Consolidated ﬁnancial statements · 2020-05-13 · • Nuclear, which operates in the construction and dismantling of nuclear plants and in the treatment of radioactive waste from

2019Consolidatedfinancialstatements

16152 Genoa - Italy - Via N. Lorenzi, 8 - Phone +39 010 6551 - Fax +39 010 655 3411 - [email protected] - www.ansaldoenergia.com

AN

SALD

O EN

ERGIA - Consolidated financial statem

ents 2019

Copertina 2019 CONSOLIDATO INGLESE_Layout 1 11/05/20 12.03 Pagina 1

16152 Genoa - Italy - Via N. Lorenzi, 8 - Phone +39 010 6551 - Fax +39 010 655 3411 [email protected] - www.ansaldoenergia.com

Contents

6 Significant Data

7 RepoRt on opeRationS

9 The Group and the Market

13 Financial results

26 Production activities

28 Commercial activities

31 Organisational and process/product developments

33 Investments

35 R&D

37 Personnel

39 Environment, health and safety in the workplace

41 Quality and environment

43 Information required as per Law 124/2017

44 Risk management

45 Guarantees given as part of the agreement for the sale of the Parent Company's shares

46 Related party transactions

47 Performance outlook

49 conSoliDateD financial StatementS aS of 31.12.2019

50 Consolidated Income Statement

51 Consolidated Statement of comprehensive income

52 Consolidated Statement of financial position

53 Consolidated Statement of cash flows

54 Consolidated Statement of Changes in Equity

55 Reconciliation of the Parent’s equity and net result with consolidated figures as at 31 December 2019

56 noteS to the conSoliDateD financial StatementS foR the fiScal yeaR enDeD on 31 DecembeR 2019

56 1. General Information

56 2. Form, contents and accounting standards applied

57 3. Accounting Standards adopted

74 4. Adoption of the new accounting standard IFRS 16 - Impacts on the balance sheet as of January 1, 2019

75 5. IFRS 5 – Assets held for sale and Discontinued Operations

76 6. Accounting standards and interpretations of initial application

77 7. Upcoming accounting standards and interpretations

77 8. Accounting standards, amendments and interpretations issued by the IASB but not yet approved by the European Commission

77 9. Use of estimates

79 10. Risk management

82 11. Capital management

82 12. Financial assets and liabilities by category

84 13. Fair value measurement

84 14. Segment reporting

86 15. Intangible assets

89 16. Property, plant and equipment

90 17. Equity investments

93 18. Receivables and other non-current assets

93 19. Inventories

94 20. Contract work in progress and advances from customers

94 21. Trade receivables

95 22. Financial receivables

95 23. Tax assets and liabilities

96 24. Other current assets

97 25. Cash and cash equivalents

97 26. Share capital

99 27. Loans and borrowings

103 28. Employee benefits

105 29. Provisions current and non-current

107 30. Other current and non-current liabilities

108 31. Trade payables

108 32. Derivatives

108 33. Revenues

109 34. Other operating income and expenses

109 35. Purchases and services costs

110 36. Personnel expenses

111 37. Amortization, depreciation and impairment losses

111 38. Change in finished goods, work-in-progress and semi-finished products

112 39. Internal work capitalised

112 40. Financial income and expenses

113 41. Income taxes

113 42. Profit (loss) from discontinued operations

114 43. Impact of related party transactions

114 43.1. Impact of related party transactions on assets and liabilities

118 43.2 Impact of related party transactions on profit or loss

120 44. Cash flows from operating activities

120 45. Guarantees and other commitments

122 Key eVentS occURReD afteR the enD of the yeaR

123 paRent company coRpoRate boDieS

124 AUDITORS’ REPORT

These financial statements have been translated from those issued in Italy, from Italian into English, solely for the convenience of international readers.

ANSALDO ENERGIA 2019 Consolidated Financial Statements 6

Significant data

2019: € 1,374.8 M

2018: € 1,060.1 M

2019: € 984.1 M

2018: € 1,014.7 M

2019: € (255.7) M

2018: € (232.0) M

2019: € (1,162.5) M

2018: € (930.5) M

oRDeRS2019: € 4,396.4 M

2018: € 4,613.2 MoRDeR bacKlog

2019: € (233.5) M

2018: € (193.1) Mebit

2019: € (106.8) M

2018: € (307.9) MfRee opeRating caSh floW

ReVenUe

net ReSUlt

net financial Debt2019: 3,451

2018: 3,645heaDcoUnt (at theenD of the yeaR)

(*) The application of IFRS 16 resulted in an increase in net indebtedness between 31 December 2018 and 31 December2019 of Euro 43.2 million

7ANSALDO ENERGIA 2019 Consolidated Financial Statements

Report on Operations

Dear shareholders

As further detailed below, the Parent Company’s Board ofDirectors resolved to sell some investments, thereby givingthe related mandate to a financial advisor. These investments,all operating in the Service sector, are Power SystemManufacturing LLC, together with its direct investment PSMJapan, Ansaldo Thomassen BV and other minor investments(Ansaldo Energia Korea, Ansaldo Energia Mexico andAnsaldo Servicos de Energia Brazil).For sake of presentation, the consolidated balance sheetexpresses in the row “assets available for sale” the assets ofthe six equity investments indicated above, while the

“liabilities corresponding to assets available for sale” showsthe liabilities relating to the same equity investments. The consolidated income statement, on the other hand,excludes all the items of the six investments indicated above,but states a comparative figure as if the assets had already beenavailable for sale in 2018 and, therefore, includes in the specificitem “Profit (loss) from discontinued operations” the total ofthe profits (losses) of the investments for both 2018 and 2019. For sake of presentation and to offer better comparison ofcertain items, the values of the two financial years underreview will be provided, where significant, in theseconsolidated financial statements, indicating whether theyinclude the effect of investment deconsolidation.


the performance of the global market for theconstruction of power generation plants andcomponents, and the relative outlook

The Ansaldo Energia Group is the world’s fourth largestproducer of systems for the production of electricity and ispresent in over 35 countries worldwide.Its activity focuses on three main business lines:• New Units, which deals with the production of gas

turbines, steam turbines and generators, as well as allengineering, procurement and construction ofthermoelectric power plants;

• Service, which provides all maintenance, repair, spareparts services on existing plants, own fleet or third-partyfleets;

• Nuclear, which operates in the construction anddismantling of nuclear plants and in the treatment ofradioactive waste from existing plants.

These activities are carried out by the parent companyAnsaldo Energia S.p.A. and by other twenty-three entities inEurope and worldwide, in addition to thirty branches locatedin the countries of customers’ plants. As mentioned, six of the twenty-three entities mentionedhave been included among the assets available for sale inthese consolidated financial statements as a process for theirdisposal is underway.

market outlook

In 2019, the growth of real-world GDP shows a slightdecrease (estimate + 3%) compared to 2018 values (+3.6%). This slowdown is global and affects both advancedeconomies and emerging and developing countries.A recovery is expected in the period 2020-2023 (GDP +

3.6%) with a realignment to the values of 2018. In particular,emerging economies are expected to recover, substantialstability in Europe, while a slowdown is expected in NorthAmerica and China. (source: International Monetary Fund).The medium-long term prospects indicate a growing globalgeneration of electricity, with a CAGR 2019-2030 of around3.0%; this growth is also found in the cumulative installedcapacity which has a CAGR 2019-3030 of approximately3.3% (Source: GlobalData).In terms of the fuel mix used to generate electric power, coalcontinued to be the primary source throughout 2019accounting for roughly 37% of production essentially stablein relation to 2017 and, followed by gas at approximately23%. The share of nuclear power drops slightly and stands ataround 10%, hydroelectric power is substantially stable at15%, while oil represents a marginal share of around 3%. Theother renewable sources (wind, solar, biomass, etc.), which arecontinuing to grow, provided for roughly 11% of worldwideelectricity production (source: GlobalData/International EnergyAgency).The worldwide data of the 2019 plants and components forthe production of electricity from fossil fuels provided byMcCoy are in line with the 2018 numbers, settling at around70 GW (-19% compared to 2017). Compared to last year,coal plants show a further decrease (-35%) balanced by anincrease in the combined turbogas cycles (+ 25%); the 60Hz of gas turbines exhibit growth of the segment while the50 Hz segment is substantially stable.McCoy 2019 data show a trend in the gas turbine market(50 Hz and +50 Mw) in line with 2018 while steam turbinescontinue to fall. A further decrease in the orders of steamturbines relating to traditional fossil cycles is expected in thecoming years, mainly linked to the gradual reduction of coalas an energy source, while orders related to gas turbines areexpected to increase both in open cycle and combined.


The Group and the Market

In the nuclear sector, new units are expected to beconcentrated mainly in emerging countries. Belgium andGermany are withdrawing, France, Sweden, Switzerland aregradually cutting back; at the same time growth is expectedin around 20 countries that are developing new projectsincluding China, India, Russia, the United Arab Emirates andSaudi Arabia. Canada and the United States have recentlyannounced their intention to keep the nuclear share as it iswithin the energy mix. Nuclear capacity in China is expectedto exceed that of the United States and the European Unionby 2030.At the start of 2019, around 60 GW of new nuclear powerplants were under construction with about two thirdsoperational by the end of 2020. About two-thirds of thesenew plants will be built in Asia (of which almost 50% inChina). With regard to the size of the plants, an increasedinterest in small modular plants is expected compared tolarge plants. While the contribution of nuclear energy to the mix of fuelsused to generate electricity is expected to remain stable orto grow slightly in 2040, fluctuating between 8 and 11%,growing attention to environmental issues could affect thisestimate (source: GlobalData/International EnergyAgency/World Nuclear Association). Due to the increasinglyrestrictive safety measures introduced by many countries, wealso expect to see an increase in service activities for existingnuclear power plants. Furthermore, the exclusion of nuclearfuel from the mix of fuels used to generate electricity bysome countries, combined with an increasing number ofplants reaching the end of their service lives, will result in agrowth of the waste management and decommissioningsegment in the coming years.The constant decline in the cost of electricity (LCOE) fromrenewable sources, combined with a growing internationalfocus on environmental issues, has enabled renewables tomake up the main source of new installations in 2019 witha share of 63%, confirming last year’s trend. The new windand photovoltaic installations mean that the cumulativeinstalled base is constantly growing, bringing attention tothe need to focus on flexibility in managing fluctuations inproduction; and gas plants remain the main source toguarantee this flexibility.The mix of sources for electricity production could seefluctuations in the short and medium term with a significantcontribution from traditional sources, especially in somecountries; however, in the long term the share in the mix oftraditional sources is expected to fall in favour of renewablesources. In particular, a substantial stability of the gas shareis expected in the mix for electricity production by 2040, also

due to the increasing use of natural gas-powered plants as aback-up (network balancing) for the growing renewablesinstallations, thus leading to a decrease in the hours of useof gas plants. Coal and oil are set to decline: theircontribution to the energy mix by 2040 is expected to dropto 25% in the current context of the environmental policiesimplemented and announced. The share lost by thesetraditional sources is expected to be replaced by clean energysources. Hydroelectricity is stable and is expected to fluctuatebetween 14% and 18%. The increased contribution ofrenewable energies to the energy mix (estimated to represent22-49% in 2040 depending on measures adopted by thevarious countries) also entails the need for OEMs to provideintegrated hybrid solutions that will offer electricity storage,and, at the same time, to develop highly efficient, flexible,and responsive gas turbines in order to meet the network’sdemands. However, the improvement of electricity storagetechnologies and the decrease in related costs could allowenergy produced from renewable sources to stabilise,constituting a possible alternative to gas peak plants tomanage temporary fluctuations in supply/demand, thusconstituting a threat for the sale of new traditional plants.

overview of 2019

The 2019 data provided by McCoy show a market in linewith 2018 (in the 50 Hz market and of machines with apower greater than 50 MW). Below is a detailed analysis of the main markets where theGroup operates:

EuropeEurope has shown remarkable growth compared to 2018thanks to the introduction of the” capacity market” in Italyand the peak plants for the stabilization of the network inGermany. To date, with reference to gas turbines, there areabout 4 GW of new capacity sold. In the coming years, a constant market centred around 3 GWis expected. The main market drivers are the need forstabilization and safety in the electricity supply due to asubstantial increase in renewable sources (Capacity market)and the nuclear / coal phase out.

Middle EastThe Middle East also performed better than 2018 with 6 GWof new capacity sold compared to 4 GW in 2018. Large pipeline projects in the Middle East area suggest asignificant market for gas turbines for the coming years.

ANSALDO ENERGIA 2019 Consolidated Financial Statements10

AfricaThe African market, after the important order of H classes inEgypt in 2016, continues to decline from 9 GW in 2016 to2.4 in 2017 and reaching just over 1 GW in 2018. Also 2019does not record a change of trend. Geopolitical instabilityand limited investor confidence are penalizing this market.

Asia The Asian market marks a slowdown in orders compared to2018. In particular, Asia, excluding China, stood in 2019 on4 GW of new capacity sold, compared to 8 GW in 2017 and5 GW sold during 2018 respectively. China stands at 6 GWcompared to 5 GW in 2018 and 8 GW in 2017.

RussiaOrders in Russia for 2019 are below country capacity: Thecapacity market in the country, which aims to renew theinstalled fleet with more efficient technologies, is stillstruggling to transform itself into orders for new gasturbines. Strict location criteria for OEMs are holding backthe gas turbine market.

the future trend

Regarding the outlook of the market in which your Groupoperates, there is a strong dynamism and evolution of thesame thanks to the push of three fundamental factors suchas the electrification of final consumption, the containmentof emissions into the atmosphere and the transition towardsthe generation paradigm distributed.Electricity consumption, currently 19% of total energydemand, is expected to grow by up to 24% in the nexttwenty years.The Paris agreements and the subsequent ones go in thedirection of the containment of global warming and requirea gradual shift towards sources with a lower environmentalimpact.The distributed generation, as opposed to the traditionalcentralized one, pushes more and more towards alternativeenergies and self-production, given the decrease in the costsof the related technologies.In this context, the gas turbine market also plays afundamental role in relation to the five fundamental pillars:• availability, as opposed to the uncertainty of renewables;• environmental sustainability, thanks to the greater eco-

sustainability of the source compared to other fossil fuels;• logistics, following the construction of numerous

international gas pipelines;

• flexibility, especially when combined with renewabletechnologies;

• efficiency, ever greater in the new generation combinedcycles.

Therefore, we are convinced that your group’s choice tofocus strongly on the gas turbine market will proveincreasingly successful in the medium and long term.In particular, as regards future orders, the medium-termprospects, in line with the main macroeconomic andgeopolitical scenarios, envisage a partial recovery of ordersfor gas turbines in the five-year period 2020 - 2024 in termsof installed MW, while waiting a slowdown in terms ofnumber of units following the growth in the mix of class Hproducts characterized by high power and efficiency.The increase in the installed fleet of renewable plants requiresattention to the management of the network, on the onehand highlighting the importance of integrating gas plantswith renewable sources and with storage systems toharmonize supply and demand and, d ‘ on the other hand,requiring the adaptation of traditional plants, both new andexisting, to offer ever higher standards of reliability andavailability, focus on costs, improvement of flexibility,adaptation of plants so that they can use new fuels (primarilyhydrogen) , improvement of the turndown and ramp rateand focus on predictive maintenance, all areas in which yourGroup is strengthening.With regard to the service activities, the medium to long termoutlook indicates a growing market for at least the nextdecade, but one that will be characterised by increasingcompetition. China, Southeast Asia, and the Middle East arethe regions where greater growth is expected. For the Group, and in particular for the Service segment, therenewal of the plant fleet, with a competitive advantage forOEMs, the growth of the upgrade market for existing plantsand the multi-technological skills present within Ansaldo willbe a discriminating factor to be exploited to achievesignificant growth.Lastly, the Nuclear sector is expected to grow, albeit to amuch lesser extent than the two other business lines between0.5% and 1.5% in the next twenty years, especially towardsnew markets such as China, Russia and India. Therefore, theGroup will have to place itself in this context of moderategrowth, which however has a very significant value on aglobal scale, thanks to the profound skills on the topic thathave developed over years of experience in the field.In conclusion, a strong interest in the future for gas-firedpower plants is conceivable: for these reasons, turbines of ahigher class than F, for which your Group has investedsignificant resources in the last three years, could play an


increasingly important role central to the energy scene, upto, according to the best estimate, around 65% of newinstallations in 2030. The GT36 of Ansaldo Energia therefore,even in a context of heated competitiveness, may representthe flagship product for the Group.

competitive positioning

Since 1997, the Group has grown significantly gainingmarket share: the fleet of machines installed representsabout 7% of the global gas turbine market above 100 MW,while the sales market share was around 2019 11.5%. Byanalysing the orders for turbogas (for open or combinedcycle plants) within the regions belonging to the mainreference market (50Hz and + 50MW), the Group obtained

an excellent result with a market share of 22%.This significant increase in terms of volumes was madepossible by constant investments in research anddevelopment projects, which made it possible to design theconstruction of innovative, competitive and efficient powerplants and plants. In this context, we are proud to report that the new H-classturbine, the GT 36, has had significant success on themarket, having been the subject of three orders in Italy andone in China, in addition to significant expressions of interestreceived. The construction of the Porto Marghera plantscheduled for the end of the current year, for example, aimsto be the most efficient thermoelectric plant in Europe, withhigh yields in the order of 63%, highly sustainable from anenvironmental point of view, thanks a 40% reduction in Co2

emissions and 70% nitrogen oxide.


The 2019 financial year was characterized by some factorsthat led to the negative result of Euro 255.7 million.The main causes, of an extra operational nature, commented

subsequently, which affected the aforementioned result were(in millions of Euro):


Financial results

euro/millions

Impairment of some intangible assets (188.5)

Deferred tax reversal on some of the above items 24.0

Impairment of goodwill (9.0)

Further write-downs for the Gebze Project - Turkey (70.0)

Other non-recurring write-downs (8.0)

It is therefore clear that, net of these effects, the Group’sresult would have been substantially balanced. The details ofthe effects of an extra-operational nature mentioned abovewill be reported in the explanatory notes.This result is strongly offset by the acquisition of orders,finalized with the new perimeter, with the exclusion of thesubsidiaries available for sale, equal to Euro 1,375 million,increased by 29.7% compared to the same figure in 2018,always net of subsidiaries available for sale. This trend,commented in detail later with also evidence of theacquisition of the companies that left the consolidationperimeter, is even more significant if one considers thatnumerous orders have been acquired in Italy, characterizingthe Ansaldo Energia Group as the leading driver of theenergy transition. in Italy. This factor, which represents oneof the essential lines of the business plan, which will bediscussed later, certainly bodes well for a turnaround whichshould bring the Group’s results and performance back to anewly positive and correlated level in the short term. thegreat professionalism and skills existing within the same.As shown in the balance sheet as at 31 December 2019,

current financial liabilities amount to Euro 757 million andinclude the first Bond issued by the Parent Company in 2015for a value of Euro 260.8 million, the repayment of whichmust take place in a single payment at the end of April 2020. It should be noted that these consolidated financial statementsas at 31 December 2019 have been prepared on a goingconcern basis, since the majority shareholder informed theCompany that it had approved, on April 2, 2020, the financialsupport requested to the Company’s Shareholders withcommunication of April 1, 2020. The support in question willbe substantiated in the following actions:• the payment, by the shareholders, to the future capital

increase account, for an amount of Euro 400 millionwhich will be converted in share capital by 30 June 2020;

• a commitment to provide additional equity, wherenecessary to Euro 50 million until December 31, 2023(extendable, under certain conditions, until December 31,2025);

• the extension of the repayment terms of theShareholder’s Loan of Euro 200 million to a datesubsequent to 30 June 2026.

The commitments will allow the Company, Ansaldo EnergiaS.p.A., to repay the bond falling due on April 28, 2020.

The main significant events of the 2019 financial year areshown below in order of time:• Ansaldo Energia SpA and China United Gas Turbine

Company (UGTC) signed a contract at the end of March2019 for technological collaboration in the heavy-dutygas turbine sector. Under the terms of the contract,Ansaldo Energia will support UGTC’s gas turbine programwith its technical experience in design, engineering andtesting. The aim of the contract is to establish a long-termand mutually beneficial partnership for both parties. Thecontract value is equal to Euro 150 million, and the 2019consolidated income statement benefited from revenuesequal to Euro 30 million.

• in April 2019, a contractual amendment was establishedwith the credit institutions with which the Group hasfinancial relations subject to compliance with certainfinancial parameters which established the Leverage Ratio(ratio between Net Borrowings and Adjusted EBITDA) atthe maximum value of 5 at the end of 2019, at themaximum value of 4.8 at the end of 2020, to return inthe subsequent periods to the maximum value of 4. Thisamendment also included the setting of the Interest Ratioparameter at 3.5 (ratio between EBITDA and Net Interest),with calculation as at 30 June 2019.

Moreover, in the second half of the year, also inconsideration of the aforementioned expiry of the firsttranche of bonds at the end of April 2020 for Euro 260million, the Parent Company began a series of meetingswith banking institutions in order to restructure itsfinancial debt. At the end of this process, the ParentCompany’s financial debt will be substantially rescheduledthanks to the signing of new agreements, in order tomake the financial debt profile more consistent with theexecution of the business plan.Following these agreements, the first testing date forfinancial covenants will be June 30, 2021.In a nutshell, the agreements with credit institutionsalready agreed between the parties, provide mainly forthe amendment and restatement of some lines offinancing currently in place for a total value of Euro 450million as follows:– Euro 300 million Term Loan expiring in December 2023

automatically extended for 50% of the capital sharesin December 2024 and for the remainder in December

2025, in the event of full re-financing of the bondexpiring in 2024;

– Revolving Credit Facility of Euro 150 million withmaturity date aligned with the Term Loan above.

– With reference to the new syndicated bondingfacilities, two committed tranches will be madeavailable, as follows: a first tranche amounting to Euro 339 million; a second tranche up to Euro 568 million made

available from time to time as existinguncommitted bilateral bonding facilitiesdefinitively expire.

Considering the very advanced stage of the contractualcompletion process of the agreements with financialinstitutions, already reached in the substance, togetherwith the financial support received from the majorityshareholder, even if subject to them, it’s deemed thatthere are no significant uncertainties regarding the use ofthe going concern assumption in the preparation of thesefinancial statements.

• at the end of May 2019 CDP Equity SpA, shareholder ofthe parent company, made a payment of Euro 200 millionas a subordinated Shareholders’ loan, bearing interest atthe six-month Euribor rate in addition to the spread of675 bps. The deadline for the repayment of this loanoriginally set at 31 December 2024 will be postponed toa date later than 30 June 2026, as previously indicated;

• with the approval of the financial statements for the yearended 31 December 2018, the mandates granted to theBoard of Directors and the control body of the parentcompany Ansaldo Energia SpA had expired. The samebodies were subject to an extension until theShareholders’ Meeting held on October 14, 2019, whichappointed the new Board of nine members, theChairman of the Board itself and the new Board ofStatutory Auditors. On 18 October 2019 the new Boardof Directors appointed the new Chief Executive Officerand the new CFO of the Parent Company;

• on December 5, 2019 expired the shareholders’agreements signed in December 2014 between theshareholder CDP Equity SpA (then Fondo StrategicoItaliano SpA) and Shanghai Electric Hongkong Co. Limited(hereinafter SEC): these agreements, despite theparticipation percentages of 59.94% for CDP Equity and40% for SEC, integrated a joint control of the two entities


over the parent company Ansaldo Energia SpA As ofDecember 31, these agreements have not been renewedand therefore the Parent Company is not only formally,but also de facto controlled directly by the shareholderCDP Equity S.p.A.;

• on 20 December 2019 the Parent Company’s Board ofDirectors approved the guidelines of the 2020-2024business plan, which will allow the Group to achievesustainable growth in the medium term, also throughstructural measures. In particular, the plan guidelinesmainly:– illustrate the positive market trend of the power

generation in the gas sector over the time horizonconsidered;

– describe industrial actions for management efficiency;– show a simplification in the investment portfolio;– illustrate the Group’s long-term strategy for reversing

the trend of cash flow and maximizing it.

• in accordance with the provisions of the business planguidelines, on 30 December 2019 the Parent Companymandated a financial advisor to proceed with the sale ofsome subsidiaries in the company’s portfolio: in particular,this is the investee Power System Manufacturing LLC andthe its direct Japanese participation, in addition toAnsaldo Thomassen BV, a company incorporated underDutch law and some minor equity investments thatmanage the on-shore part of the PSM contracts (AnsaldoEnergia Korea, Ansaldo Energia Mexico and AnsaldoServicos de Energia Brazil). All these equity investmentsare operational in the sector of repairs of turbinecomponents. Accordingly to the plan’s guidelines and theassignment of the mandate to the advisor, theconsolidated balance sheet includes the total assets and

liabilities of these investee companies among the assetsand liabilities available for sale, while their result isentered in a specific item in the consolidated incomestatement called “result of discontinued operations”;

• at 31 December 2018 the financial problems of thecompany Yeni Elektrik had led to the complete write-down of all the financial receivables claimed by the Groupand to the provision of a fund of Euro 121.9 millionentered to face the probable risk that bankinginstitutions, in the face of the continuing debt situationof Yeni Elektrik, they could claim the guarantees that theGroup had provided in their favour, in some cases jointlyand severally with the other shareholder.In the meantime, the financial situation of Yeni Elektrikhas not improved in 2019 and the negotiation that theGroup has continued to pursue with the Lenders of YeniElektrik in order to restructure its financial debt hasentered a stall. In view of the persistence of this situation,the Group has decided to request a “Konkordato”procedure for the Yeni Elektrik at the “Gebze CommercialCourt of First Instance” which was approved on 3October 2019. The judge decided on February 20, 2020that Yeni Elektrik should be liquidated. Furthermore, theGroup’s management has appealed against this ruling. In the face of these circumstances, the Group Manage -ment decided to evaluate all the risks that the situation inquestion could have entailed: this analysis led to the fullwrite-down of all trade receivables and work in progressagainst Yeni Elektrik, setting aside also the total ofguarantees that the Group itself could be called upon tohonour, additional to the guarantees withdrawn during theyear and the interest paid on the loan with Nomura Bank.As mentioned above, the total impact on the consolidatedincome statement was approximately Euro 70 million.


The reclassified consolidated income statement is shownbelow:


Analysis of the financial position

20192018 post

discontinuedoperations

effect ofdiscontinuedoperations

2018 antediscontinuedoperations

euro/thousand

Revenues 984,065 1,014,668 (157,646) 1,172,314

984,065 1,014,668 (157,646) 1,172,314

Purchase and personnel expense (877,746) (880,087) 124,963 (1,005,050)

Operating impairment losses - (114) - (114)

Other operating net income (expense) 22,339 (22,553) (9,200) (13,353)

Change in work-in-progress, semi-finished products and finished goods 5,671 29,367 31,482 (2,115)

ebitDa 134,329 141,281 (10,401) 151,682

Amortisation and depreciation (48,454) (38,789) 5,882 (44,671)

ebita adjusted 85,875 102,492 (4,519) 107,011

Extraordinary (costs) / income (77,239) (248,294) - (248,294)

Restructuring costs (6,826) (4,538) - (4,538)

Amortization of intangible assets acquired with business combination (37,795) (38,321) 1,184 (39,505)

Other assets impairment loss (197,500) (4,485) - (4,485)

ebit (233,485) (193,146) (3,335) (189,811)

Net financial income (expense) (57,899) (46,780) 864 (47,644)

Income taxes (28,191) (6,233) (747) (5,486)

net ReSUlt ante DiScontinUeD (263,193) (233,693) (1,724) (231,969)

Result of discontinued operations 7,473 1,724 1,724 -

net ReSUlt (255,720) (231,969) - (231,969)

of which third parties (20) (17) - (17)


In the rest of this report, reference will always be made tothe post-deconsolidation data of the investee companiesavailable for sale in both 2019 and 2018, unless expresslyindicated.

The trend of revenues in the last two financial years and thebreakdown of the same by Business Line are shown below(in millions of Euro):

The 2019 financial year recorded a slight decrease inrevenues of 3% exclusively due to the New Units BusinessLine, which represents approximately 37.2% of revenues andapproximately 20.2% of the gross margin produced in theyear. The decrease is mainly due to the fact that in 2019 aseries of significant projects began which will produce anincrease in revenues in 2020, but which have affectedmarginally during the current year. The Service Business Linerepresented 56.0% of the revenues, but contributed 78.1%to the gross margin. Compared to 2018, the Service recordedan increase of 12.4% in revenues, but a decrease of 3.0%in margins. Lastly, the Nuclear Business Line represents 6.7%of revenues, a slight idecrease compared to 2018, but only

contributed 1.4% to the margin. The other net operating revenues/costs item, which waspositive for the amount of Euro 22.3 million, mainly includesthe following entries:• Euro 12.5 million relating to insurance reimbursements

due to damages suffered following the collapse of theMorandi Viaduct;

• Euro 8.8 million relating to insurance reimbursements dueto damages suffered in various plants;

• Euro 1.5 million relating to charges for taxes and duties;• Euro 0.9 million of net positive exchange differences on

operating items.

