benefits resulting from such payments as assets. The standard is mandatory for fiscal years beginning on or after January 1, 2011. No impact on the net assets, financial position and results of operations of the consolidated financial statements of REpower Systems AG is expected.

IFRIC 19 “Displacing Financial Liabilities with Equity Instruments” describes the requirements for entities that issue shares or other equity instruments to extinguish all or part of a financial liability. IFRIC 19 clarifies that equity instru-ments issued to extinguish a financial liability are considered to represent consideration paid in accordance with IAS 39.41, that these equity instruments should be measured at fair value, and that the difference between the carrying amount of the financial liability extinguished and the initial carrying amount of the equity instruments issued should be recognized in profit or loss. IFRIC 19 is mandatory for fiscal years beginning on or after July 1, 2010. It is not relevant to the consolidated financial statements of REpower Systems AG at present.

Various improvements to the IFRSs (May 2010), an annual collective standard to make amendments to the IFRSs was published once again in May 2010 as part of the Annual Improvement Project 2010. The collective standard contains editorial revisions and minor amendments to six IFRSs and one Interpretation. This relates to amendments to IFRS 1 “First-time Adoption of IFRS”, IFRS 3, “Business Combinations”, IFRS 7, “Financial Instruments: Disclosures”, IAS 1, “Presentation of Financial Statements”, IAS 27, “Consolidated and Separate Financial Statements”, IAS 34, “Interim Reporting” and IFRIC 13 “Customer Loyalty Programmes”. To date, it has not yet been taken up into European law. The amendments are mandatory for fiscal years beginning on or after July 1, 2010 and January 1, 2011 but, as things stand at present, will have no material impact on the net assets, financial position and results of operations of the REpower Systems AG Group.

117Group Notes

The standards and interpretations published by the IASB and IFRIC, application of which in IFRS consolidated financial state-ments in accordance with Section 315a of the German Commercial Code still requires recognition by the EU, are as follows:

In November 2009, the IASB adopted IFRS 9, “Financial Instruments: Classification and Measurement – Financial Assets”. The new standard rewrites the classification and measurement requirements of financial assets and finishes the first of a total of three phases under the header “classification and measurement”, by the end of which the existing IAS 39 “Finan-cial Instruments: Recognition and Measurement” is to be abolished. Phases II (“Amortized Cost and Impairment”) and III (“Hedge Accounting”) had not been adopted at the time the financial statements were prepared. To date, it has not yet been taken up into European law. The new provisions are mandatory for fiscal years beginning on or after January 1, 2013. The impact of IFRS 9 on the net assets, financial position and results of operations and the presentation of the REpower Systems AG Group is currently being examined and will be examined on an ongoing basis.

In addition to the provisions of IFRS 9 issued in November 2009, the IASB issued IFRS 9, “Financial Instruments: Classi-fication and Measurement – Financial Liabilities” on October 28, 2010. Financial liabilities can continue to be allocated to the measurement categories “amortized cost” or “fair value”. Under the new provisions, a company that has chosen the fair-value-option to account for its financial liabilities can no longer recognize changes in the fair value triggered by a change to its own credit risk through profit and loss in the income statement but must take them directly to equity in “other comprehensive income” in the statement of comprehensive income. A deviation from this provision is possible if presentation in this way will lead to a measurement inconsistency in the income statement. To date, the new provision has not yet been taken up into European law. The new provisions are mandatory for fiscal years beginning on or after January 1, 2013. The impact of IFRS 9 on the net assets, financial position and results of operations and the presenta-tion of the REpower Systems AG Group is currently being examined and will be examined on an ongoing basis.

The amendments to IFRS 7 “Financial Instruments: Disclosures – Transfer of Financial Assets” relate to the extension of the duty to disclose transactions for the purposes of transferring financial assets where certain rights and duties remain with the transferring entity or are assumed as part of the transaction. The disclosures should show the relation-ship between the transfer of financial assets and the corresponding financial liabilities. The transferring entity has to make extensive disclosures on the rights and obligations associated with the transaction. To date, it has not yet been taken up into European law. The amendments are mandatory for fiscal years beginning on or after July 1, 2011. The potential impact on the consolidated financial statements of REpower Systems AG is being examined at present.

The selective amendment to IAS 12, “Deferred Tax: Recovery of Underlying Assets” was published on December 20, 2010, which contains a mandatory exemption in certain cases from the basic principle of IAS 12.51, under which de-ferred taxes must be measured with the tax consequences to be expected from the expected manner of recovery of the underlying asset (or liability). This innovation is mainly of significance for countries in which the use and disposal of assets are taxed differently. Contrary to the draft standard of September 2010, the exemption now extends solely to investment properties measured at fair value but not to intangible assets or plant, property and equipment. To date, it has not yet been taken up into European law. The amendments are mandatory for fiscal years beginning on or after January 1, 2012. The impact of the changes on the net assets, financial position and results of operations and the presen-tation of the REpower Systems AG Group is currently being examined and will be examined on an ongoing basis.

On December 20, 2010, the IASB published two minor amendments to IFRS 1, Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters. The first amendment replaces the references to the fixed date of transition “January 1, 2004 with “date of transition to IFRS”. The second amendment provides guidance as to how to proceed with the presentation of IFRS-compliant financial statements if an entity could not comply with IFRS provisions for some time because its functional currency was subject to severe hyperinflation. To date, the amendments have not yet been taken up into European law. The amendments are mandatory for fiscal years beginning on or after July 1, 2010 but are irrelevant to the REpower Systems AG Group.

118 Group Notes

4 Consolidated statement of financial position4.1 Current assets4.1.1 Liquid funds

There were no restrictions on access to liquid funds in the year under review. In the previous year, the Company had only limited access to bank balances in the amount of 1,087 k EUR, as these served as a security deposit for a project in France.

4.1.2 Gross amount due from customers for contract work as an asset/as a liability

This item is used to report work in progress which is recognized using the percentage-of-completion method in accordance with IAS 11. Advance payments on the contracts recognized are deducted directly.

2011/03/31 2010/03/31k EUR k EUR

Receivables 549,295 859,939Less advance payments received –361,054 –727,399

188,241 132,540

The amount of 188,241 k EUR (previous year: 132,540 k EUR) due to the netting consists of gross amounts due from cus-tomers for contract work as an asset with an amount of 199,895 k EUR (previous year: 174,500 k EUR) and as a liability with an amount of 11,654 k EUR (previous year: 41,960 k EUR). The gross amounts due from customers for contract work as a liability are shown on the liability side.

In fiscal year 2010/11, these contracts resulted in material costs of 453,393 k EUR (previous year: 729,101 k EUR). The net contribution of revenue and material costs to operating earnings from these projects in 2010/11 was 95,902 k EUR (previous year: 130,838 k EUR). 4.1.3 Trade accounts receivable

Trade accounts receivable primarily relate to receivables from customers for the delivery of wind turbines.

2011/03/31 2010/03/31k EUR k EUR

Trade accounts receivable (after specific valuation allowances) 72,422 63,12572,422 63,125

In fiscal year 2010/11, specific valuation allowances of 6,424 k EUR were recognized on trade accounts receivable (previous year: 8,289 k EUR).

2010/11 2009 /10k EUR k EUR

Changes in specific valuation allowancesAt the start of the fiscal year 9,252 2,091Reversals –2,762 –1,128Additions 6,424 8,289At the end of the fiscal year 12,914 9,252

119Group Notes

The maturity structure of trade accounts receivable was as follows:

Maturity structure of trade accounts receivable

Carrying amount

of which: at thebalance sheet date

neitherimpaired

nor overdue

of which: after specific valuation allowances at the balance sheet date but overdue as follows

Less than 30 days

Between 30 and 180 days

More than 180 days

As of March 31, 2011

Trade accounts receivable (k EUR) 72,422 57,860 6,597 6,583 1,382

As of March 31, 2010

Trade accounts receivable (k EUR) 63,125 37,252 10,939 13,098 1,836

In the case of the trade accounts receivable that were neither impaired nor overdue, there was no evidence of the debtors being unable to meet their payment obligations as of the balance sheet date. Further information on the treatment of financial risks can be found in 7.2 “Information on the nature and extent of risks associated with financial instruments”.

REpower Systems AG requests collateral from its customers depending on the outcome of credit checks. Collateral is generally requested after signature of the purchase contract in the form of bank guarantees or warranties for the purchase price less any advance payments made. Accordingly, the nominal value of the collateral received typically exceeds the current level of accounts receivable. As of March 31, 2011, the value of the collateral received was 1,279.53 m EUR (previous year: 914.41 m EUR).

There were no trade accounts receivables whose terms were renegotiated and that would otherwise have been overdue or impaired, either at the current reporting date or in the previous year.

4.1.4 Receivables from related parties

This item is composed as follows:

2011/03/31 2010/03/31k EUR k EUR

Receivables from related partiesLoan to Windpark Finsterwalde GmbH, Finsterwalde 450 450Loan to RiaBlades S.A.1 0 10,093Other 164 0

614 10,543

1 Since February 28, 2011, this company is fully consolidated for the first time thus receivables from affiliated companies occur.

120 Group Notes

4.1.5 Receivables from associates and joint ventures

Receivables from associates are due in the amount of 6 k EUR from RETC Renewable Energy Technology Centre GmbH.

4.1.6 Inventories

As of March 31, 2011, valuation allowances on inventories amounted to 9,297 k EUR (previous year: 3,942 k EUR), of which 5,355 k EUR was recognized in income in 2010/11 (previous year: 2,152 k EUR). Expenses for raw materials and supplies amounted to 797,255 k EUR in the year under review (previous year: 862,827 k EUR).

2011/03/31 2010/03/31k EUR k EUR

Raw materials and supplies 244,391 220,866Work in progress 102,814 64,193

347,205 285,059

Raw materials and supplies relate to inventories for the production of wind energy turbines. Work in progress relates to turbines under construction.

4.1.7 Other current assets

This item is composed as follows:

2011/03/31 2010/03/31k EUR k EUR

Other miscellaneous assetsAdvance payments on non-current assets and inventories 31,649 28,415Receivables from other taxes 28,657 8.177Equipment deposit 1,329 2,364Creditors with debit balances 1,132 852Prepaid insurance premiums (ISK) 0 291Other 13,299 10,589

76,066 50,688Other financial assetsLoans 9,006 177Derivative financial instruments 3,913 7,227Receivables from insurance companies 61 697Receivables from shareholders 0 3,438Suzlon claim1 0 7,730Other 349 3,196

13,329 22,465Other current assets 89,395 73,153

1 Due to REpower North (China) Ltd. being disclosed according to IFRS 5 the Suzlon claim is shown in ‘Assets of disposal group of classified as held for sale’.

121Group Notes

4.2 Non-current assets4.2.1 Other intangible assets

In fiscal year 2010/11, research and development costs amounted to 36,905 k EUR (previous year: 25,587 k EUR).

Of the development costs 18,359 k EUR were capitalized (previous year: 5,815 k EUR).

Amortization of capitalized development costs amounted to 3,664 k EUR in fiscal year 2010/11 (previous year: 1,469 k EUR).

4.2.2 Property, plant and equipment

Land and buildings relate primarily to the Group’s own production sites and administrative buildings.

Technical equipment and machinery primarily relates to facilities for the production of wind turbines. Own work capitalized was recognized in the amount of 6,166 k EUR (previous year: 5,517 k EUR).

At the reporting date, assets under construction relate primarily to expenses for the construction of rotor blade moulds.

Land and buildings in the amount of 49,745 k EUR (value of the land charges; previous year: 50,448 k EUR) serve as collateral (see also note 4.5.).

The development of property, plant and equipment is shown in the consolidated statement of changes in non-current assets.

In fiscal year 2010/11, subsidies of 2,891 k EUR (previous year: 4,090 k EUR) were deducted directly in assets.

These subsidies are primarily related to development projects for REpower offshore technology and the construction and commissioning of the rotor blade and turbine construction site in Bremerhaven. The subsidies concerning the projects in Bremerhaven are largely granted on the condition that the necessary investments for the construction and commissioning of these plants are made by 2015 and that over 400 jobs are created by this date. REpower Systems AG and PowerBlades GmbH have already made the necessary investments. Approximately 90% of the job creation targets have been met, and these targets are expected to be met in full by 2015.

