Dolomiti Energia Trading · RUSSIA LIBYA ALGERIA NETHERLANDS LNG PANIGAGLIA LNG ROVIGO LNG LIVORNO Domestic productions and natural gas imports from 2008 to 2017 are broken down in

Financial statements 2017

DolomitiEnergiaTrading

Dolomiti Energia Trading SpA Financial statements 2017 | 3

Dolomiti Energia Trading SpAFully paid-up Share Capital 2,478,429.00 euro Via Fersina n. 23 – Trento (TN)Trento Register of Companies no. – Tax Code and VAT no. 03027910235

Company subject to the management and coordination of Dolomiti Energia Holding SpA (Econ. and Admin. Index No. 164846)

Financial statementsas at 31 December 2017

BOARD OF DIRECTORS

Chairman and Chief Executive Officer Marco MerlerDirector Maurizio LancerinDirector Raffaella Prezzi

BOARD OF STATUTORY AUDITORS

Chairman Albino LeonardiStatutory Auditors Mauro Caldonazzi Sara BrunelliIndependent auditors PricewaterhouseCoopers SpA

Pictures: Electric Landscape - Archive Gruppo Dolomiti Energia

Dolomiti Energia Trading SpA Financial statements 2017 | 5

Index

REPORT ON OPERATIONS 7

FINANCIAL STATEMENTS 2017 27

Financial statements as at 31 december 2017 28

Explanatory notes to the financial statements as at 31 december 2017 33

REPORT 69

Report of the Board of Statutory auditors 70

Independent Auditors’ report 72

6 | 2017 Report on operations Dolomiti Energia Trading SpA Financial statements 2017 | 7

Dolomiti Energia Trading SpA–Report on operations


Dear Shareholders,

This report was prepared in compliance with the Italian Civil Code and the accounting principles issued by the Italian Accounting Standard Authority (OIC).

Both the Financial Statements and this report take into consideration the 2017 activities of Dolomiti Energia Trading SpA (hereinafter the Company). It should be recalled that, with a view of streamlining the sales activities within the Dolomiti Energia Group, your Company transferred the business unit related to gas and electricity sales to end customers to Trenta SpA (now Dolomiti Energia SpA), effective on 1 April 2016. Meanwhile, Trenta SpA transferred the business unit related to gas and electricity wholesale purchase and sale activities to Multiutility SpA (now Dolomiti Energia

Trading SpA), in addition to incoming despatching services and relations with the Electricity Market. Therefore, to date, Dolomiti Energia Trading SpA is the only company within the Dolomiti Energia Group that has commercial relations with gas and electricity wholesalers. It is the only company that has an incoming despatching contract with Terna, and the only supplier for all gas and electricity requirements of the company Dolomiti Energia SpA. By reason of the fact that the above-mentioned reorganisation process occurred during 2016, the year 2017 was the first year in which the financial statements reflect the mere wholesale purchase and sale business of your Company. The results for the year are therefore not entirely comparable with the data of the previous year, which include the sales activity of gas and electricity to end users carried out in the first three months of 2016.

Significant events during the year

General situation of the energy markets

ELECTRICITY

According to provisional final data made available by Terna SpA, in 2017 electricity consumption in Italy

stood at 320,437 billion kWh, up by 2% compared to the previous year, in line with 2009 consumption but, as shown in the chart below, still almost 6% lower compared to the maximum values reported in 2007 (over 340 billion kWh).

CONSUMPTION OF ELECTRICITY IN ITALY (GWh)

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

340,000

335,000

330,000

325,000

320,000

315,000

310,000

305,000

300,000

295,000

345,000

This increase in electricity consumption is the result of an economy that recorded positive results in Europe, due to both the growth recorded at world level and the strength of domestic demand, driven by the recovery of investments, more favourable financing terms and a less uncertain economic environment. In Italy as well, albeit to a lesser extent

than in other European Countries, a growth was reported which led to a GDP of around 1.5%.

At the regional level, in 2017 the rate of change was positive in all regions (except Sardinia), albeit not homogeneous: form +0.3% in North-Western Italy to +4.5% to Central Italy.

[GWH]NORTH-

WESTERN ITALY

LOMBARDY TRIVENETO AREA

TUSCANY-EMILIA

ROMAGNA

CENTRAL ITALY

SOUTHERN ITALY SICILY SARDINIA

2017 33,061 69,042 48,504 50,122 44,839 46,839 19,099 8,934

2016 32,962 67,475 48,017 47,983 43,709 46,267 18,891 8,957

% DIFF. 0.3% 2.3% 1.0% 4.5% 2.6% 1.2% 1.1% (0.3) %


In 2017, 89% of electricity demand was met with domestic production. For the remaining amount (11%), the demand was met by electricity

exchanged on foreign markets. The following detail shows how the net domestic production (285 billion kWh) increased by 2% compared to 2016.

MILLIONS OF KWH 2017 2016 CH. %

HYDROELECTRIC 37,530 43,785 (14) %

THERMAL 199,500 190,771 5%

- OF WHICH BIOMASS 17,768 17,956 (1) %

GEOTHERMAL 5,785 5,867 (1) %

WIND 17,492 17,523 0%

PHOTOVOLTAIC 24,811 21,757 14%

NET TOTAL PRODUCTION 285,118 279,703 2%

IMPORT 42,892 43,181 (1) %

EXPORT 5,132 6,155 (17) %

FOREIGN BALANCE 37,760 37,026 2%

PUMPING 2,441 2,468 (1) %

DEMAND IN ELECTRICITY (1) 320,437 314,261 2%

(1) Demand in Electricity = Production + Foreign balance – Pumping consumption.

Electricity production from thermal source increased by 5% compared to the data in 2016 (+9 billion in kWh produced), still remaining well below the value

of 261 billion kWh produced in 2008. The trend reported a significant growth compared to the minimum level achieved in 2014 (167 billion kWh).

HISTORICAL PERFORMANCE OF THERMAL ENERGY PRODUCTION (GWh)

261,328

220,984 217,369207,331

182,528167,080

180,871190,771 199,500 205,375

225,987

2008 2009 2010 2011 20132012 2014 2015 2016 2017 Average2008-2017

A clear drop is instead highlighted, compared to 2016, in hydroelectric production (-14%), due to the

low water availability recorded all over 2017. In 2016 already, hydroelectric production dropped by 15%

compared to 2015. For comparison purposes, in 2014 (historic highs in rainfall) hydroelectric production achieved 58 billion kWh, compared to 37.5 billion kWh

in 2017 (-35%). The figure related to hydroelectric production for 2017 is the lowest in the last ten years and 22% lower than the 2008-2017 average.

HISTORICAL PERFORMANCE OF HYDROELECTRIC ENERGY PRODUCTION (GWh)

47,227

53,795

47,67243,260

54,06858,067

46,45143,785

37,530

48,36051,743

2008 2009 2010 2011 20132012 2014 2015 2016 2017 Average2008-2017

Conversely, production from photovoltaic sources benefited from the weather (low rainfall) and recorded 14% increase (24.8 billion kWh in 2017,

compared to 21.7 in 2016), achieving the value recorded in 2015 (24.6 billion kWh).

HISTORICAL PERFORMANCE OF PHOTOVOLTAIC ENERGY PRODUCTION (GWh)

1,874

9,258

18,631

22,146 21,838

24,676

21,75723,046

2008 2009 2010 2011 20132012 2014 2015 2016 2017 Average2013-2017

24,811

Production from wind remained unchanged compared to 2016, while production from

geothermal sources (-1%) and biomass (-1%) slightly decreased.


HISTORICAL PERFORMANCE OF WIND ENERGY PRODUCTION (GWh)

5,055

9,048 9,560

13,33314,886 15,089

14,589

17,523 17,492

12,266

6,087

2008 2009 2010 2011 20132012 2014 2015 2016 2017 Average2008-2017

The maximum required output in Italy in 2017 was reported on 3 August, at 4 p.m. and amounted to 55.002 MW, compared with the peak of 59.353 MW recorded on 21 July 2015, at 4 p.m..

The first months of 2017 were still characterised, like the last months of 2016, by problems connected with both a cold spell that hit the entire Europe, and by the fact that, for maintenance purposes, the French nuclear power plants were unexpectedly, and for a prolonged period of time, taken out of service. The ensuing decrease in electricity

production in France, added to the increase in demand due to weather conditions, not only led, for some days, to a halt in imports, but also to a reversion in flows, with electricity exported also to France. This event remarkably affected the entire Italian market, as better described hereunder.

NATURAL GAS

The natural gas consumption confirmed its growth for the third consecutive year (+6% compared to 2016), achieving 75 billion Smc, in line with 2012.

GROSS CONSUMPTION OF NATURAL GAS IN ITALY (MILLION of Smc)

84,883 83,09777,831 74,915

70,069

61,91267,523

70,91475,151 74,443

78,129

2008 2009 2010 2011 20132012 2014 2015 2016 2017 Average2008-2017

Also the growth in thermoelectric consumption (+9%) contributed to this result, driven by the strong demand in electricity (in the first months of 2017, due to the problem of French nuclear power plants and, in Summer months, to the exceptional heat wave that hit both Italy and Europe), as well

as to the growth in industrial (+7%) and household consumption (+3%) by reason of low temperatures recorded in Winter months of 2017, compared to 2016. The details of monthly consumption, divided by the three market types, in 2016 and 2017, are shown in the following table:

INDUSTRIAL THERMOELECTRIC DISTRIBUTION GRIDS

[MSMC] 2017 2016 % DIFF. 2017 2016 % DIFF. 2017 2016 % DIFF.