NUCLEAR TOTALREVENUES

SERVICEOPERATIONS

NEW UNITSOPERATIONS

0

200

400

600

800

1000

1200

1400

1600

2019

2018

439366

490551

86

984 1,015

66

The trend of the main indicators in the reclassified incomestatement is as follows (in millions of Euro):

EBITDA decreased compared to 2018 (4.7%), mainly due tothe decrease in revenues and margins especially in the NewUnit Business Line, partially offset by the increase in theService segment, as previously commented.EBIT was mainly made up of the following items:• Ordinary depreciation and amortization of Euro 48.65

million (Euro 38.8 million in 2018);


• Depreciation and amortization deriving from theallocation of the PPA of Euro 37.8 million (Euro 38.3million in 2018);

• Net non-recurring charges, integration costs, impairmentof other assets and restructuring charges of Euro 281.5million (Euro 257.3 million in 2018), detailed as follows:

0

50

100

150

200

2019

2018

EBITDA NET RESULT EBIT

-50

-100

-150

-200

-250

-300

141.3134.3

-233.5

-255.7

-193.1

-232.0


The trend of the total R&D expenditure can be summarisedas follows (in millions of Euro):

The significant investment in R&D activities in recent years,following the acquisition of the former Alstom Groupactivities, is mainly attributable to the new products in theportfolio, in particular the new class H turbine: thanks to thiseffort, the Group has been able to benefit over the courseof the of 2019 of some very important orders relating to theGT 36, of which we said earlier.Financial management, negative for Euro 57.9 million (Euro46.8 million in 2018) mainly includes Euro 17.1 millionrelating to interest on the Bond, Euro 12.5 million relating toother net interest expense towards banks, Euro 8.1 millionfor interest expense on the Shareholder’s loan, net exchange

rate differences for Euro 3.2 million, bank charges for Euro7.2 million and write-down of equity investments for Euro9.4 million.Income taxes have a positive impact of Euro 28.2 million(positive for Euro 6.2 million in 2018). IRES for the year 2019amounts to Euro 5.1 million, IRAP to Euro 3.1 million, whileother foreign income taxes amount to million 5.8 Euro; inaddition, the item includes the allocation of deferred taxassets on temporary deductible differences for million 6.8Euro, releases of deferred taxes for million 38.2 Euro and theuse of deferred tax assets for million 2.9 Euro.

Non-recurring expenses & Integration costs (7,559) (13,257)

Write-down on Unit receivables - (112,079)

Provision for risks – Gebze Project (Turkey) (69,680) (121,921)

Redundancy costs, Solidarity, Employees reallocation (5,522)

Impairment on intangibles assets (197,500) -

Restructuring costs (6,826) (4,538)

(281,565) (257,317)

euro/thousand 2019 2018

0

20

40

60

80

100

120

140

2019

2018

Total Expense

Capitalized Expensed

71.379.5

32.826.6

of which:

104.1106.2


The following table shows the reclassified consolidatedbalance sheet as of 31 December 2019 and as of 31December 2018:

Non-current assets mainly include intangible fixed assets forEuro 1,376.2 million, tangible assets for Euro 290.5 million,equity investments for Euro 21.4 million and prepaid taxesfor Euro 73.6 million. As commented later in the explanatorynote, intangible assets have decreased by Euro 197.5 millionfollowing the impairment of some intangible assets (Euro188.5 million) and goodwill (Euro 9 million). Non-current liabilities include employee severanceindemnities (TFR) and other defined-contribution plans foremployees for Euro 39.9 million, provisions for risks for Euro87.0 million, the provision for deferred taxes for Euro 86.3million and other non-current liabilities for Euro 3.9 million.The decrease in the year of non-current liabilities is mainlydue to the short-term transfer of the portion ofapproximately Euro 40 million relating to the debt to GeneralElectric for the Gastone operation in 2016 expiring at theend of 2020, as well as the decrease in deferred taxes for

Euro 50.8 million, Euro 24.0 million of which following thecommented impairment on intangible assets.Net working capital went from a shortfall of Euro 239.5million in 2018 to a shortfall of Euro 338.51 million in 2019,with a change of Euro 99.0 million. This change is mainlyattributable to the net effect of the decrease in inventoriesand work in progress for Euro 186.6 million, partly due alsoto the reclassification of inventories of investee companiesavailable for sale, to the increase in trade receivables for Euro53, 9 million, a reduction in trade payables and advances forEuro 87.7 million and a change in short-term risk provisionsand other short-term assets and liabilities for Euro 53.7million. Shareholders’ equity amount to Euro 193.0 million andconsisted of share capital of Euro 180 million, retainedearnings and other reserves of Euro 268.7 million, less a lossfor the year of Euro 255.7 million.

euro/thousand 31.12.2019 31.12.2018

non-current assets 1,762,429 1,944,104

non-current liabilities 227,402 324,644

1,535,027 1,619,460

Inventories 534,926 686,501

Contract work in progress 190,391 225,387

Trade Receivables 354,380 300,507

Trade Payables 417,576 423,697

Progress payments and advances from customers 722,611 804,244

Working capital (60,490) (15,546)

Current provisions 57,712 134,407

Other net current assets (liabilities) (219,940) (89,547)

net working capital (338,142) (239,500)

net invested capital 1,196,885 1,379,960

equity 193,010 449,446

attributable to non-controlling interests (171) (151)

net financial debt 1,162,507 930,514

net assets (liabilities) available for sale 158,632

of which indebtedness 30,287 -


The net financial debt as of 31 December 2019 and 2018 isshown below.

The net financial debt amounted to Euro 1,162.5 million asof 31 December 2019, for an increase of Euro 232.0 millionwith respect to 31 December 2018.The variation in short-, medium- and long-term financialpayables (Euro 45.8 million) is mainly due to the full demandof the Revolving Credit Facility, for Euro 75 million whichoccurred in the last months of the year, and the repayment ofportions of the loan. Cash and cash equivalents at the end ofthe year increased by Euro 88.9 million mainly thanks to thecollection of the RCF commented above and the positive trendin collections from customers in the last months of the year.

Short-term financial debt, including other financial payables,amounting to Euro 753.6 million at 31 December 2019, aremainly composed of the aforementioned Revolving CreditFacility for Euro 360 million, from the first tranche of thebond loan falling due on April 28 2020 for Euro 260.8million, hot money lines of credit for Euro 30 million,payables to factors for Euro 53.2 million, short-term portionsof loans for Euro 37.8 million and other items lower overallamounting to Euro 11.8 million.Medium/long-term financial debt, equal to Euro 467.8million at 31 December 2019, are mainly composed of the

Financial situation

31.12.2019 31.12.2018 euro/thousand

Current loans and borrowings 730,186 392,524

Non-current loans and borrowings 467,834 759,723

Cash and cash equivalents 318,155 229,324

banK loanS, boRRoWingS anD bonDS 879,865 922,923

Related parties financial receivables 127 851

cURRent financial ReceiVableS 127 851

Related parties loans and borrowings 209,690 -

Other current loans and borrowings 23,414 8,442

Current Lease liabilities 4,878

Non Current Lease liabilities 75,074

otheR loanS anD boRRoWingS 313,056 8,442

net financial Debt 1,192,794 930,514

net debt (cash) attributed to assets / liabilities available for sale 30,287

net financial Debt 1,162,507 930,514

second tranche of the existing bond loan for Euro 350 millionand the remainder from medium and long-term loans.The explanatory notes contain detailed information regardingthe aforementioned financial relationships.All loans, with the exception of bond issues, must complywith certain financial covenants, which are described in the

first part of this report and in the relevant section of theexplanatory notes.Total liquidity, net of that of investee companies available forsale, amounted to Euro 311.7 million and increased by Euro97.7 million in the year, as reported in the followingreclassified cash flow statement.


As previously mentioned, the significant improvement in cashand cash equivalents is mainly due to the draft of Euro 75

million of the RCF which occurred towards the end of theyear and to the significant collections in recent months.

2019 2018 euro/thousand

cash and cash equivalents as at 1 January 229,324 276,300

Gross cash flows from operating activities 127,103 138,066

Gross cash flow from operating activities from discontinued operations 24,283 4,974

Change in other operating assets and liabilities (58,226) (122,648)

Changes in other operating assets and liabilities from discontinued operations (3,068) 1,054

funds from operations (ffo) 90,092 21,446

Change in working capital (62,346) (196,527)

Changes in working capital from discontinued operations (12,465) (8,474)

cash flows generated from (used in) operating activities 15,281 (183,555)

Cash flows used in ordinary investing activities (114,404) (116,688)

Cash flow from ordinary investment activities from discontinued operations (7,646) (7,645)

free operating cash-flow (focf) (106,769) (307,888)

Strategic transactions (41,446) -

Change in other investing activities - (79)

cash flows generated from (used in) strategic investing activities and other (41,446) (79)

cash flows generated from (used in) investing activities (163,496) (124,412)

Dividends paid - -

Capital increase - 80,000

Net changes in other financial liabilities 246,456 173,620

Cash flow from financing activities from discontinued operations (10,439) 8,070

cask flows generated (used in) financing activities 236,017 261,690

exchange rate differences 470 (1,011)

Exchange rate differences from discontinued operations 430 643

other movements 129 (331)

cash and cash equivalents as at 31 December 318,155 229,324

of which cash from discontinued operations 6,437 15,343

of which cash from statement of financial position 311,718 213,981


The management assesses the Group’s financial performanceusing certain non-IFRS indicators, as described below.

Alternative “non-GAAP”performance indicators

ebit

ebita adjusted

ebitDa

free operating cash flow(focf)

funds from operations (ffo)

Working capital

Pre-tax result and financial part.

EBIT net of:• Impairment on goodwill;• Amortizations on PPA allocations;• Restructuring expenses;• Other non-recurring expenses /

income.

Adjusted EBITA net of amortizationsand depreciations of fixed assets.

Cash flow from operational andinvestment activities, net of that for“strategic investments”.

Cash flow from operationalmanagement, net of changes inworking capital.

Trade receivables and payables, work inprogress and payments on account.

€ (233.5) million

€ 85.9 million

€ 134.3 million

€ (106.8) million

€ 90.0 million

€ (60.5) million

€ (193.1) million

€ 102.5 million

€ 141.3 million

€ (307.9) million

€ 21.4 million

€ (16) million

indicator Description 2019 2018 (*)


net working capital

net invested capital

orders

order backlog

Return on Sales (RoS)

Return on investments (Roi)

Return on equity (Roe)

headcount/average headcount

Working capital net of provisions forrisks and other current assets andliabilities.

Net working capital and algebraic sumof non-current assets and liabilities.

Sum of contracts with clients signedduring the year.

Difference between orders acquired atthe balance sheet date and progressiveturnover

Ratio between Adjusted EBITA andRevenues

Ratio between EBITA Adj. And averageinvested capital during the two years

Ratio between Net Result and averageequity over the two years

Number of employees in force on thebalance sheet date

Average number of employees in theyear

€ (338.1) million

€ 1,197 million

€ 1,375 million

€ 4,396 million

8.7%

6.7%

(79.6)%

3,451

3,469

€ (240) million

€ 1,380 million

€ 1,060 million

€ 4,613 million

9.1%

8.3%

(21.6)%

3,645

3,751

indicator Descripiton 2019 2018 (*)

(*) Values net of the values of investee companies available for sale


Management performance


production activities

new UnitsDuring the course of 2019, the Ansaldo Energia Groupcontinued to operate in various parts of the world, achievingresults that were consistent with the expectations. Inparticular, the main countries in which it is engaged are: Italy,Germany, Serbia, Egypt, Algeria, Tunisia, Iran, Congo, Chinaand Oman.The main results achieved in relation to the various projectsare indicated below.

Europe• Germany

Irsching 6: work began on the EPC contract stipulatedwith Uniper System Stabilitaet (USS) for the turnkeyconstruction (excluding civil works and connection to theHV network) of a plant for operation in peak conditionsaimed at stabilizing the network in case of insufficientgeneration of energy from renewable sources. It includesan open cycle AE94.3A gas turbine, outdoor type, withnatural gas fuel, its alternator, auxiliaries and all accessorysystems (mechanical and electrical).

• SerbiaPancevo: the two AE64.3A turbines, alternators and all

auxiliaries were delivered to the site, where the customerShanghai Electric Corporation began assembly with thetechnical assistance of specialized Ansaldo Energiapersonnel.

• Italy – With the entry into force of the Marghera Levante

contract entered into with Edison for the constructionof the power island of a combined cycle power plantwith the new GT36 class H turbine of Ansaldo Energiatechnology, the works that have started and areunderway they will be completed with the commercialcommissioning of the plant in April 2022. It is the firstpower plant of this type to be built in Italy and thisconstitutes a fundamental strategic element for thesuccess of this new product on the market. A firstpositive impact was the signature, which took placeon November 29, 2019, with the same customerEdison of a contract for the complete turnkeyconstruction of another plant with the same class H

gas turbine, located in Campania (Presenzano). Theentry into force took place on December 1, 2019 andthe related work has started.

– Activities were started on the contract acquired byBaker Hughes General Electric for the supply of eightelectric generators to be coupled to GE gas turbinesfor the LNG Arctic project in Russia. The manufactureof the eight generators, which began in May 2019,will be completed in late 2020.

– Activities started on the contract acquired by theArvedi steelworks for the supply, assembly andcommissioning of an 80 MW AE64.3A gas turbine andrelated electric generator to be installed at the Servolaplant (Trieste).

– Work continued on contracts with Terna for theturnkey supply of synchronous compensators forpower factor correction and stabilization of thenational grid to be installed at various sites in southernItaly.

Middle East • Iran

– The gas turbine relating to the first Dalahoo unit wascommissioned (fuel gas) and the related provisionalacceptance was obtained.

– The Heris gas turbine was commissioned (fuel oil).– The first turbogas and related electric generator of the

Varamin plant, the electric generator at the Butia plantand the auxiliaries relating to the Qeshm plant wereshipped.

• OmanThe two combined cycle power plants of Ibri and Sohar,for which the Swiss subsidiary supplied 8 GT26 gasturbines, 8 recovery boilers and 4 steam turbines, havebeen completed and entered commercial operation.

• EgyptThe Turn Over Certificate of the 6th October add-on plantwas obtained, consisting of the transformation from opencycle to combined cycle.

Asia• China

– Sihui: the performance tests were successfully passedand the Provisional Acceptance Certificate (PAC) wasobtained for both generation units with AE94.3A gasturbines.

– Shangzhuang: the performance tests were successfullypassed and the Provisional Acceptance Certificate(PAC) was obtained for the AE94.2 gas turbinegeneration unit.

– Fengxian: the reliability run was completed on andcommercial operations for the turbine a gas AE94.3Agas turbine.

– Zhoukou: the reliability run was completed andcommercial operation began for Generation Unit 2,with gas turbine AE94.3A.

– Minzhong: the reliability run was completed andcommercial operations for the AE94.2 gas turbinegenerating unit started.

– The supply of unit 2 of the Rongcheng project (anAE94.2 gas turbine) and the shipment of parts for theZhang Jia Gang 1 and 2 projects (AE94.3 gas turbineparts) were completed.

North Africa• Tunisia

Mornaguia: in relation to the EPC contract, in accordancewith the further commitments made with the customeron the occasion of the signing of the contract, the firstUnit 11 was put into service at the beginning of June2019 approximately 10 months ahead of the contractualdate to cope with the peak network demand expected inthe summer. Furthermore, on December 19, 2019, thefirst synchronization of Unit 11 was performedapproximately 2 months in advance of the contractualdate.

• AlgeriaThe completion of the Ain Djasser III and Hassi Messaoudplants continued.

Sub-Saharan Africa– The Final Completion Certificate was obtained for the

Dedisa project (Port Elisabeth-South Africa).– In December, the third AE94.2 gas turbine supplied by

Ansaldo to the ENI customer in Pointe Noire (Congo)and relating to the CEC Expansion Project contract(Cote Mateve) was started.

ServiceIn 2019, the Global Service recorded economic and financialresults in line with expectations and slightly growingcompared to the previous year. This was possible thanks tothe careful planning of resources in terms of both man-hoursand materials rendered. As a result, 2019 has made itpossible to further increase the number of maintenanceinspections (over 500) and hours worked (over 1,800thousand), using both the so-called Field Service Network,the sum of the headcount of the various companies thatmake up the Group, and the factory personnel employed infield activities, balancing the workload.The excellent safety performances recorded on allconstruction sites, be they domestic or international, shouldbe noted.Careful coordination of resources from the Group’s variousgeographies has allowed us to have a uniform approach tosafety and quality with tangible results for the company andfor all its customers.In continuity with the activities of the previous years, theGlobal Service division has continued with the on-siteintroduction and validation of new products and services,such as GTOP power and efficiency upgrades, and advancedMXLs from Genoa and Baden, as well as combustion andplant operating flexibility improvements like FlamesheetTM,VelonoxTM, AutotuneTM and Apex.

nuclearThe activities relating to 2019 mainly focused on 2 relevantprojects, namely Krsko and ITER. The Krsko contractcontributed 76% of the segment’s revenues. During themonth of October 2019, the installations envisaged in thereactor building were successfully completed and theprefabrications of the components to be installed in the otherplant buildings were started. The planning phase which sawthe completion and revision of all DMPs, following thecomments of the Safety Authority, is in the final approvalphase. The entire procurement phase has been activated andabout 50% of the components have been tested (FAT). By2020, all supplies will be completed. Activities on the ITER project, which contribute 23% of thesegment’s revenues, involved a number of contracts duringthe year. The most significant commitment continues to bethe manufacture of the Vacuum Vessel, which has madesignificant progress.Finally, activities began at the Cadarache site for the newTAC2 job order in the second half of the year. In 2019, the Waste & Decommissioning Management sector


maintained the drop in volumes, substantially linked to animmobilization of the main customer in Italy, namely SOGIN,confirming the difficulties of progress of the Italian program.A recovery principle was registered in the second half of 2019,with the restart of some Projects suspended in previous years.At the end of 2019, the activities relating to the Resin andSludge recovery and treatment project at the Caorso site alsoentered into full swing, as did part of the supplies related tothe FTM Job which will be completed in 2020. Contrary towhat happened the previous year, in the second half of 2019the agreement with the customer improved and thefoundations were laid for new collaborations and for theresumption of some long-interrupted projects.

commercial activities

orders by geographical area and business line

Below are the data of the orders for 2018 and 2019 dividedby Business Line and by geographical area, with evidence ofthose achieved by the investee companies available for saletoday. During 2019, the Group acquired orders, with thenew perimeter for Euro 1,374.8 thousand, with a significantincrease of 29.7% compared to the previous year, mainlyderiving from excellent commercial performances in the newunits segment (+ 133.3%), and nuclear power (+ 51.2%),partially offset by reductions in service (-32.0%).


oRDeRS 2019 (Euro/million) neW UnitS SeRVice nUcleaR aVailable totalfoR Sale

total eXclUDeD effectS fRom aSSetS aVailable foR Sale 858.6 453.6 62.6 1,374.8

total effectS fRom aSSetS aVailable foR Sale (183.1) (183.1) (183.1)

total inclUDeD effectS fRom aSSetS aVailable foR Sale 858.6 636.7 62.6 1,557.9

ITALY 414.7 194.7 0.3 - 609.7

EUROPE 91.4 100.8 60.6 (11.0) 252.8

MIDDLE EAST 83.0 125.4 - (3.6) 208.4

AFRICA 8.0 24.0 - (5.7) 32.0

ASIA 261.5 38.6 0.7 (14.6) 300.1

AMERICAS - 153.2 1.0 (148.2) 153.2

new Units

In 2019, the gas turbine market saw an increase in volumesmainly thanks to countries with a frequency of 60Hz, whileon the 50Hz market, where the Group operates, the ordersmaintained a volume equivalent to 2018 or equal to 21 GW(turbines gas with power greater than 50 MW).In this market context, the Group had a significant increasein orders (+ 133% compared to 2018) which led to having amarket share of 22% in the reference segment. In particular,it should be noted, in addition to the departure of the twocontracts acquired in the previous year for the supply of thefirst two GT36s, also the signature and relative departure ofthe EPC contract of the Edison combined cycle power plantin Presenzano which provides for the third GT36 unit. for avalue of approximately Euro 333 million.The volume of new acquisitions stood at around Euro 860million and the following are the main commercial initiativesachieved during the year:• acquisition from Baker Hughes General Electric (BHGE) of

a contract for the supply of eight electric generators tobe coupled to gas turbines supplied by BHGE for the LNGArctic project in Russia for a value of Euro 18 million;

• acquisition from the Arvedi steelworks of a contract forthe supply, assembly and commissioning of an 80 MWAE64.3A gas turbine and related electric generator to beinstalled at the Servola plant (Italy) for a value ofapproximately Euro 22 million;

• acquisition from Uniper of the contract for the turnkeyconstruction, with the sole exclusion of civil works, of anopen cycle plant equipped with an AE94.3A F class gasturbine and related electric generator in the Irsching plant(Germany) for a value of approximately Euro 89 million;

• contracts with the Shanghai Gas Turbine joint venture forthe supply of components for 6 AE94.3A and 4 AE64.3Aand for a low-calorific gas turbine AE94.2K for a totalvalue of approximately 83 million;

• the technological cooperation contract with China UnitedGas Turbine for the Chinese national gas turbinedevelopment plan for a value of Euro 150 million.

Service

The Service segment is the one directly affected by thechange in the scope of consolidation, as the six companiesclassified among the assets available for sale refer entirely tothis business line.During 2019, thanks to the continuous commercial push inthe various geographical areas, the trends in the orders ofthe Global Service, although decreasing if compared with2018, confirmed expectations for all the Business Units (OEMand OEM-like) and they amount to Euro 454 million. Inparticular, we highlight the acquisition of new long-termcontracts for Turbogas GT36 and AE94.3A in Europe and theMiddle East.


oRDeRS 2018 (Euro/million) neW UnitS SeRVice nUcleaR aVailable totalfoR Sale

total eXclUDeD effectS fRom aSSetS aVailable foR Sale 368.0 650.7 41.4 (105.3) 1,060.1

total effectS fRom aSSetS aVailable foR Sale - (105.3) - (105.3) (105.3)

total inclUDeD effectS fRom aSSetS aVailable foR Sale 368.0 756 41.4 1,165.40

ITALY 267.2 95.1 3.2 (0.0) 223.7

EUROPE 0.3 205.2 36.3 (13.3) 301.6

MIDDLE EAST 37.8 305.7 - (4.4) 74.7

AFRICA 0.1 57.3 - (2.8) 263.9

ASIA 62.6 23.6 - (20.5) 173.1

AMERICAS - 69.1 1.9 (64.4) 296.4

The continuous innovation of the Group’s products,combined with the market demand for greater flexibility andincreased performance of the systems with Turbogas, thenled to important successes in the sale of the upgradepackages on OEM technology machines and related toincreased performance (upgrade MXL2) and to increaseoperational flexibility (Autotune, upgrade XXL, FlexSuite).In order to better understand the performance dynamics, themain considerations relating to the various areas are providedbelow:

ItalyThe approval of the CRM (Capacity RemunerationMechanism) has favoured the introduction on the market ofadditional production capacity, facilitating the sale oftechnological upgrades. Therefore, thanks also to theconsistency of performance demonstrated in recent years,the Group has confirmed its leadership in the upgradessector too, obtaining a level of new service orders of Euro195 million, a significant increase compared to 2018.

EuropeIn the old continent, the gradual exit from the coal scenecontinues which, together with the new clean technologiesof the combined cycles and the innovative digital techniques,has allowed gas plants to operate continuously and to be re-evaluated as a key element in the energy transition towardssources renewable. Under this push, the Group managed toextend some important long-term contracts and to entersome markets, such as the United Kingdom and Germany,where it historically played a marginal role. The value of theacquired amount of Euro 101 million should be highlighted,which however shows a significant decrease compared to2018.

AfricaThe commercial activities of Ansaldo Energia wereconcentrated above all in North Africa, the traditionalmarket, with important successes led by the subsidiary

Ansaldo Algerie, and in Nigeria where the first orders onOEM-like machines were acquired and the foundations forfuture growth were laid thanks localization policy. This areaalso saw a decrease in orders compared to 2018 for aroundEuro 33 million.

Middle EastIn 2019, the Region represented the perfect synthesis of anintegrated approach for all Business Lines, obtaining goodresults with Euro 125 million of new acquisitions. The use ofthe Dubai-based Field Service MESH Hub, combined with therepair capabilities of the Emirate subsidiary, based in AbuDhabi, led to the acquisition of significant orders in SaudiArabia and Iraq. Despite these activities, the area sufferedfrom some delays and tensions which led to the finalizationof orders lower than the previous year for about Euro 180million. The continued presence of the Group in the area andthe ever-growing attention to customers suggest that therewill be a turnaround from next year.The region also continues to offer ample opportunities forthe integrated promotion of all the Group’s service products.

AsiaThe strategic collaboration continues with Shanghai ElectricCorporation which, on the one hand, has produced newacquisitions on the Chinese market, on the other, hasallowed Ansaldo Energia to sell technological upgrades inBangladesh on Turbogas OEM. Noteworthy is thestrengthening of the commercial activities for OEM-liketechnology in Indonesia, Thailand and Japan. Orders in thearea stood at excellent values (Euro 39 million), significantlyup on 2018 (Euro 23 million in 2018).

nuclear

Overall, the 2019 acquisitions for the nuclear sector stood ata value of 62.6 million, up sharply compared to 2018 andare broken down as follows, in millions of Euro:


2019 2018 euro/million

New Unit 18.5 9.6

Service 11.9 21.1

Decommissioning 12.4 4.7

Defence 19.8 6.0

totale Revenues 62.6 41.4

organisational and process/productdevelopments

factory

The growth in the workload deriving from the productionplan of the year and from the solid prospects for 2020 hasengaged all the production lines of the factory with intenseactivity to meet contractual commitments especially startingfrom the second half of the year. The production rhythmshave returned to require the full use of factory resources, firstfor the production of the gas turbine blades and then for allthe other components and machines. The growing commitment for the production of machinesfor New Units has been balanced and coordinated with theneeds of Service to guarantee the technical and operationalsupport to the inspections managed on construction sites -with particular regard to the availability of specialisttechnicians - but also to the overhaul activities of factorycomponents where timeliness and quality of execution arefundamental competitive factors.The blade production line has completed a tight technicalqualification program for the machining of the GT26 andGT36 blades with the aim of controlling the technologiesrelating to the production of this type of blade in synergywith external suppliers who are used and guided in order tocope with the growing volumes.Genoa Repair Center (GRC) completed the qualificationprogram for pallet repair activities, moving on to theproduction phase with progressively increasing volumes aspart of a process of rationalization with the activities of theother group production centres. The generator line saw an important increase in theworkload thanks to acquisitions on innovative products andfaced significant technological challenges in the productionof compensators for Terna, alternators for Oil & GAS projectsused in extreme conditions and the new model TH12 / 65which will complete the power train planned for theMarghera plant (and later) with GT36. To this end, theupgrade of the generator test room was completed, a uniqueplant in Italy, which is a particularly valuable element of theCampi production site. The demand for machines and hot gas path parts for AE andGT gas turbines led to an increase in workloads in the secondhalf of the year resulting from the acquisitions that tookplace. The acceleration on the production of the GT36 machineshas led to an intense commitment of the rotor weldingsystems, of the machines for subsequent processing and of

the machines dedicated to the processing of large statorparts. The need to achieve maximum use of these systemsand machines led to the start - in the last quarter of the year- of a first project for the selection and training of machinetool operators and fitters. This project will be repeated insubsequent editions during 2020 and - in parallel - supportedby a process of market selection of expert resources.Throughout 2019, the factory and supply chain functionsengaged with IT colleagues in the implementation of theLight House Plant project and the new SAP platform.The preparation of data migrations and the final tests of thefunctions of MES (Manufacturing Execution System), of WM(Warehouse Management) and extension of the applicationof the MRP to the entire production cycle required a jointeffort with all the functions and resources impactedcompanies, but has certainly created the basis for a profoundrenewal of IT processes and tools whose managementadvantages will be fully grasped over the next year.