4.2.3 Associates and joint ventures

In fiscal year 2010/11, associates and joint ventures recognized using the equity method reported a total result of –360 k EUR (previous year: 1,993 k EUR) and revenue of 5,464 k EUR (previous year: 140,298 k EUR). As of March 31, 2011, these companies had non-current assets of 336 k EUR (previous year: 6,084 k EUR), current assets of 791 k EUR (previous year: 29,929 k EUR), non-current liabilities of 0 k EUR (previous year: 3,875 k EUR) and current liabilities of 321 k EUR (previous year: 20,796 k EUR).

The average number of employees as at March 31, 2010 was 19 (previous year: 43).

Finally, RETC Renewable Energy Technology Centre GmbH is included in the consolidated financial statements as an associate during the period under review, as is REpower Portugal Sistemas Eólicos S.A. until February 28, 2011.

4.2.4 Loans granted

This item includes loans granted to wind farm project companies. In the case of interest-bearing loans, the interest rates are between 2.05% and 6.64% p.a.

122 Group Notes

4.2.5 Income taxes

Current income tax expense in the individual countries and deferred taxes are reported as income taxes. Income tax expense is composed as follows:

2010/11 2009/10k EUR k EUR

Current income taxes 11,800 18,608 Current income taxes for previous years –1,372 –169Deferred taxes 12,868 7,480 Income taxes 23,296 25,919

Current taxes are calculated using the applicable tax rates in the individual countries.

Deferred taxes result from temporary differences in the carrying amounts in the companies’ tax base and the consolidated financial statements, as well as from tax loss carryforwards. They are calculated using the liability method and the tax rate applicable in the respective countries at the date on which the differences are reversed, to the extent that this is known at the balance sheet date, or using the tax rate at the balance sheet date if a change in the tax rate is not likely.

In 2011, the corporation tax rate for companies in Germany was 15.0% (previous year: 15.0%) plus the solidarity surcharge of 5.5% of this amount (previous year: 5.5%), meaning that the total corporation tax rate was 15.825% (previous year: 15.825%). Including trade tax, the total tax rate was 28.7% (previous year: 28.6%).

With regard to minimum taxation, the utilization of tax loss carryforwards in Germany is restricted. There are no restrictions for a positive basis of assessment of up to 1 m EUR. No more than 60% of any amounts exceeding this level may be reduced by offsetting against existing tax loss carryforwards.

The effects of different tax rates in Germany and abroad compared with the tax rate of the Group parent are presented under tax rate differences in the reconciliation.

The current income tax expense of 23,296 k EUR for fiscal year 2010/11 (total for previous year: 25,919 k EUR) is 67 k EUR higher than the expected income tax expense of 23,229 k EUR (total for previous year: 23,981 k EUR). The reasons for the difference between the Group’s expected and actual tax expense are shown below. Expected tax expense is calculated using the total domestic tax rate of 28.7% for fiscal year 2010/11 and 28.6% for fiscal year 2009/10:

2010/11 2009/10k EUR k EUR

IFRS profit before income tax from continuing operations 80,938 83,850

Expected tax expense 23,229 23,981Valuation adjustment of deferred taxes on tax loss carryforwards 1,615 –60Non-deductible operating expenses 451 788Ineligible foreign taxes 428 786Employee option programs/share options 367 969 Additions to/reductions in trade income tax (GewESt) 359 749Changes in tax rates 43 –534Expiry of tax loss carryforwards due to transfer of shares 0 336Different tax rates –11 –229Tax-exempt income –348 –296Other tax effects –382 140Inclusion of at-equity companies –1,083 –542Income taxes for previous years –1,372 –169Actual income tax expenses 23,296 25,919

123Group Notes

The non-deductible operating expenses primarily result from special features of the tax regulations of the country of resi-dence of the international companies (e.g. USA: non-deductibility of interest expenses until the payment has been made, 115 k EUR; Italy: non-deductibility of expenses for vehicles 137 k EUR)

The changes in tax rates relate to the adjustment of the Group tax rate to reflect the actual total tax rate of the Group parent.

A reconciliation effect also occurred in relation to expenses from employee option programs, since these expenses were not deductible from the taxable profit. The tax effect of this for the year under review was 367 k EUR (total for previous year: 969 k EUR). Please see the notes on the share option program.

Income tax expenses from the value adjustment of tax loss carryforwards mainly refers to Powerblades GmbH.

Deferred tax assets and deferred tax liabilities are attributable to the following items:

2010/11 2009/10k EUR k EUR

Deferred tax assets:Provisions 3,775 3,918Tax loss carryforwards 2,573 2,816Inventories and receivables 2,063 2,967Property, plant and equipment 223 362Other 2,235 450

Total deferred tax assets 10,869 10,513Offsetting –6,729 –7,101

Deferred tax assets after offsetting 4,140 3,412

Deferred tax liabilities:Future accounts receivable/liabilities from contract orders 28,424 20,186 Development costs 12,539 8,272 Property, plant and equipment 212 1,077Other 1,586 38

Total deferred tax liabilities 42,761 29,573Offsetting –6,729 –7,101

Total deferred tax liabilities after offsetting 36,032 22,472

Deferred taxes include deferred tax liabilities of 1,121 k EUR (previous year: 3,959 k EUR) for temporary differences recognized in equity for financial instruments.

Deferred taxes on tax loss carryforwards are recognized in the amount of the tax effect of the expected utilizable tax losses of the German and international Group companies. The key factor for determining the value of deferred tax assets is the estimated probability of a reversal of the measurement differences and the usability of the tax loss carryforwards which led to deferred tax assets. This depends on the occurrence of future taxable profit during the periods in which tax measurement differences are reversed and tax loss carryforwards can be utilized. According to the current status, tax loss carryforwards can be carried forward without restriction in subsequent years in almost all countries where tax loss carry-forwards occur. Exceptions include the tax loss carryforwards of REpower USA Corp., which amounted to 1,861 k EUR as of March 31, 2011 and were only eligible to be carried forward until 2018, subject to the company recording positive earnings.

Since the reporting year, REpower Espana has been dormant. For this reason its tax loss carryforward of 1,015 k EUR was classified as non-utilizable. Due to the negative result of PowerBlades GmbH in the reporting year, its tax loss carryforward was also treated as non-utilizable. In respect to RiaBlades S.A., Portugal, consolidated for the first time in the reporting year, the tax loss carryforward accumulated before the time of the initial consolidation was treated as not recoverable. However, tax assets were established on the tax losses generated after February 28, 2011. Due to the expected taxable income situation of all other Group companies, it is assumed that all tax loss carryforwards will be fully utilizable in the foreseeable future.

124 Group Notes

4.3 Non-current assets held for sale and discontinued operations

The assets and liabilities of REpower North (China) Ltd. are recognized as held for sale as a consequence of the initiated sales activities of the shares in REpower North (China) Ltd. The company, which was founded as a joint venture, produces REpower wind turbines for the north Chinese market and is part of the Onshore segment. Completion of the sale is expected in fiscal year 2011/2012.

A condensed cash flow statement of REpower North (China) Ltd. is shown below. Because of the first-time consolidation of this company on March 31, 2010, there are no previous year figures for REpower Systems.

2010/04/01–2011/03/31k EUR

Cash flow from operating activities –13,127Cash flow from investing activities –3Cash flow from financing activities 3,651Total cash flow –9,479

For fiscal year 2010/11 the assets and liabilities of REpower North (China) Ltd are composed as follows:

2011/03/31 k EUR

Assets of disposal group classified as held for sale Property, plant and equipment 0Intangible assets 0Inventories 11,508Other current assets 19,667

31,175

Liabilities of disposal group classified as held for saleTrade accounts payable 1,391Other current liabilities –1,837Provisions 6,690

6,224

Cumulative income and expenses taken direct to equity associated with the discontinued operationsCurrency translation differences 778

The profit/loss for the year from discontinued operations and the profit/loss from marking-to-market of the assets held for sale are composed as follows. Because of the first-time consolidation of this company on March 31, 2010, it was not included in REpower Systems’ previous year’s figures.

2011/03/31 k EUR

Income 19,903Expenses –21,904Earnings before tax from discontinued operations –2,001Taxes –65Earnings after tax from discontinued operations 2,066Thereof loss from the remeasurement of assets from discontinued operations –8,004

125Group Notes

As a consequence of the remeasurement of assets at fair value less costs to sell because of the classification of REpower North (China) as a discontinued operation an impairment loss of 8,004 k EUR was recognized in the income statement in the profit / loss from the discontinued operations.

4.4 Current liabilities4.4.1 Capital from profit participation rights

Capital from profit participation rights totaling 10,000 k EUR was taken up in May 2004 and expires in May 2011. A basic interest rate of 7.9% in addition to a variable interest rate dependent on net income is paid on profit participation rights. In fiscal year 2010/11, this interest amounted to 147 k EUR (previous year: 147 k EUR).

4.4.2 Advance payments received

Advance payments from customers for orders for which no production work has been carried out or for which the payments received exceed the capitalized costs are reported as advance payments received. The increase in this item is primarily attributable to payments received in connection with future offshore projects.

4.4.3 Provisions

Provisions primarily relate to deferred warranty expenses. Based on individual provisions of 24.2 m EUR in the previous year, additions of 36.9 m EUR, individual provisions amounted to 44.2 m EUR at the balance sheet date, taking into account utilizations of 7.0 m EUR and reverasals of 9.9 mEUR. With an initial value of general provisions of 34.5 m EUR in the pre-vious year and additions of 18.1 m EUR, general provisions amounted to 35.7 m EUR on the balance sheet date considering utilization of 8.1 m EUR and reversals of 8.8 m EUR. Provisions for warranties are utilized in accordance with legal or con-tractual obligations.

The other provisions mainly relate to provisions for litigations as well as to provisions for contingent losses and increased by 13.3 m EUR from 2.5 m EUR to 15.8 m EUR. Utilization is expected in the following fiscal year.

Provisions for pensions

Plans for pensions and similar obligations are measured in accordance with IAS 19 “Employee Benefits”. Pension provisions are measured using the projected unit credit method.

REpower Systems AG has granted a pension commitment in the form of a defined contribution plan involving benefits for retirement and surviving dependants. These benefits are financed by way of a matching insurance policy. The policyholder and beneficiary is REpower Systems AG, while the insured parties are the former employees.

The insurance policy was fully financed with the payment of a non-recurring contribution; no further contributions are required. To guarantee the claims of the pension beneficiaries, REpower Systems AG has pledged the claims arising from the insurance policy to the former employees and provided written confirmation of this pledge agreement. As a result, the insurance policy becomes a “plan asset” as defined in IAS 19. If the benefits payable under the insurance policy are the same as the benefits payable under the obligation, the fair value of the asset is deemed to be the same as that of the obli-gation in accordance with IAS 19.104, meaning that such items are not included in the consolidated statement of financial provision or the income statement. Accordingly, no obligation is recognized in the IAS consolidated statement of financial position. Thus the obligation stated in the statement of financial position equals to zero.

The Company has commitments under a provident fund for one employee (previous year: two). This relates to a defined contribution obligation that is financed by way of a corresponding agreement on the waiver of salary in connection with the grant of a commitment for provident fund benefits. The benefits of the respective insurance policies financed by the payment are used solely to satisfy the provident fund benefit obligations.

4.4.4 Deferred income

Prepayments for revenue from service and maintenance are mainly reported as deferred income. Straight-line amortization is applied for these deferred positions over the entire term of the rendered service.

126 Group Notes

4.4.5 Income tax liabilities

Income tax liabilities primarily relate to current taxes for the fiscal year.