JANUARY 1,303 1,153 13% 2,762 2,126 30% 6,731 5,570 21%

FEBRUARY 1,203 1,164 3% 2,164 1,812 19% 4,470 4,349 3%

MARCH 1,271 1,202 6% 1,864 1,775 5% 3,120 3,860 (19) %

APRIL 1,125 1,112 1% 1,731 1,444 20% 1,760 1,686 4%

MAY 1,182 1,114 6% 1,745 1,524 14% 1,391 1,351 3%

JUNE 1,155 1,054 10% 2,048 1,470 39% 985 1,034 (5) %

JULY 1,200 1,043 15% 2,234 2,010 11% 973 955 2%

AUGUST 933 844 10% 2,076 1,756 18% 806 817 (1) %

SEPTEMBER 1,196 1,095 9% 1,800 2,288 (21) % 1,134 1,071 6%

OCTOBER 1,262 1,198 5% 2,119 2,230 (5) % 1,636 1,973 (17) %

NOVEMBER 1,295 1,252 3% 2,566 2,386 8% 3,811 3,581 6%

DECEMBER 1,240 1,164 7% 2,333 2,562 (9) % 5,814 5,410 7%

TOTAL 14,365 13,395 7% 25,442 23,382 9% 32,630 31,657 3%

As regards procurement of gas, the drop in domestic production was confirmed, from 2008

to 2017 decreased by over 40%, while imports increased, achieving values similar to 2010.

DOMESTIC PRODUCTION OF NATURAL GAS (MILLION of Smc)

9,255

8,406 8,363 8,605

7,7357,149

6,771

5,785 5,538

8,118

2008 2009 2010 2011 20132012 2014 2015 2016 2017


IMPORT OF NATURAL GAS (MILLION of Smc)

2008 2009 2010 2011 20132012 2014 2015 2016 2017

76,867 75,35470,369 67,725

61,96655,757

61,20165,284

69,65069,251

The mix of domestic procurement still witnessed Russia prevailing with 44%, followed by Algeria with 27%. The percentage of LNG totalled 12% (2% in 2008).

IMPORT MIX OF NATURAL GAS 2017

1%

27%

7%

44%

1%

10%

10%

RUSSIA

LIBYA

ALGERIA

NETHERLANDS

LNG PANIGAGLIA

LNG ROVIGO

LNG LIVORNO

Domestic productions and natural gas imports from 2008 to 2017 are broken down in the following table.

[MSMC] DOMESTICPRODUCTIONS IMPORTS ALGERIA LIBYA RUSSIA NETHERLANDS LNG

PANIGAGLIALNG

ROVIGOLNG

LIVORNO

2008 9,255 76,867 24,437 9,872 24,585 15,693 1,555 - -

2009 8,118 69,251 21,371 9,168 22,917 12,022 1,344 1,549 -

2010 8,406 75,354 25,945 9,410 22,492 7,828 2,012 7,083 -

2011 8,363 70,369 21,309 2,339 26,451 10,859 1,925 7,068 -

2012 8,605 67,725 20,632 6,470 23,851 9,034 1,131 6,204 -

2013 7,735 61,966 12,460 5,704 30,265 7,495 39 5,377 264

2014 7,149 55,757 6,774 6,512 26,154 11,433 70 4,447 57

2015 6,771 61,201 7,244 7,107 29,918 10,635 34 5,942 60

2016 5,785 65,284 18,873 4,807 28,267 6,697 207 5,670 510

2017 5,538 69,650 18,880 4,641 30,180 7,248 632 6,966 944

CRUDE OIL

Oil recorded an average price of $52.1 a barrel on the international markets in 2017, with an increase of 19.2% compared to the previous year.

DATED BRENT $/BBL

Yearlyaverage

dec.jan. feb. mar. apr. may june july aug. sept. oct. nov.

52.052.1

43.7

53.6

45.1

51.951.751.6

46.7

51.451.3

45.8

51.1

45.148.3

49.952.551.6

55.154.7

32.530.7

41.538.5

46.949.7

20162017


EURO/DOLLAR EXCHANGE RATE

A significant appreciation of Euro with respect to the Dollar is to be noted; in particular, since July

2017, the Euro has progressively appreciated to approx. 1.2, with an average for 2017 of 1.12 higher than in 2016 (1.11), despite the fact that, in the first months of the year, exchange rates were near 1.05.

EXCHANGE RATE €/$

Yearlyaverage


1.091.11 1.11

1.13 1.131.12 1.11

1.111.111.10

1.071.05

1.061.06

1.181.19

1.18 1.17 1.18

1.12

1.11

1.05

1.08

1.101.121.12

20162017

NATURAL GAS PRICES

The increase in oil prices and the increase in demand for gas drove the growth of natural

gas prices which increased, in average, by 19% (arithmetic mean) at the Virtual Trading Point (PSV), while the price PFOR (reference price of the regulated market) increased by 17%.

PSV PRICE € cent/Smc

Yearlyaverage


20.2

22.822.1

18.8 19.0 18.9

20.1

18.219.0

20.0

21.1

22.7

20.2

17.0

22.020.6

16.815.8

16.917.0

15.7

14.514.514.6

16.7

19.3

20162017

PFOR PRICE € cent/Smc

Yearlyaverage


18.9 18.9 18.9 18.9 18.9 18.9

16.5 16.5 16.517.5 17.5 17.5 17.9

15.415.915.915.9

13.913.913.913.013.013.0

18.818.818.8

20162017

ELECTRICITY PRICES

As regards the electricity market, the average value

of NSP, for the year 2017, stood at 53.9 €/MWh, up by 26% compared to the average of 2016, equal to 42.7 €/MWh.

PUN €/MWh

Yearlyaverage


72.2

46,5

55.5

37.0

44.5

35.232.0

42.9 43.1

34.836.8

48.950.3

42.9

37.1

55.8

48.6

42.9

54.7

65.8 65.1

53.9

42.7

56.458.3

53.1

20162017

Worth mentioning is the strong increase recorded in the first months of 2017, especially in January, when NSP overcame, for the first time since September 2012, the value of 70 €/MWh, recording a value of 72.2 €/MWh, due to some market factors, like the

persistent scarce production in the French market, the non availability of all power plants, as well as weather conditions reported during the month (exceptional cold spell in most of Europe) and a sharp increase in spot prices of natural gas.


Also following these events, it is worth noting the important reversion in price trend. For the first time since 2012, and after four consecutive years of

decrease, in fact, an increase in SNP average was recorded, from 75.5 €MWh in 2012, to 42.7 €/MWh recorded in 2016.

PUN TREND SINCE 2008

Average2008

feb-18jan-18Average2017

Average2016

Average2015

Average2014

Average2013

Average2012

Average2011

Average2010

Average2009

112.7

82.476.2

82.285.4

70.2

58.9 58.861.8

56.1

66,.4

51.8

44.849.6

39.8

48.748.3

58.9

70.066.6

57.453.4

72,5

87.0

63.8 64.1

72.275.5

63.0

52.1 52.3

42.7

49.053.9

57.048.2

PUN (€/MWh)

PUN HV (€/MWh)

PUN HP (€/MWh)

In the first months of 2018, the great volatility in prices was confirmed, especially in Winter and Summer months, above all due to weather conditions. In particular, prices in January dropped compared to prices in December 2017 (49 €/MWh over 65.1 €/MWh in December 2017) and prices in February strongly recovered, thanks to the exceptional cold spell that hit Italy (and most of Europe) in the last week of February 2018.

Company performance

The year 2017 witnessed the full implementation of the commercial business reorganisation project, started in 2016 within the Dolomiti Energia Group, and according to which Dolomiti Energia Trading was assigned the task of managing:a) the portfolio of the Dolomiti Energia Group and

the risk connected with this activity in relation to electricity, natural gas, energy efficiency certificates (TEE) and origin certificates (GO);

b) the incoming despatching agreement with Terna for all Group production plants, including HDE’s power plants and for third-party plants;

c) the outcoming despatching agreement with

Terna of consumption units (UC) of Dolomiti Energia SpA, including forecasts and risk connected with unbalance;

d) the agreement for the supply of energy efficiency certificates (TEE) to Novareti and SET of all needs to fulfil obligations set out by law;

e) the agreement for the supply of Origin Certificates (GO) to Dolomiti Energia for its entire needs, in order to meet the offsetting requirements for the sale of certified renewable energy.

The sale of electricity and natural gas to Dolomiti Energia SpA is governed by two framework agreements, according to which the Company undertook to supply Dolomiti Energia SpA with all the quantities of electricity and natural gas that are required to supply its end customers (POD and PDR).

The despatching activities and energy management of Hydro Dolomiti Energia’s power plants are governed by an agreement with HDE, which envisages a portion of fixed remuneration and a portion of variable remuneration, proportional to the added value generated from the activities of Dolomiti Energia Trading in favour of HDE.

On 1 January 2017, the parent company Dolomiti Energia Holding transferred to Dolomiti Energia Trading the purchase/sale agreements of its withdrawal quota of hydroelectric production in the companies SF Energy (50%) and Dolomiti Edison Energy (48%).

During the last months of 2017, Dolomiti Energia Trading signed TEE purchase agreements with Nesco, a company operating in the field of energy efficiency and that became a member of the Dolomiti Energia Group in July 2017.

Moreover, effective on 1 January 2017, Dolomiti Energia Trading subscribed a service contract with Dolomiti GNL for advisory services on the purchase, by DGNL, of liquefied natural gas, destined to the gas distribution plants of DGNL (nowadays only the plant in Molveno - TN -).

For a better performance and monitoring of the above-mentioned activities, in 2016 the Company equipped itself with an ETRM (Energy Trading and Risk Management) software. With this software package, Dolomiti Energia Trading now performs all activities related to deal capturing, confirmation, statements for the Remit and Emir purposes, invoicing to be issued and to be received, relations with the administration department, relations with GME, with Terna, with production power plants, etc.. This package was developed and was fully operating at end 2016 as regards despatching and in the first half of 2017 as regards gas natural and electricity portfolio management activities. Therefore, only in the second half of 2017 the Company could fully benefit from an accurate instrument for the analysis of all deals traded, while organising them in various books in order to be able to suitably monitor them.