Service

2019 further strengthened the Regions-Business Lines matrixorganisation, consolidating synergies aimed at simplifying theapproach to the customer and maximizing the economicresult for the Group.Along these lines, the technological platform of theintegrated Remote Monitoring and Diagnostic (RM&D)system 24/7 was further developed, based on the two mainHubs in Genoa (IT) and Jupiter (US), implementing newpredictive diagnostics features through the APEX proprietarysystem. Again with a view to digital systems, the new versionAutotuneTM 3.0 has been released, expanding the customerbase that benefits from all technological platforms AE Series,GT Series, Other OEMs (V Series, W Series and Frames). Again, with a view to optimizing processes, work groupswere launched to standardize the methodologies andapproaches to Project Management, with a view to alwaysproviding the best possible assistance to customers across allthe technological platforms. Finally, in close collaboration with the innovation and productengineering bodies, the Group continued its developmentand testing of innovative solutions aimed at improving theperformance of its machinery, extending the maintenanceintervals, and increasing the flexibility/reliability of its plants,in order to render them fully accessible in terms of“retrofitting” the existing fleet.


engineering

The engineering activities carried out during the year aresummarised below:• the completion of the analysis and development of plant

solutions to support customers in the field of plantadaptation linked to transitions from conventional tocombined cycles, from fossil fuels (such as oil and/or coal)to natural gas and, more generally, to offer solutions thatprovide the plant with improved all-round performance(performance, emissions and life extension);

• the contract for the technical adjustment of Servola hasbeen signed and some contracts are being finalizedwhere the skills developed by the Group have become acompetitive advantage;

• the analysis and development of plant engineeringsolutions was completed to support customers in thesector of “hybrid” solutions, which combineelectrochemical storage systems with intensifiedtraditional production systems, both through commercialactivities with customers and through collaborations withinternationally renowned companies (e.g. SNAM andTerna);

• the development of the internally developed PlantOptimizer integrated control system continued, whichcould be a key element, supporting customers in ensuringan increasingly aligned response to the needs of thenetwork manager, both in terms of flexibility and capacityproduction, based on the three founding parameters ofthe control system: response speed, reliability andprecision;

• the development of a standardization at the plant levelrelating to the new gas turbines (primarily the GT36)continued to give customers a plant design based on thenumerous plant references accumulated over the years.This approach, combined with the Group’s plant andfunctional capabilities, then allows us to define, wherenecessary, solutions aimed at specific customer needs;

• progress continued in the digital roadmap with theincreasingly extensive application of software systems for“smart” plant design (3D models, etc.), in line withcustomers’ requests and needs;

• a new industrial communication architecture between GT-Control System and Supervisory Control And DataAcquisition electrical system (“SCADA”) was successfullytested, totally designed and developed internally. Thisnew architecture expresses in Ansaldo the highest levelof security and modernity in the digitalization and“Operational Technology (OT) Cyber Security”, through

the use of segregation tools, as well as “Data StorageServer” for the use of energy data in total availability,integrity and confidentiality. The order on which thissystem was created is Pancevo, for which the supervisionand control system of gas turbine and packages hasimplemented the architecture described above and hassuccessfully passed the tests recently completed at thetwo suppliers of the system. control and SCADA (ABB andGE/SAET);

• testing and activities continued on the plants underconstruction.

With regard to product engineering activities, the followingshould be noted:• engineering activities on the first AE94.2KS for the

Bengang plant (China). The machine will be used insidea steel plant with the aim of burning low calorific syngasand will be coupled to a compressor keyed on the sameshaft line. Being a prototype, the design of all the auxiliarysystems and the definition of the functional requirementswith the related control logics, will require a considerablecommitment also throughout 2020;

• initial engineering activities for the Servola job, in thecontext of the new Italian Capacity Market: the projectinvolves the installation of the first AE643A + (78MW),equipped with a combustion chamber equipped withceramic tiles and with an Emerson Ovation control system(first project with Emerson on New Unit);

• engineering activities for the Mornaguia order, where thetwo TGs are equipped with the new Flex Premix burner.The activities were characterized by a greatercommitment by the auxiliaries group, both as regards thedesign of the new gas distribution system and thefunctional and control group, and as regards thedevelopment and testing of all the regulation logicsassociated with the new double premix operation;

• completion of the official warranty tests on Shangzuang(formerly AE94.2 EVO2), Mazandaran and Dalahoo(AE94.3AEVO1), Jiangmen (formerly AE64.3A + tested innatural gas operation), Fengxian (formerlyAE94.3AEVO2), Ibri and Sohar (first GT26 tested by theGroup);

• start-up support activities for the Mazandaran, Dalahooand Heris machines and for the first Mornaguia machinein Tunisia. In the latter case, the commitment to thecustomer provided for the delivery of the machinerunning on natural gas by June 2019 for the summerpeak load. This goal was achieved with customersatisfaction;


• activities of continuous support to the Service, both forthe resolution of the problems of operation of the fleet,and for the realization of engineering activities for theupgrade packages. In particular, we highlight theengineering activity inherent to all the machine auxiliaries,carried out for the Enel customer on TG4 of the La Casellaplant;

• processing activities for the technical offers, where a greatdeal of effort was required for the Irsching, Staudingerand Marbach plants. All the projects, which fall within thecontext of the German Capacity Market, involved a pre-engineering and technical alignment phase that lastedmore than a year, ending with the official assignment tothe Group of the Irshing and Marbach projects and withprobable assignment also the Staudinger plant during2020;

• technical coordination of the supply of hot parts forAE943A and AE643A to the partner SGC and continuoustechnical support on the problems encountered by SGCon the Chinese fleet.

investments

Investments in 2019 were focused on completing theprojects started in 2018, in terms of the production andassembly requirements for the new GT product line on thetechnological side, and the constant and continuous renewaland efficiency improvement of plants and workplaces on thesafety side.Investments were made to the blade line with a view toacquiring new plants to guarantee both the increase incurrent production capacity and the flexibility of use to adaptto a varied production mix such as the current one, whichalso allows processing of Alstom GT 26-36 technology onblades. In this regard, a plan has been devised to replace andincrease the machining capacity with EDM machines; in 2019the related machine fleet was increased by two units withthe acquisition of a die-sink technology machine and aplunge technology machine. The replacement plan will befully completed by the end of 2020.As concerns production, with a prime focus onimplementation of safety in the workplace, activities havebeen carried out to improve factory auxiliary systems, inparticular, exhaust systems. The changes andimplementations made were necessary for increases in thecapacity of some production lines and for re-layout. Inparticular, a new exhaust system was installed dedicated tothe new hot blade adjustment area, with a significantly

increased capacity compared to the previous one andrelocated to a more favourable area of the workshop from alogistical point of view. The flushing bench project was carried out, equipped withan interlocking system and soundproofed cabin to executeair flow tests on the burners of the GT36 S5 turbine. Thissystem allows for technological mastery and with significantvalue also for R&D. In particular, the interlocking system hasbecome necessary to ensure that tests are carried out withair flow in ideal conditions. In 2019, upgrading of the overspeed cell continued; itsmodernisation was required for the new GT technology asthe existing cell did not have adequate dimensions andperformance. In particular, the drive motor for balancing thenew gas turbines GT26 and GT36-S5, the related drives andtransformers with a 7.5 MW motor and related drives wasreplaced; this plant plays a key role for the final test andinspection phase of the TG and TV Rotors.The upgrade also involved the auxiliary systems served by theplant.Particular attention was paid to the adaptation of the testroom auxiliaries to perform the characterisation tests of theTHR 12 65 (oil box, LV and DCS switchboards), a machinemodel coupled to the GT26.Equipment was acquired for the production of the THR 1265 generator, in particular for the construction of the statorwinding, rotor winding, winding assembly, mechanicalassembly and functional tests.A new FIBRO rotary-translating table has been installed onthe machine for the Magerle 260 blade grinder (small size).The purchase proved strategic for the achievement andmaintenance of the processing precision imposed by the newblades featuring ex-Alstom technology, much more stringentthan the similar products already processed on the machine,which the table previously installed on the machine wasunable to guarantee. Particular attention was paid to the maintenance of theoverhead bridge cranes.The general electromechanical and structural overhaul wascarried out with the adaptation of the safety systems of theDEMAG 100T bridge crane no. 03 which allows for safemanoeuvres in combination with the PICCINI 100t bridgecrane no. 02. The PLCs were installed on the two liftingmachines with dedicated software. As concerns the Service business, attention has been paid tothe increase in the fleet of equipment – in particular with thepurchase of boring bars to carry out the demolition work onthe valve seat through chip removal and subsequentreplacement of a new one and finishing – and the increase in


containers in order to carry out numerous general overhauls.An important focus was the acquisition of equipment formachine 94.3 and 94.2, as well as the containers for thecombustion chamber relating to machines 94.2. From the standpoint of information technology, the S4Aproject continued, involving the parent company AnsaldoEnergia and the subsidiary Ansaldo Nucleare: the analysisphase of all the processes involving the integration of flowsbetween the parent company and the subsidiaries wascompleted, the Group processes previously managed outsidethe SAP system were introduced and the actual technicalimplementation phase was executed. Go-live is scheduled forJanuary 2020.The Ansaldo Group’s network infrastructure required aninvestment for the enhancement of connectivity solutions,with particular reference to corporate resources outside thecorporate perimeter. In this context, the previous hardwaresolution has been replaced with a newer and technologicallymore advanced one.The renewal of the company Firewall involved an increase inprocessing capacity at the Genoa Server Farm, with animprovement in the storage and data redundancy functions.The activity led to a technological renewal of the hardwaresolutions available so far.Particular attention was paid to the Lighthouse Plant projectof the Business Plan 4.0, focused on the digital

transformation process, which aims to apply digitaltechnologies to support the expansion of the offer portfolio,to improve the performance and quality of processes andproducts, as well as increasing corporate competitivenessthanks to the strengthening of ICT infrastructures andplatforms. With this in mind, emphasis also went to thedevelopment of Cyber Security to ensure the protection ofcritical assets of the company and customers, in relation tothe digitisation and interconnection of machines andsystems.In addition, a Rental agreement was signed between AnsaldoEnergia Switzerland and Ansaldo Energia relating to tools forthe production of gas turbine components, in particularGT36.As regards toolings, the equipment for the production ofmachine components is being completed. The followinghave been acquired: casting moulds for GT26 2006 turbineblades and heat shields, post casting tooling for GT26turbine blades and heat shields and casting tooling for GT262011 turbine blade and heat shield. Lastly, the renovation of building 12 was completed, a projectsuspended due to the collapse of the Morandi bridge andresumed in mid-July 2019, which involved the completerenovation (including systems) of floors 4 and 5 and the roof;these offices were intended to house the personnel of thesubsidiary Ansaldo Nucleare.



Development activities in 2019 were characterised by theeffective preparation of the documentation for the start ofoperations connected with the procurement andconstruction of the GT36-S5 gas turbine intended for PortoMarghera. Another significant element related to thedevelopment of class H gas turbines was the third campaignin the Birr test plant which commenced in early summer andmade it possible to validate new technologies at the end of2019. Always in regard to technological development,particular importance goes to the test campaign whichconcluded positively in September at the DLR laboratories inCologne for the achievement of the combustion target withhigh hydrogen mixtures (above 70%), using the same burnerthat will be installed on the GT36-S5 in Porto Marghera.On the Service front, the programs to repair the first mobilestage of the GT26 gas turbine and the manufacturingprocess of the hot parts of the MXL3 service package werestarted.As concerns AE gas turbine technology, it is important tounderline the validation in Ravenna, on the AE94.3A gasturbine, of the new combustion system with devices for themitigation of acoustic instabilities. This is a significantelement of the contamination between Alstom and AnsaldoEnergia technologies. The result obtained was confirmed bythe performance achieved at the Mornaguia plant which inJune was started and delivered to the customer forcommercial operation.The development of the AE94.2KS gas turbine continuedthroughout the year. This turbine is suitable for the use ofgas with very low calorific value from the iron and steelprocesses for the Bengang plant and the design wascompleted with the issue of the manufacturingdocumentation in the last quarter of the year so as toguarantee the timing final assembly of the first unit whichwill end with the ex-works in July 2020. In addition, special

equipment was designed to monitor the behaviour of thenew redesigned components during operation and to checkthe consistency of the thermophysical parameters with thedesign values.As regards the development of the AE64.3A class F machine,the project was implemented and completed to allow thecompressor to improve and increase the life cycle in the faceof greater operational flexibility required by the market.Furthermore, atmospheric tests were performed in terms ofcombustion to evaluate the behaviour of the burners withthe use of preheated gas to obtain a significant increase inthe efficiency of the associated combined cycle; the testswere carried out both with the standard burner as a meansof obtaining a solid reference and with the newly designedburner for this type of operation.As regards the AE94.2 class E gas turbine, in 2019 the firstfiring was carried out and the full speed of the new GT3 unitwith a rating of 190 MW was achieved at the Pointe Noireplant in the Republic of the Congo. Furthermore, in May 2019 two significant milestones of theShangzhuang project (AE94.2 Rating 185 MW) wereachieved with the passing of the guarantee performancetests (PGT) and the signature with the Shanghai Electriccustomer of the Preliminary Acceptance Certificate (PAC). InNovember, this unit successfully passed the first minorinspection, having brilliantly operated commercially for over5,000 equivalent operating hours (EOH).In 2019, the development activities of the AE94.2 turbinewere mainly aimed at completing the release of upgradepackages for Service use, capable of responding to requestsfor greater installation flexibility and increased reliability ofthe TG, with a reduction in maintenance costs anddowntime.Furthermore, significant results have been obtained in termsof steam turbines to keep the product in line with the

R&D


increasingly stringent requests for flexibility made by themarket; in particular, the activities relating to the design ofthe rotor for use in the machine to be installed in PortoMarghera were completed so that it could operate at 600°Cin a flexible manner in accordance with the current requestsof the European market. We also finalised the conceptualproject of the Warm Keeping System (WKS) was so that thesteam turbine could be kept in a medium temperaturecondition to allow it to start again with shorter times andwith less consumption of the rotor’s life.Furthermore, in order to harmonise and synchronise themaintenance times of the main system components, wedefined the changes to be made to the steam supply andregulation valves, which are the components that mostrequire a rigorous definition of the maintenance intervals. The basic design of the last 43” rotor blade has also beencompleted, thus increasing the power of the turbine byapproximately 1%, which corresponds to an increase ofapproximately 0.12% absolute increase in efficiency of thecombined cycle.As concerns the activities carried out within the fundedprojects, it should be noted that the positive evaluation ofthe intermediate report of the MISE project n.F/030044/01/X28 entitled “Development of gas turbineswith reduced greenhouse gas emissions and high operationalflexibility through the use of innovative materials andadvanced production systems” with consequentdisbursement, in July, of both the contribution non-repayablethat of subsidised financing. Continuing with projectssupported by the MISE Sustainable Growth Fund, inparticular by the Digital Agenda FRI, in February 2019, the

interim reporting of the project “Dal Byte all’Energia” (FromByte to Energy) was presented to the Ministry, which issuedits approval at the end of the year; activities continued andthe project will be completed in June 2020.The project “Development of advanced thermoacousticcontrol systems in combustion processes for high efficiencyand reduced environmental impact gas turbines” alsocontinued, in which Ansaldo Energia participates in the2014-2020 National Business and CompetitivenessOperational Program. in favour of R&D projects in thetechnological areas identified by the research and innovationframework program “Horizon 2020”, launched in July 2018.In December 2019, the balance of the first year of activitywas presented to MISE.Lastly, the technological development activities underlyingtwo EU-funded projects continue, tender call H2020 - LCE28-2017, respectively “Turbo Reflex,” and Pump Heat”; Mid-Term results were released for both in the first half of 2019.In March 2019, the EU Project - Horizon 2020 Program,underway since January 2016, “Flexible Fossil Power Plantsfor the Future Energy Market through new and advancedTurbine Technologies” was formally completed successfully,the aim of which was to contribute to development of moreflexible and more efficient Power Generation plants in orderto respond to the new demands of the energy market. Stillin the European context, the POLKA collaborative project,“POLlution Know-how and Abatement”, (Grant n. 813364)supported by the EU H2020 - MSCA ITN 2018 program,which will face, with a pool of international researchers, wasstarted at the beginning of 2019, the problems ofthermoacoustic instability in the combustion of hydrogen.


The activities carried out by the Human Resources structureof the Parent Company Ansaldo Energia and of the variousGroup companies were characterized during this year byactions aimed at consolidating integration through thedefinition and application of policies and tools common toall Group companies, both to contain overheads and toreduce labour costs. During the year, the Group continued to apply, as regardsItalian companies, the “defensive” solidarity contract to deal

with a certain number of redundancies, which was followedby an additional program to reduce staff.The Group resources at the end of the year, considering theclassification of investee companies among the assetsavailable for sale made on both 2019 and 2018, amountedto 3,451 units, with a decrease compared to the end of theprevious year of 194 units ( -5.3%). This reduction affectedboth Italian and foreign companies.

Personnel

heaDcoUnt

60%

50%

40%

30%

20%

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62%

26%

2019

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63%

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2018

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organization

Organization underwent significant changes in 2019: in thecontinuity of the macro-organisational design defined byBusiness Unit, a new organisational structure was createdwhich merged the R&D and Engineering functions, re-constituting the engineering process, from the technologicaland product development phase to the construction design.The change introduced led to the completion of the analysisundertaken the previous year. Findings showed a need tomerge and successively strengthen technical competenceswhile also providing for organisational simplification andprocess integration in order to generate greater effectivenessin product management and cost sustainability.In addition to this important change, the Enterprise RiskManagement Unit in staff of the CEO was created in 2019with the aim of strengthening and focusing more oncorporate risk management activities. As for the Group directives, the directive on the use of ICTresources (AE-DI-001) was revised, qualifying in greater detailthe rules of conduct to which users must comply, andhighlighting the criticality of the daily behaviours to beobserved. All aimed at safeguarding the Group and thecompanies that are part of it from the risks of violation ofintellectual property and from operational risks (e.g.interruption of production), with possible consequences alsoin terms of image.In April, the AE Job System, the system that describes theprofessional families and macro-roles for the Group, officiallyentered into force, dividing each macro-role into differentseniority levels and qualifying the profile of technical andtransversal skills.The system was launched through a communicationcampaign that mixed the use of different tools: the Intranet,with the launch video, a video tutorial and the page where

the contents of the Job System are published; the hard copySystem Manual; classroom training for leaders.The communication took place simultaneously in all thecompanies of the Group and the training activity involved385 heads in all the companies.

training 2019

19 courses were held during the course of 2019, for a totalof 24,208 hours of training.The activities involved 291 participants for a total number of221 days of training.The trainings took place both in Genoa at the AnsaldoTraining School and in the various sites abroad.A specialist course for operating personnel was held in theAprilia plant with external and internal teachers.In January, courses on the control system were held at theGE Training School in Birr for the I&C staff of the Omaniplants in Sohar and Ibri. Shortly afterwards, those aimed atMechanical and Electrical Maintenance personnel took placeon site, which concluded the training cycle of the two Omanplants that had started in April 2017 here in Genoa.This year also ended the training aimed at the personnel ofthe Algerian Central of Ain Djasser III and in October that ofthe Egyptian central of 6th October.Instead, the first part of theoretical classroom training forO&M staff of the Tunisian power plant of Mornaguia tookplace here in Genoa with 40 training days and 60 agents andwill always end here in Genoa in February 2020 with another30 days. of classroom and 62 agents. Field training will also take place by May next year.The processing of offers for BUs is no less demanding NewUnits and B.U. Service, this year have been in the number of36.



environment

The Ansaldo Energia Group Italian sites fall within the scopeof Italian Presidential Decree no. 59 of 13 March 2013 (AUA- Unified Environmental Authorisation) and the EmissionTrading Directive due to the presence of boilers for heatingthe buildings in Via Lorenzi.In 2019, the certified Group companies achieved themaintenance of their ISO 14001 environmental certification,demonstrating the constant commitment made towardsmaintaining legal compliance and towards a progressiveimprovement of their environmental performance. The periodic update of the assessment of the significance ofthe environmental aspects and the Group Context Analysisconfirms a controlled, marginal and, therefore, widelytolerable level of environmental impact risk. As in previous years, no major environmental accidentsoccurred at Group sites in 2019.The Group continues its commitment to sustainability.As part of the activities related to environmental protection,particular attention was paid to waste management and theconsumption of natural resources.In consideration of the extension and complexity of theenvironmental aspects connected with the activities carriedout on the Group’s sites, particular attention is and will bepaid to the reduction and containment of the risks associatedwith the effectiveness of the environmental managementand control processes.The containment of this risk, intended as a measure ofuncertainty about the ability to achieve and / or maintain itsenvironmental performances, is based on the progressivedevelopment and efficiency of the IT tools to support it.

occupational health and safety

In 2019, Ansaldo Energia Group continued on the commonpath of implementation of initiatives aimed at spreading theculture of safety across all personnel involved in the variousprocesses, with the aim of creating a concrete and uniformapproach to further decrease all EHS performance indicators. The various companies have obtained the renewal andmaintenance of the certification within the OccupationalHealth and Safety Management System in accordance withISO 45001 and local regulations (OSHAD, VCA, etc.), withoutnon-compliance, confirming the awareness now rooted in allthe Group resources involved, the importance of operatingin line with the indications of the management system andits effectiveness in pursuing continuous and progressiveimprovement.Ansaldo Energia increasingly intends to be characterised byits staff’s interdependent approach to health and safety andenvironmental issues. The effort made at all levels has led,also in 2019, to a further significant reduction in the numberof accidents and related indicators.Significant attention was paid to the presence of compoundscontaining hexavalent chromium, on some surfaces ofcomponents of the gas and steam turbines operated,produced by both Ansaldo Energia and its competitors. Inthis regard, the possible training mechanisms and theeffectiveness of the measures aimed at significantly reducingthe probability of the phenomenon recurring have beenconfirmed, continuing to apply the necessary prevention andprotection measures to protect workers’ health.

Environment, health and safety in the workplace


improvements

In order to improve accident performance, in all of theGroup’s companies, we further developed the methods usedto analyse the causes of incidents, and the methods forsharing experiences on a corporate level, thus ensuring thecorrect identification of the best prevention strategies, whileat the same time measuring the efficiency and effectivenessof the corrective measures adopted.Furthermore, for the same purpose, the Group and corporateobjectives and the technical solutions necessary to resolveany shortcomings detected were shared with managers andsupervisors, above all in light of an analysis of the behavioursand avoided accidents (so-called “near misses”), andstructured processes were put in place in order to ensure thatthe workers are more directly involved in the prevention andprotection activities, with the aim of ensuring continuousimprovement. Particular emphasis was placed on activitiesinvolving various company functions which were defined andimplemented to deal with the potential or actual presenceof compounds containing Hexavalent Chromium on the hotpart surfaces of used gas and steam turbines, maintained bythe Ansaldo Energia Group companies.

Workers and top management involvement:training and auditing

In order to promote a culture of safety and respect for theenvironment, various training pathways were pursuedthrough multiple specialised courses, including notificationsput up on company notice boards, articles were published inthe company press, proposals for individual improvementwere promoted, the Safety Day was organised and meetingswere held with resources in the various companies to discussthe themes of safety and the environment. A training update

based on the “Ehs Fundamentals” course, made available toall Group employees, was also offered to all companymanagement personnel. The Environment, Health and Safety unit verified theapplication of the Group/corporate procedures andcompliance with the legal requirements on the part ofpersonnel and the subcontractors’ staff, even by conductingperiodic audits.The results were very positive on the whole. The inspectionfindings were, in any case, analysed in detail, in order toidentify any areas to be included in the company’simprovement plans, so that corrective action can be takeneffectively and efficiently. The periodic review of management trends, assignedobjectives, results achieved and improvement actions andinvestment continued, in addition to periodic meetings withthe senior management of local entities, organised byindividual companies.

Risk assessment and emergency and evacua-tion plans

The maintenance of the Risk Assessment Documentcontinued, including the Mitigation Plan of the same and theEmergency and Evacuation Plan in relation to all the sites(both permanent and temporary) where the Group operates.The risk assessment documents relating to all externalconstruction sites have been prepared, in accordance withthe reference and local legislation.Moreover, as concerns contracted activities, both internaland at external construction sites, the safety documentationwas prepared, for which the companies involved provideddocumentary and substantial evidence of the solutionsadopted for the protection of the environment, health andsafety. of their workers


company certification

The most significant event of 2019 was the “CTA” auditwhich, thanks to its positive outcome, will allow the AnsaldoEnergia Group to manage the ISO 9001 certification as MultiSite for the main companies.In 2019 all the audits for the certifications were successfullycarried out. In particular: • monitoring of the Company Quality Management System

certification (ISO 9001: 2015);• the renewal of the certification for the environment (ISO

14001);• maintenance of certification for Safety and Health in the

workplace (ISO 45001);• maintenance of the certification relating to welding

activities (ISO 3834 -2) confirmed by the Italian Institutefor Welding through a surveillance audit;

• TUV Italia confirmed the certification relating tofunctional safety (IEC 61511/61508).

Finally, it should be noted that, following the removal of thered zone closed following the collapse of the Morandibridge, the Parent Company reactivated the accreditation ofits calibration centre by carrying out the required procedures.

Quality

As far as the “quality assurance” activities are concerned,the qualification activities of the new products and supplierswere followed and managed, which also increased stronglycompared to the previous year, mainly leveraging on theinternal skills pool. Furthermore, during the year, newintegrated processes were introduced to support themanagement of the entire life cycle of suppliers, through the

use of the new Vendor Hub software platform, focusing inparticular on qualification processes (launched in December2018) and management of sourcing processes (go-live isexpected in January 2020); the last module, relating tosupplier evaluation and management of improvement plans,will be made operational in the second half of 2020.During 2019, the Group worked to standardise processes,procedures and documents for quality management of NewUnit and Service projects, guaranteeing increasingly strongsupport for project teams for budgeting, planning,management and control, also thanks to the support of thenew IT systems.In addition, numerous qualification activities (both in Ansaldoworkshops and at suppliers) in relation to new GT26-GT36technology products took place, which will also significantlyincrease during 2020, as a guarantee of which the testingactivities (Source\Incoming Inspection) upon the AnsaldoEnergia technology parts were simultaneously reduced. This balance of activities was, however, managed inaccordance with the rigorous bary-central risk managementprocess, in particular, on the monitoring of “Non-Quality”issues, across the various lines of the Genoa factory,proceeding to optimise the analysis process, in-depth studyand team working on the causes that determine non-compliance. In 2019, work continued on the application of the QualityEconomics model, which recorded all the costs linked to theprevention, detection and management of non-qualityevents among all the Business processes, analyses theirrelative trends, and supports the competent structures indefining and implementing improvement plans. This modelwas applied to the OEM Service business relating to theproduction of turbines and alternators, as well as theactivities associated with former Alstom technology. In 2019,

Quality and environment

this application was also extended to R&D activities. During2020, the analysis will also be extended to the Service andsite processes. In consideration of the 2019 Strategic Plan and thechallenges it cites, the need to have an additional tool andin support of Quality Economics, also considering theunsatisfactory results recorded in 2018, the initiative “CriticalStrategic Quality” was launched in December 2019 ”, With

an action plan managed by the Quality in collaboration withthe other corporate bodies involved and aimed at promptlyaddressing and solving the most significant and criticalproblems encountered during the year.Moreover, the Parent Company Ansaldo Energia continuedwith activities in support of the strategic partnership withShanghai Electric Corporation for the qualification andmonitoring of its local suppliers.



The reference regulations require companies that receivefinancial contributions from public administrations and theirsubsidiaries to provide certain details in the explanatorynotes.The standard in question has been clarified several times,without dispelling the doubts as to its practical application.The Company has adopted the position taken by Assonimewith Circular no. 5 of 22 February 2019, according to whichthe statutory information requirement only applies to specificand individual payments. As a result, the Company has decided to indicate thefollowing information in this note, according to the type ofcontribution/subsidy granted:• with regard to paid appointments falling within the

company’s typical activity and at market conditions, theCompany declares that it has received paid appointmentsfrom persons belonging to the Public Administration;these appointments, being part of the typical company

activity and conducted according to market conditions,are not reported in this section, since they are not subjectto the reporting obligations provided for in Article 1,paragraph 25 of Law 124/2017;

• with regard to contributions/subsidies which may havebeen used and which must be published in the NationalState Aid Register (transparency), please refer to thisdocument;

• with regard to contributions provided by private entities(e.g. training grants from Fondimpresa), these are not thesubject of any information requirements, as they falloutside the scope of this standard;

• with regard to any tax benefits from which the Companyhas benefited, we believe, also in accordance with theposition taken by Assonime in the aforesaid circular, thatthey are of a general nature and therefore do not haveto be disclosed for the purposes of the provision inquestion.

Information required as perLaw 124/2017


Regarding the international market, careful and rigorousoperational and financial risk management and identificationare increasingly important.In order to eliminate or minimise credit risk as well asoptimising cash flow from orders, commercial transactionsare carefully analysed from the outset, checking the paymentterms and methods to be offered and subsequently agreed.In particular, based on the contract’s amount, the type ofclient and the importing country, all the necessary

precautions are taken to limit the risks in terms of both thepayments and the financial instruments used, includingappropriate insurance cover or helping the customer toobtain financing in more complex cases.For all the most significant transactions in currencies otherthan the Euro, which are subject to currency risks, thecompany stipulates appropriate forward contracts.The first part of the explanatory notes specifically identifiesthe main risks to which the Group is subject.

Risk management


As part of the agreement for the sale of the ParentCompany’s shares to Fondo Strategico Italiano (now CDPEquity S.p.A.), Finmeccanica (now Leonardo S.p.A.) hasissued guarantees for disputes or issues that have requiredspecific accruals to be made for risk provisions in theconsolidated financial statements.The sales agreement requires Leonardo to providecompensation for any outlays required to cover theguaranteed issues, using various mechanisms based on thespecific circumstances. At the discretion of CDP Equity, this

compensation can be paid directly by either the ParentCompany or CDP Equity itself.It should be noted that CDP Equity has come to a formalagreement with the Parent Company, whereby all futurecompensation relating to the “asbestos” issue shall be paiddirectly by Leonardo to the Parent Company itself.With regard to all the other issues guaranteed by Leonardo,on the other hand, CDP Equity has not yet determined therecipients of any compensation to be provided.