4.4.6 Other current liabilities

Other current liabilities are composed as follows:

2011/03/31 2010/03/31k EUR k EUR

Other financial liabilitiesLiabilities to employees 14,564 9,531Liabilities to Ventinveste S.A. from supplementary capital 3,000 0Derivative financial instruments 1,203 2,046Debtors with credit balances 459 660Security deposit 10 2,832

19,236 15,069Other miscellaneous liabilities Liabilities from other taxes 10,008 3,776Social security liabilities 1,001 547Other 3,448 2,983

14,457 7,306Other current liabilities 33,693 22,375

4.5 Long-term loans

Long-term loans totaling 50,870 k EUR (previous year: 43,486 k EUR) relate to liabilities to credit institutions. The interest rate for bank loans was between 5.0% and 7.25% p.a. Non-current bank liabilities amounting to 49,745 k EUR (previous year: 50,448 k EUR including collateral for profit participation rights) are secured by liens and assignments of security from electricity revenues as well as insurance claims.

On May 26, 2009, REpower Systems AG was granted a syndicated loan with a total volume of 600,000 k EUR, 500,000 k EUR of which can be utilized in the form of guarantees and the remaining 100,000 k EUR as a cash loan. As at March 31, 2011, credit lines had been drawn on in the amount of 412.9 m EUR exclusively for sureties and guarantees. The syndicated loan was secured by way of rights from registered patents and patent applications of REpower Systems AG. Furthermore, the credit loan agreement contains common rights of termination for the lender that become valid as soon as regulated defaults occur. These violations include contracts of domination- or profit transfer agreements, the failure to comply with certain financial covenants or a change of control. In addition, dividend payment is also only possible to a defined extent.

With agreement concluded with financing banks a covenant breech of the syndicated credit facilities could be avoided retrospectively as per March 31, 2011.

4.6 Equity capital

The change in equity components is shown in the consolidated statement of changes in equity.

127Group Notes

4.6.1 Subscribed capital

At March 31, 2011, the share capital of REpower Systems AG amounted to 9,220,179 EUR (previous year: 9,199,829 EUR) and is divided into 9,220,179 (previous year: 9,199,829) no-par value ordinary bearer shares, each with a notional interest in the share capital of 1.00 EUR. This includes 20,350 (previous year: 22,790) shares issued as part of an employee option program which are entered in the commercial register after each reporting date. Authorized capital

By resolution of the Annual General Meeting on October 25, 2010, the Executive Board was authorized, with the approval of the Supervisory Board, to increase the share capital of REpower Systems AG by up to 4,599,914.00 EUR on one or several occasions by issuing new shares against cash or non-cash contributions up to and including October 24, 2015.

Contingent capital

The share capital was contingently increased of 4,227,276.00 EUR by resolution of the Annual General Meeting on October 25, 2010. The contingent capital increase authorizes the issue of bonds with warrants and/or convertible bonds as well as income bonds and/or profit sharing rights totaling up to 700 m EUR until October 24, 2015.

Furthermore, the Executive Board is authorized to increase the share capital contingently by a nominal amount of up to 341,960 EUR (previous year: 372,647 EUR) in the context of share option plans.

The reduction is due to the utilization of contingent capital in fiscal year 2010/11 in the amount of 1,750 EUR for the 2005 share option plan, 3,700 EUR for the 2006 share option plan and 14,900 EUR for the 2007 share option plan. This respective contingent capital increase will be resolved by the Supervisory Board on May 31, 2011 and the registration in the Commercial Register will follow. Up to 140,000 option rights were issued as part of the 2008 share option program; due to expiry/forfeiture of single option rights these were reduced to 127,939 options at the reporting date.

4.6.2 Additional paid-in capital

The additional paid-in capital results from the initial public offering of REpower Systems AG in the year 2002.

The increase in additional paid-in capital of 3,103 k EUR is the result of a capital increase of 1,825 k EUR implemented as part of an employee share option program which had not yet been entered in the commercial register on the reporting date. In application of IFRS 2 the corresponding effect to the amount stated in the item “personnel expenses” is shown in the additional paid-in capital.

The development of capital reserves is shown in the statement of changes in equity.

Share option program

REpower Systems AG operates a share option program which offers beneficiaries the right to acquire one share per option at a defined basic price. Cash settlement is not possible. The options can be exercised during an agreed period each with a duration of five years, but only starting from two years after they are granted (blocking period). Options issued in fiscal year 2008/09 may be exercised only on condition that the margin of the consolidated result from operating activities (EBIT margin) in fiscal year 2008/09 is at least 6.3% or the margin of the consolidated result from operating activities (EBIT margin) in fiscal year 2009/10 is at least 8.4%. In order to reflect the long-term nature of the option program, the options are to be exercised in the following tranches: a maximum of 50% of the option rights can be exercised after the legally prescribed holding period of two years from the issue date of the option rights, a further 25% three years after the issue date, and a further 25% four years after the issue date. No further option rights were issued in the period under review.

128 Group Notes

As at March 31, 2011, share options had been issued to the Executive Board and key employees in the years 2007 to 2008 under the share option programs. The changes compared with the previous year’s reporting date can be seen in the table below.

Number Basic price orshare price on

exercise (weighted average) in EUR

Outstanding options at the start of the fiscal year 342,816 130.0Granted 0 -Exercised –20,350 91.57Forfeited/expired –66,770 112.20Outstanding options at the end of the fiscal year 255,696 138.62of which exercisable 191,727 129,82

The exercise price ranges from 112.20 EUR to 165.00 EUR. No option rights from the employee option programs 2005 and 2006 are outstanding on the balance sheet date.

The exercise price is 112.20 EUR for 127,757 option rights and 165.00 EUR for the remaining 127,939 option rights.

The fair values of the share options at the grant date were calculated by an external expert on the basis of the following assumptions and factors.

Granted in fiscal year 2007Basic price 112.20 EURREpower Systems AG share price 122.50 EURRisk-free interest rate 4.47%Expected volatility 43.37%Remaining blocking period (in months) 24Remaining maturity 60Fair value per share option 50.32 EUR

Expected volatility is based on historical volatility, which is determined on the basis of the daily closing prices for REpower Systems AG shares. REpower Systems’ share performance in the first half of 2007 was significantly influenced by a takeover battle for REpower Systems AG between two companies. Due to the one-off nature of this event and the extreme share price fluctuations involved, the historical data was adjusted for the period of the takeover battle.

129Group Notes

The options forming part of the 2008 option program were issued in several tranches. The fair values of the share options on the respective grant date were also calculated by an external expert on the basis of the following assumptions and factors:

Tranche 2008 I 2008 II 2008 III 2008 IV 2008 VValuation date 2008/10/14 2008/10/24 2008/10/27 2008/11/07 2008/11/14Basic price 165.00 EUR 165.00 EUR 165.00 EUR 165.00 EUR 165.00 EURREpower Systems AG share price 165.00 EUR 80.74 EUR 55.58 EUR 122.82 EUR 102.18 EURRisk-free interest rate 3.76 % 3.22% 3.19% 3.00% 2.80%Expected volatility 44.36% 46.96% 50.01% 57.15% 57.51%Fair value of portion 1 (remaining blocking period 24 months)

63.10 EUR 16.06 EUR 7.84 EUR 44.79 EUR 32.57 EUR

Fair value of portion 2 (remaining blocking period 36 months)


Fair value of portion 3 (remaining blocking period 48 months)


Fair value per share option 64.97 EUR 16.47 EUR 8.03 EUR 46.60 EUR 33.88 EUR

Valuation was performed using a binomial model. This allows for the possibility of early exercise of the options within the exercise period. The so-called early exercise behavior of beneficiaries is recognized in the binomial model in accordance with the Hull and White approach. Providing that the option can be exercised on the basis of the exercise period and current share price development, the early exercise of the options was assumed in all cases in which the share price has reached a certain threshold. The threshold for early exercise was set at 200% of the exercise price in accordance with available studies for the US market.

In fiscal year 2010/11, the Company recognized personnel expenses from share-based payments totaling 1,278 k EUR (previous year: 3,423 k EUR).

4.6.3 Non-controlling interests

Non-controlling interests relate to the shares held by third parties in German and international Group companies. These in-clude shares of third parties in the 2010/2011 fiscal year in REpower North (China) Ltd., in PowerBlades GmbH, in REpower Diekat S.A. and in the course of the year in PowerBlades S.A.

130 Group Notes

5 Income statement disclosures5.1 Revenues

In fiscal years 2010/2011 and 2009/10, the operations of companies of the REpower Systems Group related almost exclusively to the development and manufacture of wind turbines and wind turbine projects. A breakdown of revenues by segment can be found in note 9 (segment reporting).

2010 /11 2009 /10k EUR k. EUR

Revenue from the sale of wind turbines 1,116,639 1,209,809Service/maintenance and material sales 81,784 70,962License revenues 7,530 8,623Electricity revenues 1,597 2,589Other 8,552 11,595

1,216,102 1,303,577

In accordance with IAS 11, contract revenue was recognized in the amount of 1,095,943 k EUR (previous year: 1,144,920 k EUR). This is reported under revenues from the sale of wind turbines.

5.2 Other operating income

Other operating income is composed as follows:

2010 /11 2009 /10k EUR k EUR

Currency translation gains 9,876 7,983Insurance payments/compensation 8,198 1,334Income from the initial consolidation in Portugal 5,667 0Income from hedge accounting 4,680 0Income from the reversal of specific valuation allowances 2,564 1,345Investment subsidies, research and development subsidies 1,590 2,525Income from the Blockland sale 1,483 0Gains on the sale of WEL assets 1,339 0Income from the reversal of provisions 113 1,068Gains on the disposal of non-current assets 64 1,468Other 2,570 3,824

38,144 19,547

5.3 Personnel expenses

2010 /11 2009 /10k EUR k EUR

Wages and salaries 98,539 85,448Social security contributions 19,812 17,513

118,351 102,961

The average number of employees for the year 2010/11 was 2,132 (previous year: 1,838)

131Group Notes

5.4 Other operating expenses

Other operating expenses are composed as follows:

2010 /11 2009 /10k EUR k EUR

Legal and consulting costs 19,584 8,168Payment transaction costs/currency translation losses 16,371 11,355Purchased services 12,880 8,962Office and land costs 10,764 9,609Travel expenses 10,325 9,385Warranty expenses 9,893 19,668Vehicle costs 6,860 5,571Write-offs/write-downs of receivables 6,759 8,302IT & telecommunication costs 5,869 5,384Costs of training and appointing staff 5,820 5,177Compensation for loss of production 4,447 11,676Repairs and maintenance 4,215 2,092Administration costs 3,828 2,914Advertising and trade fair expenses 3,653 2,036Insurance costs 1,284 2,229Penalties/bonuses 949 5,598License fees 550 1,082Other 8,652 7,993

132,703 127,201

The increase of legal and consulting costs mainly results from consulting services related to strategic projects and from additions to provisions for litigations.

5.5 Net finance costs and income from investments

Net finance costs and income from investments are composed as follows:

2011/03/31 2010/03/31k EUR k EUR

Interest and similar financial incomeOther interest and similar income 6,722 3,134Income from other loans and securities 4 9

6,726 3,143Interest and similar financial expensesWrite-downs on financial assets 0 –2,890Other interest and similar expenses –11,451 –16,712

–11,451 –19,602Share of result from associates and joint ventures –360 1,993Financial and investment result –5,085 –14,466

Borrowing expenses largely relate to guarantee commissions and interest on loans taken out by the Company.

The share of result from associates and joint-ventures amounts to –275 k EUR and is attributable to RETC.

132 Group Notes

5.6 Earnings per share

Undiluted earnings per share are calculated by dividing the consolidated net income/loss attributable to REpower Systems AG’s shareholders by the weighted average number of shares outstanding during the fiscal year. Earnings per share are diluted by potential shares. This includes option rights, which only dilute earnings if they result in shares being issued at a value below the average share price. There was a dilution effect from options from the 2007 share option plans that have not yet been exercised.