In particular, the business of Dolomiti Energia Trading, related to both electricity and natural gas, was divided in the following books, where the first forward margin and the final forward margin are monitored. Electricity:• book related to sales to Dolomiti Energia;• book related to hydro productions (SFE,

DEE, DEH);• book related to imports (import tenders,

interconnector, etc.);

• book related to trading activities;• book related to purchase activities of third-party

production (origination);• book related to CCC hedging;• book related to certificates (TEE and GO).

Natural gas:• book related to sales to Dolomiti Energia;• book related to natural gas stocks;• book related to streamlining of transportation

capacities.

ELECTRICITY-RELATED BUSINESS

The first margin of electricity-related business showed very negative results for 2017. This was due to the results of the sales activities to Dolomiti Energia, while all other books reported positive results.

The negative result of the sales book to Dolomiti Energia depends on some main factors, which negatively affected the result, including:a) fixed price sales portfolio to Dolomiti Energia

(around 2.4 TWh), which showed various changes, starting from April 2016 (1 TWh sold at the minimum historic price of 39 €/MWh) until November 2017, with a progressive total average price of 44 €/MWh;

b) this sales portfolio was hedged only starting from October 2016, due to the fact that, until September 2016, price trend for 2017 fluctuated somewhat, in any case very close to sales prices, in an environment where prices had been decreasing since 2012, as previously described. As a consequence, on the whole, the fixed price purchase portfolio at end 2017 was equal to around 2 TWh, with an average price of 50.4 €/MWh (prices with a similar trend as sales prices).

Higher costs borne to purchase, at electricity market prices, further volumes (0,43 TWh) to be sold at fixed prices have to be added to the above-mentioned factor, which featured an impact that can be estimated in around 13 million euro. In particular, this factor had very negative effects on the Company’s accounts in January 2017, when the electricity market prices reached 72 €/MWh baseload (31 €/MWh in April 2016), and the price to purchase the required quantities on the electricity market affected the Company’s results for over 4 million euro. These costs were unfortunately


only marginally offset by benefits due to the optimisation of purchases on intraday markets.

All the other books produced positive results, starting from hydroelectric productions of plants related to SF Energy and Dolomiti Edison Energy which, despite an almost halved production volume, compared to normal values, contributed with a first margin of around 5.5 million euro due to high sales prices of electricity recorded in 2017.

The dispatching and energy management activities of HDE’s power plants generated a first margin of 0.8 million euro, while electricity imports generated a first margin of 1 million euro. The book’s results related to tenders with Terna for the hedging of the CCT risk, as well as the book related to the purchase of third-party production (Origination) and streamlining and trading activities were also positive.

The result of the book related to environmental certificates, especially TEEs, was good due to TEE’s price increase in 2017, from 100 €/TEE recorded in 2016 to over 400 €/TEE recorded between the

end of 2017 and first months of 2018. Within the TEE market, some law uncertainties and sudden changes in rules issued by ARERA (former AEEGSI), which might expose the Company to important risks in the future, are to be reported and are the object of careful monitoring.

NATURAL GAS-RELATED BUSINESS

The portfolio of sales activities of natural gas, albeit without the sales business to end customers, proved its solidity in managing sales to wholesalers (among which the main wholesaler is the commercial company of the Dolomiti Energia Group). The results obtained are consistent with expectations.As only shipper of the Dolomiti Energia Group through the purchase of gas at the wholesale Virtual Trading Point (PSV) from the main Italian and European players, your Company managed the transport agreements signed with almost all domestic transporters (Snam Rete Gas, Retragas, SGI, etc.) and the contract with Stogit for the management of quantities injected in stocks during Summer months to be then supplied in Winter time.

Structure

The breakdown of the corporate structure remained unchanged with respect to 2016, with Dolomiti Energia Holding SpA as majority shareholder

(98.72% of share capital), while the minority interest is held by the company Carlo Tassara SpA (1.28%).

Summary of economic, equity and financial positions

As regards the comment on the items in the Company’s Income Statement and Balance Sheet, reference is made to information included in the

Explanatory Notes. Tables with the main economic and financial indicators are shown hereunder.

Key economic and financial result indicators

INDEX FORMULA 2017 2016 DIFFERENCE

VOP PRODUCTION VALUE THOUSANDS OF EURO 750,373 528,614 221,759

EBITDA GROSS OPERATING MARGIN THOUSANDS OF EURO (8,433) (1,910) (6,523)

EBIT NET OPERATING MARGIN THOUSANDS OF EURO (8,543) (2,625) (5,918)

PROFIT FOR THE YEAR PROFIT FOR THE YEAR THOUSANDS OF EURO (6,860) (4,257) (2,603)

ROE NET PROFIT/EQUITY % (41.3) % (28.8) % (12.5) %

ROI EBIT/INVESTED CAPITAL % (4.9) % (1.5) % (3.4) %

ROS EBIT/PRODUCTION VALUE % (1.1) % (0.5) % (0.6) %

The performance of interim results for the period highlights the worsening of all indicators.

INDEX FORMULA 2017 2016 DIFFERENCE

DEBT RATIO LIABILITIES/EQUITY 17.04 15.90 1.14

CURRENT RATIO SHORT-TERM ASSETS/LIABILITIES 1.00 1.00 -

The financial indicators are in line with those of the previous year. It is highlighted that the Company’s business is the trading and wholesale of electricity

and natural gas. These indicators are therefore to be considered within that scenario.


Risk analysis

Credit risk

Credit is monitored constantly during the year to ensure that the total always expresses the estimated realisable value.

The Company works in the business area of the market of energy product sales and therefore is exposed to credit risk.

To limit the effects of that variable, a diligent reliability and credit worthiness analysis was carried out on customers through a credit check procedure aimed at selecting the new clients to be supplied. There is a payment reminder schedule for all customers and when deemed appropriate, the contract is terminated due to delinquency.

Liquidity risk

To face this risk, i.e. the risk that the financial resources available may be insufficient to fulfil short-term financial obligations, the Company entered into a service agreement with the parent company Dolomiti Energia Holding, which envisages that the latter sees to the centralised management of the treasury under cash pooling along with the surety management activities. Dolomiti Energia

Trading’s financial situation is therefore monitored systematically and does not present any particular critical aspects.

Market risk

Dolomiti Energia Trading's main risk factor is linked to price fluctuations in the commodities (electricity and gas), whose marketing represents the core business activity. The risk management objectives and policies adopted aim to minimise this risk to prevent price fluctuations from resulting in significant changes in the Company's operating margins. Risk limitation is pursued both by seeking to balance the purchase and sales pricing methods, and where this is not possible by making appropriate use of risk hedging instruments, therefore availing itself of a suitable mix of physical and financial contracts.

In particular, the Directors decided to subscribe appropriate financial instruments, whose spreads between fixed and variable price traded on a monthly basis were charged to the income statement as raw material purchase costs if these are hedging instruments or under value adjustments of financial assets and liabilities if these instruments do not meet the eligibility terms for the hedging accounting.

Human resources

As at 31 December 2017, the Company workforce numbered 19. The table below shows the changes

in the number of the workforce during the period by category.

CATEGORY 2016 HIRED RESIGNED CHANGES IN POSITION 2017

EXECUTIVES 1 - - - 1

MANAGERS 2 - - - 2

EMPLOYEES 15 1 - - 16

BLUE-COLLAR WORKERS - - - - -

18 1 - - 19

No accidents were reported in 2017.

Research and development

The Company did not conduct research and development during the year.

Related party transactions

Infra-group transactions

The main transactions existing between Dolomiti Energia Trading and the companies belonging to the Dolomiti Energia Group are described below. The transactions are regulated at arm's length.

Agreement for the use of general services. - The Company signed a service agreement, with the affiliate Dolomiti Energia, that governs costs relative to the use of shared structures and services.

Commercial dealings with Dolomiti Energia SpA. - The Company signed a contract for the supply of electricity and gas to Dolomiti Energia SpA.

Framework agreement for the sale of electricity with Hydro Dolomiti Energia Srl. (hereinafter HDE). - The Company signed with HDE, investee company of Dolomiti Energia, an agreement for the purchase/

sale of energy between the parties, to be entered into each time with specific term sheets.

Derivative contracts with Hydro Dolomiti Energia Srl. - The Company signed derivative contracts on commodities with the affiliated company in order to hedge the expected cash flows related to highly probable scheduled transactions.

Service provision agreement with Dolomiti Energia SpA. - The affiliated company supplies to Dolomiti Energia Trading general services in the sectors of operation, invoicing, technical back office, customer care, internet, credit management, printing service, posting and delivery of invoices. The contract is understood as automatically renewed from year to year unless prior notice of termination is sent.


Service provision agreement with Dolomiti Energia Holding SpA. The parent company supplies services to Dolomiti Energia Trading in the sectors of administration, corporate, finance and risk management, planning and development, human resources, information services and hardware and software development. The contract is understood as automatically renewed from year to year unless prior notice of termination is sent.

Tax consolidation. Agreements governing the national tax consolidation regime, signed with the parent company, have been in force since 2010 (three-year duration, automatically renewable). The agreement's key characteristics are provided below:• duration: from the 2013 financial year to 2017

inclusive, automatically renewable, unless a prior advance notice of termination is provided;

• transfer of taxable income: if the consolidated company records positive taxable income, it must pay the tax to the consolidating company with a settlement date no later than the deadline for

payments to the Tax Authorities;• transfer of tax losses: if a negative taxable

income is recorded (tax loss), the consolidating company agrees to recognise a final amount equal to the tax corresponding to the tax loss, less 3% for discounting purposes.