Guarantees given as part of theagreement for the sale of theParent Company’s shares


The relations of the Group companies with related parties,be they commercial or financial, are all conducted at marketconditions and are analytically detailed at the bottom of theexplanatory note.business plan.

Related party transactions


Despite the challenging past year, the Group Management,also supported by the positive trend in orders and thebacklog, has approved a five-year business plan whichreflects the fact that the Group can return to positiveeconomic and financial equilibrium in the short term.In particular, this plan is based on five essential guidelines:• the positive market trend that substantially increases in

2019 by more than 30% compared to 2018 and whichin 2020 confirms the 1:1 ratio between orders receivedand the revenues that will be recorded (so-called “bookto bill”), with an important contribution from the NewUnit sector. Furthermore, revenues from 2020 areexpected to grow by 15% compared to 2019 and refermore than 90% to orders in the portfolio;

• a particular focus on cash generation and its stabilisation;• enhancement of business actions and efficiency in the

supply chain management process;

• simplification of the investment portfolio withdisinvestments of some assets;

• a long-term strategy that will bring the Group back to acentral position in the energy market.

The plan also provides for corrective and structural actions interms of improving working capital, reducing costs byrationalising the purchasing processes. From a financial pointof view, 2020 will be a year in which the Group will returnto generate cash, despite the fact that the level ofinvestments is in no way penalized, while revenues andEBITDA will grow at a sustainable pace and in line with theplanned actions by the management.For all these reasons, confidence in the future of the Groupand in its ability to generate value for Shareholders isrenewed.

Performance outlook

48 ANSALDO ENERGIA 2019 Consolidated Financial Statements

Consolidated Financial Statementsas of 31.12.2019



consolidated income Statement

euro/thousand of which of which with related with related notes 2019 parties 2018 parties

Revenue 33 984,065 41,760 1,014,668 47,515

Other operating income 34 39,414 - 26,726

Purchases costs 35 321,093 627 321,463 2,680

Services costs 35 360,476 12,052 361,943 6,245

Personnel expenses 36 250,526 255,301

Amortization, depreciation and impairment losses 37 283,749 193,789

Other operating expenses 34 86,755 15 171,220 10

Change in finished goods, work-in-progress and semi-finished products 38 5,671 29,367

(-) Internal work capitalised 39 39,964 39,809

ebit (233,485) (193,146)

Financial income 40 12,136 653 16,632 791

Financial expenses 40 60,588 8,138 59,999 492

Share of profits (losses) of associates and joint ventures accounted for using equity method 17 (9,447) (3,413)

profit (loss) before taxes and discontinued operations (291,384) (239,926)

Income taxes 41 (28,191) (6,233)

Profit (loss) from discontinued operations 42 7,473 1,724

net result (255,720) (231,969)

- attributable to the owners of the parent (255,700) (231,952)

- attributable to non-controlling interests (20) (17)


consolidated Statement of comprehensive income


net ReSUlt (255,720) (231,969)

- of which attributable to group (255,700) (231,952)

- of which attributable to third parties (20) (17)

of which attributable to discontinued operations 7,473

Other components of the comprehensive income statement:

Items that will not be reclassified to profit (loss):

- Actuarial gains (losses) on defined benefit plans plan measurement (6,412) (1,215)

revaluation / (devaluation) (6,412) (1,215)

Items that may be reclassified to fiscal year profit (loss):

- Changes in cash flow hedges: (2,288) (15,349)

fair value gains (losses) (2,288) (15,349)

of which attributable to discontinued operations (27)

- Exchange differences 1,865 1,623

- gains (losses) 1,865 1,623


- Tax effect 1,494 3,062

other comprehensive income, net of tax effect (5,341) (11,879)


total comprehensive income (loss) (261,061) (243,848)



consolidated Statement of financial position

euro/thousand of which of which with related with related notes 31.12.2019 parties 31.12.2018 parties

assets Non-current assets Intangible assets 15 1,376,160 1,570,270 Property, plant and equipment 16 290,541 269,770 Equity investments 17 21,420 31,820 Receivables 18 745 1,172 Deferred tax assets 18 73,563 71,073 1,762,429 1,944,105 Current assets Inventories 19 534,926 686,501 Contract work in progress 20 190,391 225,387 Trade receivables 21 354,380 75,327 300,507 77,697Tax assets 23 5,277 4,790 Financial receivables 22 127 127 851 851Other current assets 24 75,190 10,907 73,652 11,200Cash and cash equivalents 25 311,718 229,324 1,472,009 1,521,012 Assets available for sale 324,337 total assets 3,558,775 3,465,117 equity and liabilities Equity Share capital 26 180,000 180,000 Other reserves 26 13,181 269,597 Equity attributable to the owners of the parent 193,181 449,597 Equity attributable to non-controlling interests (171) (151) total equity 193,010 449,446 Non-current liabilities Loans and borrowings 27 716,998 209,690 759,723 -Employee benefits 28 39,926 35,636 Provisions 29 87,046 100,982 Deferred tax liabilities 30 86,327 137,054 Other non-current liabilities 30 14,104 10,225 50,972 10,225 944,401 1,084,367 Current liabilities Progress payments and advances from customers 20 722,611 804,244 Trade payables 31 417,576 23,339 423,697 5,657Loans and borrowings 27 757,354 - 400,966 -Tax liabilities 22 5,346 14,201 Provisions 29 57,712 134,407 Derivatives 32 12,996 6,646 Other current liabilities 30 282,064 - 147,143 - 2,255,659 1,931,304 Liabilities related to assets available for sale 165,705 total liabilities 3,365,765 3,015,671 total liabilities and equity 3,558,775 3,465,117


consolidated Statement of cash flows

euro/thousand notes 2019 2018

Cash flows from operating activities:

Gross cash flow from operating activities 43 127,103 138,066

Gross cash flow from operating activities from discontinued operations 24,283 4,974

Changes in working capital (62,346) (275,822)

Changes in working capital from discontinued operations (12,465) (8,474)

Net interests paid (39,878) (34,852)

Income taxes paid (18,348) (8,501)

Net interests and taxes paid from discontinued operations (3,068) 1,054

cash flows generated from (used in) operating activities 15,281 (183,555)

Cash flow from investing activities:

Acquisition of companies, net of cash acquired (2) (40)

Sale of investments 1,002 1,043

Investments in tangible and intangible assets (116,337) (119,723)

Sale of property, plant and equipment and intangible assets 933 263

Dividends received - 1,720

Other investment activities - (29)

Cash flow from ordinary investment activities from discontinued operations (7,646) (7,645)


cash flows generated from (used in) strategic investing activities (41,446) -


Cash flow from financing activities:

Capital increase and payments from shareholders - 80,000

Net changes in financial assets/liabilities and other financing activities 246,456 173,620

Cash flow from financing activities from discontinued operations (10,439) 8,070

cash flows generated from (used in) financing activities 236,017 261,690

Net increase (decrease) in cash and cash equivalents 87,801 (46,277)

Exchange rate gain (losses) 471 (1,011)

Exchange rate gain (losses) of discontinued operation 430 643

Other changes 129 (331)

Cash and cash equivalents as at January 1st 229,324 276,300

cash and cash equivalents as at 31 December 318,155 229,324

of which cash from discontinued operations 6,437 15,343

of which cash from statement of financial position 311,718 213,981


consolidated Statement of changes in equity

euro/thousand Share Retained hedging acturial other total capital earnings reserve reserve reserves equity of the group

1 January 2018 100,000 100,204 7,448 (18,380) 432,742 622,014

Comprehensive income for the year:

Net result - (231,952) - - - (231,952)

Other comprehensive income (expense) - 1,623 (12,415) (1,087) - (11,879)

total comprehensive income - (230,329) (12,415) (1,087) - (243,831)

Shareholders related transactions recorded directly in equity

Capital increases 80,000 - - - - 80,000

total shareholders transactions recorded directly in equity 80,000 - - - - 80,000

Other changes - (2,496) 1 - (6,093) (8,588)

31 December 2018 180,000 (132,621) (4,966) (19,467) 426,651 449,597

Comprehensive income for the year:

Net result - (255,700) - - - (255,700)

Other comprehensive income (expense) - 1,818 (1,876) (5,330) 47 (5,341)

total comprehensive income - (253,882) (1,876) (5,330) 47 (261,041)

Shareholders related transactions recorded directly in equity

Other transactions - - - 23 4,602 4,625

Reclassifications (8,906) 8,906 -

31 December 2019 180,000 (395,409) (6,842) (24,774) 440,206 193,181


Reconciliation of the parent’s equity and net result with consolidated figures as at 31 December 2019

euro/thousand equity of which: net Result

parent company equity and net result as at 31 December 2019 219,233 (122,317)

Equity surplus in annual financial statements compared to the carrying amounts of investments in consolideted companies (155,787) (72,149)

Consolidation adjustments for:

- PPA Nuclear Engineering Group 15,229 (5,933)

- PPA Gastone 97,670 (73,605)

- other adjustments 16,836 18,304

equity and net result attributable to the owners as at 31 December 2019 193,181 (255,700)

Non-controlling interests (171) (20)

total equity and net result as at 31 December 2019 193,010 (255,720)


Notes to the consolidated financialstatements for the fiscal year endedon 31 December 2019

1. general information

Ansaldo Energia S.p.A. (“Ansaldo Energia”, the “Company” or the “Parent Company”, and, together with the othercompanies controlled by or affiliated with the same, as the “Group” or “Ansaldo Energia Group”) is a joint stock companydomiciled in Italy, with registered offices at no. 8 Via Nicola Lorenzi, Genoa, and organised according to the legal system ofthe Italian Republic.The company is jointly owned by CDP Equity S.p.A. (an Italian investment holding company belonging to Cassa Depositi ePrestiti Group, formerly known as Fondo Strategico Italiano) and by the Chinese company Shanghai Electric Hongkong Co.Limited, which respectively hold 59.94% and 40% of the share capital in Ansaldo Energia. The remaining 0.06% is held bynatural persons. As already mentioned in the Directors ‘report, the non-renewal of the shareholders’ agreements between the Shareholders,which expired on 5 December 2019, meant that the Parent Company, starting from this, is not only formally, but also defacto controlled directly by the Shareholder CDP Equity S.p.A.The Group’s mission is to perform, in Italy and abroad, industrial, commercial, design, supply, technology assembly, start-upand service activities in the power generation Plants and Components service line, as well as in similar service lines, in additionto performing all works connected with the aforementioned activities. Cutting-edge technology, high professional standards,extensive production capacity and competitive projects and products have been constant features of the Group from theoutset and will drive it forward into the future.

2. form, contents and accounting standards applied

a) basis for preparationThe consolidated financial statements for the fiscal year ended on 31 December 2019 (henceforth also referred to as the“Consolidated Financial Statements”) have been prepared in accordance with the International Financial Reporting Standards(IFRS) issued by the International Accounting Standards Board and adopted by the European Union. The term IFRS is to beunderstood as the ”International Financial Reporting Standards”, all the “International Accounting Standards” (“IAS”), andall the interpretations of the International Financial Reporting Standards Interpretations Committee (“IFRIC”), previouslyknown as the “Standards Interpretations Committee” (“SIC”), which, as of the date of the Consolidated Financial Statements’approval, have been approved by the European Union according to the procedure required by EC Regulation no. 1606/2002of the European Parliament and of the Council of 19 July 2002. In particular, it should be noted that the IFRS have beenapplied consistently to all the periods presented within this document.These Consolidated Financial Statements have been prepared:• based on the best available knowledge of the IFRS, and taking into account the best interpretations in this field; any

future interpretative guidance and updates will be reflected in subsequent fiscal years in accordance with the methodsrequired by the financial reporting standards, on a case-by-case basis;

• on a going concern basis, as indicated in the Report on Operations;• based on the conventional cost criterion, with the exception of the valuation of the assets and liabilities in cases where

the application of the fair value criterion is required.

b) form and content of the financial statementsThe Consolidated Financial Statements have been prepared in Euro, which corresponds to the currency of the main economicenvironment in which the entities comprising the Group operate. Unless otherwise specified, all the amounts included inthis document are expressed in Euro. The reporting formats and the relative classification criteria adopted by the Group, within the scope of the options providedby IAS 1 “Presentation of financial statements” (“IAS 1”), are indicated below:• the consolidated income statement – the scheme of which maintains a cost and revenue classification based on the

nature of the same. This statement contains the net income before taxes and the effects of any discontinued operations,as well as the net income attributable to minority shareholders and the net income attributable to the Group;

• the consolidated statement of consolidated comprehensive income – shows the changes in equity resulting fromtransactions other than capital transactions carried out with the company’s shareholders;

• the consolidated statement of consolidated financial position has been prepared by classifying the assets and liabilitiesbased on the “current/non-current” criterion;

• the consolidated cash flow statement was prepared by reporting the cash flows resulting from operating activitiesaccording to the “indirect method”;

• the consolidated statement of changes in equity contains the total income (expenses) for the fiscal year, transactionswith shareholders, and other changes in equity.

The statement reconciling the profit and equity of the Parent Company and the Group was also included, which, throughthe classification of the various consolidation adjustments, explains the reconciliation between the data shown on the Parent’sfinancial statements and those shown on the consolidated financial statements.The templates used are those that best represent the Group’s economic, equity, and financial situation.

The preparation of the Consolidated Financial Statements required the use of estimates by the management (for more details,please refer to Note 9, titled “Use of estimates”).

On April 3, 2020, the Board of Directors resolved to submit the draft financial statements as at December 31, 2019 toshareholders. On the same date it authorised its disclosure and convened the Shareholders’ Meeting in ordinary sessionon April 20, 2020 and April 23. 2020, respectively on first and second call.

These Consolidated Financial Statements have been audited by PricewaterhouseCoopers S.p.A.

3. accounting Standards adopted

a) basis and scope of consolidationThe Consolidated Financial Statements include the economic, equity, and financial situations of the Company and thecompanies/entities included within the scope of consolidation (henceforth the “consolidated entities”), prepared accordingto the IFRS. The financial information regarding the consolidated entities has been drafted with reference to the year endedon 31 December 2019, and, where necessary, has been adjusted accordingly in order to render it consistent with the Group’s


accounting standards. The year-end date of the consolidated entities is aligned with that of the Parent Company; if this doesnot occur, they prepare special financial statements for the parent company’s use. The consolidated entities are listed below,along with the relative percentages of the Group’s direct or indirect holdings.

companies consolidated on a line-by-line basis

company name investment % Variation contribution of of the Direct indirect perimeter group %

Aliveri Power Unit Maintenance SA 100% 100%

Ansaldo Energia Holding USA Corp. 100% 100%

Ansaldo Energia IP UK Ltd 100% 100%

Ansaldo Energia Iranian LLC 70% 30% X2 100%

Ansaldo Energia Korea Yuhan Heosa 5% 95% X1 100%

Ansaldo Energia Messico S. DE. R.L. DE C.V. 5% 95% X1 100%

Ansaldo Energia Muscat LLC 50% 50% 100%

Ansaldo Energia Nigeria Limited 70% 30% X2 100%

Ansaldo Energia Spain S.L. 100% 100%

Ansaldo Energia Switzerland AG 100% 100%

Ansaldo Nucleare S.p.A. 100% 100%

Ansaldo Russia LLC 100% 100%

Ansaldo Serviços de Energia Brasil LTDA 5% 95% X1 100%

Ansaldo Thomassen B.V. 100% X1 100%

Ansaldo Thomassen Gulf 100% 100%

Asia Power Project Private Ltd 100% 100%

Consorzio Stabile Ansaldo New Clear 18.18% 72.73% 90.91%

Ghannouch Maintenance Sarl 100% 100%

Niehlgas GmbH 100% 100%

Nuclear Engineering Group Ltd 100% 100%

Power System Manufacturing LLC 100% X1 100%

Power Systems Manufacturing Japan 100% X1 100%

Yeni Aen Insaat Anonim Sirketi 100% 100%

1. Company “Available for sale”.

2. Companies established in the previous year and fully consolidated starting from 1/1/2019.


companies measured using the equity method

changes to the scope of consolidationThe following changes took place during the course of the 2019 fiscal year:• Ansaldo Energia Iranian LLC, established at the end of 2018, becomes operational and is therefore fully consolidated;• the conditions for the full consolidation of Ansaldo Nigeria Limited, previously consolidated using the equity method,

have matured.

The criteria used by the Group to define the scope of consolidation and the relative consolidation principles are shown below.

SubsidiariesAn investor controls an entity when: i) it is exposed to, or has the right to participate in, the variability of its economic returns;and ii) it is able to exercise its own decision making power over the relevant activities of the entity itself in order to influencesaid returns. The existence of control is verified every time events and/or circumstances indicate a change in any of the aboveindicators of control. The subsidiaries are consolidated using the full consolidation method starting on the date upon whichcontrol was acquired, and cease to be consolidated starting on the date upon which control is transferred to another party.The financial statements of all the subsidiaries have closing dates that coincide with that of the Parent Company.The following criteria are adopted for full consolidation:• the assets and liabilities, as well as income and expenses, of the subsidiaries are incorporated line by line by attributing

to the minority shareholders, where applicable, the share of equity and the net result for the period pertaining to them;this share is recorded separately in the equity and in the statement of income;

• the profits and losses with relative tax effects resulting from transactions between fully consolidated companies, not yetrealised with third parties, are eliminated, if significant, with the exception of losses that are not eliminated where thetransaction indicates a reduction in the value of the asset transferred. Reciprocal receivables and payables, costs andrevenues, and financial income and expenses are also eliminated;

• in the presence of shares acquired after the assumption of control (acquisition of non-controlling interests), any differencebetween the acquisition cost and the corresponding portion of the acquired equity is recorded directly in the equityattributable to the Group; similarly, the effects arising from the disposal of minority interests without loss of control arerecorded in the equity. In contrast, any sale of investment shares resulting in loss of control requires the following to berecorded on the statement of income:(i) any capital gains/losses calculated as the difference between the consideration received and the corresponding portion

of consolidated equity sold;

company name investment % Variation contribution of of the Direct indirect perimeter group %

A-U Finance Holdings BV 40% 40%

Ansaldo Algerie 49% 49%

Ansaldo Gas Turbine High Technology 60% 60%

Polaris - Anserv Srl 20% 20%

Shanghai Electric Gas Turbine 40% 40%

SPVTCCC BV 100% X1 100%

1. Company not consolidated on a line-by-line basis since not operational on the date in question.


(ii) the effect of the recalculation of any residual investment maintained in order to align it with the relative fair value;(iii) any values reported among the other comprehensive income components relating to the investee company of which

control has been lost that are required to be reversed on the statement of income, or, if not required to be reversedon the statement of income, under the “Other reserves” equity item.

The value of any investment maintained, aligned with the relative fair value on the date of loss of control, represents thenew carrying amount of the investment, which also constitutes the reference value for its subsequent valuation accordingto the applicable valuation criteria.

Joint arrangementsA joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require theunanimous consent of the parties sharing control.Joint arrangements are either joint operations or joint ventures.A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to theassets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. A joint operatoraccounts for the assets, liabilities, revenues and expenses relating to its involvement in a joint operation. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the netassets of the arrangement. Those parties are called joint ventures. A joint venture recognises its interest in a joint venture asan investment and shall account for that investment using the equity method.

associatesAssociates are companies over which the Group has significant influence, which is presumed to exist when the investmentrepresents 20% to 50% of the voting rights. Associates are accounted for using the equity method and are initially recordedat cost. The equity method is described below:• where necessary, the carrying amount of these investments is aligned with the adjusted equity of the relative company

in order to reflect the application of the EU IFRS, and includes the entry of the greater values attributed to the assets andliabilities, as well as any goodwill, identified at the time of acquisition, according to a process similar to that successivelydescribed for business combinations;

• the Group’s share of the profit or loss is recorded starting on the date that the significant influence begins, and up untilthe date that the significant influence ceases. If, as a result of losses, the company accounted for using the method inquestion records a negative equity, the carrying amount of the investment is cancelled, and any surplus attributable tothe Group, in the event that the latter has made efforts to fulfil legal or implicit obligations of the investee company, orotherwise to cover its losses, is recorded in a special provision; the changes in equity for companies accounted for usingthe equity method that are not indicated on the income statement are recorded directly on the statement of income;

• unrealised profits and losses generated on transactions carried out between the Company, its subsidiaries, and the investeecompany accounted for using the equity method, are eliminated based on the value of the Group’s share in the investeecompany itself, with the exception of losses, if these are representative of the asset’s impairment, and dividends, whichare eliminated entirely.

In the case of objective evidence of impairment, recoverability is verified by comparing the entry value with its relativerecoverable amount determined by adopting the criteria indicated in the note titled “Impairment losses on tangible andintangible assets (impairment test)”. When the reasons for the write-downs made no longer subsist, the value of theinvestments is restored within the limits of the write-downs made, with the effects being recorded on the income statement.

Any sale of investment shares resulting in loss of joint control or significant influence over the investee company requires thefollowing to be recorded on the statement of income:• any capital gains/losses calculated as the difference between the consideration received and the corresponding portion

of the underwritten value sold;


• the effect of the recalculation of any residual investment maintained in order to align it with the relative fair value;• any values reported among the other comprehensive income components relating to the investee company that are

required to be reclassified on the statement of income.The value of any investment maintained, aligned with the relative fair value on the date of loss of joint control or significantinfluence, represents the new carrying amount and therefore the reference value for subsequent valuation according to theapplicable valuation criteria.Once an investment accounted for using the equity method, or a share of such an investment, is classified for resale, as itmeets the established criteria for such a classification, the investment or investment share in question is no longer accountedfor using the equity method.

business combinationsThe business combinations under which control of a business is gained are recorded by applying the so-called acquisitionmethod, in accordance with IFRS 3. In particular, the identifiable assets acquired, and the liabilities and contingent liabilitiesassumed, are recorded at their current value on the date of acquisition, or rather the date upon which control is acquired(the “Acquisition Date”), with the exception of deferred tax assets and liabilities, assets and liabilities relating to employeebenefits, and assets held for sale that are recorded according to the relative financial reporting standards. If positive, thedifference between the acquisition cost and the current value of the assets and liabilities is included among the intangibleassets, such as goodwill; if negative, after having double checked the correct calculation of the current value of the assetsand liabilities acquired and their acquisition cost, this difference is recorded as income directly on the statement ofcomprehensive income. When the determination of the values of the acquired business’s assets and liabilities is carried outon a temporary basis, it must be concluded within a maximum of twelve months from the date of acquisition, and onlytaking into account information relating to facts and circumstances that existed as of the Acquisition Date. The temporarilycalculated values are recorded with a retrospective effect during the fiscal year in which the determination is completed.Ancillary transaction charges are recorded on the statement of comprehensive income at the time in which they are incurred.The acquisition cost is represented by the fair value of the assets transferred, the liabilities assumed, and the capitalinstruments issued for the purposes of the acquisition as of the Acquisition Date, and also includes the contingentconsideration, or rather the portion of the consideration whose amount and disbursement are dependent upon future events.The contingent consideration is recorded based on the relative fair value as of the Acquisition Date, and the subsequentchanges in the fair value are recorded on the statement of income if the contingent consideration is a financial asset orliability, while contingent considerations classified as equity are recalculated and their subsequent extinction is recordeddirectly in equity.In the case of acquisition of control at a later stage, the acquisition cost is determined by summing the fair value of theinvestment previously held in the acquiree, and the amount paid for the additional share. Any difference between the fairvalue of the investment previously held and its carrying amount is recorded on the statement of comprehensive income.Upon acquisition of control, any amounts previously recorded among the other comprehensive income components arerecorded on the statement of comprehensive income, or else in another equity item if its reclassification on the statementof income is not required.

translation of foreign currency accounts and balances

Translation of foreign currency entries Foreign currency monetary items (cash and cash equivalents, assets and liabilities to be received or settled in established ordeterminable monetary amounts, etc.), as well as non-monetary items (advances to suppliers of goods and/or services, etc.),are initially recognised at the exchange rate ruling when the transaction is performed. Subsequently, monetary items aretranslated into the functional currency at the closing rate on the reporting date and any exchange rate gains or losses arerecorded on the income statement. Non-monetary items are maintained at the exchange rate ruling at the transaction date,


unless continuing adverse economic trends affect the rate, in which case exchange rate differences are recorded on theincome statement.

Translation of balances expressed in a currency other than the functional currencyBalances expressed in a foreign currency (except for currencies of hyperinflationary economies, which is not currently thecase of the Group) are translated into the functional currency as follows:• assets and liabilities are translated at the closing rate;• costs and revenue, income and expense are translated at the average exchange rate of the year or at the rate ruling at

the date of the transaction if this varies significantly from the average rate;• exchange rate gains or losses arising from the translation of captions at a rate that differs from the closing rate and from

the translation of opening equity at a rate that differs from the closing rate are taken to the translation reserve. Thetranslation reserve is released to profit or loss when the investment is sold.

• goodwill and fair value adjustments relating to the acquisition of foreign operations are recognised as assets and liabilitiesof the foreign operation and translated at the closing rate.

The exchange rates used for the conversion of the aforementioned balances are shown in the following table:

exchange rate exchange exchange rate exchangeas at average as at average

31 December rate as 31 December rate as2019 2019 2018 2018

USD - U.S. Dollar 1.1234 1.1195 1.145 1.181

IRU - Indian Rupii 80.187 78.8361 79.7298 80.7332

AUD - Dollaro Australiano 1.622 1.5797 1.622 1.5797

ROL - Romani Leu 47,830 47,453 46,635 46,540

FSV - Swiss Franc 1.0854 1.1124 1.1269 1.155

AED - Dirhams UAE 4.1257 4.1113 4.205 4.3371

TYR - Turkish Lira 6.6843 6.3578 6.0588 5.7077

RUB - Russian Ruble 69.9563 72.4553 79.7153 74.0416

CNY - Yuan Renminbi 7.8205 7.7355 7.8751 7.8081

TND - Tunisian Dinar 3.139 3.2803 3.4302 3.1106

JPY - Japanese YEN 121.94 122.0058 125.85 130.3959

BRL - Brazilian Real 4.5157 4.4134 4.444 4.3085

MXN - Mexican Peso 21.2202 21.5565 22.4921 22.7054

IRR - RIAL IRANIANI 47,183 47,018 48,090 48,210

KRW - Korean Won 1,296.28 1,305.32 1,277.93 1,299.07

NGN - Naira Nigeriano 344.3221 343.0512 350.9425 360.9013

GBP - Pound Sterling 0.8508 0.87777 0.89453 0.88471

OMR - Omani Riyal 0.4319 0.4304 0.4403 0.4541


b) accounting standards and valuation criteria

intangible assetsIntangible assets consist of clearly identifiable non-monetary assets without physical substance that are controlled by theGroup and are capable of generating future economic benefits for the company, as well as the goodwill recorded followingbusiness combinations. They are recognised at purchase and/or production cost, including directly related charges incurredto prepare them for use and borrowing costs relating to their acquisition, development or production for those assets thatrequire a long time period before being ready for use or sale. Their carrying amount is net of accumulated amortization,except for assets with an indefinite useful life, and any impairment losses. Amortization begins when the asset becomesavailable for use and is calculated systematically over the residual useful life of each asset. It is calculated considering theactual use of the asset during the fiscal year in which an intangible asset is initially recognised.The following main intangible assets can be identified within the context of the Group:

Development costs This item includes the costs incurred to apply the results of research and other knowledge to a plan or project for theproduction of new or substantially advanced materials, devices, processes, systems or services before commercial productioncommences or before the assets are used, when it can be demonstrated that they will generate future economic benefits.It is amortised based on the units of production method over the period in which the expected future economic benefits willbe obtained (the “stamp” method). On the other hand, expenditure incurred in the research stage of a project is expensedwhen incurred.

Industrial patents and intellectual property rightsIndustrial patents and intellectual property rights are recognised at acquisition cost, net of accumulated amortization andimpairment losses. Amortization begins when the title to the right is acquired and the asset is ready for use. Assets areamortised over the shorter of their expected useful life and the title term.

Concessions, licences and trademarksThis category includes: concessions, i.e., those public administration measures entitling private sector entities to use publicassets on an exclusive basis or to manage public services under regulated conditions; licences giving the right to use patentsor other intangible assets for a fixed term or a term that can be established; trademarks identifying the origin of productsor goods from a specific company and licences to use know-how, software or the property of others. The costs, includingdirect and indirect expenses incurred to obtain these rights, are capitalised after the rights have been acquired and areamortised systematically over the shorter of the period of expected use and the period for which the right has been acquired.

GoodwillGoodwill recognised as an intangible asset arises from business combinations and reflects an excess in the acquisition costof the business or business unit over the total fair value at the acquisition date of acquired assets and liabilities. As it has anindefinite useful life, goodwill is not amortised. Instead, it is tested for impairment at least once a year, unless the marketand management indicators identified by the Group show that the test has to be conducted when preparing interim financialstatements.

tangible assets The tangible assets are measured at purchase or production cost, net of accumulated depreciation and any impairmentlosses. Cost includes direct charges incurred to prepare assets for use and any disposal and removal costs that will be incurredto restore the site to its original conditions and borrowing costs relating to their acquisition, construction or production forthose assets that require a long time period before being ready for use or sale.