2010 /11 2009 /10k EUR k EUR

Consolidated net result attributable to REpower Systems AG’s shareholders 58,152,366 58,330,161Diluted consolidated net result attributable to REpower Systems AG’s shareholders 58,152,366 58,330,161Weighted average number of shares outstanding (undiluted) 9,220,179 9,199,829Effect of share options 263,257 346,801Weighted average number of shares outstanding (diluted) 9,483,436 9,546,630Earnings per share (undiluted) 6.31 6.34Earnings per share (diluted) 6.13 6.11

6 Contingent liabilities and other financial obligations

2011/03/31 2010/03/31k EUR k EUR

Other financial obligationsObligations from leases and rental contracts

Due within one year 18,553 32,316 Due between 1 and 5 years 44,804 90,839 Due in more than 5 years 240,243 134,991

303,600 241,792 Contingent liabilitiesLand charges 49,745 50,448Guarantees 10,696 4,883

60,441 55,331

The syndicated loan was also secured by way of rights from registered patents and patent applications of REpower Systems AG.

All leases at REpower Systems AG and the companies included in the scope of consolidation are operating leases. Lease payments are recognized directly in income on a straight-line basis over the term of the lease.

Obligations from leases and rental contracts relate primarily to obligations for the rental of office and warehouse space. Expenses amounting to 9,810 k EUR (previous year: 8,973 k EUR) were recognized for leases and rental contracts in 2010/11.

In fiscal year 2010/11, there were also three shipping charter agreements for offshore systems, which were concluded in the previous year and will be renegotiated at the end of the year under review and into the next fiscal year. The contracts each have a term of at least 10 years. The first charter is likely to come into effect on September 1, 2012. Together, the charter contracts are likely to result in charter fees of 27.5 m EUR. An advance payment of 650 k EUR was made in 2010/11.

133Group Notes

At the balance sheet date, REpower Systems AG reported land charges of 49.7 m EUR, as well as guarantees for associated companies and joint ventures a well as subsidiaries amounting to 10.7 m EUR (previous year: 4.8 m EUR). Utilization is considered to be unlikely.

At the balance sheet date, the Company had commitments of around 484.5 m EUR (previous year: 116.0 m EUR) for the pur-chase of inventories and around 6.3 m EUR (previous year: 2.8 m EUR) for the purchase of property, plant and equipment.

7 Financial risks and financial instruments 7.1 Principles of risk management

With regard to its assets, financial liabilities and planned transactions, REpower Systems AG is subject to risks arising from changes in raw materials and purchase prices, exchange rates, interest rates and share prices. The aim of financial risk man-agement is to limit these market risks through ongoing operating and financially oriented activities. To this end, specific hedging instruments are employed depending on the assessment of the respective risk. Risks are only hedged if they affect the Group’s cash flow. Derivative financial instruments are only employed in exceptional circumstances to hedge exchange rate risks, particularly those relating to customer contracts, and are not used for trading or other speculative purposes.

The principles of financial policy are agreed on an annual basis by the Executive Board and monitored by the Supervisory Board. The implementation of financial policy and ongoing risk management is the responsibility of Group Treasury with the involvement of Group Controlling. Certain transactions require the prior consent of the Executive Board, which is also regularly informed of the scope and amount of the current risk exposure. Treasury considers the effective management of financial instruments and market risks as one of its main functions. In order to assess the effects of different events on the market, simulation calculations are performed using various worst-case and market scenarios.

7.2 Information on the nature and extent of risks associated with financial instruments

Primary financial instruments classified as assets in accordance with IFRS 7 include receivables and other assets, provided that they are based on a contract, as well as cash and cash equivalents. Primary financial instruments classified as liabilities in accordance with IFRS 7 include all sub-groups of liabilities with the exception of provisions, deferred income and deferred taxes as well as income tax liabilities. Furthermore, those items which are not based on a contract are not included. Deriva-tives are only employed to a limited extent.

Credit and default risk is constantly monitored. Before entering into purchase and delivery contracts, the Group checks the customer’s credit rating using a standardized credit check process including the evaluation of information from external rating agencies and credit agencies and the analysis of financial information, and requests the provision of corresponding collateral. The result of the credit check process is documented for each customer. The credit and default risk of financial assets is limited to a maximum of the amounts reported on the asset side of the consolidated statement of financial position. There is no material concentration of default risks within the Group.

Exchange rate risks only exist insofar as deliveries are made to countries outside the euro zone or cross-border deliveries are made from such countries. Risks within the meaning of IFRS 7 arise from financial instruments that are denominated in a currency other than the functional currency and that are of a monetary nature; exchange rate differences arising from the translation of financial statements into the Group currency are not included.

IFRS 7 requires the performance of a currency sensitivity analysis showing the effects of hypothetical changes in relevant risk variables on earnings and shareholders’ equity. Foreign currency sensitivity is calculated for primary monetary financial instruments (cash and cash equivalents, trade receivables and payables, other assets and other liabilities) by simulating a 10% increase or decrease in the value of all foreign currencies against the functional currency.

134 Group Notes

The simulated appreciation or devaluation of the relevant currencies would have impacted the financial statements as of March 31, 2011 as follows:

Currency risk

USD AUD CADExchange rates as of March 31, 2011Exchange rates 1.4207 1.3736 1.3785 Exchange rate +10% 1.5628 1.5110 1.5164 Exchange rate –10% 1.2786 1.2362 1.2407

Receivables/liabilitiesReceivables 46,264,612.62 20,211,550.81 18,023,376.11 Liabilities 6,752,047.36 258,248.04 7,977,482.80 Delta in foreign currency 39,512,565.26 19,953,302.77 10,045,893.31 Delta in EUR 27,812,040.02 14,526,283.32 7,287,554.09 Exchange rate +10% 25,283,672.75 13,205,712.11 6,625,049.17 Delta in EUR –2,528,367.27 –1,320,571.21 –662,504.92 Exchange rate –10% 30,902,266.69 16,140,314.80 8,097,282.32 Delta in EUR 3,090,226.67 1,614,031.48 809,728.23

Liquid fundsLiquid funds 4,554,210.07 482,444.98 10,111,260.00 Liquid funds in EUR 3,205,609.96 351,226.69 7,334,972.80 Exchange rate +10% 2,914,190.87 319,296.99 6,668,157.09 Delta in EUR –291,419.09 –31,929.70 –666,815.71 Exchange rate –10% 3,561,788.84 390,251.88 8,149,969.77 Delta in EUR 356,178.88 39,025.19 814,996.98

Sensitivity analysis derivativesExchange rates as of March 31, 2011Exchange rates 1.4207 1.3736 1.3785 Exchange rate +10% 1.5628 1.5110 1.5164 Exchange rate –10% 1.2786 1.2362 1.2407

DerivativesAssets 0.00 0.00 600,415.53 Liabilities –1,025,601.33 0.00 –453,945.18 Delta in foreign currency –1,025,601.33 0.00 146,470.35 Delta in EUR –721,898.59 0.00 106,253.43 Exchange rate +10% –2,662,573.94 0.00 225,682.08 Delta in EUR –1,874,128.20 0.00 163,715.69 Exchange rate –10% 974,401.41 0.00 –275,833.65 Delta in EUR 685,860.08 0.00 –200,096.95

Sensitivity analysis – TotalExchange rate +10% 25,535,289.68 13,525,009.10 13,518,888.34 Delta in EUR –4,693,914.57 –1,352,500.91 –1,165,604.94 Exchange rate –10% 35,438,456.95 16,530,566.68 15,971,418.44 Delta in EUR 4,132,265.63 1,653,056.67 1,424,628.25

For reasons of materiality, the table deals with the foreign currencies USD, AUD and CAD. Derivatives relate to financial instruments which are undesignated hedges. Foreign exchange volatility impacts derivatives on the basis of nominal values.

135Group Notes

Regarding foreign currency hedges, the fair value of financial instruments used in cashflow hedges would decrease by 15,986 k EUR if the foreign currency (USD) appreciated by 10% against the functional currency. In this case the fair value of the financial instruments used in cashflow hedges shall be allocated to shareholders’ equity in full (decrease). The fair value of the financial instruments would increase by 15,006 k EUR if the foreign currency depreciated by 10%. In this case, the increased fair value of the financial instruments is allocable to equity capital in full (increase).

At REpower Systems AG, exchange rate risk primarily arises from operating activities when contracts are concluded in a functional currency other than the EUR. The primary risks are in connection with the currency pairs EUR/USD, EUR/CAD, EUR/AUD and EUR/GBP. The recording and measurement of the potential risk from transactions and payments in foreign currency is performed centrally by Treasury and is ensured by way of direct reporting by the companies and divisions affected. The natural hedge approach is applied in order to harmonize global cash flows. Payments made and received in the same currency are offset and the net exposure is calculated for each foreign currency. The risk position per currency measured in this manner is monitored and managed by the Treasury. Hedges are concluded to limit this risk. Exchange rate risks in the Company’s operating activities are hedged using forward exchange contracts, currency swaps, currency options and derivatives. Transacting or holding such contracts for trading or speculation purposes is not permitted.

Liquidity risk

Liquidity risk is monitored as part of rolling liquidity planning. Financing is provided mainly through advance payments for projects from customers. Payments made and received are monitored continuously as part of liquidity planning. As of March 31, 2011, unutilized guarantee facilities totaled 126,823 k EUR (previous year: 246,208 k EUR) and unutilized cash facilities totaled 94,350 k EUR (previous year: 93,993 k EUR). These facilities were mainly provided under a syndicated loan with a term until May 26, 2012.

The following table shows the contractually agreed, undiscounted interest and principal payments for the REpower Group’s primary financial liabilities and derivative financial instruments with a negative fair value. Interest rate derivatives are included at their net cash flow, while currency derivatives are listed as cross-settlement derivatives. Derivatives with positive fair values constitute assets, and hence are not included.

136 Group Notes

Maturity of financial liabilities

Carrying amount as of

2011/03/31k EUR

Cash flowsup to 1 yeark EUR

Cash flowsbetween 1 and

5 yearsk EUR

Cash flowsmore than

5 yearsk EUR

Short-term loans and current portion of long-term loans 5,615 7,515 0 0Capital from profit participation rights 10,000 10,066 0 0Trade accounts payable 234,084 234,084 0 0Liabilities to associates and joint ventures 163 163 0 0Derivatives held for trading 1,203 1,079 152 0Long-term loans 50,870 17,313 26,440 15,251Other financial liabilities 14,457 14,457 0 0Total 316,392 284,677 26,592 15,251

Carrying amount as of

2010/03/31k EUR

Cash flowsup to 1 yeark EUR

Cash flowsbetween 1 and

5 yearsk EUR

Cash flowsmore than

5 yearsk EUR

Short-term loans and current portion of long-term loans 4,137 4,456 0 0Trade accounts payable 140,318 140,318 0 0Liabilities to associates and joint ventures 1,280 1,280 0 0Derivatives held for trading 735 605 706 0Derivatives classified ashedging instruments 1,311 12,963 0 0Long-term loans 43,487 2,919 30,896 21,390Capital from profit participation rights 10,000 582 10,066 0Other financial liabilities 15,069 15,069 0 0Total 216,337 178,192 41,668 21,390

This table does not contain any budgeted figures, but rather only those financial instruments held as of March 31, 2011 and 2010 for which the Group had entered into contractual agreements on the corresponding payments. Foreign currency amounts are converted using the closing rate. The currency derivatives held for trading will be settled gross.

No financial assets were pledged as collateral as of March 31, 2011 or 2010.

As at November 29, 2006, REpower Systems AG had utilized individual loans with a total value of 2,368 k EUR. In an effort to optimize interest payments, these individual loans were converted into a variable-rate euro loan in the same amount, the interest on which was optimized by entering into a swap and cap.

On May 26, 2009, REpower Systems AG was granted a syndicated loan with a total volume of 600,000 k EUR, 500,000 k EUR of which can be utilized in the form of guarantees and the remaining 100,000 k EUR as a cash loan. To hedge the average utilization of the variable-interest cash credit facilities, two interest rate swaps have been concluded in the amount of 20,000 k EUR each.