Centralised treasury service (cash pooling). Since 1 April 2011, Dolomiti Energia Trading and Dolomiti Energia Holding have agreed to centralise within the pool leader company (Dolomiti Energia Holding) the Company's treasury management with the zero balance cash pooling method, so as to optimise cash flow management. The relationship is governed by a dedicated agreement between the parties, which establishes its operating and technical procedures and economic conditions.

The payables/receivables and purchase/sale transactions with related parties are set forth in detail in the tables below (figures in thousands of euro).

TRADE RECEIVABLES FINANCIAL RECEIVABLES

TRADE PAYABLES

FINANCIAL PAYABLES

DOLOMITI ENERGIA HOLDING SPA 33,945 2,764,006 634,045 52,934,662

DOLOMITI ENERGIA SPA 53,626,260 - 7,261,595 -

SET DISTRIBUZIONE SPA 369,458 - - -

NOVARETI SPA 399,764 - 516,218 -

HYDRO DOLOMITI ENERGIA SRL 5,471,625 11,174,885 12,355,750 507,044

DOLOMITI GNL SRL 7,248 - - -

NESCO SRL - - 770,324 -

TOTAL 59,908,300 13,938,891 21,537,932 53,441,706

REVENUE PURCHASES FINANCIAL FINANCIAL

GOODS SERVICES OTHER GOODS SERVICES OTHER CHARGES CHARGES

DOLOMITI ENERGIA HOLDING SPA - 63,232 - 1,047,923 1,383,654 - - 808,294

DOLOMITI ENERGIA SPA 320,423,108 56,560 - 16,282,010 531,151 29,000 - -

SET DISTRIBUZIONE SPA 9,024,185 - - - - - - -

NOVARETI SPA 9,121,479 2,650 - 1,172,298 42,200 - - -

HYDRO DOLOMITI ENERGIA SRL 34,963,197 1,049,765 - 137,854,652 2,196,641 - - -

NESCO SRL - - - 770,324 - - - -

TOTAL 373,531,969 1,172,207 - 157,127,207 4,153,646 29,000 - 808,294

Business outlook

In order to avert the occurrence of the same conditions that in 2017 led to the negative result in the book related to the sale of electricity to Dolomiti Energia, your Company has adequately strengthened its control instruments and modified its operating procedures to ensure a substantial balance between fixed price purchases and sales.

Based on the economic and financial outlook for 2018, with the scenario envisaged for the preparation of these financial statements, your Company expects to report positive results, in terms

of margins and profits, again in 2018, in line with the budgeted results.

The further evolution envisaged for the use of the ETRM software, as regards the calculation and control of risks associated to various portfolios, might be fully implemented in the first half of 2018. This software will be a further support for the monitoring and the achievement of targets assigned to the Company, within a market scenario that is in any case characterised by a strong increase in market volatility.

Treasury shares

As at 31 December 2017, Dolomiti Energia Trading SpA did not hold, either directly or indirectly

through trust companies or third parties, treasury shares or shares of parent companies.

Trento, 27 March 2018

On behalf of the Board of DirectorsThe ChairmanMarco Merler

26 | 2017 Financial statements Dolomiti Energia Trading SpA Financial statements 2017 | 27

Dolomiti Energia Trading SpA–Financial statements 2017


Financial statements as at 31 december 2017(VALUES IN EURO)

BALANCE SHEET - ASSETS 31/12/2017 31/12/2016

A) SHAREHOLDER CAPITAL CONTRIBUTIONS OUTSTANDING - -

B) FIXED ASSETS

I) INTANGIBLE ASSETS

4) FRANCHISE, LICENSES, TRADEMARKS AND SIMILAR RIGHTS 808 2,529

5) GOODWILL 838,485 943,295

7) OTHER INTANGIBLE ASSETS 4,956 7,952

TOTAL 844,249 953,776

II) PROPERTY, PLANT AND EQUIPMENT

4) OTHER ASSETS 1,908 3,110

TOTAL 1,908 3,110

III) FINANCIAL FIXED ASSETS

2) RECEIVABLES REPRESENTING FIXED ASSETS:

D-BIS) FROM OTHERS 24,021,828 19,397,259

TOTAL 24,021,828 19,397,259

TOTAL FIXED ASSETS 24,867,985 20,354,145

C) CURRENT ASSETS

I) INVENTORIES

1) RAW MATERIALS AND CONSUMABLES 4,566,808 6,316,294

6) OTHER INVENTORIES 5,226,664 4,854,028

TOTAL 9,793,472 11,170,322

II) CURRENT RECEIVABLES

1) TRADE RECEIVABLES 29,468,278 60,323,848

4) DUE FROM PARENT COMPANIES 2,797,951 3,320,852

5) DUE FROM COMPANIES SUBJECTED TO THE CONTROL OF PARENT COMPANIES 59,874,356 57,274,352

5 BIS) TAX CREDITS 1,699,722 2,673,401

5 TER) PREPAID TAXES 1,781,147 2,633,673

5 QUARTER) RECEIVABLES FROM OTHERS 10,837,182 4,513,897

TOTAL 106,458,636 130,740,023

III) SHORT-TERM INVESTMENTS

5) DERIVATIVE ASSETS 33,484,243 15,407,102

6) OTHER SECURITIES FROM CURRENT ASSETS 824,324 802,731

TOTAL 34,308,567 16,209,833

IV) CASH AND CASH EQUIVALENTS

1) BANKS AND POSTAL CURRENT ACCOUNTS 307,360 113,567

3) CASH ON HAND 235 145

TOTAL 307,595 113,712

TOTAL CURRENT ASSETS 150,868,270 158,233,890

D) PREPAYMENTS AND ACCRUED INCOME

PREPAYMENTS 23,215 9,348

TOTAL PREPAYMENTS AND ACCRUED INCOME 23,215 9,348

TOTAL ASSETS 175,759,470 178,597,383

(VALUES IN EURO)

BALANCE SHEET - LIABILITIES 31/12/2017 31/12/2016

A) SHAREHOLDERS' EQUITY

I) SHARE CAPITAL 2,478,429 2,478,429

II) SHARE PREMIUM RESERVE 42,466 42,466

IV) LEGAL RESERVE 495,686 495,686

VII) OTHER RESERVES

- EXTRAORDINARY RESERVE 8,110,222 8,110,222

- MERGER SURPLUS RESERVE FROM CANCELLATION 561,311 561,311

- RESERVE FOR FUTURE CAPITAL INCREASE 5,000,000 -

VII) RESERVE TO COVER HEDGING OPERATIONS OF EXPECTED CASH FLOWS 4,596,651 3,514,237

VIII) RETAINED EARNINGS (LOSSES) (4,684,075) (426,700)

IX) PROFIT (LOSS) FOR THE YEAR (6,859,978) (4,257,375)

TOTAL SHAREHOLDERS' EQUITY 9,740,712 10,518,276

B) PROVISION FOR RISKS AND CHARGES

2) TAXES (INCLUDING DEFERRED TAXES) 3,220,729 3,697,704

3) DERIVATIVE LIABILITIES 27,499,634 10,783,106

TOTAL 30,720,363 14,480,810

C) EMPLOYEE TERMINATION BENEFITS 118,125 93,620

D) AYABLES

4) DUE TO BANKS - 276,387

7) TRADE PAYABLES 60,392,660 102,753,624

11) DUE TO PARENT COMPANIES 53,568,707 25,573,960

11 BIS) DUE TO COMPANIES SUBJECTED TO THE CONTROL OF PARENT COMPANIES 20,903,887 24,669,582

12) TAX PAYABLES 36,221 28,353

13) SOCIAL SECURITY AND WELFARE PAYABLES 45,416 43,302

14) OTHER PAYABLES 233,379 159,469

- PAYABLE WITHIN 12 MONTHS 135,379 159,469

- PAYABLE BEYOND 12 MONTHS 98,000 -

TOTAL 135,180,270 153,504,677

E) ACCRUED LIABILITIES AND DEFERRED INCOME

TOTAL - -

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 175,759,470 178,597,383


(VALUES IN EURO)

INCOME STATEMENT FINANCIAL YEAR 2017

FINANCIAL YEAR 2016

A) PRODUCTION VALUE

1) REVENUE FROM SALES AND SERVICES 749,574,508 526,965,428

5) OTHER REVENUE AND INCOME: 798,394 1,648,838

B) OTHER REVENUE 798,394 1,648,838

TOTAL PRODUCTION VALUE 750,372,902 528,614,266

B) PRODUCTION COSTS

6) FOR RAW MATERIALS, CONSUMABLES AND MERCHANDISE 737,463,911 485,730,080

7) SERVICE COSTS 18,357,489 46,675,704

8) FOR USE OF THIRD PARTY ASSETS 54,479 74,404

9) PERSONNEL COSTS 1,129,837 1,001,013

A) WAGES AND SALARIES 835,348 699,703

B) SOCIAL SECURITY COSTS 232,359 198,969

C) EMPLOYEE TERMINATION BENEFITS 50,016 39,916

E) OTHER COSTS 12,114 62,425

10) AMORTISATION, DEPRECIATION AND WRITE-DOWNS 110,729 715,147

A) AMORTISATION OF INTANGIBLE ASSETS 109,527 118,741

B) DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT 1,202 4,022

D) WRITE-DOWN OF RECEIVABLES RECOGNISED TO CURRENT ASSETS AND CASH EQUIVALENTS - 592,384

11) CHANGES IN INVENTORIES OF RAW MATERIALS, CONSUMABLES AND MERCHANDISE 1,376,850 (3,722,183)