Tangible assets whose carrying amount will mainly be recovered through a sale transaction (rather than the continued useof the asset) are valued at their carrying amount or their fair value fewer disposal costs, whichever is less. Goods classifiedas “for sale” must be immediately available for sale, their disposal must be highly probable (meaning that there are alreadycommitments to that effect), and their sale value must be reasonable in relation to their fair value.Goods acquired following business combinations are recorded at their fair value as of the acquisition date, possibly correctedwithin the next 12 months. This value represents the cost of acquisition.Costs for ordinary and/or routine maintenance and repairs are taken directly to profit or loss when incurred. Costs to expand,upgrade or improve owned or leased assets are capitalised only to the extent they meet the requirements to be classifiedseparately as assets or part of an asset. Grants related to assets are taken as a direct decrease in the cost of the asset towhich they relate.The carrying amount of each asset is depreciated on a systematic basis. Depreciation is calculated on a straight-line basiseach year over the residual useful lives of assets. It is calculated considering the actual use of the asset in the year in whicha tangible asset item is initially recognised. The following table lists the depreciation periods for the various types of assets:

The estimated useful lives and residual values are regularly reviewed. Depreciation ceases when the asset is sold or reclassifiedas held for sale. If a depreciable asset is comprised of separately identifiable components with useful lives that differsignificantly from the other components comprising the asset, depreciation is calculated separately for each component,using the component approach. This item also includes equipment allocated to specific programmes (tooling), depreciatedbased on the method of units produced as opposed to the total expected.Profits and losses on the sale of assets or groups of assets are measured by comparing the selling price with the relatedcarrying amount.

leased assetsAs of January 1, 2019, the Ansaldo Energia Group has adopted IFRS 16 - Leasing (issued with Regulation (EU) No. 2017/1986). The following is a summary of the new general drafting criteria introduced, the related impacts deriving from the initialapplication of the new principle on the balance sheet and the amounts recognised in the balance sheet and income statementas at 31 December 2019.

Initial evaluation of the agreementThe Company assesses whether a contract is a leasing contract (or contains a component), when entering into the agreement.During the contractual life, this initial assessment is reviewed only in the face of substantial changes in the contractualconditions (e.g. changes in the subject of the contract or in the requirements that impact on the right to control the underlyingasset). If the leasing contract also contains a “non-leasing” component, the Company separates and handles this componentaccording to the reference accounting principle, except for the case in which the separation cannot be achieved on the basisof objective criteria: in this case, the Company makes use of the practical expedient granted by the principle of treating theleasing and non-leasing components together in accordance with IFRS 16.

Description years

Land Indefinite useful life

Industrial buildings 33

Plant and machinery 20 - 5

Equipment 8 - 2.5

Furniture and fittings 8 - 5

Motor vehicles 5 - 4


The Company recognises an asset consisting of the right of use and a corresponding leasing liability for all the leasingcontracts in which it is a lessee, with the exception of short-term contracts (with a duration of no more than twelve months),to contracts in which the single underlying asset is of low value (up to Euro 5 thousand), and to contracts in which theunderlying asset has the nature of an intangible asset (e.g. software licenses). For these contracts, the Company avails itselfof the option not to apply the provisions of IFRS 16, thus recognising the leasing instalments as operating costs in exchangefor short-term trade payables.

Rights of useAt the start date of the contract, the Company recognizes the right of use equal to the initial value of the correspondingleasing liability, plus the payments due for the leasing before the starting date of the leasing and for any initial direct costs. Subsequently, these assets are valued net of accumulated depreciation and impairment. The right of use is amortised in theshorter of the contractual term and the useful life of the underlying asset. If a lease transfers ownership of the underlyingasset, or the cost of the asset consisting of the right of use reflects that the Company plans to exercise a purchase option,the related asset consisting of the right to use is amortised over the useful life of the underlying asset. Depreciation beginson the leasing date. The Company applies IAS 36 - Impairment of assets to determine whether an asset consisting of theright of use should be impaired.Consistent with the provisions of the accounting principle, the company has decided to present the right-of-use assets bynature, or by including them in the same item in which the corresponding underlying assets would be presented if theywere owned. The explanatory note then specifies the line of financial statements in which these user right activities areclassified.

Leasing liabilitiesThe leasing liability is initially measured at the present value of the unpaid leasing payments on the leasing start date,discounted using the implicit leasing rate. If this rate cannot be determined promptly, the Company uses the marginalfinancing rate, defined, reviewed and updated periodically (at least once during the year) for the entire duration of the loan.

Payments included in the initial measurement of the lease liability include:• fixed payments (including fixed payments in substance), net of any leasing incentives to be received;• where applicable, the strike price of the purchase option, if the lessee has reasonable certainty to exercise the option.

Subsequently, the leasing liability is increased to reflect interest on the residual value (using the effective interest method)and reduced to reflect the lease payments paid.The Company restates the leasing liability (and makes a corresponding adjustment to the related right of use) in the eventof a change:• the duration of the lease (e.g. in the event of early termination of the contract, or extension of the expiry date);• the evaluation of a purchase option of the underlying asset. In such cases, the payments due for leasing will be reviewed

on the basis of the revised duration of the leasing and to take into account the change in the amounts to be paid underthe purchase option.

Only in the event of a substantial and significant change in the duration of the lease or the future payments due for thelease, the Company restates the residual value of the leasing liability by referring to the marginal loan rate in force on thedate of the change (instead of the one applied at inception of the agreement). In all other cases, the leasing liability isrecalculated using the initial discount rate. Leasing liabilities are presented in the balance sheet financial payables item and detailed in this explanatory note.


Use of IFRS 16 estimates The description of the main estimates adopted by the Group at 31 December 2019 in accordance with IFRS 16 is providedbelow.

• Incremental borrowing rate With regard to the determination of the borrowing rate, the Group has chosen to refer to an Incremental Borrowing Rateor “IBR” for each contract falling within the perimeter of IFRS 16, taking into account the following factors:

– SWAP rates of individual currencies and single maturities;– estimate of the representative credit spread on an unsecured 5-10 year debt, made by the lessee on the basis of similar

negotiations recently held with bank counterparties;– adjustment of the previous component to consider the economic context and the country in which the contract resides.

Contracts with similar characteristics are valued using a single discount rate.The IBR associated with the beginning of each contract will be subject to review at each lease modification, i.e. substantialand significant changes to the contractual conditions in the evolution of the agreement (e.g. duration of the contract oramount of future payments due for the leasing).

• Contract durationWith regard to the determination of the contractual duration both at the start date of the contract and at a later date (inthe case of substantial and significant changes to the contractual conditions), the Group uses an evaluation approach thatis based on the duration foreseen by the obligation agreed between the Parties, compatible with future intentions inwanting/being able to achieve the end and the experiences acquired. The effects deriving from the first application of thisstandard in the consolidated financial statements of the Ansaldo Energia Group at 31 December 2019, are indicated inparagraph 4 below.

impairment losses

a) GoodwillAs indicated above, goodwill underwent annual impairment, testing, or more frequently in the presence of indicators givingthe impression that it may have suffered an impairment, in accordance with IAS 36 (Impairment of assets). This verificationis normally carried out at the end of each fiscal year, and the reference date for this verification therefore coincides with theclosing date of the financial statements.The impairment test, which is described in greater detail under Note 15, is carried out in relation to each of the cashgenerating Units (cgU) to which goodwill has been allocated, or in the case of Ansaldo Energia Group, to the only CGUidentified. Any impairment of goodwill is recorded if the recoverable amount thereof is less than its carrying value on thefinancial statements. The recoverable value is to be understood as the greater of either the fair value of the CGU, less thedisposal costs, or the relative value in use, with the latter being understood as the actual value of the future cash flows forthat asset. In determining the value in use, the expected future cash flows are discounted using a pre-tax discount rate thatreflects the current market assessments of the cost of money in relation to the period of the investment and risks specific tothe asset. If the impairment resulting from the impairment test exceeds the value of the goodwill allocated to the CGU, theremaining surplus is allocated to the assets included in the CGU in proportion to their carrying value. The minimum limit forthis allocation is the greater of the following amounts:• the fair value of the asset less the sales expenses;• the value in use, as defined above;• zero.The original value of the goodwill cannot be restored if the reasons for the impairment no longer subsist.


b) Tangible and intangible assets with a finite useful lifeOn each of the financial statements’ reference dates, checks are carried out to determine whether there are any indicatorsthat tangible and intangible assets have suffered impairment losses. For this purpose, both internal and external sources ofinformation are taken into account. With regard to the former (internal sources), the following are taken into consideration:the obsolescence or physical deterioration of the asset, any significant changes in the use of the asset, and the asset’seconomic performance in relation to the expectations. With regard to external sources, the following are taken intoconsideration: the trend of the assets’ market prices, any technological, market or regulatory discontinuity, the trend of themarket interest rates or the cost of capital used to evaluate the investments.If such indicators are determined to be present, the recoverable value of the aforementioned assets is estimated, with anydepreciation with respect to the relative book value being recorded on the statement of comprehensive income. Therecoverable value of an asset is represented by the greater of either the fair value, less the ancillary sales costs, or the relativevalue in use, determined by discounting the estimated future cash flows for the asset in question, including those derivingfrom its transfer at the end of its useful life, if significant and reasonably ascertainable, and excluding any disposal costs. Indetermining the value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects thecurrent market assessments of the cost of money in relation to the period of the investment and risks specific to the asset.For an asset that does not generate largely independent cash flows, the recoverable value is determined in relation to thecash-generating unit to which the asset belongs.An impairment loss is recorded on the statement of comprehensive income whenever the carrying amount of the asset, orof the CGU to which it is allocated, exceeds the relative recoverable value. The impairment losses of a CGU are first recordedas a reduction of the carrying amount of any goodwill attributed to the same, and then as a reduction of the other assets,in proportion to their carrying values, and within the limits of their recoverable values. If the conditions for a write-downpreviously carried out no longer subsist, the carrying amount of the asset is restored through registration on the incomestatement, within the limits of the carrying value that the asset in question would have had if the write-down had neverbeen done and the relative amortizations had been carried out.

investments in other companiesInvestments in other companies (other than those in subsidiaries, associates and joint ventures) are evaluated at fair value;any changes in the value of such investments are registered in an equity reserve by attributing them to the othercomprehensive income components that will be reclassified on the separate consolidated income statement at the time ofsale or in the presence of an impairment deemed to be definitive. Other unlisted equity investments for which the fair value cannot be reliably determined are stated at cost and adjustedfor the impairments to be recorded on the separate consolidated income statement, in accordance with the provisions ofIFRS 9.Impairments of other investments classified among the “financial assets available for sale” cannot be subsequently reversed.

inventoriesInventories are measured at the lower of cost and net realisable value. Cost is calculated using the weighted average costmethod. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion and the estimated costs necessary to make the sale. Produced raw materials are measured at standard cost,which is reviewed half-yearly.Work-in-progress and semi-finished products are measured at production cost, excluding borrowing costs and overheads.Inventories are shown net of the obsolescence provision, which is calculated on the basis of the forecast of (i) unfavourableeconomic conditions that could arise in the future or (ii) the risk of product unsaleability.

contract work in progressContract work in progress is recognised in accordance with the percentage of completion method whereby contract cost,revenue and profits (losses) are recognised using the percentage of completion method. The stage of completion is calculated


on the basis of the ratio of costs incurred at the measurement date and the expected overall costs for the contract.The measurement reflects the best estimate of the stage of completion at the reporting date. The Group periodically updatesthe assumptions underlying these measurements. Any profits or losses are recognised in the year in which the adjustmentsare made. The expected loss on a contract affecting operating profit is recognised entirely under operating expense when it becomesreasonably foreseeable. Similarly, any reversal thereof is recognised under other operating income, if related to internal costs.External costs are covered directly through utilisation of the provision for expected losses to complete contracts. Contract work in progress is recognised net of any allowances, expected losses and progress payments and advances relatingto contracts in progress. This analysis is performed individually for each contract, recognising the positive difference (workin progress in excess of progress payments and advances) under contract work in progress and the negative difference under“progress billings”. If the amount recognised under progress billings is not collected at the preparation date of the annualand/or interim financial statements, a balancing entry is recognised under trade receivables.Contracts with consideration in a currency other than the functional currency (Euro in this case) are measured by translatingthe portion of consideration accrued, as per the percentage of completion method, at the closing rate. However, under theGroup’s policy governing currency risk, all contracts whose cash inflows and outflows are significantly exposed to exchangerate fluctuations are adequately hedged: In this case, the recognition procedures set out below.

financial assets The following table shows the classification of financial assets by category in line with the IFRS 9 standard:

Financial assets valued at amortised costFinancial assets which have been verified to meet the following requirements are classified in this category:a) the asset is held as part of a business model whose objective is to hold the asset for the purpose of collecting contractual

cash flows; andb) the contractual terms of the asset include cash flows represented solely by payments of principal and interest on the

principal amount to be repaid.These are mainly receivables from customers, loans and other receivables.Trade receivables that do not contain a significant financial component are recognised at the price defined for the relatedtransaction (determined in accordance with the provisions of IFRS 15 Revenues from customer contracts).Other receivables and loans are initially recognised in the financial statements at their fair value increased by any directlyattributable accessory costs to the transactions that generated them. At the time of subsequent measurement, financialassets are shown at amortised cost, with the exception of loans that do not contain a significant financial component, usingthe effective interest rate. The effects of this measurement are recognised as a financial income component.

Financial assets at fair value through profit or loss (“FVOCI”)Financial assets which have been verified to meet the following requirements are classified in this category:a) the asset is held as part of a business model whose objective is achieved both through the collection of contractual cash

flows and through the sale of the asset itself; andb) the contractual terms of the asset include cash flows represented solely by payments of principal and interest on the

principal amount to be repaid.These assets are initially recognised in the financial statements at their fair value plus any additional costs directly attributableto the transactions that generated them. At the time of subsequent measurement, the measurement made at the time ofrecognition is updated and any changes in fair value are recognised in the statement of comprehensive income.

Financial assets at fair value with a balancing entry in the consolidated income statement (“FVPL”)Financial assets that are not classified in any of the previous categories (i.e. residual category) are classified in this category.These are mainly derivative instruments.


Assets belonging to this category are recorded at fair value upon initial recognition. Ancillary costs incurred on recognitionof the asset are immediately recognised in the consolidated income statement. On subsequent measurement, FVPL financialassets are measured at fair value. Gains and losses arising from changes in fair value are recognised in the consolidatedincome statement in the period in which they are recognised under “Gains (losses) from assets measured at fair value”.Purchases and disposals of financial assets are accounted for at the settlement date. Financial assets are removed from thefinancial statements when the related contractual rights expire, or when the Company transfers all the risks and rewards ofownership of the financial asset.

DerivativesThe Ansaldo Energia Group has availed itself of the possibility provided for in § 7.2.21 of IFRS 9 to postpone the adoptionof the hedge accounting module of the same accounting standard and to continue to apply the provisions of IAS 39 for theaccounting of derivatives as hedging instruments.Derivatives are always classified as assets held for trading and measured at fair value on the income statement, unless theyqualify for hedge accounting and are effective in hedging the underlying assets, liabilities or commitments of the Group.Specifically, the Group uses derivatives exclusively as part of its strategies of hedging the risk of fluctuations in the fair valueof recognised assets or liabilities or due to contractual commitments (fair value hedges), or in the expected cash flows ofcontractually-defined or highly probable future transactions (cash flow hedges). For details on the recognition of currencyrisk hedges on long-term contracts, reference should be made to the section titled “Estimated costs to complete long-termcontracts.”The effectiveness of hedges is documented at the inception of the transaction, as well as periodically at each annual orinterim reporting date. Hedge effectiveness is measured by comparing the variations in the fair value of the hedginginstrument with those of the hedged item, or, for more complex instruments, using statistical analysis based on risk variations.

Hedging construction contracts against currency riskTo avoid the risk of fluctuations in foreign currency cash inflows and outflows on construction contracts, the Group specificallyhedges the individual cash flows expected on the contract. Hedges are made on finalising the contracts, unless previousframework agreements exist that make contract acquisition highly likely. Currency risk is usually hedged using plain vanilla(forward) instruments. If the hedge is not deemed effective, fair value gains or losses on these instruments are immediatelyexpensed as financial items and the related underlying item is measured as if it were not hedged, hence it is exposed to thecurrency risk. Hedges which fall under the first type of instrument are recognised as cash flow hedges, considering thepremium or the discount as the ineffective portion in the case of forwards, or time value in the case of options. The ineffectiveportion is recognised under financial items.

Fair value hedgesChanges in the fair value of derivatives designated as fair value hedges and which qualify as such are recognised in profit orloss, as are changes in the fair value of the underlying assets or liabilities attributable to the risk eliminated by the hedgingtransaction.

Cash flow hedgesChanges in the fair value of derivatives designated as cash flow hedges and which qualify as such are recognised to theextent of the portion determined to be “effective”, in a specific equity reserve (“hedging reserve”). This is subsequentlyreclassified on the income statement when the forecast transaction affects profit or loss. The change in the fair value of theineffective portion is recognised immediately in profit or loss. If the forecast transaction is no longer highly probable, therelevant portion of the “hedging reserve” is released immediately to profit or loss. If the hedging instrument is sold or nolonger effectively hedges the risk for which it was agreed, the relevant portion of the “hedging reserve” is retained in equityuntil the underlying transaction affects profit or loss.


Fair value measurementThe Fair value valuations of the financial instruments are carried out by applying IFRS 13 “Fair value measurement” (“IFRS13”). The fair value represents the price that would be received for the sale of an asset or paid for the transfer of a liabilitywithin the context of an ordinary transaction carried out between market operators on the measurement date.The fair value measurement is based on the assumption that the sale of the asset or the transfer of the liability takes placeon the main market, or rather the market with the greatest volume and level of transactions for the asset or liability inquestion. In the absence of a main market, it is assumed that the transaction takes place on the most advantageous marketto which the Group has access, or rather the market most likely to maximise the results of the asset’s sale, or minimise theamount to be paid for the transfer of the liability.The fair value of an asset or liability is determined in consideration of the assumptions that market participants would useto define the price of the asset or liability in question, with the presumption that they are acting in their best economicinterests. The market participants are independent and informed buyers and sellers who are capable of entering into atransaction for an asset or liability, and are motivated, but are not obliged or induced, to carry out the transaction.In carrying out the fair value measurement, the Group takes into account the characteristics of the specific asset or liability,and namely, for non-financial assets, the ability of a market participant to generate economic benefits by employing theasset for its greatest and best possible use, or by selling it to another market participant capable of using it for its greatestand best possible use. The fair value measurement of the assets and liabilities is carried out using techniques appropriate forthe circumstances, and for which sufficient data are available, maximising the use of observable inputs.IFRS 13 identifies the following hierarchy of fair value levels, which reflects the significance of the inputs used in the relativedetermination:• Level 1 – Quoted price (active market): the data used in the measurements are prices quoted on markets where the same

assets and liabilities in question are exchanged.• Level 2 – Use of parameters observable on the market (e.g. for derivatives, the exchange rates used by the Bank of Italy,

market rate curves, volatility provided by qualified providers, credit spreads calculated based on the CDS, etc.) other thanthe quoted prices referred to in level 1.

• Level 3 – Use of unobservable market parameters (e.g. internal assumptions, cash flows, risk-adjusted spreads, etc.).

Derecognition of financial assets and liabilitiesA financial asset (or, where applicable, part of a financial asset or part of a group of similar financial assets) is derecognisedfrom the financial statements when: • the rights to receive cash flows from the asset are extinguished; • the Company retains the right to receive cash flows from the asset, but has assumed the contractual obligation to promptly

pay them entirely to a third party; • the Company has transferred the right to receive cash flows from the asset and (a) has substantially transferred all the

risks and benefits of the financial asset’s ownership, or (b) has neither transferred nor substantially retained all the risksand benefits of the asset’s ownership, but has transferred control of the same.

A financial liability is derecognised from the financial statements when the obligation underlying the liability is extinguished,cancelled or fulfilled.

cash and cash equivalentsThis item includes cash on hand, deposits and accounts with banks or other credit institutions available for currenttransactions, post office current accounts and other cash equivalents as well as investments maturing within three monthsof the acquisition date. They are recognised at fair value.

payables and other liabilities (excluding derivatives)Financial liabilities include financial payables, payables for leases and trade payables.Amounts due to banks and other lenders are initially recognised at fair value net of directly attributable transaction costs


and are subsequently measured at amortised cost using the effective interest rate method. If there is a change in the expectedcash flows, the value of the liabilities is recalculated to reflect this change based on the current value of the new expectedcash flows and the initially determined internal rate of return.Leasing payables are recognised as required by IFRS 16, commented above.Trade payables are obligations to pay for goods or services acquired from suppliers in the ordinary course of business. Tradepayables are classified as current liabilities if they are paid within one year of the balance sheet date. Otherwise, thesepayables are classified as non-current liabilities.Trade and other payables are initially recognised at fair value and subsequently measured using the amortised cost method.When a financial liability is hedged against interest rate risk by a fair value hedge, changes in fair value due to the hedgedrisk are not included in the amortised cost calculation. These changes are amortised from the moment in which the fairvalue hedge accounting is interrupted.Financial liabilities are eliminated from the financial statements when the obligation underlying the liability is extinguished,cancelled or fulfilled.With reference to the derecognition of a financial liability, new records must be created for its extinction and the recognitionof a new liability if the contractual terms are substantially different. The terms are considerably different if the actualisedvalue of the financial flow under the new terms, including any fee paid net of the fee received and actualised using theoriginal interest rate, are at least 10% different from the actualised value of the remaining financial flows of the originalfinancial liability. If the exchange of debt instruments or the change in the terms are recognised as an extinction, any costsor fees paid are recorded as income or losses associated with the extinction. If the exchange or modification is not recognisedas extinction, any costs or fees sustained will adjust the accounting value of the liability and will be amortised over theremaining term of the liability in question.

equity

Share capitalShare capital is comprised of the parent’s subscribed and paid-in share capital. Any costs closely related to the issue of sharesare classified as a decrease in share capital when they are directly related to such operation, net of any deferred taxation.

employee benefits

Post-employment benefitsSeveral pension (or supplementary) schemes are in place. They can be analysed as follows:• Defined contribution plans under which the company pays fixed contributions into a separate entity (e.g. a fund) and

has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to payemployees benefits relating to employee service. Contributions payable to a defined contribution plan are recognisedonly when employees have rendered service in exchange for such contributions;

• Defined benefit plans whereby the Company has an obligation to provide the agreed benefits to current and formeremployees and bears the actuarial and investment risks of the plan. The cost of this plan is therefore not defined in termsof the contributions due for the fiscal year, but is rather recalculated based on the dynamics of the wages and certaindemographic and statistical assumptions. The method utilised is defined as the “projected unit credit method”.

As a result of this option, the value of the liability recorded in the balance sheet is in line with that resulting from its actuarialvaluation, with full and immediate recognition of actuarial gains and losses in the period in which they arise in the statementof comprehensive income, through a specific other comprehensive income reserve (“reserve for actuarial gains (losses) inshareholders’ equity”).


Other long-term employee benefits and post-employment benefitsSome Group employees are granted certain benefits such as jubilee benefits and seniority bonuses which are sometimespaid after retirement (such as medical benefits). The accounting treatment is the same as that applied to defined benefitplans, hence the “projected unit credit method” is used.However, with respect to “other long-term benefits”, any actuarial gains and losses are recognised immediately and entirelyin profit or loss when they arise.

Termination benefitsTermination benefits are recognised as a liability and an expense when the Company is demonstrably committed toterminating the employment of an employee or Group of employees before the normal retirement date or providingtermination benefits as a result of an offer made in order to encourage voluntary redundancy. Termination benefits do notgenerate future economic benefits for the Company and, accordingly, are immediately expensed.

provisions Provisions are recognised if, at the reporting date, as a result of a past event, there is a legal or constructive obligation thatwill lead to an outflow of resources which can be estimated reliably. The amount recognised as a provision is the best estimateof the discounted outlay required to settle the obligation. The discount rate used reflects current market assessments andthe additional effects of the risk specific to the liability.Changes in estimates are recognised in profit or loss when they take place.

Estimated costs to complete long-term contractsThe Group operates in extremely complex business areas and with complex contractual arrangements which are recognisedusing the percentage of completion method. The margins recorded on the income statement depend on both the order andthe margins forecast from the entire project on completion. Consequently, for the purposes of correctly recognising work inprogress and profits related to works yet to be completed, management is required to make an accurate estimate of expectedcosts to complete, expected increases and delays, additional costs and penalties which could have an impact on the expectedprofit. In order to better assist management’s estimates, contract risk management and analysis procedures have beenintroduced to identify, monitor and quantify the risks related to contract performance (for more details, please refer to Note5 “Use of estimates”). The carrying amounts reflect the management’s best estimate at that time, assisted by the aboveprocedural tools.Moreover, the Group operates in markets where disputes tend to take a long time to settle especially when state bodies areinvolved. This requires that management predicts the outcome of such disputes.

RevenuesRevenue is recognised in accordance with IFRS 15, which requires the recognition of revenue from customer contracts foran amount that reflects the consideration to which the entity believes it is entitled in exchange for the transfer of goods orservices to the customer.Revenue is recognised when the related performance obligation is met, i.e. when the promised good or service is transferredto the customer. The transfer is considered completed when the customer obtains control of the good or service, which maytake place continuously (over time) or at a specific time (at a point in time).Revenues from performance obligations met over time are recognised on the basis of the stage of completion method (orpercentage of completion) according to which costs, revenues and margins are recognised on the basis of productionprogress, determined by reference to the ratio between costs incurred at the measurement date and total expected costs onthe programme or on the basis of the units of product delivered.The measurement reflects the best estimate of the stage of completion as of the date of the financial statements. Theestimates are updated regularly. Any profits or losses are recognised in the year in which the adjustments are made. Theexpected loss on a contract affecting operating profit is recognised entirely under operating expense when it becomes


reasonably foreseeable. Vice versa, any reversal thereof is recognised under other operating income, if related to internalcosts. External costs are covered directly through utilisation of the provision for expected losses to complete contracts.

grantsGrants are recognised on an accruals basis and in direct correlation with costs incurred when their allocation has beenformally approved. Specifically, grants related to assets are recognised in profit or loss directly in line with thedepreciation/amortization of the assets/projects to which they relate and are recognised as a direct reduction indepreciation/amortization. In the statement of financial position, they are recognised as a direct reduction of the capitalisedasset to the extent of the residual amount not yet recognised in profit or loss.

costsCosts are recognised if they are pertinent to the Group’s business and on an accruals basis.

financial income and expensesInterest income and expense are recognised on an accruals basis using the effective interest method, i.e., at the interest ratethat makes all cash inflows and outflows (including any premiums, discounts, commissions, etc.) comprising the transactionfinancially equivalent.Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takesa substantial period of time to get ready for its intended use or sale (qualifying assets) are capitalised as part of the cost ofthat asset.

DividendsDividends are recognised when the right to receive payment is established. This usually coincides with the shareholders’resolution approving their distribution. Dividends paid to the shareholders are considered as a change in equity and recognisedas a liability in the year in which the distribution was approved by the parent’s shareholders.

income taxes The Group’s tax expense includes current and deferred taxes. When they refer to income and expense recognised in equitythrough other comprehensive income, they are offset against the same item. Current taxes are calculated on the basis ofthe tax legislation applicable in the countries where the Group operates, enacted at the reporting date. Any risks arisingfrom different interpretations of income and expense, as well as pending litigation with the tax authorities are assessed atleast quarterly in order to adjust the relevant provisions.Deferred taxes are recognised in respect of temporary differences between the carrying amounts of assets and liabilities andtheir tax base. Deferred tax assets and liabilities are measured at the tax rates that are expected to be enacted when realisingassets and settling liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets arerecognised to the extent that it is probable that sufficient taxable profits will be available in the years the related temporarydifferences reverse against which the deductible temporary differences can be utilised.

Related party transactionsRelated parties are to be understood as companies that have the same parent company as the Group, companies that directlyor indirectly control or are subject to joint control by the Group, and those in which the Group holds a share that allows itto exercise significant influence. The definition of related parties also covers members of the Company’s Board of Directorsand managers with strategic responsibilities. Managers with strategic responsibilities are those who have direct or indirectpower and responsibility in relation to the planning, management, and/or monitoring of the Group’s activities.


4. adoption of the new accounting standard ifRS 16 - impacts on the balance sheet as ofJanuary 1, 2019

The main information elements and the summary of the impact of the application, starting from 1 January 2019 of the IFRS16 (Leasing). As allowed by the Standard, the Group has applied IFRS 16 using the simplified retrospective method in the variant thatrequires the identification of:• the financial liability of the lease from the initial application date and taking into account future payments due up to the

contractual maturity;• the asset consisting of the right of use equal to the amount of the financial liability of the lease adjusted for any prepaid

expenses or accrued expenses relating to the leases recognised in the statement of financial position immediately beforethe date of the initial application.

The method does not provide for the restatement of the comparative data and allows some facilitations in the calculationmethods of the financial liability and of the right of use at the transition date.At January 1, 2019, within the Group, contracts falling within the scope of IFRS 16 mainly refer to:• land and buildings for office and industrial use,• leases of material for factory and/or office use; • car leases.