137Group Notes

Interest rate risk

The interest derivatives concluded have the following fair values as of March 31, 2011, including accrued interest which was calculated by marking to market:

Product Nominal

k EUR

Maturity Fixed interest rate/ strike

Reporting dateValuation

k EURCap 300 2013/06/28 5.000 0Swap 808 2013/12/02 3.500 –21Swap 20,000 2012/05/28 1.890 –68Swap 20,000 2012/05/28 1.875 –63

Due to materiality considerations, sensitivity analysis is only performed for material items:

Sensitivity analysis interest rate swaps

Product Nominal

k EUR

Fixed interest rates

Maturity Reporting date valuation

k EUR

Scenario +100 BP

k EUR

Szenario –100 BP

k EURSwap 20,000 1.8900 2012/05/28 –68 166 –302Swap 20,000 1.8750 2012/05/28 –63 151 –280

Within the Group, interest rate changes result in an increase or decrease in the interest expense for variable-interest loans and overdrafts. In addition to the interest rate derivatives shown in the table, no interest risks are currency hedged. Overall, the Company does not have any material assets or liabilities that are sensitive to interest rates.

The recording and measurement of the potential risk from external financing is performed centrally by Treasury and is en-sured by way of direct reporting by the responsible employees. The interest rate risk positions calculated in this manner are monitored and controlled by Treasury. Hedges are concluded to limit this risk. Interest rate risks are hedged using interest rate swaps, interest rate caps and derivatives. Transacting or holding such contracts for trading or speculation purposes is not permitted.

Derivatives

As part of the disclosure of market risks, IFRS 7 requires the disclosure of information on how hypothetical changes in risk variables would affect the price of financial instruments. In particular, these risk variable include purchase prices for components and share or index prices. The material market risk from component price development is offset by time- or volume-based contracts with suppliers or by the direct participation of suppliers in joint ventures.

138 Group Notes

The following table shows the carrying amounts and nominal volumes of financial derivatives as of March 31, 2011 and 2010:

Financial derivatives 2010 /11 2009 / 10Carrying amount Nominal volume Carrying amount Nominal volume

k EUR k EUR k EUR k EURAssetsInterest rate caps

Not used in hedging relationships 0 300 0 420Used in cash flow hedges 0 0 0 0

Currency swaps Not used in hedging relationships 436 15,319 37 1,828Used in cash flow hedges 0 0 0 0

Forward exchange contracts Not used in hedging relationships 0 0 0 0Used in cash flow hedges 3,917 164,276 0 0

Currency options Not used in hedging relationships 0 0 0 0Used in cash flow hedges 0 0 7,227 143,007

LiabilitiesInterest rate swaps 0 0 0 0

Not used in hedging relationships 152 40,808 736 41,068Used in cash flow hedges

Currency swaps Not used in hedging relationships 1,051 26,806 0 0Used in cash flow hedges 0 0 0 0

Forward exchange contracts Not used in hedging relationships 0 0 0 0Used in cash flow hedges 0 0 1,311 12,963

Currency option transactions Not used in hedging relationships 0 0 0 0Used in cash flow hedges 0 0 0 0

The effective portion of the income effect of changes in the fair value of financial derivatives used in cash flow hedges is taken directly to equity. The effective portion of the changes in the value of derivative financial instruments taken directly to equity in the period under review amounted to –987 k EUR (previous year: –8,986 k EUR).

During the fiscal year 2010/11 no amounts have been transferred from equity to profit and loss as part of cash flow hedge accounting. but due to the discontinuation of the underlying transaction a total of 4,680 k EUR was shifted from equity to profit and loss and is reported in the income statement item “Other operating income”.

With regard to hedged planned transactions, 4,072 k EUR was removed from equity in the year under review and included in the cost of non-financial assets (basis adjustment).

The ineffective portion of the change in the fair value of hedging instruments amounted to 10.4 k EUR. This amount was reported in the income statement under “Other operating income”.

139Group Notes

The following table shows when the book values of the cash flow hedges are expected to occur and be recognized in profit or loss:

Occurrence and recognition in profit or loss

Carrying amount up to 1 year

between 1 and 5 years

more than 5 years

k EUR k EUR k EUR k EURForward exchange contracts Assets 3,917 3,478 439 0Liabilities 0 0 0 0

7.3 Information on the significance of financial instruments for the consolidated financial statements

Based on the relevant consolidated statement of financial position items, the relationships between the classification of financial instruments in accordance with IFRS 7 and the carrying amounts of the financial instruments are shown in the following tables. Liquid funds not allocated to any IAS 39 category are also shown. The prior-year comparative figures as of March 31, 2010 are shown separately in each of the following tables.

The carrying amounts of the financial assets measured at fair value correspond to their market values.

Category* 2011/03/31 2010/03/31Carrying amount Carrying amount

k EUR k EURLiquid funds n/a 320,447 215,856 Gross amount due from customers for contract work as an asset L+R 199,895 174,499 Trade accounts receivable L+R 72,422 63,125 Receivables from associates and joint ventures L+R 6 2,268 Loans granted L+R 7,162 6,729 Other financial assets – miscellaneous L+R 6,347 15,061 Other financial assets – loans L+R 9,006 177 Other financial investment L+R 1,743 668 Receivables from related parties L+R 614 10,543 Total L+R L+R 617,642 488,926Other financial assets – derivatives HFT 436 37Other financial assets – derivatives used in hedge accounting n/a 3,917 7,227 Shares in project corporations AFS 26 26

* AFS: available-for-saleL+R: loans and receivablesHFT: Held for Trading

Liquid funds, future accounts receivable from contract orders, trade accounts receivable, receivables from associates and joint ventures and other financial assets generally have a term of twelve months or less, meaning that their carrying amounts on the reporting date correspond closely to their fair values.

The fair values of non-current receivables correspond to the present value of the payments associated with these assets, taking into account the current parameters reflecting changes in conditions and expectations due to market- and partner-related developments.

140 Group Notes

Financial liabilities are shown in the following table:

Category* 2011/03/31 2010/03/31Carrying amount

k EURCarrying amount

k EURTrade accounts payable OL 234,084 140,318 Liabilities from associates and joint venturesJoint ventures OL 163 1,280 Capital from profit participation rights OL 10,000 10,000 Other current financialliabilities OL 19,236 15,069 Long-term loans OL 50,870 43,487 Short-term loans OL 5,615 4,137 Total OL OL 319,968 214,291

* OL Other liabilities

Due to variable interest rates, the carrying amounts of financial liabilities correspond to the fair value.

Due to the short term of trade payables and other financial liabilities, it is assumed that their carrying amounts and fair values are identical.

The following table provides a breakdown of financial assets and financial liabilities carried at fair value at the reporting date in terms of their relevance for the input data required for measurement. This implies a differentiation between values observable on active markets (level 1), observable input data based on a fair value measurement model (level 2) and input data not based on observable market data:

2011/03/31 k EUR

Level 1 k EUR

Level 2 k EUR

Level 3k EUR

Assets carried at fair valueFinancial assets at FV through profit or loss 0 0 0 0Held for trading (HFT) 436 0 436 0Derivative financial instruments used in hedging relationships 3,917 0 3,917 0Available-for-sale securities 0 0 0 0Equity instruments 0 0 0 0Total assets 4,353 0 4,353 0

Liabilities carried at fair valueFinancial liabilities at FV through profit or loss 0 0 0 0Held for trading (HFT) 1,203 0 1,203 0Derivative financial instruments used in hedging relationships 0 0 0 0Total liabilities 1,203 0 1,203 0

Net gains and losses on loans and receivables consist primarily of results from write-downs and reversals thereof. With regard to write-downs, please see the notes on trade accounts receivable (4.1.3.) and other current assets (4.1.7.). The net results of write-downs and reversals thereof are primarily reported in other operating expenses.

141Group Notes

The following table shows the net gains and losses for each valuation category:

Net gain/loss2010 /11

k EUR2009 / 10

k EURLoans and receivables (LaR) 3,662 7,161Financial instruments held for trading (HFT) –767 –699Total 2,895 6,462

As part of the recognition of changes in the value of available-for-sale financial assets directly in equity, no remeasurement gains or losses were taken directly to equity in fiscal year 2010/11 or in the previous year. Accordingly, no gains or losses were transferred from equity to profit or loss in either of these periods.

For information on the provision of collateral, please refer to note 4.1.3.

REpower Systems has received collateral amounting to 1,279,530 k EUR (previous year: 914,411 k EUR); this represents the fair value of the collateral, which primarily relates to standard industry guarantees from third parties for obligations of customers and suppliers for which REpower has carried out preliminary work or made advance payments.

8 Capital management

The aim of the Group’s capital management is to ensure that it maintains a good equity ratio and a high credit rating in order to support its business activities and maximize shareholder value. This is especially significant in the context of growth targets.

REpower Systems AG has a balanced capital structure. Shareholders’ equity covers non-current assets by more than 100%. The Company is not subject to any statutory capital requirements.

The Group monitors its capital on the basis of the equity ratio, this being the ratio of the shareholders’ equity reported in the IFRS consolidated financial statements to total assets. Another figure used in capital management is net working capital or the net working capital ratio. Net working capital is calculated as follows: current assets (adjusted for liquid funds) minus current liabilities (adjusted for provisions). To calculate the net working capital ratio, this net figure is compared with the total operating performance for the last 12 months.

9 Information on segment reporting

The segment reporting of the REpower Systems Group is performed in accordance with IFRS 8 “Operating Segments”. This standard uses the “management approach”, under which the structure and content of segment reporting has been adjusted to bring it into line with the reports that are regularly presented to internal decision-makers. The management approach is intended to allow the users of external financial reports to view the Company from the same perspective as the management (“chief operating decision-maker”).

The chief operating decision-maker (CODM) at REpower Systems AG is defined as the full Executive Board. Both annual decisions about corporate planning and budgeting and individual decisions taken during the year regarding capital ex-penditure and additional budget allocations are made by the entire Executive Board during its meetings. These decisions are made taking into account the assessed segment performance on the basis of regular reports provided by the sec-ondary management level (Senior Vice President level).

142 Group Notes

REpower Systems AG is organized in a matrix structure. Information is consolidated at the level of the individual countries as well as the individual product and service lines. However, the key principle of corporate management at REpower is not the geographical perspective, but rather a strategic segmentation and orientation based on the various product and service groups offered by the Group. This means that the primary focus is generally on the maintenance and improvement of product quality. In accordance with the criteria of IFRS 8, three business segments have been identified, each of which have a segment manager from the second management level: the Onshore segment, the Offshore segment, and the Service and Maintenance segment.

The common international parameter of EBIT (earnings before interest and taxes) is a key performance indicator in segment reporting. It is used to measure the success of each segment, and hence for internal management. EBIT shows the operating result, irrespective of regional taxation systems and different forms of financing. This means that this figure is also suitable for international comparisons. Based on the early application of IFRS 8.23 (Improvements to IFRS April 2009) there is no presentation of segment assets as this item is not used in decision-making by the CODM.

The calculation methods used for internal reporting are consistent with the principles applied within the Group and described in the “Accounting policies” section. The segment data presented was mainly derived from cost accounting. The reconciliation contains expenses and income that cannot be assigned to any of the identified segments in terms of their content. Settle-ment prices are determined in accordance with market practice. The figures as of March 31, 2011 are compared with the prior-year figures as of March 31, 2010 in each case. Onshore segment

Onshore segment2010/04/01–2011/03/31

k EUR

2009/04/01 2010/03/31

k EURRevenues 909,767 1,096,801 Changes in inventories/work performed by the entity and capitalized 48,552 19,520Total performance 958,319 1,116,321 Operating expenses –861,021 –972,500Intersegment income/expenses –6,960 –3,408 EBIT 90,338 140,413

The Onshore segment contains all revenue generated from the marketing, project management and installation of onshore wind turbines and the corresponding additional income and expenses. The onshore product portfolio of REpower included in segment revenue includes the MM series and the 3.XM turbines in particular.

Revenue in accordance with IAS 11 is included in the calculation of segment results. Intersegment expenses essentially relate to commissioning services performed by the Service and Maintenance segment.

In the year under review additions to provisions of 11,843 k EUR were explicitly accounted for in the result of the Onshore segment.