14) OTHER OPERATING EXPENSES 423,056 765,207

TOTAL PRODUCTION COSTS 758,916,351 531,239,372

DIFFERENCE BETWEEN PRODUCTION VALUE AND COSTS (8,543,449) (2,625,106)

C) FINANCIAL INCOME AND CHARGES

16) OTHER FINANCIAL INCOME 30,065 27,653

D) FINANCIAL INCOME OTHER THAN THE ABOVE 30,065 27,653

17) INTEREST AND OTHER FINANCIAL CHARGES (821,656) (714,034)

C) FROM PARENT COMPANIES (808,294) (700,594)

D) FROM OTHERS (13,362) (13,440)

17 BIS) EXCHANGE GAINS AND LOSSES (10) 378

TOTAL FINANCIAL INCOME AND CHARGES (791,601) (686,003)

D) VALUE ADJUSTMENTS OF INVESTMENTS AND FINANCIAL LIABILITIES

18) REVALUATIONS 20,310,587 -

D) FINANCIAL DERIVATIVES 20,310,587 -

19) WRITE-DOWNS (20,342,210) (2,051,294)

D) FINANCIAL DERIVATIVES (20,342,210) (2,051,294)

TOTAL VALUE ADJUSTMENTS OF INVESTMENTS AND FINANCIAL LIABILITIES (31,623) (2,051,294)

PROFIT BEFORE TAX (9,366,673) (5,362,403)

20) INCOME TAXES FOR THE YEAR 2,506,695 1,105,028

- TAX RELATING TO PRIOR PERIODS 322,357 (26,501)

- PREPAID (DEFERRED) TAX 8,263 (276,971)

- GAINS FROM TAX CONSOLIDATION 2,176,075 1,408,500

21) PROFIT (LOSS) FOR THE YEAR (6,859,978) (4,257,375)

(IN THOUSANDS OF EURO)

CASH FLOW STATEMENT 2017 2016

A. CASH FLOWS FROM OPERATIONS

PROFIT (+) LOSS (-) FOR THE YEAR (6,860) (4,257)

INCOME TAXES (2,507) (1,105)

ACCRUED INTEREST INCOME (-) (30) (28)

ACCRUED INTEREST EXPENSE (+) 822 714

1. PROFIT (+) / LOSS (-) FOR THE YEAR BEFORE INCOME TAXES, INTEREST, DIVIDENDS AND CAPITAL GAINS/LOSSES (8,575) (4,676)

ALLOCATIONS/ABSORPTIONS OF PROVISIONS FOR RISKS AND OTHER CHARGES 66 40

AMORTISATION/DEPRECIATION OF INTANGIBLE ASSETS/PROPERTY, PLANT AND EQUIPMENT 111 123

VALUE ADJUSTMENTS OF INVESTMENTS AND FINANCIAL LIABILITIES RELATED TO DERIVATIVES THAT DO NOT INVOLVE ANY CASH MOVEMENTS 64 (589)

TOTAL ADJUSTMENTS FOR NON-MONETARY ITEMS 241 (426)

2. CASH FLOW BEFORE CHANGES IN NWC (8,334) (5,102)

DECREASE (+) / INCREASE (-) IN INVENTORIES 1,377 (3,722)

DECREASE (+) / INCREASE (-) IN ACCOUNTS RECEIVABLE 30,856 (48,781)

INCREASE (+) / DECREASE (-) IN ACCOUNTS PAYABLE (39,968) 62,837

DECREASE (+) / INCREASE (-) IN PREPAYMENTS AND ACCRUED INCOME (14) 40

OTHER CHANGES IN NET WORKING CAPITAL (14,276) (17,098)

TOTAL CHANGES IN NET WORKING CAPITAL (22,025) (6,724)

3. CASH FLOW AFTER CHANGES IN NWC (30,359) (11,826)

INTEREST COLLECTED (+) 8 8

INTEREST PAID (-) (769) (531)

INCOME TAXES REIMBURSED (+) / PAID (-) 2,808 (2,051)

USE OF PROVISIONS - (1,814)

TOTAL OTHER ADJUSTMENTS 2,047 (4,388)

CASH FLOW FROM INVESTMENT ACTIVITIES (A) (28,312) (16,214)

B. CASH FLOWS FROM OPERATIONS

INTANGIBLE ASSETS/INVESTMENTS (-) - (1,048)

FINANCIAL FIXED ASSETS/INVESTMENTS (-) (11,668) (9,357)

FINANCIAL FIXED ASSETS / DISINVESTMENTS (+) 4,650 13,361

COLLECTIONS / (PAYMENTS) OF NON-HEDGING DERIVATIVES 32 -

CASH FLOW FROM INVESTMENT ACTIVITIES (B) (6,986) 2,956

C. CASH FLOWS FROM FINANCING ACTIVITIES

THIRD-PARTY FUNDS/INCREASE (+)/DECREASE (-) SHORT-TERM LOANS FROM BANKS (276) 272

EQUITY / CAPITAL INCREASE AGAINST PAYMENT (+) 5,000 -

EQUITY / DIVIDENDS PAID (-) - (2,067)

INCREASE (+) / DECREASE (-) IN CASH POOLING ACCOUNTS PAYABLE 30,768 7,767

CASH FLOW FROM FINANCING ACTIVITIES (C) 35,492 5,972

INCREASE (+)/DECREASE (-) IN CASH AND CASH EQUIVALENTS (A+B+C) 194 (7,286)

EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS - -

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 114 7,400

CASH AND CASH EQUIVALENTS AT YEAR END 308 114


The treasury contract in place with the Parent Company envisages that management of funding requirements be centralised at the pooler company (Dolomiti Energia Holding), which operates through the transfer of credit and debit balances of the current accounts of Dolomiti Energia Trading. Therefore, due to the cash pooling effect, the Company's balance on pooling accounts at the end of the day are always zero, having been transferred to the Parent Company, which in turn meets the funding requirements of the Company if its own financial resources are insufficient. The Company also has current accounts that are excluded from cash pooling.

These financial statements are true, genuine and comply with the accounting records.


On behalf of the Board of Directors The Chairman Marco Merler

Explanatory notes to the financial statements as at 31 december 2017

Foreword

With a view of streamlining the sales activities within the Dolomiti Energia Group, Dolomiti Energia Trading SpA (hereinafter also “DET” or the “Company”), former Multiutility SpA, transferred the business unit related to gas and electricity sales to end customers to Dolomiti Energia SpA (former Trenta SpA), effective on 1 April 2016. Meanwhile, Dolomiti Energia SpA transferred the business unit related to gas and electricity wholesale purchase and sale activities to Dolomiti Energia Trading SpA, in addition to incoming despatching services and relations with the Electricity Market. Therefore, to date, Dolomiti Energia Trading SpA is the only company within the Dolomiti Energia Group that has commercial relations with gas and electricity wholesalers. It is the only company that has an incoming despatching contract with Terna, and the only supplier for all gas and electricity requirements of the company Dolomiti Energia SpA.

Balance-sheet figures for 2016, disclosed for comparison purpose, therefore represent, above all under the economic viewpoint, a hybrid business, characterised by both sales to end users and trading to wholesalers in the first quarter of 2016, and for the remaining period of the year characterised by trading activities only. In 2017, on an exclusive basis, DET performed the trading business, which, also in terms of volumes, grew remarkably compared to the previous year. This had a significant impact on both equity and book amounts, compared to 2016.

Drawing-up criteria

The financial statements for the year ended 31 December 2017 and these Explanatory Notes were drawn up according to provisions set forth by Articles 2423 and seq. of the Italian Civil Code, supplemented by the accounting standards issued by the Italian Accounting Standard Authority (OIC).

The Financial Statements comprise the following documents:• Balance Sheet;• Income Statement;• Cash Flow Statement;• Explanatory Notes.

These Explanatory Notes are intended to describe, analyse and, in some cases, supplement the Financial Statements data. They also include information required by Article 2427 of the Italian Civil Code that is consistent with amendments to regulations, as introduced by Legislative Decree 139/15 and the accounting principles recommended by the Italian Accounting Standard Authority.

These financial statements are expressed in euro.

Furthermore:a) the valuation criteria are those set forth in Article

2426 of the Italian Civil Code; exceptional cases which would make it necessary to not apply the valuation criteria set forth, since incompatible with the "true and fair view" of the equity and financial situation as well as the economic result of the Company, pursuant to Article 2423, paragraph 4, were not identified;

b) the items of the Balance Sheet and the Income Statement were not grouped;

c) there are no asset and liability items that fall under more than one item in the statement.

Reference is made to the Report on Operations as regards the following:a) type of business carried out;b) business outlook;c) relations with parent companies, subsidiaries,

associated companies and companies subject to joint control of the parent company.

Compared to the previous year, all contingent assets were classified under item A 5) Other revenue and income, and not by kind, like in the previous year. Balance-sheet figures for 2016, disclosed for comparison purposes, have been duly adjusted.


These reclassifications involved the exposure of a higher value in 2016 production, equal to 184 thousand euro and therefore higher production costs, for the same amount. The difference between value and production costs therefore remained unchanged.