On the same date, having defined the perimeter of the agreements, the Group reports assets for rights of use for Euro 74.9million relating to leases previously classified as operating leases within the scope of application of IAS 17 and financialpayables for a total of Euro 74.9 million equal to the present value of the remaining payments discounted at an appropriatediscount rate. The rate range is between 3.18% and 15.30%. This gap is due to various valuation parameters ranging from the type ofasset covered by the contract to the duration of the contract and to the considerations on the risks associated with thecountry in which the contract is stipulated.

More precisely, the effects of the balance sheet entries as of January 1, 2019 deriving from the application of the Standardwere as follows (values in thousands of Euro):

01.01.2019 31.12.2019 euro/thousand

Right of use recorded in Property, Plant and Equipment 74,928 42,334

Values reclassified in assets available for sale 35,389

Exchange rate differences on right of use asset (1,480)

IFRS 16 Lease Liabilities (non current) 68,253 39,475

IFRS 16 Lease Liabilities (current) 6,675 3,768

Values reclassified in assets available for sale 36,593

Services Cost (7,176)

Amortization 5,767

Interest Expenses 1,951

Economic effect - available for sale 1,331


Depreciation is calculated over the lease term, while interest expense is calculated with the discount rate determined asdescribed above for each contract.

5. ifRS 5 – assets held for sale and Discontinued operations

During the year, the Group indicated the investments in PSM Power system Manufacturing, PSM Japan, Ansaldo ThomassenBV, Ansaldo Energia Mexico, Ansaldo Energia Korea and Ansaldo Servicos de Energia Brasil among the assets available forsale, in application of the IFRS principle 5.

The standard provides that the disposal activities and groups are classified as available for sale if their book value is recoverablemainly through their disposal rather than through its continuous use.

Specifically, an asset (or a disposal group) is classified as available for sale if it meets the following requirements: • the asset is available for sale under current conditions and the sale is highly likely or a binding sales program or business

has already been started to find a buyer and • the sale is expected to be completed within one year of the classification date.

In the statement of financial position, the assets available for sale and the assets/liabilities belonging to the disposal groupare presented as a separate item from the other assets and liabilities and their total is reflected respectively in the currentassets and liabilities.Discontinued Operation means a significant business unit or a geographical area of assets classified as held for sale andfalling within a coordinated disposal program.

In the practical application of the principle in question, and in compliance with the provisions of the reference principles, theGroup has adopted the following exhibition choices:• presentation of the 2019 balance sheet with separate indication of assets and liabilities available for sale;• no changes were made to the comparative balance sheet;• separate indication in the consolidated income statement of the profits or losses of discontinued operations net of tax

effects in a single item, represented by the total; • elimination of intercompany asset items;• elimination of intercompany economic items in the economic situations of discontinued operations.

In the consolidated income statement for the period, the profit/loss net of discontinued operations, as well as the profit orloss deriving from the measurement at Fair Value Less Costs to Sell or from the disposal of the discontinued operations orgroups (Discontinued Operations) are combined in a single item in the final section of the Income Statement, separatelyfrom the result for Continuing Operations. Cash flows for Discontinued Operations are instead shown separately in the cash flow statement. The above information isalso presented for the comparative period.In accordance with IFRS 5, the Group of discontinued operations has been considered a “discontinued operation” from themoment in which the dismissed group companies are those specialised in the “OSP” business line and, with particularreference to PSM, it covers an entire geographical area of operation of the Group, meaning America.


6. accounting standards and interpretations of initial application

The following is applicable from January 1, 2019:

• ifRS 16 – Leasing, adopted by EU Regulation 2017/1986. The new principle is aimed at improving the recording of leaseagreements, providing users of the financial statements with useful information for evaluating the effect of the lease onthe financial situation, the net result and on the cash flows of the lessee. This discipline involves a considerable revisionof the current accounting recognition of passive leasing contacts by introducing, for the lessor, a unified model for thedifferent types of leasing (both financial and operational).

• annual improvements to ifRS: 2015 - 2017 cycle, adopted with EU Regulation 2019/412. The changes affected:– ifRS 3 – business combinations: an entity remeasures its previous interest in a Joint Operation when it gains controlof the business.– ifRS 11 – Joint control arrangements: an entity does not remeasure its previous interest in a Joint Operation whenit obtains joint control of the business.– iaS 12 – income taxes: an entity must record the tax effects of dividends for the purposes of income taxes in theprofit (loss) for the year, in the other components of the comprehensive income statement or in equity, depending onwhere the entity originally disclosed transactions that generated distributable earnings. – iaS 23 – financial charges: an entity determines the amount of financial charges that can be capitalised excludingthe financial charges applicable to loans obtained specifically for the purpose of acquiring an asset that justifies acapitalization, until all the operations necessary for the asset to be usable or saleable are not completed.

• amendments to iaS 19: modification, reduction or termination of the plan, adopted with Regulation (EU) no.2019/402. After a change, reduction or settlement of a defined benefit plan, an entity shall update its assumptions andre-measure its defined benefit liability or asset. The company must use the updated assumptions to measure the cost ofthe current service and net interest for the remainder of the reporting period after the event.

• amendments to iaS 28: long-term interests in associates and Joint Ventures, adopted with Regulation (EU) no.2019/237. The entity applies IFRS 9 to those interests in associates and joint ventures for which it does not apply theequity method, including long-term interests and which are essentially part of the net investment in these associatedcompanies and Joint Ventures.

• ifRic 23 – Uncertainty over income tax treatments, adopted with EU Regulation no. 2018/1595. An entity mustconsider whether the competent authority is likely to accept any tax treatment, or group of tax treatment, that it hasused or plans to use in its tax return. If an entity believes that a particular tax treatment is likely to be accepted, it mustdetermine taxable income (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistent with the taxtreatment included in their tax documentation. If the entity concludes that a particular tax treatment is not likely to beaccepted, the entity must use the most likely amount or expected value of the tax treatment in determining the taxableincome (tax loss), tax bases, unused tax losses carried forward, unused tax credits and tax rates. The decision should bebased on which method provides better predictions for resolving uncertainty.

• amendments to ifRS 9 – financial instruments – negative cleared prepayments, adopted by EU Regulation2018/498. Some financial assets with negative offsetting can be measured at amortised cost. The assets concerned,which include some loans and debt securities, would otherwise be measured at fair value through profit or loss (FVTPL).Negative offsetting arises where the contractual terms allow for early repayment of the instrument before the contractualexpiration, but the amount of the advance payment may be less than the unpaid principal and interest amounts. However,to obtain an evaluation of the amortised cost, the negative offsetting must be “reasonable” for the early termination of


the contract. An example of such reasonable offsetting is an amount that reflects the effect of the change in the referenceinterest rate. In addition, for the purpose of measuring at amortised cost, the asset must be held within a “Hold tocollect” business model.

7. Upcoming accounting standards and interpretations

The following is applicable from January 1, 2020:• Changes to the references to the Conceptual Framework in the body of the IFRS. The amendments update some of the

references and citations in the IFRS standards and interpretations so that they refer to the revised Conceptual Frameworkor specify the version of the Conceptual Framework to which they refer.

• Amendments to iaS 1 – presentation of financial Statements and to iaS 8 – accounting Standards, changes inaccounting estimates and errors to Clarify the Definition of “Relevant” in order to make it easier for companies tomake judgements about the relevance and to improve the relevance of information in the notes to the financialstatements.

• Amendments to ifRS 9 – financial instruments, to iaS 39 – financial instruments: recognition and measurementand to ifRS 7 – financial instruments: additional information with which temporary derogations have beenintroduced and limited to the application of the provisions relating to the accounting of hedging transactions so thatcompanies can continue to comply with the provisions assuming that the reference indices for determining the existinginterest rates have not changed following the reform of the interbank rates (Interest Rate Benchmark Reform).1

8. accounting standards, amendments and interpretations issued by the iaSb but not yetapproved by the european commission

At the date of approval of the financial statements in question, certain accounting standards, amendments and interpretationswere issued by the IASB but not yet approved by the European Commission:• IFRS 17 – Insurance Contracts;• Amendments to IFRS 3 – Business Combinations;• Amendments to IAS 1 – Presentation of Financial Statements: Classification of Liabilities as Current or Non-current.The potential impact that these standards, amendments and interpretations could have on the financial reporting of theGroup when applied are still being studied.

9. Use of estimates

The preparation of the financial statements requires the directors to apply accounting standards and methodologies which,under certain circumstances, are based on difficult and subjective evaluations and estimates, historical experience, and


1. The reform of the benchmark indices employed to establish interest rates refers to the reform, which concerns the entire market, of a ben-chmark index for the determination of interest rates, including the replacement of a benchmark index for the determination of interest rates withan alternative reference rate, such as that resulting from the recommendations contained in the report of the Financial Stability Board of July 2014“Reforming Major Interest Rate Benchmarks”.

assumptions that are considered to be reasonable and realistic in light of the relative circumstances. The application of theseestimates and assumptions affects the amounts reported on the financial statements, the statement of financial position,the income statement, the comprehensive income statement, the statement of cash flows, and the disclosures provided.Due to the uncertainty that characterises the assumptions and the conditions upon which the estimates are based, the finalresults of the items on the financial statements for which these estimates and assumptions have been utilised may differ,even considerably, from those contained in the financial statements showing the effects of the estimated items.Even if not all of the estimated accounting entries are significant on an individual basis, they are significant collectively. Forthis reason, the areas that need to be evaluated more subjectively by the directors during the preparation of the estimates,and for which any changes in the conditions underlying the assumptions could have a significant impact upon the Group’sfinancial results, are summarised below.

Deferred tax assetsThe deferred tax assets are recognised against the temporary deductible differences between the values of the assets andliabilities indicated on the financial statements with respect to the corresponding value for tax purposes. A discretionalassessment must be made in order for the directors to determine the amount of the deferred tax assets that can be accountedfor, which depends on the estimate of the probable timing and the amount of the future taxable profits.

Provision for doubtful receivables The recoverability of the receivables is assessed taking into account the risk of their inability to be collected, their age, andthe impairment losses on receivables recorded in the past for similar types of receivables.

Provisions Provisions representing the risk of negative outcomes have been recorded for legal and tax risks. The value of the provisionsrecorded on the financial statements for these risks represents the best estimate to date made by the directors. This estimateinvolves certain assumptions dependent upon factors that can change over time, and which could therefore have a significanteffect in relation to the current estimates made by the directors during the preparation of the Group’s consolidated financialstatements.

Impairment of assetsGoodwill and other tangible and intangible assets with finite useful lives are tested for impairment, which is recorded throughwrite-downs whenever the indicators reveal the likelihood of difficulty in recovering the relative net carrying amount throughuse. The verification of the existence of these indicators requires the directors to make subjective assessments based on theinformation available within the Group and on the market, as well as from historical experience. Moreover, if it is determinedthat a potential impairment may have been generated, the Group proceeds with the determination of the same usingappropriate valuation techniques. The correct identification of the elements indicating a potential impairment of tangibleand intangible assets, and the estimates for the determination of the same, depending upon factors that can change overtime, thus affecting the evaluations and estimates made by the directors themselves.

DepreciationThe costs of the tangible and intangible assets with finite useful lives are amortised at constant rates over the course of theestimated useful lives of the relative assets themselves. The useful economic lives of such assets are determined by thedirectors at the time of their acquisition, based on historical experience for similar assets, market conditions, and anticipatedfuture events that could have an impact on the useful lives of the assets, including changes in technology. Their actualeconomic lives may therefore differ from their estimated useful lives.As required by section 10 of IAS 8 (Accounting policies, changes in accounting estimates and errors), in the absence of aStandard or Interpretation specifically applicable to a particular transaction, the Management shall make use of weightedsubjective evaluations to determine the accounting methodologies to be adopted in order to provide consolidated financial


statements that faithfully represent the Group’s financial position, operating results, and cash flows, reflect the economicsubstance of the transactions, are neutral, are prepared according to the principle of prudence, and are complete in all ofthe relevant aspects.

Recognition of revenues and costs relating to contract work in progressThe group uses the percentage of completion method to account for long-term contracts. The margins recorded on theincome statement depend on both the order and the margins forecast from the entire project on completion. Consequently,for the purposes of correctly recognising work in progress and profits related to works yet to be completed, the directors arerequired to make an accurate estimate of expected costs to complete, expected increases and delays, additional costs andpenalties which could have an impact on the expected profit. Using the percentage of completion method requires theGroup to estimate the costs of completion, which in turn requires estimates to be made that depend upon factors that canchange over time, and could therefore have a significant effect upon the current values. If the actual cost is different fromthe estimated cost, this change will have an impact on the results in future fiscal years.

10. Risk management

The group is exposed to a series of business and financial risks associated with its operations.The main business risks consist of the following:• Economic crisis: the continuation of the economic crisis could compromise the Group’s profitability and its ability to

generate cash flows, including by its core businesses. In order to counteract this risk, the Group pursues its goal ofincreasing production efficiency and improving contract execution capacity while concurrently cutting structural costs.

• Long term fixed price contracts: the Group’s response to this risk consists of following the established procedures duringthe preparation and approval of its main sales offers, with the main financial and performance indicators, includingEconomic Value Added (EVA), one of the reference indicators, being continuously checked right from the initial phases.The Group also checks the estimated contract costs regularly, at least every three months. It identifies, monitors andevaluates risks and uncertainties inherent in contract performance using the “Contract management” directive, as wellas two procedures (Lifecycle Management and Risk Assessment) designed to reduce the probability that risks or theirnegative consequences will materialise, and ensure that the appropriate mitigation measures are promptly applied.This procedure involves senior management, the program managers and the quality, production and finance functions(the so-called “phase review”).

• Customer liability: the Group is exposed to risks of customer or third party liability linked to the proper execution of thecontracts, which it addresses by stipulating standard insurance policies available on the market to cover any damagescaused. However, damage could arise that is not covered by insurance policies, or that exceed the sum insured, or elsethe insurance premiums, which are nevertheless constantly monitored by the management, could increase in the future.

• Legislative compliance: The Group ensures its constant compliance with the relevant legislation through specificprocedures, subordinating the start of any commercial actions to checking compliance with limits and attainment of thenecessary authorisations.

The risks of a financial nature consist of:• Liquidity risks, which consist of the risk that the available financial resources will not be sufficient to meet the obligations

under the agreed terms and deadlines;• Market risks, related to the Group’s exposure to interest-bearing financial instruments (interest rate risks) and to operations

in areas that use currencies other than the Group’s functional currency (currency risk); • Credit risk, arising from normal trading transactions or financing activities.


The Group specifically monitors each of these financial risks and acts promptly to contain them, including, for example, byusing hedging derivatives.The potential impact of hypothetical fluctuations in the reference parameters on actual results is described below, includingusing sensitivity analyses. As set out in IFRS 7, these analyses are based on simplified scenarios applied to the actual figuresof the reference years. However, because of their nature, they cannot be considered as indicators of the real effects of futurechanges in reference parameters when a different financial position and different market conditions are considered. Moreover,they do not reflect the interrelations and complexities of the reference markets.

liquidity riskLiquidity risk consists of the risk that, due to the inability to raise new funds or liquidate assets on the market, the Group isunable to meet its payment obligations, resulting in a negative impact upon the operating result if it were to be forced toincur additional costs to meet its commitments or a situation of insolvency. The Group’s aim is to establish a financial structure that, in keeping with its business objectives and the defined limits, i)ensures an adequate level of liquidity, minimising the relative opportunity cost, and ii) maintains a balance in terms of thedebt composition and duration.The following table shows a maturity analysis based on the contractual repayment obligations in relation to the capitalisedvalues of the bond, the trade payables, and other liabilities held as of 31 December 2019 and 2018. The first column showsthe year-end balance, while the next columns show the foreseen cash outs at the indicated deadlines, including interest.

euro/thousand amount as at Whitin over 1 year and over total December 31, 2019 1 year up to5 years 5 years

Bonds 619,213 277,970 388,500 - 666,470

Other current and non-current financial liabilities 891,863 254,956 896,758 24,406 1,176,120

Financial liabilities discontinued operations (36,724) (36,724) - - (36,724)

Trade payables 417,576 417,576 - - 417,576

Other current and non-current liabilities 382,495 282,064 101,556 - 383,620

euro/thousand amount as at Whitin over 1 year and over total December 31, 2018 1 year up to5 years 5 years

Bonds 618,387 17,171 302,563 353,191 672,925

Other current and non-current financial liabilities 542,302 369,910 134,830 23,008 527,748

Trade payables 423,697 423,697 - - 423,697

Other current and non-current liabilities 335,169 147,143 189,601 - 336,744


interest rate riskThe Group is exposed to interest rate variations in relation to the use of its liquidity. The interest rate risks were measured bymeans of a sensitivity analysis, as required by IFRS 7, conducted upon the exposed part at risk of changes to the interest ratenot covered by derivatives. If the reference rates were 50 basis points higher/lower, the effects on shareholders’ equity at 31December 2019 and on the result for the year ended on that date would have been insignificant.

foreign exchange risksThe Group’s procedures require that revenue in foreign currency exposed to the currency risk be hedged on acquisition ofthe related contract. With respect to expenses, the Group’s policy provides that supply agreements are mainly contracted inEuro. Any foreign currency purchases are usually hedged by a corresponding amount of revenue in the same currency.The notional amount in Euro of all items hedged by sell-side derivatives totalled Euro 129,592K and Euro 1,370K for buy-side derivatives as of 31 December 2019.In view of the above, and, in particular, excluding the effect of the policy of hedging transactions in currencies other thanthe Euro, the sensitivity analysis on the variations in foreign exchange rates is insignificant.

credit riskThe Group is exposed to credit risk in terms of both its trading counterparties and its financing and investing activities, inaddition to the guarantees given for third-party liabilities or commitments.In order to remove or contain the credit risk from trading transactions, especially with foreign counterparties, the Group hasimplemented a careful hedging policy that provides for hedging trading transactions since inception and carefully monitoringthe conditions and payment terms to propose in its commercial offers, that may subsequently be included in sales agreements.Specifically, depending on the contractual amount, the type of customer and importing country, specific measures are takento contain credit risk, in terms of payment terms and related financial means required, such as stand-by or irrevocable andconfirmed letters of credit or, where this is not possible and if the country/customer is specifically at risk, the Group considerswhether to request an adequate insurance policy through the dedicated Export Credit Agencies, like SACE, or internationalbanks, in the case of contracts that require financing of supply.

The following table provides a breakdown of the trade receivables, grouped by maturity and by geographical region, net ofthe provision for doubtful receivables:

trade receivables euro/thousand area europe area US other total

at 31.12.2019

- Retentions - - 203 203

- Not yet due 57,838 1,093 62,605 121,535

- Overdue by less than six months 15,559 3,577 81,326 100,462

- Overdue between six months and one year 15,829 4,818 58,321 78,968

- Overdue between one and five years 7,807 (2,135) 29,099 34,771

-Overdue more than five years 9,961 5,285 3,194 18,440

106,993 12,638 234,749 354,380

There is no significant risk of credit concentration, either by geographical area, sector or type of customer.


11. capital management

The management of the Group’s capital is aimed at ensuring a solid credit rating and adequate capital indicator levels tosupport the investment plans, in accordance with the contractual obligations assumed with lenders.The Group obtains the capital necessary to finance the development needs of its businesses and operational activities; thefunding sources consist of a balanced mix of risk capital and debt capital, in order to ensure a balanced financial structureand to minimise the overall cost of capital, with consequent benefits for all the “stakeholders.” The current financial situationof the Group has led to a downturn of the risk indices in question, but we remain confident of a recovery of the balancebetween sources in the short term.The return on the risk capital is monitored based on the market trend and business performance, once all the other obligationshave been met, including debt servicing; therefore, in order to ensure an adequate return on the capital, the protection ofbusiness continuity, and the development of the businesses, the Group constantly monitors the changes in the level of debtin relation to equity, the business trend, and the cash flow forecasts, over both the short and medium/long term.

12. financial assets and liabilities by category

The following tables detail the Group’s financial assets and liabilities as required by IFRS 7, in accordance with the categoriesidentified by IFRS 9, as of 31 December 2019 and 2018. The Group has no financial assets or liabilities measured at fairvalue through profit or loss or in the statement of comprehensive income, nor financial assets available for sale.

Other current financial assets 311,845 311,845

Other non-current financial assets -

Other receivables and other non current assets 745 745

Trade receivables 354,380 354,380

Other receivables and other current assets 80,467 - 80,467

total 747,437 - 747,437

Loans and borrowings and other current liabilities 757,354 757,354

Other debts and other non-current liabilities 14,104 14,104

Loans and borrowings and other non-current liabilities 716,998 716,998

Trade payables 417,576 417,576

Other debts and other current liabiliites 287,410 12,996 300,406

total 2,193,442 12,996 2,206,438

euro/thousand 31.12.2019 financial assets hedging total and liabilities at derivatives amortized cost


The reconciliation table for the net financial position from January 1, 2019 to December 31, 2019, which highlights thefinancial changes and changes that did not involve cash flow (non-cash changes), is provided below:

As already commented in the dedicated paragraphs, the application of IFRS 16 resulted in a negative impact on the financialposition equal to Euro 43,243 thousand (of which 39,475 in the medium/long term).The item “other changes” of financial payables includes the reclassifications from medium / long to short term, of which themost significant amount relates to the portion of the Bond expiring in 2020 for Euro 260,846 thousand. In addition, amongthe increases in medium/long-term loans, the previously mentioned Shareholders’ loan of Euro 208,138 thousand is noted.For a detailed analysis of the existing loans, please refer to the related financial statements.

euro/thousand 31.12.2018 financial assets hedging total and liabilities at derivatives amortized cost

Other current financial assets 230,175 230,175

Other non-current financial assets 1,172 1,172

Trade receivables 300,507 300,507

Other receivables and other current assets 78,443 78,443

total 610,296 610,296

Loans and borrowings and other current liabilities 400,966 400,966

Other debts and other non-current liabilities 50,972 50,972

Loans and borrowings and other non-current liabilities 759,723 759,723

Trade payables 423,697 423,697

Other debts and other current liabiliites 161,345 6,646 167,991

total 1,796,702 6,646 1,803,348

euro/thousand cash and financial Short term medium/long total cash equivalent freceivables loans term loans

net financial debt as at 31 december 2018 229,324 851 (400,966) (759,723) (930,514)

Cash Flow of the period 82,394 (724) (57,710) (255,953) (231,993)

Exchange rate gains (losses) - - - - -

Other changes - - (298,678) 298,678 -

net financial debt as at 31 december 2019 311,718 127 (757,354) (716,998) (1,162,507)


13. fair value measurement

The following table summarises the assets and liabilities measured at fair value as of 31 December 2019 and 2018, basedon the level that reflects the inputs used to determine their fair value:

The Group makes use of internal evaluation models generally used in financial practice. There were no transfers betweenthe various levels of the fair value hierarchy during the periods in question.

14. Segment reporting

For the purposes of IFRS 8 - Operating segments, the Group’s activities belong to a single operating segment, namely thatof energy. Moreover, while noting the heavily transversal nature of its activities, on a managerial level the Group has further based itsorganisation on a structure that, in turn, is divided into service lines and geographical areas. The Group has thus identified the following service lines: plants and components, service, nuclear and renewables. Thegeographical area scheme, on the other hand, in which the risks and benefits are also significantly influenced by the factthat the company operates in different countries or different geographical areas, has been evaluated as secondary. For a more detailed analysis of each service line, please refer to the Report on Operations.In order to complete the disclosures, the following table shows the breakdown of the revenues by service line and bygeographical area, as well as the detail of the gross margin (defined as the difference between revenue and cost ofproduction) for each service line.

euro/thousand fair Value fair Value fair Value fair Value 2019 hierarchy 2018 hierarchy

assets

Currency forward/swap/option - -

Interest rate swap - -

liabilities

Currency forward/swap/option 12,226 Level 2 6,086 Level 2

Interest rate swap 892 Level 2 560 Level 2

Reclassifications in liabilities related to assets available for sale (122) Level 2 - Level 2

euro/thousand new Units Service nuclear Renewable total energies

Revenues 363,769 551,444 66,166 2,686 984,065

Gross Margin 39,910 157,515 3,128 875 201,428


Furthermore, the following table shows the revenues by geographical area (or rather allocated based on the countries in wherethe customers are based) and the fixed assets by geographical area (which instead are allocated based on their specific locations):

Revenues


Italy 305,427 243,816

Europe/CIS*/Africa/ Middle East 513,362 423,540

America 13,067 19,918

Asia / Australia 152,209 327,394

984,065 1,014,668

*CIS= Commonwealth of Independent States

non-current assets


Italy 1,125,864 1,617,004

Europe/CIS*/Africa/ Middle East 625,962 284,945

America 376 22,263

Asia / Australia 10,226 19,893

1,762,428 1,944,105

*CIS= Commonwealth of Independent States


15. intangible assets

This item and the relative change can be detailed as follows:

During the course of the 2019 fiscal year, the Group continued to develop new technologies relating to the GT26 and GT36turbines. The main development project regarded the prototype of the GT36 turbine, which was carried out jointly by theItalian and Swiss teams.


euro/thousand goodwill Development patent concessions, intangible other total expenses and licenses and assets assets similar trademarks acquired under rights through develop- business ment combinations (ppa)

January 1, 2018 as follows:

Cost 805,967 157,030 367 129,003 657,669 203,496 1,953,532

Accumulated amortization and impairment (811) 122,404 367 36,190 241,523 14,449 414,122

carrying amount 806,778 34,626 - 92,813 416,146 189,047 1,539,410

Investments - - - - - 86,696 86,696

Amortization and impairment - 8,790 - 2,657 39,505 5,432 56,384

Reclassifications - 2,345 - 922 1,087 (4,354) -

Other changes - 82 - 184 - 282 548

December 31, 2018 as follows:

Cost 805,893 159,564 367 110,725 659,300 284,441 2,020,290

Accumulated amortization and impairment (885) 131,301 367 19,463 281,572 18,202 450,020

carrying amount 806,778 28,263 - 91,262 377,728 266,239 1,570,270

Investments - 4,383 - - - 92,890 97,273

Sales - - - - - 123 123

Amortization and impairment 9,000 7,229 - 2,131 130,849 97,142 246,351

Amortization as a result of discontinued operations 3,148 555 53 3,755

Reclassifications - 21,312 - 0 - (21,312) 0

Other changes - (1,503) - (568) (1,155) 3,016 (210)

Reclassifications into assets available for sale (11,880) (3,412) (23,947) (1,705) (40,944)


Cost 806,333 170,407 367 104,375 635,355 349,094 2,065,931

Accumulated amortization and impairment 8,555 140,209 367 19,779 413,578 107,283 689,771

carrying amount 797,778 30,198 - 84,596 221,777 241,811 1,376,160

The main deviations from the 2018 financial statement values relating to the aforementioned technology are attributable tothe results of the impairment test commented on in the specific paragraph.These results determined the need to make a write-down of Euro 96,000 thousand with an impact on assets underconstruction as well as Euro 86,000 thousand on intangible assets allocated following the PPA deriving from the acquisitionin 2016 linked to the so-called Gastone project. The item “Goodwill”, also written down following the impairment test as described in the following paragraph, deviates byEuro 771,552 thousand deriving from the application of the purchase price allocation process as required by the accountingstandard IFRS 3 in relation to the merger that took place in 2012 with Ansaldo Energia Holding S.p.A., and for Euro 26,226thousand from the acquisition of the British Nuclear Engineering Group.The item “Concessions, licenses and trademarks” mainly refers to the Ansaldo brand registered in Ansaldo Energia (for aresidual value of Euro 78,451 thousand) and Ansaldo Nucleare (for a residual value of Euro 3,420 thousand).The item “Intangible assets acquired for business combinations” refer to General Electric Company’s acquisition of a part ofAlstom’s business in the field of gas turbines (the so-called Gastone Project) for Euro 144,755 thousand, as well as Euro77,022 thousand of intangible assets deriving from the PPA relating to the aforementioned 2012 merger.Finally, the “Other fixed assets in progress” mainly refer to the residual value of the costs incurred for the development ofthe GT 36, for Euro 184,312 thousand, of which Euro 16 million of materials and components that will be intended to beused for testing activities carried out in the Birr plant (Switzerland).Furthermore, as already mentioned, the item in question has undergone a decrease of Euro 96,000 thousand following theimpairment test.

goodwillThe “Goodwill” item, which amounted to Euro 797,778 thousand as of 31 December 2019, can be attributed as follows:– Euro 772 million reverse merger between Ansaldo Energia S.p.A. and its parent company Ansaldo Energia Holding S.p.A.

in 2012;– Euro 26 million for the acquisition of Nuclear Engineering Services, currently Ansaldo Nuclear.