143Group Notes

Offshore segment

Offshore segment2010/04/01–2011/03/31

k EUR

2009/04/01 2010/03/31

k EURRevenues 206,872 113,008Changes in inventories/work performed by the entity and capitalized 11,041 1,443 Total performance 217,913 114,451 Operating expenses –193,588 –98,871 Intersegment income/expenses –1,260 –662 EBIT 23,065 14,918

The Offshore segment includes all national and international activities in the area of offshore wind farms. Specialist expertise is required from the marketing, manufacture and product management through to the installation of wind turbines on the open sea, particularly since the market environment is completely different to the traditional Onshore segment. REpower’s offshore product portfolio is composed of 5M and 6M wind turbines.

Revenue in accordance with IAS 11 is included in the calculation of segment results. The Intersegment expenses essentially relate to commissioning services performed by the Service and Maintenance segment.

In the year under review, additions to provisions explicitly relating to the Offshore segment amounted to 7,500 k EUR.

Service and Maintenance segment

Service and Maintenance segment2010/04/01–2011/03/31

k EUR

2009/04/01–2010/03/31

k EURRevenues 1 84,531 70,962 Changes in inventories/work performed by the entity and capitalized 0 0Total performance 84,531 70,962 Operating expenses –96,313 –76,387 Intersegment income/expenses 22,744 11,841 EBIT 10,962 6,416

1 For management reporting purposes the revenues of the Service and Maintenance segment include power proceeds and intracompany revenues.

The Service and Maintenance segment is responsible for planned maintenance and the rectification of technical faults in wind turbines at both national and international level. It also performs technical updates and upgrades and the technical commissioning of turbines. Internal settlement prices between the segments are derived from the full-cost hourly rates based on the annual budgets of the operating units.

24/7 remote monitoring allows the performance and availability of the turbines to be permanently monitored and controlled and any faults to be located and addressed in both the Onshore and the Offshore segment.

144 Group Notes

In the year under review an addition of provisions in the amount of 4,472 k EUR, a utilization of 849 k EUR and reversals of 577 k EUR were explicitly accounted for in the result of the service and maintenance segment.

To ensure a high level of customer satisfaction, damage must be repaired as quickly as possible. During the statutory warranty period, this applies irrespective of whether the right to take action against upstream suppliers has already been exercised. The resulting claim settlement is actively supported by the Service and Maintenance segment and implemented with respect to the customer. This can lead to temporary postponements of earnings in the income statement for the segment, as any cost reimbursements from upstream suppliers can only be collected well after the costs have arisen.

Reconciliation

Segmenttotals

Reconciliation Group (EBIT)

(k EUR)

2010/04/01– 2011/03/31

2009/04/01–2010/03/31

2010/04/01–2011/03/31

2009/04/01–2010/03/31

2010/04/01–2011/03/31

2009/04/01–2010/03/31 2

Revenues 1,201,170 1,280,771 14,932 22,807 1,216,102 1,303,577Changes in inventories/work performed by the entity and capitalized 59,593 20,963 0 5,814 59,593 26,778Total performance 1,260,763 1,301,734 14,932 28,621 1,275,695 1,330,355Operating Expenses1 –1,150,922 –1,147,758 –38,750 –84,281 –1,189,672 –1,232,039Intersegment income/expenses 14,524 7,771 –14,524 –7,771 0 0EBIT 124,365 161,747 –38,342 –63,431 86,023 98,316Financial and investments result –5,085 –14,466EBT 80,938 83,850

1 Offset against other operating income in the reconciliation2 Adjustment previous-year figures due to posting development expenses under own work capitalized.

The revenue in the reconciliation primarily relates to income from licenses. This year for the first time the power proceeds are accounted for in the Service and Maintenance segment.

Most of the expenses in the reconciliation relate to overheads that were not allocated to the individual segments due to de-viations from forecasts. A significant proportion also relates to allocations to individual provisions on a company level. As the provisions were mainly set up at the level of the company as a whole, in the vast majority of cases no further assignment takes place to the segments. In difference to the previous year in the fiscal year 2010/11 the general warranty provisions have been allocated to the individual segments whereas the addition of general warranty provisions is allocated to the Onshore and Offshore segment and the utilization or reversal is credited to the Service and Maintenance segment.

In fiscal year 2010/11 revenues of 342.7 m EUR were achieved in the domestic market Germany (previous year: 193.8 m EUR).

Other countries making a significant contribution to revenues were United Kingdom with 267.0 m EUR (previous year: 297.2 m EUR), France with 236.2 m EUR (previous year: 361.9 m EUR) and Italy with 178.5 m EUR (previous year: 133.6 m EUR).

In the year under review, revenues of more than 10% of the Group’s total revenues were achieved with two individual customers, in the amount of 240.3 m EUR and 198.3 m EUR respectively.

145Group Notes

10 Information on the consolidated statement of cash flows

In accordance with IAS 7, the consolidated statement of cash flows is classified into the areas operating activity, invest-ing activity and financing activity. The cash and cash equivalents shown in the cash flow statement contain cash and bank balances. Short-term bank liabilities are deducted.

Liquid funds are composed as follows:

2010 /11 2009 / 10k EUR k EUR

Cash and cash equivalents at the beginning of the periodLiquid funds 215,856 101,239Less short-term bank liabilities –4,137 –6,448Total 211,719 94,791

Cash and cash equivalents at the end of the period Liquid funds 320,448 215,856Less short-term bank liabilities –15,615 –4,137

Cash displayed as ‘Assets of disposal group of classified as held for sale’ in the statement of financial position 6,460 0

Total 311,293 211,719

The indirect method was used to calculate the cash flow from operating activity. The cash flow statement starts with net income for the year before taxes. The cash outflows from interest and taxes were allocated to ongoing business activity and recognized separately there.

The cash flow from investing activities is composed of payments for investment in intangible assets and in property, plant and equipment as well as receipts for the disposal of fixed assets.

As part of the acquisition of shares in subsidiaries, a purchase price totaling 294. k EUR was settled through liquid funds. As part of the acquisition, cash and cash equivalents amounting to 2,270 k EUR were transferred through the inclusion of three companies in the consolidated group.

As a result, assets of 57,939 k EUR and liabilities of 67,071 k EUR were acquired.

The item “Other non-cash income and expenses” from the cashflow statement of 5.861 k EUR substantially relates to the revaluation of the former 50% stake of REpower Portugal Sistemas Eólicos S.A. at fair value. In this context REpower recognized a profit of 5,667 k EUR.

146 Group Notes

11 Related parties disclosures

In accordance with IAS 24, the persons and entities, which control the Group or exercise a significant influence on it or which the Group controls or on which it exercises a significant influence are regarded as related parties for the REpower Systems AG Group.

In addition to business relationships with the subsidiaries included in the consolidated financial statements by means of full consolidation, there were the following business relationships with related parties.

The following transactions were concluded with the shareholder Suzlon Energy Ltd. and its subsidiaries as well as its related parties:

Company Contents Volume

Hansen Transmission International NV

Contract dated September 8, 2009 on the supply of MM gears and 6M gears to REpower Systems AG and other Group compa-nies in the period from 2010 to 2014 with a volume of approx. 211 m EUR MM gears and approx. EUR 64 m EUR 6M gears

3,138,119 EUR

Suzlon Energy Ltd. Transfer of consulting expenses incurred in connection with the preparation of limited reviews and other services in fiscal year 2010/11

243,622 EUR

Hansen Transmission International NV

Term sheet to ensure the delivery of gears from the Indian production plant of Hansen Transmission International NV to REpower, increased scope of supply

No transactions under this contract in FY 2010/11

SE Forge Ltd. Term sheet for supply of hubs and casting patterns for support-ing bases for REpower type MM82 and MM92 turbines


Suzlon Wind Energy Corporation, USA

Agency agreement dated January 11, 2011 between REpower and Suzlon. Suzlon supports REpower in marketing its wind turbines (MM82, MM92, 3.XM) in the USA and also in Canada (except the Quebec region) following the addendum to the agency agreement.


Suzlon Energy Australia Pty. Ltd., Australia

Agency agreement dated January 11, 2011 between REpower and Suzlon. Suzlon supports REpower in marketing its wind turbines (MM82, MM92, 3.XM) in Australia


Suzlon Energy Ltd. Supply contract dated November 1, 2007 for the supply of RE40 rotor blades to REpower Systems AG and other Group companies in the period from 2008 to 2010 with a volume of around 62 m EUR


Suzlon Energy Ltd. Supply contract dated January 18/31, 2008 for the supply of RE45 rotor blades to REpower Systems AG and other Group companies in the period from 2008 to 2011 with a volume of around 77 m EUR


Suzlon Energy Ltd./SE Drive Technik GmbH

Joint venture agreement dated February 6, 2008 on cooperation in the area of common fundamental research and training on wind energy topics


Suzlon Energy Australia Pty. Ltd., Australia

Utilization of Suzlon Australia services related to tender preparation or project management


147Group Notes

On the basis of the blades supply contract between REpower North (China) Ltd. and Suzlon Energy Ltd. dated November 1, 2007 concerning RE40 blades, no blades were supplied to REpower Group in fiscal year 2008/09. The blade supplies commit-ted for 2008 on the basis of this contract therefore had to be purchased by the REpower Group on the European market from other blade suppliers. However, the contract prices and conditions agreed with Suzlon could not be met and additional trans-port costs were incurred. The additional expenses of 7.73 m EUR were transferred from REpower North (China) Ltd., Baotou, China to Suzlon Group during the previous fiscal year. An agreement with Suzlon Group has been set up during the reporting period which considers interest expenses. The total amount of 8.30 m EUR shall be balanced within the next five years. The claim is disclosed as discounted non-current receivables of 7.60 m EUR in the consolidated financial statements of REpower Systems AG for fiscal year 2010/11.

Transactions with related parties withstand comparison with third parties.

12 Information on the corporate bodies of REpower Systems AG, Hamburg

The following are or were appointed as members of the Supervisory Board:

Mr. Tulsi R. Tanti, Pune, India (Chairman)

Dr. Christof Maria Fritzen, Kronberg/Taunus, Consultant, (Deputy Chairman)

Mr. Girish Tanti, Pune, India

Mr. Kirtikant J. Vagadia, Pune, India

Mr. Thomas Rex, Breydin (since 10/2010)

Mr. Roland Fischer, Rantrum (since 10/2010)

Mr. Kai Trede, Husum (until 10/2010)

Mr. Alf Trede, Schwesing (until 10/2010)

The following are or were appointed to the Executive Board of REpower Systems AG:

Mr. Andreas Nauen, Brande, (Chairman since 07/2010)

Mr. Derrick Noe, Hamburg

Mr. Matthias Schubert, Rendsburg

Mr. Gregor Gnädig, Hamburg (since 10/2010)

Mr. Per Hornung Pedersen, Hamburg (until 03/2011)

Mr. Lars Rytter Kristensen, Hamburg (until 09/2010)

148 Group Notes

13 Declaration of Compliance with the German Corporate Governance Code

A declaration of compliance with the German Corporate Governance Code was issued by the Executive Board and Supervisory Board and promptly published on the Company’s website. This declaration of compliance is permanently accessible.

14 Remuneration for the Supervisory Board and the Executive Board of REpower Systems AG

In accordance with the articles of association of REpower Systems AG, the remuneration of the members of the Supervisory Board for fiscal year 2010/11 is composed as follows:

Name Fixed remuneration Variable remuneration

Total2010/11

Total2009/10

EUR EUR EUR EURTulsi R. Tanti 30,000 0 30,000 32,000Dr. Christof Maria Fritzen 22,500 0 22,500 24,000Girish R. Tanti 15,000 0 15,000 16,000Kirtikant J. Vagadia 15,000 0 15,000 16,000Thomas Rex (since 10–2010) 1 6,250 0 6,250 0Roland Fischer (since 10–2010) 1 6,250 0 6,250 0Alf Trede (until 10–2010) 8,750 0 8,750 16,000Kai Trede (until 10–2010) 8,750 0 8,750 16,000

112,500 0 112,500 120,000

1 Thomas Rex and Roland Fischer were elected as members of the Supervisory Board on October 25, 2010.

The actual remuneration paid to the Executive Board members in the fiscal year 2010/11 was calculated and determined on the basis of the remuneration schemes applicable to each Executive Board member. The individual amounts of the remuneration of members of the Executive Board can be derived from the table below.