APPLICATION OF THE PRINCIPLE OF RELEVANCE

Pursuant to Article 2423, paragraph 4, of the Italian Civil Code, obligations cannot be fulfilled in terms of recognition, measurement, presentation and disclosures when their compliance would have irrelevant effects for the purpose of a true andfair view, except for obligations concerning the regular book keeping. To this purpose, the criteria based on which the above provision was applied within the Company’s financial statements are shown hereunder:• Short-term receivables and payables were recognised at their nominal value, without applying the amortised cost, as well as medium/long-term receivables and payables, which accrue interests at a rate that can be considered as arm’s length rate, and for which the differences between initial value and value at maturity (also taking account of any amounts directly attributable to transactions that generated such receivables and payables) would not be significant with respect to the nominal value of receivables or payables. Receivables recorded at their nominal value are adjusted by special provisions for write-downs when the nominal value of the same are required to be aligned with the estimated realisable value as it is lower;

Principles applied in the valuation of financial statement items

The financial statement items were measured on the basis of general criteria of prudence and accrual under the assumption that the Company is a going concern, as well as taking into consideration the nature of the transaction and agreement considered. The application of the principle of prudence entailed individually measuring the elements making up the individual asset and liability entries or items, in order to avoid offsetting items that

should be recognised and profits that should not be recognised because not realised.In compliance with the accrual principle, the effect of transactions and other events was stated for accounting purposes and attributed to the year to which those transactions and events refer, and not to that in which the relative cash movements actually take place (collections and payments).

The measurement criteria adopted in preparing the financial statements are described below.

INTANGIBLE ASSETS

Intangible assets, characterised by a lack of tangibility, are represented by costs, which do not terminate their utility in the period they are incurred, but rather manifest economic benefits over several years. They are stated at the purchase cost effectively incurred inclusive of related charges, and/or at production cost if created internally, which includes all the costs directly attributable and also the portion of the indirect costs reasonably attributable to the asset.

They are stated net of the portions of amortisation, calculated systematically on a straight-line basis in relation to their residual useful life.

In the event of impairment, regardless of the amortisation already accounted for, the asset is correspondingly written down. If the assumptions, on which the write-down is based, are no longer valid in subsequent years, the original value is written back, only adjusted by amortisation.

Acquired trademarks are amortised over five years. Other multi-year costs are amortised based on the duration of the contracts to which they refer.

Goodwill was recorded following the purchase, against payment, of a business unit. Pursuant to provisions set forth by Article 2426 of the Italian Civil Code, as amended by the Legislative Decree 139/2015, goodwill is amortised based on its useful life, and in any case over a period not longer than 20 years. In exceptional cases, when it is not possible to reliably estimate its useful life, it is amortised over a period of 10 years maximum. There is no goodwill prior to 1 January 2016.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment include assets held for long-term use whose economic utility extends beyond the limits of one year, acquired from third parties or produced internally. The cost effectively incurred for the acquisition of the asset also includes the related costs, incurred so that the fixed assets can be used. The production costs include all the costs directly attributable to the asset (typically materials and direct labour) and the portion

of other general production costs reasonably attributable to the fixed asset.

They are stated net of the portions of depreciation, calculated systematically on a straight-line basis in relation to their residual useful life. The depreciation period begins from the year in which the asset is available and ready for use, and for assets acquired during the year, the rate is halved, to take into account the minor use. In particular, depreciation is calculated according to the rates shown below:

CATEGORY RATE APPLIED

ELECTRONIC AND OFFICE MACHINES 20%

FURNITURE AND FIXTURES 12%

In the event of impairment, regardless of the amortisation already accounted for, the asset is correspondingly written down. If the assumptions, on which the write-down is based, are no longer valid in subsequent years, the original value is written back, only adjusted by amortisation.

Extraordinary maintenance charges increase the book value of the fixed assets to which they refer, since they increase the production capacity or the useful life attributable to the existing asset; ordinary maintenance charges are charged to the income statement.

No financial charges relating to loans possibly obtained for the construction and manufacture of assets, have been capitalised.

RECEIVABLES

Receivables are recorded in the financial statements according to the amortised cost criterion, taking account of timing and the estimated realisable value. In particular, the initial book value is the nominal value of the receivable, less all returns, discounts, allowances and premiums, and including any costs directly resulting from the transaction that generated the receivable itself. Transaction costs, any assets and liabilities, as well as any difference between initial value and nominal value upon maturity are included in the calculation of the amortised cost, by using the effective interest

rate criterion. The amortised cost is not applied to receivables for which its application would involve irrelevant effects with respect to the accounting based on the nominal value. It is estimated that the effects are irrelevant when they concern all short-term receivables, as well as all medium/long-term receivables that accrue interest at a rate which is similar to the market one and for which the difference between initial value and value upon maturity (taking also account of any amounts that are directly attributable to the transaction that generated the receivable) is not significant vis-à-vis the nominal value of the receivable.

The classification of accounts receivable under current assets and financial fixed assets is regardless of the collectability principle (i.e. based on the period of time within which the assets will be transformed in cash, which is conventionally 12 months). Conversely, the various assets are classified based on the function that they play within the Company’s normal business. Accounts receivable related to financial management are recognised under financial fixed assets, while accounts receivable related to operations and other accounts receivable are recorded under current assets. In order to determine the amounts that are collectible within and after 12 months, the classification is made based on their contractual or legal maturity terms, also taking account of the following:• facts and events envisaged in the agreement that


might cause a change in the original maturity term, and that occurred before the reporting date of the financial statements;

• the realistic capacity of the debtor to fulfil the obligation within the terms set forth by the agreement;

• the period of time in which the creditor reasonably deems to have the right to collect the accounts receivable.

A special provision for write-downs was created to hedge any insolvency risks. The consistency of this provision, with respect to doubtful debts, is checked periodically and, in any case, at the end of every year, taking also account of non-collectability positions already arisen or deemed as probable.

INVENTORIES

Inventories represent assets destined for sale or which contribute to their realisation in the Company’s normal business and mainly include raw, ancillary and consumable materials and merchandise, as well as energy securities intended to be exchanged on the market. The assets in inventories are recognised at purchase cost, inclusive of related charges. Inventories are valued in the financial statements at the lower between cost and the realisable value based on the market as at the year-end date.

The cost of property, plant and equipment (raw materials, consumables and merchandise) is determined using the weighted average cost method, since the quantities purchased are not individually identifiable, but are included in a series of equally available assets.

The costs related to Energy Certificates are instead determined using the FIFO (first in first out) method, which is deemed as better reflecting the current market value given the fact that the prices of these certificates strongly fluctuate, also in relation to periods shorter than twelve months. Until 31 December 2016, the energy certificates were measured using the weighted cost method. By reason of the fact that in 2016 the Company made irrelevant sales of certificates, in terms of quantity and value, the effect of the changed method was not significant and, while applying the materiality principle, pursuant to Article 2423, paragraph 4, of

the Italian Civil Code, this effect was not disclosed in the Company’s accounts.

SHORT-TERM INVESTMENTS

Securities in current assets represent investments in financial instruments, which assign the right to receive a specific flow of liquidity or one that can be determined, without the right to directly or indirectly take part in the management of the issuing body. They are not intended to be held over the long-term in the company assets, due to the characteristics of the instrument and the will of company management. They are recognised at purchase cost, inclusive of any related charges. Current securities are valued on the basis of purchase cost or the realisable value based on market trends, whichever lower. With regard to securities without coupon, the financial income pertaining to the year is recorded as a direct matching balance to the book value of the security.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents, recognised at face value, represent the balance at year end of bank deposits and cash and are immediately usable for the Company’s purposes. They include all the incomings and outgoings, which have taken place by the balance sheet date.

ACCRUALS AND DEFERRALS

These represent costs and income common to two or more accounting periods, the entity of which varies over time. The amount of the accruals and deferrals is determined by means of the breakdown of the revenue or the cost, for the purpose of allocating just the pertinent portion to the current period.

PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges include costs and liabilities of a specific nature whose existence is certain or probable, but whose timing and extent are unknown as of the year end date. The provisions represent a realistic estimate of the liability to be incurred on the basis of the information available.

When evaluating these provisions, the general principles of prudence and accruals are observed and steps are not taken to establish generic provisions lacking economic justification.In the event that the events which could give rise to liabilities or losses are deemed merely possible (or the degree of occurrence of the future event is less than probable), no provision is made, but disclosure is whoever provided in the explanatory notes.

EMPLOYEE TERMINATION BENEFITS

The employee termination benefits are provided on an accruals basis in compliance with the law and employment contracts in force, considering all types of continuous wages and salaries. The amount recorded in the financial statements reflects the effective liability accrued in favour of employees as at the year-end date, net of advances paid out, and equals that which would be due to employees if their employment were to end on that date.

PAYABLES

Payables include specific and certain liabilities, which represent obligations to pay a determinate amount usually on an established date. They are recognised in the financial statements based on the amortised cost criterion, taking account of timing. In particular, the initial book value is the nominal value of the payable, less transaction costs and all returns, discounts, allowances and premiums, directly resulting from the transaction that generated the payable itself. Transaction costs, any assets and liabilities, as well as any difference between initial value and nominal value upon maturity are included in the calculation of the amortised cost, by using the effective interest rate criterion. The amortised cost is not applied to payables for which its application would involve irrelevant effects with respect to the accounting based on the nominal value. It is estimated that the effects are irrelevant when they concern all short-term payables, as well as all medium/long-term payables that accrue interest at a rate which is similar to the market one and for which the difference between initial value and value upon maturity (taking also account of any amounts that are directly attributable to the transaction that generated the payable) is not significant vis-à-vis the nominal value of the payable.

FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions, typically attributable to the purchase of goods or services whose prices are expressed in foreign currency, are recognised in euro at the time the transaction is carried out, applying the spot exchange rate to the foreign currency amount. At year-end, the foreign currency assets and liabilities are adjusted to the spot exchange rate as of the year-end date and the related exchange gains and losses are booked to the income statement.

FINANCIAL DERIVATIVES

Financial derivatives are recognised at fair value. Changes in fair value are charged to the income statements or, if the instrument hedges the fluctuation risk of estimated cash flows related to another financial instrument or a planned transaction, they are directly charged to a positive or negative equity reserve. This reserve will be charged to the income statement to the extent and with timescale corresponding to the occurrence, or changes, of cash flows of the hedged instruments, or upon the occurrence of the hedged transaction. In the event that, at the reporting date, the fair value is positive, it will be recorded under item “Derivative assets”, under Financial fixed assets or under Short-term investments. If an amount is negative, it will be recorded under item “Derivative liabilities”, under provisions for risks and charges.