The group of cash-generating units (CGUs), to which the goodwill is allocated, coincides with the operating segment intowhich all the products and services provided by the Group converge — or rather the Energy segment (for more details,please refer to note 14 “Segment reporting”). [In this regard, it should be noted that Goodwill is recoverable through thejoint activity of a group of CGUs, which specifically coincides with the Energy sector].In keeping with the requirements of the international accounting standards, the impairment test to ascertain any impairmentof goodwill had already been conducted by the date of these financial statements. The impairment test was carried out bycomparing the carrying amount of the goodwill with the CGU value in use to which it refers.The value in use was calculated using the Discounted Cash Flow (“DCF”) method, by discounting the operational cash flowsgenerated by the asset itself (net of taxation) at a discount rate representing the weighted average cost of capital.The post-tax WACC used for discounting future cash flows is 9.1%, inclusive of an additional risk premium of 40 bps inorder to consider environmental uncertainty. This rate is expressive of a sector target financial structure, arouse from thedebt ratios, at market values, of a basket of comparable listed companies.The annual terminal growth rate is 1.5%, estimated also considering the fast-growing markets in which the Group mainlyoperates. The value in use was obtained by discounting (i) the operating cash flows - net of tax - deriving from the activity in an explicitforecast period corresponding to the 2020-2024 Plan period, as well as (ii) the present value of the flows cash flow beyondthe explicit forecast period (terminal value), obtained by projecting the normalized cash flow in perpetuity relating to thelast year of the explicit forecast. The 2020/2024 Plan has been approved by the Parent Company’s Board of Directors andthe expected result flows have been estimated on the basis of past economic-income performance and future expectations.The value in use, thus determined, was compared with the adjusted net invested capital, including operating assets (afterany impairment losses) and goodwill.


From the results of the impairment test carried out, it emerges that the estimated recoverable value for the CGU is Euro 9million lower than the relative book value at the reference date, therefore we proceeded to reflect a loss in value at theGoodwill level.We also performed a sensitivity analysis to verify the effects on the results of the impairment test of the variation of someparameters deemed significant, namely WACC, growth rate in perpetuity, EBITDA in constancy of the other parameters: thisanalysis yields scenarios of greater devaluation of the consolidated assets subject to impairment tests which, however, donot appear probable in the current context.

SenSitiVity analySiS Variable Variation impact on recoverable amount

Increase of WACC 1% (177) M€

Decrease in growth rate (g) (1%) (139) M€

Decrease in EBITDA (10%) (148) M€

impairment of intangible assetsA recoverability analysis of intangible assets was also performed in order to analyse all those assets not yet available for useor those for which impairment presumptions have emerged (so-called trigger events).The Intellectual Properties related to R&D specifically linked to the GT36 project (“IPR & D GT36”), pursuant to IAS 36 §10,have been subjected to impairment test. This test was based on the DCF Method, using the value in use as the recoverablevalue configuration.As regards the determination of the recoverable value of the IPR & D GT36, an estimate was made of the cash flowsgenerated by the technology in question, discounted at an opportunity cost of capital that reflects the specific risk of theasset.The cash flows considered include all the income and expenses expected in relation to the economic flows of the orders, thegeneral and administrative overheads of the completion of research and development, the costs expected for the learningcurve, the investments in tangible fixed assets and maintenance research and development.Economic flows consider a residual useful life of the technology that spans a time horizon of 20 years foreseen for the saleof new units and 28 years for the sale of the related service. The opportunity cost of capital, used at the valuation reference date, is in line with that used for the impairment test inregard to Goodwill.The carrying amount of the IPR & D GT36 was determined by allocating, in addition to the intangible assets in question, thespecific operating net working capital, as well as certain fixed assets “serving” on the basis of appropriate allocation drivers.The result of this calculation showed that the present value of future flows is Euro 157,600 thousand lower than the bookvalue and therefore an impairment loss was recognised. To this end, the residual value of the GT36 technology, as assignedin PPA 2016 (Euro 86,030 thousand), was written down, which corresponds to the release of the related deferred taxes forEuro 24,002 thousand and to the write-down of assets under construction for Euro 96,000 thousand. We performed analyses for all the other intangible assets subject to amortization to identify any potential impairment thatrevealed the need to devalue the residual value of the NEG trademark (Euro 6,470 thousand), which was previously recordedas an intangible asset. acquired from Business Combination, but not to perform other specific impairment tests.


16. property, plant and equipment

This item and the relative change can be detailed as follows:

The investments for plants entering production mainly relates to:• the improvement works of the building 12 owned by the Parent Company, and more specifically the complete renovation

(including systems) of floors 4 and 5 and the roof (Euro 3,802 thousand);• the acquisition of moulds for turbine blade casting for GT26 2006 and 2011 which remain with suppliers for the

processing of casting for Euro 3,376 thousand;


euro/thousand lands plant equipment others fixed assets leased total and and in progress assets buildings machinery and advances

January 1, 2018 as follows:

Cost 198,995 335,771 118,206 35,062 32,911 1,412 720,945

Accumulated amortization and impairment 78,820 258,718 94,467 28,196 724 460,201

carrying amount 120,175 77,053 23,739 6,866 32,911 688 261,432

Investments - 2,788 1,654 400 35,657 202 40,701

Sales - 144 20 4 131 - 299

Amortization and impairment 6,103 16,193 7,433 2,356 - 193 32,278

Reclassifications 3,601 16,405 9,326 699 (30,279) - (248)

Other changes 190 214 1 (70) 125 2 462


Cost 203,122 356,152 128,297 35,708 38,283 1,610 763,172

Accumulated amortization and impairment 85,259 276,029 101,030 30,173 - 911 493,402

carrying amount 117,863 80,123 27,267 5,535 38,283 699 269,770

Investments 3,959 2,241 110 1,396 18,207 853 26,766

Recognition of leased assets / rights of use from IFRS16 adoption - - - - - 86,576 86,576

Sales - 16 3 1 749 2,459 3,228

Amortization and impairment 5,619 12,668 11,023 2,199 - 5,889 37,398

Amortization as a result of discontinued operations 574 2,044 31 241 2,518 5,407

Reclassifications 4,120 10,131 14,011 1,779 (30,039) (0) 0

Other changes 73 287 32 125 (3,622) 1,038 (2,068)

Reclassifications into assets available for sale (65) (6,431) (58) (431) (2,099) (35,389) (44,471)


Cost 204,306 308,230 141,731 31,280 19,981 49,287 754,816

Accumulated amortization and impairment 84,549 236,607 111,426 25,317 - 6,376 464,275

carrying amount 119,757 71,623 30,305 5,963 19,981 42,911 290,541

• the activities concerning all the necessary plant works aimed at separating the only medium voltage ring previouslyexisting into three different MV rings for each cadastral unit in the Ansaldo Energia area of Via Lorenzi, 8. The activityalso involved Enel laying and supplying 2 new supply points in order to make available for each of them a power of 9.9MW, Euro 2,250 thousand;

• the completion of the rotor welding following the need to adapt to the sizing of the GT technology machines, for Euro1,768 thousand;

• tooling for post casting for turbine and compressor blades and heat shield GT26, for Euro 918 thousand; • the implementation of new equipment (kits) to allow the Field Service to carry out C-inspection activities on GT26

machines for a total of Euro 836 thousand;• GT26 and GT36 rotor handling/processing tools, for Euro 703 thousand;• a plan to replace and increase the mechanical processing capacity of hot blades with EDM machines; in 2019 the related

machine fleet was increased by two units with the acquisition of a machine with wire technology and one with die-sinktechnology, for Euro 575 thousand;

• the extraordinary overhaul of the 200 Ton overhead crane n.63 installed at building 35 to allow you to safely perform amanoeuvre in combination with overhead crane n. 176 of 350 t, using the new 500t ETS lifting beam, for Euro 389 thousand.

Leased assets mainly refer to buildings and cars capitalised following IFRS 16.

17. equity investments

The value of “Equity investments” amounted to Euro 21,420thousand, down Euro 10,400 thousand on 31 December 2018.The main changes that led to the variation in the “Equity investments” are highlighted below:

euro/thousand 31.12.2019 31.12.2018

January 1st 31,820 39,923

Acquisitions/subscriptions and capital increases 2 50

Share of profits (losses) of associates and joint ventures accounted for using equity method (except provision for risk on investments) (9,447) (2,961)

Dividends received - (1,720)

Capital reimboursement (1,001) (995)

Revaluation (Devaluation) (143) (211)

Increases from companies aggregation - 246

Change in scope of consolidation (124) (77)

Other changes and exchange differences 313 (2,435)

December 31st 21,420 31,820

The changes for the fiscal year essentially refer to:• the write-down of the investments in the two Chinese Joint Ventures AGT (Ansaldo Gas Turbine High Technology Co.

Ltd.) and SEGT (Shanghai Electric Gas Turbine Co. Ltd.), respectively for Euro 1,232 thousand and Euro 8,720 thousand;the former is a 60% holding, and the latter is a 40% holding; the two JVs are both part of the cooperation project with


Ansaldo Energia partner Shanghai Electric Hong Kong Co. Limited, with the goals of penetrating into the Chinese marketand implementing energy-related Research and Development projects; during the course of the fiscal year, the two JVsrespectively accumulated losses (respectively of Euro 2,053 thousand and Euro 21,802 thousand), which resulted in theirdevaluation on the financial statements;

• the write-down of the investment in the Renewable Energy Consortium for Euro 10 thousand;• the write-down of the equity investment in Euroimpresa Legnano Scrl for Euro 133 thousand;• the entry into the consolidation area using the full method of the Ansaldo Iranian company, which at December 31, 2018

was included among the companies valued with the equity method for Euro 49 thousand;• the entry into the consolidation area of Ansaldo Energia Nigeria for Euro 437 thousand;• upon leaving Polaris’s consolidation area for Euro 512 thousand;• repayment of the capital in Cogenerazione Rosignano (Euro 1,001 thousand).

Foreign exchange differences are included in the line “other changes”.

list of equity investments as of 31 December 2019

euro/thousand Denomination investment % investment amount

Subsidiaries and associates

Ansaldo Algerie 49% 610

AU Finance Holding 40% 414

Polaris Anserv 20% 54

SPVTCCC 100% 24

Joint ventures

Ansaldo Gas Turbine Technology 60% 6,518

Shanghai Electric Gas Turbine 40% 3,640

other equity investments and consortia

AC Boilers 10% 6,000

Cogenerazione Rosignano 33% 3,999

Consorzio CISA in liquidazione 66% 68

Consorzio CORIBA in liquidazione 5% 3

Consorzio CREATE 20% 5

Consorzio SIRE in liquidazione 29% 25

Dynamic 25% 2

Euroimpresa Legnano in liquidazione 10% 22

Santa Radegonda 19% 6

SIET 2% 15

SIIT Distretto Tecnologico Ligure 2% 14

Other Companies 0.10% 1

total equity investments (net of impairment losses) 21,420


As mentioned, the main effects of the valuation of the associates using the equity method upon the consolidated financialstatements as of 31 December 2019 was the devaluation of investments in the two Chinese Joint Ventures Ansaldo GasTurbine High Technology Co. Ltd. and Shanghai Electric Gas Turbine Co. Ltd.

The most significant provisional data regarding these two investments are provided below:

euro/thousand as of December 31, 2019 ansaldo gas turbine Shanghai electric technology co. gas turbine co

Total Assets 18,015 274,582

Total Liabilities 7,152 265,481

Total Equity 10,863 9,101

Operating Result (2,053) (21,802)

Total revenues 4,922 183,301

The figures were converted using the exchange rate at 2019.

As a guarantee of the investment in AC Boiler, the Parent Company boasts an option for the acquisition of the entire amountof the capital of the company CCA, Centro Combustion Ambiente.

As of December 31, 2019, the capital of this company, 100% controlled by the company AC Boiler, is burdened by a pledgein favour of the financing banks of the majority shareholder of AC Boiler. An agreement entered into between the latter andthe Parent Company provides for a commitment to release the pledge in case of exercise of the aforementioned option.

The table below shows the effects of valuations of investments consolidated using the equity method:


NNS evaluation - 1,070

Polaris Anserv evaluation 4 6

Shanghai Electric Gas Turbine evaluation (8,720) (2,625)

Ansaldo Gas Turbine Technology evaluation (1,232) (1,822)

Ansaldo America Latina evaluation - 9

Ansaldo Algeria evaluation 433 103

SPVTCCC evaluation 41 (9)

AU Finance Holding evaluation 27 185

Ansaldo Nigeria evaluation (452)

Polaris evaluation - 122

(9,447) (3,413)


18. Receivables and other non-current assets

This item can be detailed as follows:

euro/thousand 31.12.2019 31.12.2018

Guarantee deposits 479 567

Other 386 605

Reclassifications into assets available for sale (120) -

non-current receivables 745 1,172

Deferred tax assets 77,971 71,073

Reclassifications into assets available for sale (4,408) -

other non-current assets 73,563 71,073

Deferred tax assets have not had significant changes compared to 31 December 2018 and are mainly allocated to thedeductible temporary differences represented by the write-downs of the receivable from Unit NV which occurred in previousyears, as well as on provisions for taxed risks and employee benefits.

19. inventories


euro/thousand 31.12.2019 31.12.2018

Raw materials, consumables and supplies 413,936 420,094

Work in progress and semi-finished products 243,392 247,465

Advances to suppliers 20,231 18,942


534,926 686,501

Raw materials, consumables and supplies They are stated net of the allowance for inventory write-down of Euro 24,658 thousand.The change in the provision reflects provisions of Euro 8,810 thousand, while the reclassification of assets available for saleamounts to Euro 46,892 thousand. During the year, they decreased by Euro 6,158 thousand in line with the volume of orders in progress.

Work in progress and semi-finished products Semi-finished products, which increased by Euro 4,073 thousand, relate to highly standard parts which will only be allocatedto sales contracts when customised.

advances to suppliersThese increased by Euro 1,289 thousand. The variation is mainly due to the normal life of orders associated with production.The inventory items were shown net of assets available for sale, which would have had a value of Euro 143 million at 31December 2019.


20. contract work in progress and advances from customers


euro/thousand 31.12.2019 31.12.2018

Work in progress (gross) 1,217,199 1,196,112

Advances from clients 981,877 970,725


Work in progress (net) 190,391 225,387

Advances from customers (gross) 4,098,695 3,940,585

Work in progress 3,299,342 3,136,341


advances from customers (net) 722,611 804,244

Net work in progress decreased by Euro 34,996 thousand, of which Euro 44,931 relating to reclassifications into assetsavailable for sale.Net advances from customers decreased by Euro 81,633 thousand, of which 76,742 relating to assets available for sale, andwere generated mainly by the plant engineering contracts nearing completion, as well as the LYSA contracts, whose billingconditions are not strictly linked to progress on production.We ascertained the costs still to be incurred in relation to closed orders after completing the works, setting up a specificprovision. As required by IFRS 15, construction contracts are measured using the cost to cost method, i.e., by calculating the percentageof completion as the ratio of costs incurred and total expected costs. Contract work in progress at the reporting date iscalculated by applying the percentage of completion to contract revenue. The contract profits for the year resulting fromthe application of this method totalled Euro 201,428 thousand.

21. trade receivables


euro/thousand 31.12.2019 31.12.2018

Receivables 317,831 229,186

(Impairment) (3,721) (6,376)

Receivables from related parties 75,327 77,697


354,380 300,507

With regard to legal disputes and judicial or insolvency proceedings, the trade receivables in dispute are recorded at nominalvalue and written down in a specific provision for doubtful accounts. The receivables recorded are not supported bypromissory notes or similar securities.


The provision for doubtful trade receivables underwent the following change in 2019:

opening balance 6,376

Used during the exercise 214

Other movements (exchange rate differences) 73

Reclassifications into assets available for sale (2,514)

closing balance 3,721

The analysis of the receivables past due and the considerations on the methods for managing the credit risk are provided inNote 10.The Parent Company resorted to the non-recourse assignment of some receivables from customers. The balance at 31/12 isEuro 35,551 thousand.

22. financial receivables

euro/thousand 31.12.2019 31.12.2018

Receivables 280,407 249,319

(Impairment) (280,407) (249,319)

Receivables from related parties 127 851

127 851

Financial receivables amounted to Euro 127 thousand and relate exclusively to items with related parties, already detailed inthe corresponding paragraph.Financial receivables resulting from the relationships established with the Unit NV Group, increased during the year by 31,088,have been written down in full, as already commented in detail in the Report on Operations.

23. tax assets and liabilities


31.12.2019 31.12.2018 euro/thousand Receivables payables Receivables payables

Current tax 5,279 6,663 4,790 14,201

Reclassifications into assets available for sale (2) (1,317) - -

5,277 5,346 4,790 14,201


Current tax assetsThese mainly refer to advance payments and taxes paid in excess.

Current tax liabilitiesThe composition of the balance mainly relates to the Ires (Euro 4,747 thousand) and Irap (Euro 12 thousand) debit balancesof the Parent Company, while the remainder refers to the income taxes of the foreign subsidiaries.

24. other current assets

The breakdown of the item is provided below:

euro/thousand 31.12.2019 31.12.2018

Prepayments - current portion 6,820 7,089

Employees and pension institution receivables 2,129 2,514

Other tax assets 18,158 19,161

Other Assets 42,511 33,688

Other receivables from related parties 10,907 11,200


75,190 73,652

The prepayments mainly regard the portion of insurance premiums for assembly pertaining to future years and allocated tothe contracts on a percentage of completion basis.Other current assets include:• an amount due to the Parent from the customer NLC Neyveli for interest on the late payment of withholding taxes of

Euro 3,949 thousand, which was unduly withheld and with respect to which formal litigation is underway in India; • Parent Company guarantee deposits of Euro 1,490 thousand;• a receivable from Leonardo S.p.A. of Euro 5,626 thousand for the asbestos risk guaranteed to Ansaldo Energia following

the sale of its shares to the FSI (now CDP Equity);• a receivable from Leonardo S.p.A. For the Parent Company amounting to Euro 4,953 thousand as reimbursement for an

IRAP deduction from IRES (Monti Decree).• VAT credits of Ansaldo Nucleare for a total of Euro 2,820 thousand.

The receivables from the tax authorities also include branch receivables for Euro 14,169 thousand.


25. cash and cash equivalents


euro/thousand 31.12.2019 31.12.2018

Cash and cash equivalents 318,155 229,324


311,718 229,324

The item refers to a bank current account of which Euro 19,050 thousand secured and Euro 10,352 thousand collateral tothe issue of guarantees; the latter, in February 2020, were made available.Also, bank deposits include amounts available related to the Vacuum Vessel project for Euro 13,452 thousand which will bedistributed to companies belonging to the Temporary Association of Companies that manage the project activities, upondefinition of the amounts pertaining to each participant.

26. Share capital

The equity as of 31 December 2019 amounted to Euro 193,010 thousand.

Share capital

number nominal total of shares value

Shares 18,000,000 € 10 € 180,000,000

31 dicembre 2019 18,000,000 € 10 € 180,000,000

The Parent Company’s share capital can be broken down as follows:• 10,788,750 shares held by CDP Equity• 7,200,000 shares held by Shanghai Electric Hongkong Co. Limited• 11,250 shares held by Key management personnelFollowing the expiration and non-renewal of the shareholders’ agreements in December 2019, the Company is controlledby CDP Equity and is not subject to management and coordination activities.The Parent does not hold any treasury shares.


other reserves The changes in the other reserves are listed below.

euro/thousand Retained hedging actuarial other total earinings reserve Reserve reserve

December 1, 2018 100,204 7,448 (18,380) 432,742 522,014

Net result (231,952) - - (231,952)

Other changes (3,736) 1 - (7,023) (10,758)

Fair value adjustements - (15,349) (1,215) - (16,564)

Transfers to profit and loss statement - - - 2,370 2,370

Deferred taxes - 2,934 128 (198) 2,864

Consolidation adjustments 2,863 - - (1,240) 1,623

December 31, 2018 (132,621) (4,966) (19,467) 426,651 269,597

Net result (255,700) - - - (255,700)

Other changes - - 23 4,602 4,625

Reclassifications (8,906) 8,906 -

Fair value adjustements - (2,288) (6,412) - (8,700)

Deferred taxes from equity method - 412 1,082 - 1,494

Consolidation adjustments 1,818 - - 47 1,865

December 31, 2019 (395,409) (6,842) (24,774) 440,206 13,181

minority interestsThe minority interests are representative of the non-controlling interests in the Group’s subsidiaries. The relative changes areshown in the schemes contained within these financial statements.

other reservesThe row “Other changes” of 2019, states the effect of using the provision for the bonus attributed to the staff of AnsaldoEnergia Switzerland whose provision had been made through the registration of the PPA deriving from the Gastone project.(Euro 4,721 thousand).


27. loans and borrowings


The changes in current financial payables are shown below.

euro/thousand 31.12.2018 new borrowings payment other 31.12.2019 (and other increases) movements

Bonds 618,387 826 - 619,213

Bank loans and borrowings 532,140 338,503 291,865 27 578,805

Lease liabilities 166 88,527 12,090 3,351 79,952

Other loans and borrowings 9,996 21,000 6,797 (783) 23,416

Related parties loans and borrowings - 208,138 - 1,553 209,690

Reclassifications in liabilities related to assets available for sale (36,724) (36,724)

1,160,689 656,994 310,752 (32,576) 1,474,352

At 31 December 2019, the bond issue amounted to Euro 619,213 thousand and in 2019 interest accrued amounted toEuro 17,124 thousand.


euro/thousand 31.12.2019 31.12.2018 current non current total current non current total

Bonds 271,564 347,649 619,213 10,718 607,669 618,387

Bank loans and borrowings 458,621 120,184 578,805 381,806 150,334 532,140

Lease liabilities 4,878 75,074 79,952 – 166 166

Other loans and borrowings 23,416 – 23,416 8,442 1,554 9,996

Related parties loans and borrowings – 209,690 209,690 – – –

Reclassifications in liabilities available for sale (1,125) (35,599) (36,724) – – – 757,354 716,998 1,474,352 400,966 759,723 1,160,689

The characteristics of the main loan transactions in place at 31 December 2019 can be summarised as follows:

bond 1- issuance of bonds Bond issued by Ansaldo Energia Spa and purchased by institutional investorson the secondary market. Nominal value of Euro 420 million at an annualfixed rate of 2.875%. Issue date 28/04/2015 for the Euro 350 million quotaand 28/04/2016 for the Euro 70 million increase. On 28/04/2017 (value date01/06/2017), a buyback operation was carried out on the market for a shareof Euro 159.2 million. As of 31/12/2018 the Bond maturing on 28/04/2020amounted to Euro 260.8 million. There are no covenants in the contract.

bond 2- issuance of bonds Bond issued by Ansaldo Energia Spa and purchased by institutional investorson the secondary market. Nominal value of Euro 350 million at an annualfixed rate of 2.75%. Date of issue 31/05/2017. Maturity 31/05/2024. Thereare no covenants in the contract.

Revolving facility (pool) Line of credit signed by Ansaldo Energia Spa on 27/04/2015 and amendedon 10/07/2017 and 19/04/2019 with a pool of banks (Barclays, BNP Paribas,Commerzbank, Credit Agricole, HSBC, Intesa, Santander, Societe General,UniCredit) for a nominal value of Euro 360 Euro at the Euribor rate 1/2/3/6months + Spread. The spread is based on the Energia Group’s leverage ratio.At 30/06/2019 it was equal to 3.5% per annum. Maturity 30/06/2022. Theline of credit was used at 31/12/2019 for Euro 360 million.

Sace facility agreement (bnp-Sace) Loan in the name of Ansaldo Energia Spa with BNP Paribas for a nominalvalue of Euro 26.1 million, with a constant capital repayment plan, backedby SACE. Interest rate Euribor 6 months (zero-floor) + Spread. Spread is of1.2%. This loan is a result of the renegotiation of the previous loan grantedon 31/07/2014, which allowed Ansaldo Energia’s subsidiary AnsaldoNucleare to purchase the company Ansaldo Nuclear Ltd (UK). Granted on06/08/2015 Maturity 31/01/2021. In order to eliminate Euribor volatility, anInterest Rate Swap contract was stipulated in November 2014 with anannual fixed rate of 0.415%.

loan 1 (eib) Loan undersigned on August 6-7, 2015 by Ansaldo Energia Spa andamended on 19/04/2019 with the European Investment Bank (EIB) for anominal value of Euro 50 million with constant capital repayment plan. Initialfixed rate of 1.53% per annum amended to 1.98% for the amount of Euro25 million not Guaranteed by CdP; fixed rate of 0.492% for the amount ofEuro 25 million Guaranteed by CdP. This loan is based on the submission ofa program research and development for the next few years. Maturity17/10/2022.

Description credit line


loan 2 (eib) Loan undersigned on December 15-19, 2016 and amended on April 19,2019 by Ansaldo Energia Spa with European Investment Bank (EIB) for anominal value of Euro 80 million, with a bi-annual and constant capitalrepayment plan starting on 31/07/2018. Fixed rate 1.551% per annumamended to 2.081%. This loan is based on the presentation of a multi-yearR&D plan. Maturity 31/01/2024.

loan (Ubi) Loan undersigned on October 27, 2017 and amended on April 19, 2019by Ansaldo Energia Spa with Unione Banche Italiane (UBI) for a nominalvalue of Euro 60 million, with a bi-annual capital repayment plan startingon 30/04/2020. Interest rate Euribor 6 months + spread. The initial spreadof 2.3% has been amended to 3.5%. Maturity 30/10/2024. In order toeliminate Euribor volatility, an Interest Rate Swap contract was stipulatedon 31/10/2017 with an annual fixed rate of 0.3050%.

Subordinated Shareholder loan Loan undersigned on 15/05/2019 by Ansaldo Energia Spa with CDP Equity cDp equity for a nominal value of Euro 200 million, with a bullet capital repayment plan

starting on 31/12/2024. Interest rate Euribor 6 months (zero-floor) + Spread(6.75%).

ansaldo nucleare Loan signed on 25 June 2018 by Ansaldo Nucleare Spa with Mediocreditomediocredito bank loan (miSe) Banca, the only entity that disburses both the bank portion and the portionand facilitated loan (cDp) financed by CDP. Loan obtained for the development of an integrated

technology for the disposal of radioactive waste from the decommissioningof nuclear plants. Ansaldo Energia is the Guarantor. The total loan amountsto Euro 6.7 million, broken down as follows: Bank Loan of Euro 1.5 million(22.22%) and Facilitated Loan of Euro 5.2 million (77.78%). Both have ahalf-yearly capital repayment plan starting from 31/12/2024. Rate Euribor6 months + spread of 3%. Rate Facilitated Fixed rate of 0.80% per annum.Maturity December 31, 2028.

ansaldo energia Loan obtained following the Ministerial Decree dated October 15, 2014 facilitated mediocredito bank loan (Sustainable Growth Fund). Date of issue 03/07/2019. Nominal value Euro

5.9 million (50% of the report). Six-monthly capital and interest repaymentplan every June 30 and December 31 of each year. Maturity 30/06/2027.Fixed rate of 0.80% per annum.

ansaldo thomassen gulf Loan signed on 07/06/2018 by Ansaldo Thomassen Gulf with Intesa San bank loan intesa San paolo Paolo Abu Dhabi Branch for the construction of “Warehouse and Borrower’s abu Dhabi branch general Corporate purposes”. Loan of AED 14 million with a six-monthly

repayment plan for 5 years with a constant instalment and equal to AED1.4 million from June 2021 (3 years of pre-amortization). Maturity June2026. Interest rate Euribor 6 months + spread. Spread is of 3.05%.