As part of the existing share option programs, share options were also issued to members of the Executive Board in fis-cal years 2006, 2007 and 2008/09. The possibility of exercising the options is linked to performance targets. In order to achieve the performance target for the 2008 stock option plan initiated in fiscal year 2008/09, the EBIT margin needs to at least 6.3% in fiscal year 2008/09 or at least 8.4% in fiscal year 2009/10.

The fair value of the options issued in fiscal year 2008/09 amounted to 36.00 EUR for the first tranche with a two-year holding period, 38.00 EUR for the second tranche with a three-year holding period and 39.00 EUR for the third tranche with a four-year holding period.

Name Option rights2007

Option rights2008

Total

Number of shares Number of shares Number of sharesAndreas Nauen 0 0 0Derrick Noe 0 0 0Matthias Schubert 14,000 6,000 20,000Gregor Gnädig 0 0 0Per Hornung Pedersen 0 8,000 8,000Lars Rytter Kristensen 0 6,000 6,000

14,000 20,000 34,000

149Group Notes

The total remuneration of the Executive Board for fiscal year 2010/11 is as follows:

Name Fixedbasic salary

Variableremuneration4

Otherpayments5

Non-cash benefits6

Totalremuneration

EUR EUR EUR EUR EURAndreas Nauen 337,500.00 0 280,000.00 12,659.40 630,159.40Derrick Noe 430,000.00 0 50,000.00 11,053.80 491,053.80Matthias Schubert 325,000.00 0 0.00 12,411.84 337,411.84Gregor Gnädig 1 210,000.00 0 152,500.00 6,584.40 369,084.40Per HornungPedersen 2 430,000.00 0 530,000.00 15,767.05 975,767.05Lars RytterKristensen 3 132,500.00 0 417,659.04 6,676.80 556,835.84Total 1,865,000.00 0 1,430,159.04 65,153.29 3,360,312.33

1 Gregor Gnädig joined REpower Systems AG on October 1, 2010.2 Per Hornung Pedersen left REpower Systems AG on March 31, 2011.3 Lars Rytter Kristensen left REpower Systems AG on September 30, 20104 Variable remuneration will be paid following submission of the approved annual financial statements in fiscal year 2011/12. This amount may differ

from the values presented here.5 Including severance payments, compensation for non-compete obligation, one-time extra payments, allowances for housing or relocation costs, allo-

wances for expenses incurred for personal tax or legal advice advisors and reimbursements of school fees and for costs of private health insurance, in each case as applicable.

6 Non-cash benefits e.g. for private use of company car.

REpower Systems AG has also granted a pension commitment in the form of a defined contribution plan to the former CEO Prof. Dr. Fritz Vahrenholt, involving benefits for retirement and surviving dependants. The insurance policy was fully financed with the payment of a non-recurring contribution; no further contributions are required. The benefit will amount to 1,032 k EUR in the event of his survival in 1,000 k EUR in the event of his death. The pension commitment has already been taken into account in the financial statements in previous years.

The Company has commitments under a provident fund for the member of the Executive Board Matthias Schubert. This relates to defined contribution obligations that are financed by way of a corresponding agreement on the waiver of salary in connection with the grant of a commitment for provident fund benefits. The monthly contribution amounts to 5 k EUR. The premiums are included as part of the fixed remuneration. In addition, commitments under a provident fund existed for Lars Rytter Kristensen in the previous year. He left the company in the reporting period.

Lars Rytter Kristensen, who left on September 30, 2010, received the fixed salary outstanding to the end of his normal term at the end of March 2012. The Company paid Lars Rytter Kristensen an amount of 405,159 EUR as compensation for agreeing not to compete with the Company following the end of his contract. This included the pro rata temporis variable remuneration to which his was entitled and settlement of his residual holiday entitlement. The amounts were paid in full in the period under review.

Per Hornung Pedersen, who left on March 31, 2011, received the fixed salary outstanding to the end of his normal term at the end of March 2012. The Company paid Per Hornung Pedersen an amount of 500,000 EUR as compensation for agreeing not to compete with the Company following the end of his contract. This included the pro rata temporis variable remunera-tion to which his was entitled and settlement of his residual holiday entitlement. The amounts were paid in full in the period under review.

On the reporting date, the only members of the Executive Board, who held shares in REpower Systems AG were Matthias Schubert (10,000 shares) and Per Hornung Pedersen (280 shares).

150 Group Notes

15 Information on the remuneration paid to the auditor

In total, an amount of 310,000 EUR (previous year: 496,000 EUR) was expensed as a fee for auditing the consolidated fi-nancial statements and the annual financial statements of the parent company and its subsidiaries for the past fiscal year. In addition, fees totaling 113,000 EUR (previous year: 36,250 EUR) were agreed in the period under review for services outside the audit of these companies. Here, 0 EUR (previous year: 10,000 EUR) were attributable to tax consultation and 113,000 EUR (previous year: 26,250 EUR) to other services.

16 Proposed allocation of profit of REpower Systems AG

The unappropriated surplus amounts to 95,769267 EUR. The Executive Board will propose payment of a dividend of 13,830,269 EUR (corresponding to 1.50 EUR per share) to the Supervisory Board for resolution at the annual general meeting. The remaining amount of 81,938,998 EUR will be carried forward to new account.

17 Material events after the reporting date

On April 4, 2011 AE-Rotor Holding B.V. informed REpower Systems AG that it held more than 95% of the Company’s share capital. At the same time, AE-Rotor Holding B.V. requested that as per Section 327a Paragraph 1 AktG, the Annual General Meeting of REpower Systems AG should resolve to transfer the transfer the shares of the remaining shareholders (minority shareholders) to AE-Rotor Holding B.V. against a suitable cash settlement. In accordance with the request, the resolution should be made at the company’s next Annual General Meeting.

Approval of this application for a squeeze out by the Annual General Meeting as well as the subsequent procedure would mean delisting for REpower.

The consolidated financial statements were prepared on 20 May 2011 and consequently released for submission to the Supervisory Board. The consolidated financial statements will be presented to the Supervisory Board for approval in the Supervisory Board meeting on May 31, 2011.

Hamburg, May 20, 2011

The Executive Board

Derrick Noe (CFO)


Gregor Gnädig(COO)

Andreas Nauen(CEO)

151Group Notes

152 Group Notes

Statement of consolidated fixed assets 2010 /11Acquisition and production costs Depreciation and amortization Book values

Balance2010/04 /01

Additions Additions from first

consolidation

Reclassifi–cations

Reclassification to assets held

for sale

Disposals Balance2011/ 03/31

Balance2010 / 04 / 01

Additions Reclassifi–cations

Reclassification to assets held for

sale

Disposals Balance2011/ 03 / 31

2011/ 03 / 31 2010 / 03 / 31

EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EURI. Property, plant and equipment

1. Land, leasehold rights and buildings, including buildings on non–owned land 72,720,729 1,050,206 28,556,392 3,742,985 –2,521,000 0 103,549,313 4,029,249 2,058,028 0 0 0 6,087,277 97,462,037 68,691,4802. Technical equipment, plant and machinery 56,606,617 30,992,748 130,629 5,171,106 0 –31,091,726 61,809,375 18,281,978 11,559,985 43,071 0 –6,639,941 23,244,772 38,564,603 38,324,6393. Other equipment, fixtures, fittings and equipment 43,154,584 11,846,511 3,981,839 –635,427 –2,081,000 –5,860,196 50,406,312 21,801,014 5,501,549 –36,163 0 –2,604,923 24,661,478 25,744,834 21,353,5704. Advance payments and plant and machinery in process of construction 17,811,190 7,822,155 0 –8,294,605 0 –2,631,090 14,707,649 488,822 1,039,682 0 0 0 1,528,504 13,179,146 17,322,368Total property, plant and equipment 190,293,120 51,711,619 32,668,861 –15,940 –4,602,000 –39,583,011 230,472,649 44,601,063 20,158,924 6,908 0 –9,244,864 55,522,031 174,950,619 145,692,057

II. Intangible assets1.1. Software and other licences 25,425,387 2,250,107 1,703 15,940 –4,405,603 –874,769 22,412,765 10,422,649 2,965,917 186,211 0 –331,570 13,243,207 9,169,558 15,002,7381.2. Development costs 29,279,738 18,358,975 0 0 0 0 47,638,713 3,106,319 3,664,178 –193,118 0 0 6,577,379 41,061,335 26,173,4191. Intangible assets 54,705,125 20,609,083 1,703 15,940 –4,405,603 –874,769 70,051,478 13,528,968 6,630,095 –6,907 0 –331,570 19,820,586 50,230,892 41,176,1542. Goodwill 4,866,063 0 31,483,207 0 0 0 36,349,270 3,237,696 0 0 0 0 3,237,696 33,111,574 1,628,367Total intangible assets 59,571,188 20,609,083 31,484,910 15,940 –4,405,603 –874,769 106,400,748 16,766,664 6,630,095 –6,907 0 –331,570 23,058,282 83,342,466 42,804,524

Total 249,864,308 72,320,702 64,153,771 0 –9,007,603 –40,457,781 336,873,397 61,367,727 26,789,018 0 0 –9,576,434 78,580,312 258,293,086 188,496,581

Statement of consolidated fixed assets 2009/10Acquisition and production costs Depreciation and amortization Carrying amount

Balance2009 / 04 / 01


consolidation


Disposals Balance2010 /03 / 31

Balance2009 / 04 / 01

Additions Disposals Balance2010 / 03 / 31

2010 / 03 / 31 2009 / 03 / 31

EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EURI. Property, plant and equipment

1. Land, leasehold rights and buildings, including buildings on non–owned land 52,664,087 13,621,873 2,521,000 4,950,359 –1,036,590 72,720,729 2,489,919 1,576,321 –36,991 4,029,249 68,691,480 50,174,1682. Technical equipment, plant and machinery 33,477,840 5,486,095 10,831,345 6,822,937 –11,600 56,606,617 10,031,889 8,250,089 0 18,281,978 38,324,639 23,445,9513. Other equipment, fixtures, fittings and equipment 33,766,099 7,930,898 2,081,000 129,500 –752,912 43,154,584 15,269,566 7,051,838 –520,389 21,801,014 21,353,570 18,496,5334. Advance payments and plant and machinery in process of construction 18,600,871 11,463,519 1,883,051 –11,902,797 –2,233,455 17,811,190 0 488,822 0 488,822 17,322,368 18,600,871Total property, plant and equipment 138,508,897 38,502,385 17,316,395 0 –4,034,557 190,293,120 27,791,374 17,367,069 –557,380 44,601,063 145,692,057 110,717,523

II. Intangible assets1.1. Software and other licences 13,707,940 5,116,095 6,619,111 0 –17,760 25,425,387 8,559,261 1,863,388 0 10,422,649 15,002,738 5,148,6801.2. Development costs 23,464,883 5,814,855 0 0 0 29,279,738 1,637,760 1,468,559 0 3,106,319 26,173,419 21,827,1231. Intangible assets 37,172,823 10,930,950 6,619,111 0 –17,760 54,705,125 10,197,021 3,331,947 0 13,528,968 41,176,157 26,975,8032. Goodwill 4,625,063 241,000 0 0 0 4,866,063 3,237,696 0 0 3,237,696 1,628,367 1,387,367Total intangible assets 41,797,886 11,171,950 6,619,111 0 –17,760 59,571,188 13,434,717 3,331,947 0 16,766,664 42,804,524 28,363,170

Total 180,306,784 49,674,335 23,935,506 0 –4,052,317 249,864,308 41,226,091 20,699,017 –557,380 61,367,727 188,496,581 139,080,693

153Group Notes

Statement of consolidated fixed assets 2010 /11Acquisition and production costs Depreciation and amortization Book values