OPERATING COSTS AND REVENUES

Revenues from the sale of products and costs for the purchase of the same are recognised upon transfer of all risks and benefits connected with ownership, which usually coincides with shipment or delivery of goods. Revenues and costs for services are recognised when the service is rendered.Sales revenues and purchase costs are recorded on an accrual basis, net of returns, discounts, allowances and premiums, as well as the taxes directly associated with the sale or the purchase of products and services.

INCOME TAXES FOR THE YEAR

The current taxes for the year are established on the basis of a realistic forecast of the taxable income pertaining to the year, in accordance with


current tax legislation and are stated, net of the advances paid and the withholdings made, in the item Tax payables (in the event a net payable emerges) and in the item Tax credits (in the event a net credit emerges).

Prepaid and deferred taxes are provided for on the timing differences between the value assigned to an asset or liability on the basis of statutory criteria and the corresponding value for tax purposes. In observance of the prudence principle, prepaid taxes are recognised if their future recovery is reasonably certain.

Any estimate variations (including rate variations) are allocated to the taxes for the year.

The content and significance of the main financial statements items are illustrated below.

Assets

INTANGIBLE ASSETS

A breakdown of the changes during the year is shown below.

(VALUES IN EURO)

INTANGIBLE ASSETS 31/12/2016 INCREASES DECREASES AMORTISATION 31/12/2017

B) I - INTANGIBLE ASSETS - HISTORICAL COST

3) INDUSTRIAL PATENT AND INTELLECTUAL PROPERTY RIGHTS 657,126 - - - 657,126

4) FRANCHISE, LICENSES, TRADEMARKS AND SIMILAR RIGHTS 54,861 - - - 54,861

5) GOODWILL 1,048,106 - - - 1,048,106

7) OTHER INTANGIBLE ASSETS 194,787 - - - 194,787

TOTAL HISTORICAL COST 1,954,880 - - - 1,954,880

B) I - INTANGIBLE ASSETS - ACCUMULATED AMORTISATION

3) INDUSTRIAL PATENT AND INTELLECTUAL PROPERTY RIGHTS (657,126) - - - (657,126)

4) FRANCHISE, LICENSES, TRADEMARKS AND SIMILAR RIGHTS (52,332) - - (1,721) (54,053)

5) GOODWILL (104,811) - - (104,810) (209,621)

7) OTHER INTANGIBLE ASSETS (186,835) - - (2,996) (189,831)

TOTAL ACCUMULATED AMORTISATION (1,001,104) - - (109,527) (1,110,631)

B) I - INTANGIBLE ASSETS - NET VALUE

3) INDUSTRIAL PATENT AND INTELLECTUAL PROPERTY RIGHTS - - - - -

4) FRANCHISE, LICENSES, TRADEMARKS AND SIMILAR RIGHTS 2,529 - - (1,721) 808

5) GOODWILL 943,295 - - (104,810) 838,485

7) OTHER INTANGIBLE ASSETS 7,952 - - (2,996) 4,956

TOTAL B) I - INTANGIBLE ASSETS 953,776 - - (109,527) 844,249

The item Industrial patent and intellectual property rights includes the value related to the application software, purchased under a permanent usage licence and partially amortised.

The item Franchise, licenses, trademarks and similar rights is entirely related to commercial trademarks.

Goodwill was recorded in 2016 following the purchase, against payment, of the business unit concerning the wholesale trading of electricity and gas from the affiliated company Dolomiti Energia SpA (former Trenta SpA). The amount recognised, equal to 1,048 thousand euro, resulted from the difference between the total price borne for the acquisition of the business value and the value attributed to the transferred equity assets and liabilities. Goodwill is amortised over a period of ten years.

Other multi-annual costs are related to improvements to third-party assets and are amortised consistently with the residual duration of the agreement to which they refer.

PROPERTY, PLANT AND EQUIPMENT

A breakdown of the changes during the year is shown below.

(VALUES IN EURO)

PROPERTY, PLANT AND EQUIPMENT 31/12/2016 INCREASES DECREASES DEPRECIATION 31/12/2017

B) II - PROPERTY, PLANT AND EQUIPMENT - HISTORICAL COST

2) PLANTS AND EQUIPMENT 51,929 - - - 51,929

3) INDUSTRIAL AND COMMERCIAL FITTINGS 22,078 - - - 22,078

4) OTHER ASSETS 188,136 - - - 188,136

TOTAL HISTORICAL COST 262,143 - - - 262,143

B) II - PROPERTY, PLANT AND EQUIPMENT - ACCUMULATED DEPRECIATION

2) PLANTS AND EQUIPMENT (51,929) - - - (51,929)

3) INDUSTRIAL AND COMMERCIAL FITTINGS (22,078) - - - (22,078)

4) OTHER ASSETS (185,026) - - (1,202) (186,228)

TOTAL ACCUMULATED DEPRECIATION (259,033) - - (1,202) (260,235)

B) II - PROPERTY, PLANT AND EQUIPMENT - NET VALUE

2) PLANTS AND EQUIPMENT - - - - -

3) INDUSTRIAL AND COMMERCIAL FITTINGS - - - - -

4) OTHER ASSETS 3,110 - - (1,202) 1,908

TOTAL B) II - PROPERTY, PLANT AND EQUIPMENT 3,110 - - (1,202) 1,908

The item Other assets primarily includes the amount related to furniture and fixtures.


FINANCIAL FIXED ASSETS

Accounts receivable

(VALUES IN EURO)

2) RECEIVABLES REPRESENTING FIXED ASSETS: 31/12/2017 31/12/2016 CHANGE

D-BIS) FROM OTHERS 24,021,828 19,397,259 4,624,569

RECEIVABLES REPRESENTING FIXED ASSETS: 24,021,828 19,397,259 4,624,569

The item Receivables from others includes guarantee deposits paid by the Company to the Energy Markets Operator (GME) to operate on the Energy Account Platform for 20,004 thousand euro (15,397 thousand euro as at 31 December 2016). Over the year, DET used this deposit to offset some transactions made with GME, for a total amount of 2,393 thousand euro, and provided for an allocation of 7,000 thousand euro to supplement the guarantee.

The balance also included guarantee deposits of transactions performed on international stock

markets, in the amount of 3,500 thousand euro (4,000 thousand euro at end of the previous year). This item, systematically reviewed in relation to volumes traded on the markets, involved reimbursements for the year totalling 4,650 thousand euro and payments equal to 4,150 thousand euro.

Lastly, in 2017 the Company paid a guarantee deposit of 518 thousand euro in favour of Terna SpA, for the participation to the 2018 virtual import tender.

CURRENT ASSETS

INVENTORIES

(VALUES IN EURO)

INVENTORIES 31/12/2016 INCREASES DECREASES OTHER CHANGES 31/12/2017

I) INVENTORIES

1) RAW MATERIALS AND CONSUMABLES

METHANE GAS INVENTORIES 6,316,294 5,985,613 (7,735,099) - 4,566,808

6) OTHER INVENTORIES -

ENERGY EFFICIENCY CERTIFICATES, INVENTORIES 4,854,028 23,680,967 (23,917,165) 17,874 4,635,704

GUARANTEES OF ORIGIN, INVENTORIES - 1,014,590 (423,630) - 590,960

INVENTORIES 11,170,322 30,681,170 (32,075,894) 17,874 9,793,472

These are all methane gas inventories owned by the Company and in stock as at 31 December 2017 at the storage sites of Stogit SpA, and amount to 4,567 thousand euro. The change during the year reflects the strategic and operating policies of the Company.

Inventories related to energy efficiency certificates (TEE and GO), exchanged on the energy market by the Company with trading purposes and still unsold on 31 December 2017, amounted to 5,227 thousand euro. The line “Other changes” includes the higher value of TEE initial inventories resulting from the

change in the measurement method (18 thousand euro). For further information on the effect of the

change, reference is made to section “Principles applied in the valuation of financial statement items”.

ACCOUNTS RECEIVABLE

Trade receivables net of the bad debt provision

(VALUES IN EURO)

1) TRADE RECEIVABLES 31/12/2017 31/12/2016 CHANGE

INVOICES ISSUED 5,912,653 15,141,236 (9,228,583)

GAS 694,860 282,377 412,483

ELECTRICITY 5,217,793 14,858,859 (9,641,066)

INVOICES TO BE ISSUED 24,148,009 45,774,996 (21,626,987)

GAS 3,761,994 1,538,567 2,223,427

ELECTRICITY 19,653,099 44,234,484 (24,581,385)

OTHER SERVICES 732,916 1,945 730,971

BAD DEBT PROVISION (592,384) (592,384) -

TRADE RECEIVABLES 29,468,278 60,323,848 (30,855,570)

Trade receivables mainly refer to the electricity and gas sold during the year. The significant decrease, compared to the previous year, is due, in the amount of around 11 million euro, to invoices, related to the electricity commodity, that were overdue in December 2016 and paid in January 2017. A strong decrease in receivables was also noted for invoices to the issued on the electricity commodity, related

to lower transactions performed in the last two-month period of 2017, compared to the same period of the previous year.

A dedicated bad debt provision was allocated to represent receivables at the estimated realisable value. The changes in that provision over the year are shown below.