For all the loans listed in the table, with the exception of Bonds, compliance with two indicators would be required: the“Leverage Ratio”(Net Borrowing / Adjusted EBITDA) and the “Interest Cover Ratio” (Adjusted EBITDA / Net Interest Payable).The Report on Operations indicates all the information relating to these financial covenants.Finally, the financial liabilities include Euro 23,104 thousand referred to the Parent for a receivable without recourse collectedfrom the customer during the final days of the fiscal year and not yet returned to the factor.


net financial debtThe details of the financial indebtedness as of 31 December 2019 and 2018 are provided below:

euro/thousand 31.12.2019 of which 31.12.2018 of which related parties related parties

Bank accounts 318,155 229,324

Securities held for trading - -

caSh anD caSh eQUiValentS 318,155 229,324

cURRent financial ReceiVableS 127 127 851 851

Current bank loans and borrowings 458,621 381,806

Bond liabilities 271,564 10,718

Lease liabilities 4,878 -

Other current loans and borrowings 23,416 - 8,442 -

cURRent financial Debt 758,479 400,966

net cURRent financial Debt (caSh) 440,197 170,791

Non-current bank loans and borrowings 120,184 150,335

Bond liabilities 347,649 607,669

Lease liabilities 75,074 - 166 -

Other non current liabilities 209,690 209,690 1,553 -

non-cURRent financial Debt 752,597 759,723

net financial Debt (caSh) 1,192,794 930,514

Of which net financial debt (cash) from assets / liabilities available for sale 30,287 -

net financial Debt (caSh) fRom Statement of financial poSition 1,162,507 930,514


28. employee benefits


euro/thousand 31.12.2019 31.12.2018

TFR 14,344 17,092

Defined benefit pension plans 23,130 16,040

Other provisions for personnel 2,470 2,504

Reclassifications in liabilities related to assets available for sale (18) -

39,926 35,636

This amount mainly includes the liability relating to the defined benefit plans of the Group’ foreign companies amountingto Euro 23,130 thousand and the debt for the Employee Severance Indemnity amounting to Euro 14,344 thousand. The provision for employee severance indemnities (TFR), relating to the Italian companies, represents the residual portion ofthe debt at the date of entry into force of the reform, net of the payments made up to the reference dates and, being similar,according to IAS 19, to a liability deriving from a defined benefit plan, has been subject to actuarial valuation.

euro/thousand 31.12.2019 31.12.2018

opening balance 17,092 18,802

Interest costs 75 154

Actuarial losses (gains) on equity 595 1,215

Decreases due to sales 3,419 3,079

Other changes 1 -

closing balance 14,344 17,092

The details of the main economic and demographic assumptions used for the purposes of the actuarial valuations are providedbelow:

tfR 31.12.2019 31.12.2018

Discount rate 0.17% 1.06%

Wage increase rate 2.46% 2.46%

Inflation rate 1.50% 1.50%


The assumptions taken into consideration for the calculation during the two years under review are expressed in the followingtable:

The movements in the item “Defined Benefits of Obligation” are shown below:

present value of the obligation 31.12.2019 31.12.2018

Opening Balance 16,040 13,608

Costs for services provided 1,376 2,485

Actuarial losses (gains) on equity 5,817 -

Benefits paid (103) (53)

closing balance 23,130 16,040

As of January 1, 2017, employees of the subsidiary Ansaldo Energia Switzerland AG are registered in pension plans subjectto the centralized management of a separate and independent legal entity, registered in the “Cantonal Register of SupervisedInstitutions of the Canton of Schwyz”. The pension fund is financed by contributions paid by the employer and affiliated employees. The surpluses or deficits of theindividual pension plans at the date of preparation of these financial statements as at 31 December 2019, were determinedon the basis of the economic and financial situation of the pension fund. In compliance with the provisions of IAS 19, the pension plans of Ansaldo Energia Switzerland AG - Pensionkasse (or PK)and Zusatkasse (or ZK) - are defined benefit plans and are valued accordingly. The actuarial method used to determine thepresent value of the liability and the relative costs of future commitments is that of the Projected Unit Credit Method (PUCM).The actuarial assumptions of the demographic, economic and financial variables concerning the personnel being assessedwere also adopted and employed by independent actuaries. At 31 December 2019, pursuant to IAS 19, Ansaldo Energia Svizzera AG’s pension liabilities of 24 million Swiss francs weredetermined as the difference between the current value of defined benefit liabilities (equal to 139 million Swiss francs) andthe value of the corresponding pension assets managed by the above entity in accordance with internal regulations andprocedures (amounting to 115 million Swiss francs).

tfR tfR and defined and defined benefit plans benefit plans 31.12.2019 31.12.2018

Death R.G. 48 R.G. 48

Retirement 5.2 5.8

annual turnover frequency and tfR advances

Average advances frequency 2.35% 2.34%

Average turnover frequency 2.93% 2.93%


29. provisions current and non-current


Restructuring costsThe provision includes the residual amounts accrued by the parent in previous years to cover the risks related to thediscontinuance of operations.

product warrantyThis provision is set up to cover direct and indirect damage covered by warranties granted (contractually guaranteedperformance and the guarantee period contractually provided for). Indirect damage to the total installed may occur due tothe performance of the Group’s products.


euro/thousand Restructuring product pending tax fund others total warranty disputes

1 January 2018

Current 439 - 3,945 - 11,168 15,552

Non-current - 16,193 - 32,350 83,756 132,299

439 16,193 3,945 32,350 94,924 147,851

Provisions - 16,000 300 231 121,937 138,468

Utilization 275 - 1,377 5,955 29,937 37,544

Reversals - 873 - - 8,468 9,341

Other changes - 223 - - 455 678

Reclassifications - (4,907) - - 184 (4,723)

31 December 2018 164 26,636 2,868 26,626 179,095 235,389

Broken down as follows:

Current 164 - 2,868 - 131,375 134,407

Non-current - 26,636 - 26,626 47,720 100,982

164 26,636 2,868 26,626 179,095 235,389

Accruals - - - 6,392 69,691 76,083

Utilization - - 131 1,496 18,980 20,607

Reversals - - - 2,256 956 3,212

Other changes - 69 1 (1) 1 70

Reclassifications - (734) - - (139,908) (140,642)

Reclassifications into liabilities available for sale - (2,323) - - - (2,323)

31 December 2019 164 23,648 2,738 29,265 88,943 144,758

Broken down as follows:

Current 164 - 2,738 - 54,810 57,712

Non-current - 23,648 - 29,265 34,133 87,046

164 23,648 2,738 29,265 88,943 144,758

pending litigationThis provision represents our best estimate of our liability in relation to arbitration and legal proceedings with third partiesboth in Italy and abroad relating to orders and sale of assets in previous years.

taxesThe tax provision represents our best estimate of tax risk in Italy and abroad (relating to branches) and amounts to Euro29,265 thousand.The tax fund is mainly used for:• a dispute with the Indian tax authorities about the taxability of materials sold FOB (free on board) to customers (Euro

13,700,000, partially already paid). The Group believes that the materials are exempt from local taxes by virtue of thedouble tax treaty in force between the two countries. In order to strengthen its position, in addition to defending thecase at all levels in India, it has also commenced the out-of-court settlement procedure provided for by the treaty;

• Euro 6,500 thousand, risks relating to irrecoverable Tunisian taxes;• Euro 3,919 thousand in taxes at risk in Algeria for tax disputes relating to the years 2004-2007 (following an audit by the

tax authorities, the tax office has deducted from the Parent Company’s bank accounts the amount of Euro 2,500thousand);

• Euro 800 thousand risks relating to direct taxes in Pakistan;• Euro Euro 600 thousand risks related to indirect taxes in Turkey;• Euro 450 thousand risks related to indirect taxes in Indonesia

other provisionsThese mainly consist of:• costs to be incurred after the completion of contracts for warranties or contractual commitments (Euro 29,395 thousand).

The provision changed due to net utilisations totalling Euro 13,087 thousand;• asbestos risk costs for Euro 7,392 thousand. The provision is the best estimate based on past figures and consolidated

scientific practice, which show that latency times may exceed 15 to 40 years. Past events mainly involved the Legnanoand Genoa plants. Any future outlays for the asbestos issue covered by this provision will be reimbursed by Finmeccanica(now Leonardo S.p.A.), as per its specific guarantee included in the agreements between it and Fondo Strategico Italiano(now CDP Equity) as part of the transaction involving the parent’s ownership. CDP Equity also formally agreed that allfuture compensation for any litigation arising in the context of the asbestos issue will be paid directly to Ansaldo Energiaby Leonardo S.p.A.;

• costs to face the risks related to Turkey (Euro 46,623 thousand) of which the provisions for the period amounted to Euro69,691 thousand, related to the risks of enforcing the guarantees given in favour of Yeni Elektrik and net trade receivables,as detailed in more detail in Report on Operations.

The “reclassifications” item refers to some reallocations, among which the most important, in other liabilities, pertains tothe Parent Company and follows the fact that, unlike the previous year, we became aware of the date on which it shouldhave been meet the repayment of the loan granted to the investee AU Finance Holding BV by Nomura Bank, as well as therepayment of the credit line guaranteed on behalf of the company Yeni Elektrik actually paid in January 2020.


30. other current and non-current liabilities


non current current euro/thousand 31.12.2019 31.12.2018 31.12.2019 31.12.2018

Employees 3,879 3,354 20,571 22,280

Deferred income - - - 2

Social security institutions - - 13,761 11,761

Other - 37,393 246,793 102,699

Other payables to related parties 10,225 10,225 - -

Reclassifications in liabilities related to assets available for sale - - (5,368) -

Increases from companies aggregation - - - -

total other debts 14,104 50,972 275,757 136,742

Other current tax liabilities 7,085 10,401

Deferred taxes 97,337 137,054 - -

Reclassifications in liabilities related to assets available for sale (11,010) - (778) -

total other liabilities 100,431 188,026 282,064 147,143

Payables to employees The “Payables to employees” refer to the payables for additional monthly payments, vacation time, and paid leave accruedbut not utilised, and settled in the following fiscal year.The non-current amount refers to the seniority bonuses set aside and measured at fair value.

Payables to social security and welfare institutions They relate to the contributions to be borne by the Group and by employees due to these institutions on the Decemberwages and salaries paid in January and on the remuneration of the year whose contributions are paid quarterly or yearly.

Other payables The item “Other payables” includes the current portions of the payable to General Electric for the Gastone operation (forabout Euro 80 million), payables related to the Vacuum Vessel Project for Euro 13,452 thousand, the VAT debt of the ParentCompany for December for Euro 5,568 thousands (given the transfer of the previous VAT credit for Euro 14,527 thousand),the debt to Nomura for the repayment of the loan granted to AU Finance for Euro 117,243 thousand, as well as payablesto consultants and other minor items. In the first days of 2020, part of the payables to GE (Euro 30 million) and the total ofthe Nomura debt were paid.

Related partiesThis payable refers entirely to the share of the Ansaldo Energia Switzerland capital increase subscribed by the companySimest S.p.A. (Cassa Depositi e Prestiti Group) in 2017. With regard to this share, the Parent Company has a call with a five-year maturity, to be compulsorily exercised, such that the share currently in the possession of Simest S.p.A. is considered, inevery effect, a de facto investment by the Group in return for a non-current payable from Simest S.p.A.


31. trade payables

Trade payables decreased by Euro 6,121 thousand due to lower production during the year. The maturity factoring operations included in this item at 31 December 2019 show a total debt of Euro 53,884 thousand(Euro 51,584 thousand in 2018). Through these transactions, the Parent allows its suppliers to factor their receivables forgoods supplied or services provided to the Group, whereby they collect their receivables and the Group may avail of a furtherdeferment of its trade payables, bearing the related interest. The latter approximated Euro 541 thousand during the yearand are recorded under “Other operating expenses” in the income statement.

32. Derivatives


31.12.2019 31.12.2018 euro/thousand assets liabilities assets liabilities

Currency forwards – 12,226 – 6,086

IRS hedging on non-current loan – 892 – 560

Reclassifications into liabilities available for sale – (122) – –

– 12,996 – 6,646

In keeping with the corporate policy, the Group arranged to cover its foreign currency assets and liabilities with derivativescalled “forward foreign exchange tools” and with a medium- and long-term variable rate IRS loan.

33. Revenues


Sales Revenue 722,292 820,220

Services Revenure 139,564 170,601

861,856 990,821

Change in Work-in-progress 80,449 (23,668)

Related parties Revenue 41,760 47,515

total Revenue 984,065 1,014,668

Revenue from sales and services is detailed in the table presented in note 14 “Segment reporting” section.In addition to the operating revenue for the period, the revenues also include the amounts acquired upon obtaining theProvisional Acceptance Certificate (PAC) attesting to the completed plants’ transfer of ownership to the customer.


34. other operating income and expenses

2019 2018 euro/thousand income expense income expense

Grants for Research and Development 1,015 - - -

Other grants related to income - - 37 -

Gains/losses on sales of property, plant and equipmentand intangible assets 62 4 8 13

Accruals to/reversals of provisions 956 69,691 2,831 138,237

Exchange rate gains (losses) on operating activities 6,351 5,766 5,288 7,060

Unrealised exchange rate gains and losses 8,584 8,174 16,558 18,256

Financial income/expenses on trade receivables/payables - 677 1 529

Insurance compensation 21,416 755 -

Taxes - 1,507 - 5,689

Indirect taxes - 628 579

Other operating income/expense 1,030 293 1,248 847

Other related parties operating income/expense - 15 - 10

39,414 86,755 26,726 171,220

The item “provisions” refers to the risks associated with the Gebze operation in Turkey, commented on several times in theprevious paragraphs, as well as in the Report. In particular, this concerns the provision for commercial risks related to thecollection of receivables or the effective continuation of orders, as well as the provision for financial risks, which in the eventof enforcement of the guarantees still in force at present, could reasonably be required.The exchange differences relate to the adjustment of trade receivables and payables originally expressed in currencies otherthan the Euro to the exchange rates at the end of the period.Insurance reimbursements are mainly due to the damages suffered in various plants, including Mirfa (Euro 4,621 thousand)and to the damages suffered following the collapse of the Morandi Viaduct (Euro 12,550 thousand).

35. purchases and services costs


Materials from third parties 299,201 374,056

Change in inventories 21,265 (55,273)

Purchases from related parties 627 2,680

total purchases 321,093 321,463

Services from third parties 340,777 345,241

Services from related parties 12,052 6,245

Rentals and operating leases 7,647 10,457

total services 360,476 361,943


Costs for the purchase of materials from third parties amount to Euro 299,201 thousand, a decrease of Euro 74,855 thousandcompared to the previous year.Costs for third-party services amount to Euro 340,777 thousand, a decrease of Euro 4,464 thousand compared to theprevious year.Service costs (of which Euro 12,052 thousand towards unconsolidated related parties) refer to customs duties and transportcosts (including Ansaldo Energia for Euro 82,073 thousand and Ansaldo Energia Switzerland for Euro 663 thousand), traveland transfers (between of which Euro 16,082 thousand of Ansaldo Energia, Euro 1,017 thousand of Ansaldo Nucleare, Euro2,207 thousand of Ansaldo Energia Switzerland), costs for ordinary maintenance (mainly Euro 2,988 thousand of the ParentCompany), fees for directors and statutory auditors (Euro 1,138 thousand in Ansaldo Energia and Euro 107 thousand inAnsaldo Nucleare) and the remainder for miscellaneous industrial services, consultancy and general expenses. Costs for operating fees to third parties include rents for apartments used by Italian and foreign shipbuilders (Euro 2,129thousand relating to the Parent Company), rentals of photocopiers and IT equipment (Euro 1,201 thousand of the ParentCompany) and other leases not falling within the scope of IFRS 16 applications because they relate to contracts of less thantwelve months or individually less than $ 5,000.

36. personnel expenses


Wages and salaries 188,417 196,701

Social security and pension contributions 45,090 44,130

Costs related to other defined benefit plans 1,248 1,290

Costs related to defined contribution plans 7,980 8,034

Restructuring costs 6,826 4,538

Other costs 965 608

250,526 255,301

The employees on the books, at the end of 2019, including the effects of discontinued operations, amounted to 3,451 unitswith a decrease of 194 units compared to the end of 2018 with the same perimeter (-5%).

The table below shows employees by category and average number:

2019 2018 Variation

Managers 68 75 (7)

of which related to entities available for sale 5

Junior Managers 465 507 (42)


White Collars 2,386 2,608 (222)


Blue Collars 971 1,022 (51)


3,890 4,212 (322)



The personnel expenses of Euro 250,526 thousand consist of monthly and deferred pay, social security contributions andemployee severance indemnities accrued as of 31 December 2019, and include the portion relating to the Parent’s foreignpermanent establishments (Euro 13,752 thousand).

37. amortization, depreciation and impairment losses


Amortization and depreciation:

- intangible assets 48,851 47,462

- property, plant and equipment 37,398 28,683

86,249 76,145

Impairment:

- intagible assets and other asstes 188,500 117,644

- impairment on goodwill 9,000 -

197,500 117,644

total amortization, depreciation and impairment losses 283,749 193,789

The depreciation trend reflects the depreciation of the tangible and intangible fixed assets based on their estimated usefullives. For more details, please refer to Note 13 “Intangible assets” and Note 14 “Tangible assets.”The impairment - other assets item includes the write-down of GT36 technology.

38. change in finished goods, work-in-progress and semi-finished products


Changes in inventories of finished products, in progress and semi-finished goods 5,671 29,367

The change is attributable to the normal increase in semi-finished products pending matching with sales orders.


39. internal work capitalised

The increases in tangible fixed assets for internal work relate to the cost of labour and costs for materials and mainly referto intangible development activities of the prototype and technology of the GT36.


Employees costs 37,109 38,695

Materials 775 1,114

Other 2,080

39,964 39,809

40. financial income and expenses

The “financial income” item can be detailed as follows:

The financial income mainly includes interest income, which basically consists of the balances held in ordinary and foreigncurrency bank accounts, and the exchange rate differences on the amounts in foreign currencies, above all those derivingfrom the U.S. dollar area.Financial expenses are set out in detail in the table above and are mainly composed of interest expenses on the bond issue(Euro 17,124 thousand), interest expenses on the Revolving loan (Euro 9,168 thousand), exchange differences on financialitems, as well as discounting charges on the payable to General Electric (for Euro 1,817 thousand) as well as the discountingof the leasing payables deriving from the application of IFRS16 (for Euro 1,951 thousand).The value adjustments of the investments refer to the Renewable Energy Consortium (Euro 10 thousand) and to EuroimpresaLegnano (Euro 133 thousand).


euro/thousand 2019 2018 income expense net income expense net

Interest cost on defined benefit plans - 75 (75) - 154 (154)

Interest on discounted value - 3,768 (3,768) - 2,190 (2,190)

Interests 2,488 30,701 (28,213) 1,640 26,168 (24,528)

Commissions - 7,225 (7,225) - 6,999 (6,999)

Premiums paid/collected on forwards - 1,273 (1,273) 73 248 (175)

Exchange rate gains and losses 8,995 6,344 2,651 13,775 20,426 (6,651)

Fair value gains and losses - 2,335 (2,335) - 3,042 (3,042)

Investments in subsidiaries Value Adjustments - 143 (143) - 211 (211)

Other financial income and expenses - 586 (586) 353 69 284

Related parties financial income/expenses 653 8,138 (7,485) 791 492 299

12,136 60,588 (48,452) 16,632 59,999 (43,367)

41. income taxes

The income taxes item consists of the following:


IRES 5,113 9,207

IRAP 3,056 2,255

Tax provision reversals (2,446) (60)

Other income taxes 2,305 4,527

Tax fund surplus 2,256 -

Prior year taxes (2,718) 1,747

Provisions for tax risks 6,392 231

Net deferred tax (42,149) (24,140)

(28,191) (6,233)

Net deferred taxes are affected by a release of deferred taxes for Euro 38,218 thousand (of which Euro 24,002 thousandrelating to the release of deferred taxes on the impairment loss described above), of provisions for deferred tax assets forEuro 6,800 thousand, net of use of the same for Euro 2,869 thousand.

42. profit (loss) from discontinued operations

As previously mentioned, during the year the Group indicated the investments in PSM Power System Manufacturing, PSMJapan, Ansaldo Energia Mexico, Ansaldo Energia Korea, Ansaldo Servicos de Energia Brasil and Ansaldo Thomassen BVamong the assets available for sale, in application to IFRS 5.In accordance with the provisions of the aforementioned principle, the breakdown of the breakdown of the profit associatedwith discontinued operations is shown below:

euro/thousand Discontinued operations effect 2019 2018

Revenues 171,567 168,492

Operating cost 150,509 158,092

Total amortization and depreciation 10,386 7,066

opeRating ReSUlt (ebit) 10,672 3,334

Financial income (expenses) (3,857) (863)

Result before taxes 6,815 2,471

Taxes 658 (747)

total pRofit anD loSS from discontinued operations 7,473 1,724


43. impact of related party transactions

43.1. impact of related party transactions on assets and liabilities

Related party transactions fall under ordinary management, and are conducted at market value (when not governed byspecific contractual conditions), in the same way as interest-bearing debts and loans. They mainly comprise the exchange ofgoods, provision of services and financing from and to the parent and subsidiaries, associates, joint ventures and consortia.

The amounts of the related party receivables are highlighted below:

euro/thousand current trade other total financial receivables current Receivables as at 31.12.2019 receivables receivables

Participating companies

Shanghai Electric Hong Kong 21,030 21,030

- 21,030 - 21,030

Subsidiaries

SPVTCCC 53 947 1,000

53 947 - 1,000

Group companies and others

AC Boilers 298 298

Ansaldo Algeria 1,249 1,249

Ansaldo Gas Turbine Technology 324 324

Eni 9,613 9,613

Shanghai Electric Gas Turbine 6,857 6,857

Simest 74 74

Snam 19 19

Terna 10,564 10,564

Yeni Elektrik 240 240

74 29,164 - 29,238

Entities under MEF control and significant influence

Enel 11,427 11,427

Leonardo 12,395 10,907 23,302

Sogin 364 364

- 24,186 10,907 35,093

total 127 75,327 10,907 86,361


euro/thousand current trade other total financial receivables current Receivables as at 31.12.2018 receivables receivables

Companies that exercise joint control

Shanghai Electric Hong Kong 33,509 33,509

- 33,509 - 33,509

Subsidiaries

Ansaldo Energia Nigeria 373 373

SPVTCCC 5 5

378 - 378


Ansaldo Algeria 95 95


Eni 16,387 16,387


Simest 473 473

Yeni Elektrik 240 240

473 25,820 - 26,293

Consortium

Consorzio C.R.I.S. 1 1

- 1 - 1

Entities under MEF control or significant influence

Enel 15,772 15,772

Leonardo 1,255 11,200 12,455

Sogin 1,340 1,340

- 18,367 11,200 29,567

total 851 77,697 11,200 89,748


The amounts of the related party payables are highlighted below:

euro/thousand non current other trade total financial non-current payables payables as at 31.12.2019 payables liabilities

Parent companies

Cassa Depositi e prestiti 1,552 1,552

CDP Equity 208,138 208,138

209,690 - - 209,690


Shanghai Electric Hong Kong 835 835

835 835

Subsidiaries

SPVTCCC 289 289

- - 289 289


AC Boilers 7,847 7,847


Eni 180 180


Simest 10,225 10,225

Tamini Trasformatori 1,726 1,726

Valvitalia 817 817

- 10,225 16,786 27,011


Enel 309 309

Ferrovie dello stato -

Leonardo 5,120 5,120

- - 5,429 5,429

total 209,690 10,225 23,339 243,254


euro/thousand other current trade total non-current loans and payables payables as at 31.12.2018 liabilities borrowings


Shanghai Electric Hong Kong 527 527

527 527


Eni 64 64

Polaris Anserv 71 71

Simest 10,225 10,225

10,225 135 10,360


Enel 15 15

Leonardo 4,980 4,980

4,995 4,995

total 10,225 5,657 15,882


43.2 impact of related party transactions on profit or loss

The impact of related party transactions on profit or loss in 2019 and 2018 is summarised below:

euro/thousand Revenues costs other financial financial operative income charges 2019 costs

Parent companies

CDP Equity 8,138

- - - - 8,138


Shanghai Electric Group 690

Shanghai Electric Hong Kong 8,183

8,183 690 - - -

Subsidiaries

SPVTCCC 741

741 - - - -


AC Boilers (244)

Ansaldo Algerie 1,154


AU Finance Holding 208

Eni 7,260 598 12

Shanghai Electric Gas Turbine Technology 5,540 5,902

Simest 445

SPVTCCC 82

14,408 6,637 12 653 -


Enel 18,219 287

Ferrovie dello Stato 25

Leonardo 5,040 3

Sogin 209

18,428 5,352 3 - -

total 41,760 12,679 15 653 8,138


euro/thousand Revenues costs other financial financial operative income charges 2018 costs


Shanghai Electric Hong Kong 13,500

13,500

Subsidiaries

Ansaldo Energia Nigeria 2

2


Ansaldo Algerie 95

Ansaldo Gas Turbine Technology 322

AU Finance Holding 177

Eni 940 349 7

Polaris Anserv 358

Shanghai Electric Gas Turbine Technology 2,283

Simest 473 478

3,640 707 7 650 478

Consortium

Consorzio C.R.I.S. 14

14


Enel 27,835 2,472

Ferrovie dello Stato 42

Leonardo 5,609 3 139

Sogin 2,540 95

30,375 8,218 3 139 -

total 47,515 8,925 10 791 492

Financial income relates to the investment of cash during the year, including with temporary time constraints, always in linewith best market conditions. Expense paid to subsidiaries related to services received, net of fees for those rendered. Financial income and expense arisefrom financial transactions carried out at the market rates adopted by the Group.Related party transactions mainly relate to the provision of materials and services for specific contracts or general services.


44. cash flows from operating activities


Net result (263,193) (233,689)

Profit / loss of discontinued operations 7,473 1,724

Amortization, depreciation and impairment losses 274,750 193,788

Goodwill Impairment 9,000 -

Write-downs (absorption) inventories and work in progress 6,913 285

Income taxes (28,191) (6,233)

Accruals to provisions 68,735 135,406

Defined benefit pension and stock grant plan costs 1,247 1,723

Gains on the sale of non-current assets (58) 6

Impairment losses on equity investments cost measured 9,447 3,413

Financial income and expense, net of impairment losses on measured cost equity investments 48,453 43,367

Cash flow from discontinued operations 16,809 3,250

151,385 143,040

45. guarantees and other commitments

personal guarantees given

The Company has the following guarantees in place as of 31 December 2019:

euro/thousand 31.12.2019 31.12.2018

Third parties guarantees 942,309 1,009,149

personal guarantees issued 942,309 1,009,149

These mainly regard sureties issued by banks and insurance companies to:• customers for participation in tenders (Euro 6,370 thousand);• customers for advances received and as performance bonds (Euro 883,815 thousand);• others, including: financial backers, customs and tax offices, lessors, Inps (Euro 35,695 thousand);• indemnity in favour of Cassa Depositi e Prestiti for the EBI loan (Euro 16,429 thousand).


personal guarantees received

euro/thousand 31.12.2019 31.12.2018

Sureties received 80,185 108,765

Others 12,196 46,940

personal guarantees received 92,381 155,705

These relate to:• performance bonds received from suppliers (Euro 80,185 thousand);• letters of credit received from customers guaranteeing payment (Euro 12,196 thousand).


Key events occurred after the end of the year

The main events that occurred in the first months of 2020 were the following:• in the early days of the year, a loan of Euro 100 million was granted, used to repay the Nomura debt; the Lenders are

three credit institutions and CPD S.p.A., each with a share of Euro 25 million. The duration of this loan is six monthsextendable, upon request, up to a maximum of twelve months from the original disbursement. The interest rate is equalto the Euribor plus a spread of 450 bps for the six-month period, and 500 bps for the possible extension of a further sixmonths.

• on January 3, 2020 the loan with Nomura Bank has been paid back for Euro 98 million;• on January 3, 2020, as the half-yearly interest as at June 30, 2019 relating to the loans of Yeni Elektrik had not been

paid, a bank guarantee has been enforced for USD 20.7 million. This enforcement is fully covered by the provision accruedfor these specific risks in Turkey as at 31 December 2019.

• on February 5, 2020, the Parent Company’s Board of Directors approved the Group’s industrial plan which outlines anindustrial and financial recovery phase;

• as previously described, in response to the request for a “Konkordato” with Yeni Elektrik, the judge in charge of theprocedure, on 20 February 2020 pronounced differently from the continuation of the activity of said company. YourGroup has currently filed appeal against the decision taken by the judge to protect its interests;

• on April 2, 2020 the majority shareholder CDP Equity S.p.A. informed the Company that it had approved the financialsupport requested to the Company Shareholders through the communication dated April 1, 2020, in the ways and inthe forms indicated in the first part of the Report on Operations.

• It should be noted that the spread of the infection caused by the “Covid-19” virus, accompanied by uncertainties aboutthe possible evolution of its effects on the production, economic and social fabric, national and international, could havenegative effects on the Ansaldo Energia Group, at present the quantification is under definition.The negative effects could materialise both in relation to commercial matters, such as the damage to the relationshipwith some “Service” customers due to the interruption of the activities, and for operational issues, such as: potentialdelays in engineering activities due to reduced workforce; slowdowns in supplies due to the interruption of the activitiesof some suppliers; slowdowns in shipments and interruption of factory activities with the consequent need to prepare anat least partial recovery plan for delays which prioritises critical orders; potential closure of some “New Units” yards;suspension and slowdown of “Service” contracts due to travel restrictions. In any case, the main economic, financial and equity figures of Ansaldo Energia Group that could be impacted by theeffects of the emergency situation in progress in 2020, with consequences that could also affect 2021 and 2022, areRevenues, Turnover, EBITDA and the Net Financial Position (NFP), for which the impact of Covid-19 is constantly monitored.



boaRD of DiRectoRSappointed by the Shareholders’ Meeting of 14 October 2019 for the three-year period 2019-2021

Zampini Giuseppe President

Yuan Jianhua Vicepresident

Marino GiuseppeChief Executive Officer and General Manager (BoD 10/18/2019)

Councilors:

Bergonzi SimoneCastano GiampietroMascardi FabiolaMassoli FabioWang FufangZheng Xiaohong

boaRD of StatUtoRy aUDitoRSappointed by the Shareholders’ Meeting of 14 October 2019 for the three-year period 2019-2021

Casò Michele President

Statutory auditors:

Biancone PaoloFiorani Federica

Alternate auditors:

Gardin SamanthaVilla Pietro Michele

inDepenDent aUDitoRfor the three years period 2017-2019

PricewaterhouseCoopers S.p.A.

RemUneRation committee

Zampini Giuseppe President

Yuan Jianhua Vicepresident

Mascardi Fabiola Massoli Fabio Zheng Xiaohong

Parent CompanyCorporate Bodies


Auditor’s Report


126 ANSALDO ENERGIA 2019 Consolidated Financial Statements


Edited by:Ansaldo Energia S.p.A.

2019Consolidatedfinancialstatements

16152 Genoa - Italy - Via N. Lorenzi, 8 - Phone +39 010 6551 - Fax +39 010 655 3411 - [email protected] - www.ansaldoenergia.com

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Consolidated ﬁnancial statements · 2020-05-13 · • Nuclear, which operates in the construction and dismantling of nuclear plants and in the treatment of radioactive waste from