Balance2010/04 /01


consolidation


Reclassification to assets held

for sale

Disposals Balance2011/ 03/31

Balance2010 / 04 / 01

Additions Reclassifi–cations

Reclassification to assets held for

sale

Disposals Balance2011/ 03 / 31

2011/ 03 / 31 2010 / 03 / 31

EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EURI. Property, plant and equipment

1. Land, leasehold rights and buildings, including buildings on non–owned land 72,720,729 1,050,206 28,556,392 3,742,985 –2,521,000 0 103,549,313 4,029,249 2,058,028 0 0 0 6,087,277 97,462,037 68,691,4802. Technical equipment, plant and machinery 56,606,617 30,992,748 130,629 5,171,106 0 –31,091,726 61,809,375 18,281,978 11,559,985 43,071 0 –6,639,941 23,244,772 38,564,603 38,324,6393. Other equipment, fixtures, fittings and equipment 43,154,584 11,846,511 3,981,839 –635,427 –2,081,000 –5,860,196 50,406,312 21,801,014 5,501,549 –36,163 0 –2,604,923 24,661,478 25,744,834 21,353,5704. Advance payments and plant and machinery in process of construction 17,811,190 7,822,155 0 –8,294,605 0 –2,631,090 14,707,649 488,822 1,039,682 0 0 0 1,528,504 13,179,146 17,322,368Total property, plant and equipment 190,293,120 51,711,619 32,668,861 –15,940 –4,602,000 –39,583,011 230,472,649 44,601,063 20,158,924 6,908 0 –9,244,864 55,522,031 174,950,619 145,692,057

II. Intangible assets1.1. Software and other licences 25,425,387 2,250,107 1,703 15,940 –4,405,603 –874,769 22,412,765 10,422,649 2,965,917 186,211 0 –331,570 13,243,207 9,169,558 15,002,7381.2. Development costs 29,279,738 18,358,975 0 0 0 0 47,638,713 3,106,319 3,664,178 –193,118 0 0 6,577,379 41,061,335 26,173,4191. Intangible assets 54,705,125 20,609,083 1,703 15,940 –4,405,603 –874,769 70,051,478 13,528,968 6,630,095 –6,907 0 –331,570 19,820,586 50,230,892 41,176,1542. Goodwill 4,866,063 0 31,483,207 0 0 0 36,349,270 3,237,696 0 0 0 0 3,237,696 33,111,574 1,628,367Total intangible assets 59,571,188 20,609,083 31,484,910 15,940 –4,405,603 –874,769 106,400,748 16,766,664 6,630,095 –6,907 0 –331,570 23,058,282 83,342,466 42,804,524

Total 249,864,308 72,320,702 64,153,771 0 –9,007,603 –40,457,781 336,873,397 61,367,727 26,789,018 0 0 –9,576,434 78,580,312 258,293,086 188,496,581

Statement of consolidated fixed assets 2009/10Acquisition and production costs Depreciation and amortization Carrying amount

Balance2009 / 04 / 01


consolidation


Disposals Balance2010 /03 / 31

Balance2009 / 04 / 01

Additions Disposals Balance2010 / 03 / 31

2010 / 03 / 31 2009 / 03 / 31

EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EURI. Property, plant and equipment

1. Land, leasehold rights and buildings, including buildings on non–owned land 52,664,087 13,621,873 2,521,000 4,950,359 –1,036,590 72,720,729 2,489,919 1,576,321 –36,991 4,029,249 68,691,480 50,174,1682. Technical equipment, plant and machinery 33,477,840 5,486,095 10,831,345 6,822,937 –11,600 56,606,617 10,031,889 8,250,089 0 18,281,978 38,324,639 23,445,9513. Other equipment, fixtures, fittings and equipment 33,766,099 7,930,898 2,081,000 129,500 –752,912 43,154,584 15,269,566 7,051,838 –520,389 21,801,014 21,353,570 18,496,5334. Advance payments and plant and machinery in process of construction 18,600,871 11,463,519 1,883,051 –11,902,797 –2,233,455 17,811,190 0 488,822 0 488,822 17,322,368 18,600,871Total property, plant and equipment 138,508,897 38,502,385 17,316,395 0 –4,034,557 190,293,120 27,791,374 17,367,069 –557,380 44,601,063 145,692,057 110,717,523

II. Intangible assets1.1. Software and other licences 13,707,940 5,116,095 6,619,111 0 –17,760 25,425,387 8,559,261 1,863,388 0 10,422,649 15,002,738 5,148,6801.2. Development costs 23,464,883 5,814,855 0 0 0 29,279,738 1,637,760 1,468,559 0 3,106,319 26,173,419 21,827,1231. Intangible assets 37,172,823 10,930,950 6,619,111 0 –17,760 54,705,125 10,197,021 3,331,947 0 13,528,968 41,176,157 26,975,8032. Goodwill 4,625,063 241,000 0 0 0 4,866,063 3,237,696 0 0 3,237,696 1,628,367 1,387,367Total intangible assets 41,797,886 11,171,950 6,619,111 0 –17,760 59,571,188 13,434,717 3,331,947 0 16,766,664 42,804,524 28,363,170

Total 180,306,784 49,674,335 23,935,506 0 –4,052,317 249,864,308 41,226,091 20,699,017 –557,380 61,367,727 188,496,581 139,080,693

154 Group Notes

List of share ownershipDisclosure in line with Article 313 (2) nos. 1 to 4 HGB Companies

Companies Shareholding Equity as per end of fiscal year

Earnings

% EUR EURInvestments in affiliated companiesREpower Betriebs- und Beteiligungs GmbH, Rendsburg, Germany 4 100.00 –210,035.00 –193,499.00REpower Windpark Betriebs GmbH, Hamburg, Germany 1, 3, 4 100.00 25,398.86 2,716.64REpower Investitions- & Projektierungs GmbH & Co. KG, Rendsburg, Germany 1, 4 100.00 –26,663.70 –4,564.16Windpark Blockland GmbH & Co. KG, Hamburg, Germany 1, 4 100.00 536,429.21 547,888.90REpower Systems GmbH (previously REpower GmbH), Ham-burg, Germany 100.00 5,900,155.65 0REpower Espana S.L., Madrid, Spain 5 100.00 –330,292.05 –335,656.09REpower Italia S.r.l., Milan, Italy 5 100.00 1,666,910.21 916,114.67REpower S.A.S., Courbevoie, France 5 100.00 5,489,730.39 1,596,120.86REpower Australia Pty. Ltd., Melbourne, Australia 5 100.00 –3,794,186.50 –1,398,999.90REpower UK Ltd., Edinburgh, United Kingdom 5 100.00 1,652,552.80 631,628.83REpower USA Corp., Denver, USA 5 100.00 –1,480,604.63 –658,559.97REpower Benelux bvba., Ostend, Belgium 5 100.00 360,300.48 303,360.30REpower Wind Systems Trading, Peking, People's Republic of China 5 100.00 58,045.56 80,981.64REpower Systems Inc., Montreal, Canada 5 100.00 –1,144,766.47 –843,040.31PowerBlades S.A., Vagos, Portugal 5,6 100.00 2,703,049.81 1,802,731.58REpower Systems Scandinavia, Stockholm, Sweden 5 100.00 60,759.77 47,798.36REpower Systems Polska, Sp.z o.o., Warsaw, Poland 5 100.00 243,727.36 218,907.97Rep Ventures Portugal S.A., Porto, Portugal 100.00 –245,937.30 –176,583.07REpower Portugal Sistemas Eólicos S.A., Oliveira de Frades, Portugal 5,6 100.00 9,803,914.34 49,053.87WEL Windenergie Logistik GmbH, Schloss Holte-Stukenbrock 5 100.00 309,467.96 247,750.99REpower Diekat S.A., Athens, Greece (in liquidation) 2, 5 60.00 –7,578.83 –1,501.13REpower North (China) Ltd., Baotou, People's Republic of China 5 54.42 16,821,531.98 –2,214,044.10PowerBlades GmbH, Bremerhaven, Germany 51.00 –792,410.83 –2,747,069.91RiaBlades S.A., Vagos, Portugal 5, 6, 8 3.00 –6,504,290.77 –355,301.94Ventipower S.A., Oliveira de Frades, Portugal 5, 6 3.00 464,236.04 –346,237.42

Investments in associatesRETC Renewable Energy Technology Center GmbH, Hamburg, Germany 5 50.00 878,020.00 –550,433.50

InvestmentsWindpark Finsterwalde GmbH, Finsterwalde, Germany 4, 6 30.00 1,445,449.29 –363,341.12Ventinveste, Lisbon, Portugal 5, 6 1.00 4,065,221.95 –493,770.46REpower Geothermie GmbH, Breydin, Germany (in liquidation) 4, 7 100.00 –77,468.48 –4,890.25

1 Shares held indirectly by REpower Betriebs- und Beteiligungs GmbH 2 Figures from 31 March 20083 REpower Windpark Betriebs GmbH traded until 9 April 2008 als BWU Projekt GmbH, located in Trampe. At the same time, the company was sold by

REpower Systems AG to Betriebs- und Beteiligungsgesellschaft GmbH. 4 Calculated in line with national accounting standards5 Calculated in line with IFRS – Group Accounting Manual REpower Systems AG6 Figures from 31 December 20107 Figures from 31 December 20088 Shares held indirectly by Ventinveste S.A.

155Group Notes

156 Group Notes

Responsibility Statement

“To the best of our knowledge, and in accordance with the applicable reporting principles for financial reporting, the consoli-dated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected future development of the Group.”

Hamburg, May 20, 2011

The Executive Board

Derrick Noe (CFO)


Gregor Gnädig(COO)

Andreas Nauen(CEO)

157Group Notes

Auditors Report

We have audited the consolidated financial statements prepared by REpower Systems AG, Hamburg, comprising the consolidated balance sheet, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated cash flow statement and the notes to the consoli-dated financial statements, together with the Combined Management Report of the Company and the Group for the fiscal year from 1 April 2010 to 31 March 2011. The preparation of the consolidated financial statements and the Com-bined Management Report of the Company and the Group in accordance with IFRSs [International Financial Reporting Standards] as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB [“Handelsgesetzbuch”: German Commercial Code] are the responsibility of the Company’s management. Our re-sponsibility is to express an opinion on the consolidated financial statements and on the Combined Management Report of the Company and the Group based on our audit.

We conducted our audit of the consolidated financial statements in accordance with Sec. 317 HGB and German generally ac-cepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial state-ments in accordance with the applicable financial reporting framework and in the Combined Management Report of the Company and the Group are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Combined Management Report of the Company and the Group are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the ac-counting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the Combined Management Report of the Company and the Group. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The Combined Management Report of the Company and the Group is consistent with the consolidated financial state-ments and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.

Hamburg May 20, 2011

Ernst & Young GmbHWirtschaftsprüfungsgesellschaft

Grummer Tuchen

German Public Auditor German Public Auditor

158 Group Notes

159Group Notes

Financial calendar

Publication of Annual Report for 2010 /11 2011/06/07

Press and Analyst Conference 2010 /11, Frankfurt a. M. 2011/06/07

Interim report on the results of the first quarter of 2011/12, telephone conference 2011/08/12

Annual General Meeting, Hamburg 2011/08/30

Interim report on the results of the first six months of 2011/12, telephone conference 2011/11/14

Interim report on the results of the first nine months of 2011/12, telephone conference 2012/02/14

160 Group Notes

Imprint

Imprint

EditorREpower Systems AG, Hamburg

TextBerichtsmanufaktur GmbH

DesignBartsch Design, Wismar

PhotographyJan Oelker(Title)

PrintStadtdruckerei Weidner, Rostock

Legal reference

This Annual Report contains statements oriented to future developments which are based on our current assumptions and prognoses. As a result of known as well as unknown risks, uncertainty and influences, the actual results, financial situation or development may deviate from the assumptions presented in this document. We shall not assume any obligation to update any statements tuned to future developments.

160

Documents

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 · Group Notes 1 Key Figures Group figures (IFRS) Fiscal year 2010/11 Fiscal year 2009/10 Fiscal year 2008/09 Short fiscal