(VALUES IN EURO)

BAD DEBT PROVISION 31/12/2017 31/12/2016 CHANGE

OPENING BAD DEBT PROVISION (592,384) (2,437,163) 1,844,779

ALLOCATION - (592,384) 592,384

USE - 785,173 (785,173)

OTHER CHANGES - 1,651,990 (1,651,990)

CLOSING BAD DEBT PROVISION (592,384) (592,384) -

In the above-mentioned table, the item Other changes as at 31 December 2016 shows the value of the bad debt provision related to the commercial business unit and transferred to the affiliated company Dolomiti Energia SpA (former

Trenta SpA). In 2017, the Company borne no credit losses and did not allocate any further amount to the bad debt provision as it was deemed adequate with respect to the remote risk of insolvency for the Company.


Due from parent companies

(VALUES IN EURO)

4) DUE FROM PARENT COMPANIES 31/12/2017 31/12/2016 CHANGE

INVOICES/BILLS ISSUED (10,083) 712 (10,795)

ELECTRICITY (10,083) - (10,083)

OTHER SERVICES - 712 (712)

INVOICES TO BE ISSUED 2,808,034 3,320,140 (512,106)

ELECTRICITY 52,209 841,150 (788,941)

OTHER SERVICES 2,755,825 2,478,990 276,835

DUE FROM PARENT COMPANIES 2,797,951 3,320,852 (522,901)

OF WHICH

DUE FROM PARENT COMPANIES (TAXES) 2,764,006 2,483,657 280,349

Receivables due from the parent company Dolomiti Energia Holding SpA mainly include, in the amount of 576 thousand euro, VAT credit resulting from the adhesion of the entity to Group VAT, and, in the amount of 2,188 thousand euro, tax credits resulting from the adhesion to the national tax consolidation regime, in place since 2010 (three-year duration, tacitly renewable), whose main characteristics are shown hereunder:• duration: from the 2016 financial year to 2018

inclusive, automatically renewable, unless a prior advance notice of termination is provided;

• transfer of taxable income: if the consolidated

company records positive taxable income, it must pay the tax to the consolidating company with a settlement date no later than the deadline for payments to the Tax Authorities;

• transfer of tax losses: if a negative taxable income is recorded (tax loss), the consolidating company agrees to recognise a final amount equal to the tax corresponding to the tax loss less 3% for discounting purposes.

Receivables from tax consolidation therefore resulted from the transfer of tax losses to the parent company and the transfer of ACE 2017.

Due from companies subjected to the control of parent companies

(VALUES IN EURO)

5) RECEIVABLES FROM ASSOCIATED COMPANIES 31/12/2017 31/12/2016 CHANGE

INVOICES/BILLS ISSUED 24,506 60,813 (36,307)

ELECTRICITY 16,373 60,813 (44,440)

OTHER SERVICES 8,133 - 8,133

INVOICES TO BE ISSUED 59,849,850 57,213,539 2,636,311

GAS 31,762,220 35,411,565 (3,649,345)

ELECTRICITY 27,305,429 21,265,276 6,040,153

OTHER SERVICES 782,201 536,698 245,503

DUE FROM ASSOCIATED COMPANIES 59,874,356 57,274,352 2,600,004

This item refers primarily to receivables resulting form electricity and gas supply, as today the Company is the only supplier for the entire needs of

the company Dolomiti Energia SpA, in charge of the direct supply of end users.

Tax credits

(VALUES IN EURO)

5 BIS) TAX CREDITS 31/12/2017 31/12/2016 CHANGE

IRAP CREDIT 334,919 334,919 -

VAT CREDIT 1,312,326 2,272,032 (959,706)

OTHER TAX CREDITS 2,816 2,960 (144)

IRES CREDIT 49,661 63,490 (13,829)

TAX CREDITS 1,699,722 2,673,401 (973,679)

The item Tax credits includes primarily 1,312 thousand euro related to VAT credit accrued in 2016, before the adhesion to Group VAT, and 335 thousand euro related to IRAP credit resulting from the payment of 2016 tax accounts, still unused as tax losses were reported, for IRAP tax purpose, in 2016 and 2017.

During the year, Tax Authorities repaid VAT credits for 2016 in the amount of 960 thousand euro and receivables resulting from the IRES refund application for deductibility of IRAP in the years from 2007 to 2011, related to a merged company

for 14 thousand euro. The item also included 50 thousand euro of IRES credit from the IRES refund application for deductibility of IRAP in the years from 2007 to 2011 (25 thousand euro) and from the distribution plan of an investee company liquidated in 2013 (25 thousand euro).

Prepaid taxes

For the details on credits for prepaid taxes (1,781 thousand euro), see the statements on temporary differences that led to the reporting of deferred tax assets.

Due from other

(VALUES IN EURO)

5 QUARTER) RECEIVABLES FROM OTHERS 31/12/2017 31/12/2016 CHANGE

OTHER RECEIVABLES 9,135,109 883,113 8,251,996

ADVANCES/DEPOSITS 1,699,693 3,626,854 (1,927,161)

DUE FROM SOCIAL SECURITY INSTITUTIONS 2,380 3,930 (1,550)

DUE FROM OTHERS 10,837,182 4,513,897 6,323,285

The item Receivables due from others, amounting to 10,837 thousand euro (4,514 thousand euro as at 31 December 2016), refers primarily to the prepayment of fair value on derivative contracts on commodities, with delivery in 2018 (9,117 thousand euro), signed on regulated markets. The significant

increase, compared to the previous year, is due to the greater use of derivatives to hedge the risk of fluctuations in the procurement prices for electricity and gas commodities.The item Advances to suppliers, equal to 1,700 thousand euro (3,627 thousand euro as at 31


December 2016), is primarily related to advance payments paid against future acquisitions of electricity and energy certificates.

With regard to the requirement of point 6) of Article 2427 of the Italian Civil Code, no other

receivable posted to the financial statement assets has duration of more than five years. Trade receivables and other receivables include amounts due from foreign counterparties for a total of 10,785 thousand euro.

SHORT-TERM INVESTMENTS

Derivative assets

(VALUES IN EURO)

5) DERIVATIVE ASSETS 31/12/2017 31/12/2016 CHANGE

HEDGING DERIVATIVE ASSETS 13,244,706 15,407,102 (2,162,396)

DERIVATIVE ASSETS NOT FOR HEDGE PURPOSES 20,239,537 - 20,239,537

DERIVATIVE ASSETS 33,484,243 15,407,102 18,077,141

The item Derivative assets, equal to 33,484 thousand euro (15,407 thousand euro as at 31 December 2016), includes the fair value as at 31 December 2017, amounting to 13,245 thousand euro, on derivative assets on commodities entered to hedge scheduled transactions that are related to the purchase and sale of electricity and gas and will very likely occur. These derivatives, whose hedging relation with the hedge element proved to be effective, were recognised in the specific Equity reserve (Reserve to cover hedging operations of expected cash flows), less the related tax effect. They include, in the amount of 7,237 thousand euro,

the fair value of derivative assets entered with the affiliated company Hydro Dolomiti Energia Srl.The item also includes 20,240 thousand euro related to fair value, as at 31 December 2017, of derivative assets on commodities that do not meet the eligibility terms for the hedging accounting. Their fair value was recorded in the Income Statement for the year, under item “Write-ups of financial derivatives”. For a thorough understanding of financial derivatives subscribed by the Company, reference is made to the section related to Financial derivatives.

Other securities from current assets

(VALUES IN EURO)

6) OTHER SECURITIES FROM CURRENT ASSETS 31/12/2017 31/12/2016 CHANGE

ZERO COUPON SECURITIES 824,324 802,731 21,593

OTHER SECURITIES FROM CURRENT ASSETS 824,324 802,731 21,593

Other securities refer to Capitalisation Certificates without coupon in which the Company made

investments of liquidity. The higher value is due to the implicit interest accrued during the year.

CASH AND CASH EQUIVALENTS

(VALUES IN EURO)

IV) CASH AND CASH EQUIVALENTS 31/12/2017 31/12/2016 CHANGE

1) BANKS AND POSTAL CURRENT ACCOUNTS 307,360 113,567 193,793

3) CASH ON HAND 235 145 90

CASH AND CASH EQUIVALENTS 307,595 113,712 193,883

The balance includes cash on hand and bank deposits effectively available and readily convertible into cash as at the end of the financial year.

PREPAYMENTS AND ACCRUED INCOME

(VALUES IN EURO)

D) PREPAYMENTS AND ACCRUED INCOME 31/12/2017 31/12/2016 CHANGE

ANNUAL PREPAYMENTS 23,215 9,348 13,867

PREPAYMENTS AND ACCRUED INCOME 23,215 9,348 13,867

The item Annual prepayments includes deferred costs pertaining to 2018.

As at 31 December 2017, there are no accruals and deferrals with a duration of over five years.

Liabilities and shareholders' equity

SHAREHOLDERS' EQUITY

As at 31 December 2017, the share capital,

consisting of shares with a nominal value of 1 euro, was fully paid up. Provided below is the breakdown of the corporate structure.

SHAREHOLDER NUMBER OF SHARES NOMINAL VALUE %

DOLOMITI ENERGIA HOLDING SPA 2,446,829 2,446,829 98.72

CARLO TASSARA SPA 31,600 31,600 1.28

TOTAL SHARE CAPITAL 2,478,429 2,478,429 100.00


The changes that occurred in the individual items of Shareholders' Equity in the last two years are shown below.

(VALUES IN EURO)

DESCRIPTION I) SHARE CAPITAL

II) SHARE PREMIUM RESERVE

IV) LEGAL RESERVE

VI) OTHER RESERVES - EXTRAORDINARY

RESERVE

VI) OTHER RESERVES - MERGER SURPLUS

RESERVE FROM CANCELLATION

VI) OTHER RESERVES - RESERVE FOR FUTURE

SHARE CAPITAL INCREASE

VII) RESERVE TO COVER HEDGING OPERATIONS

OF EXPECTED CASH FLOWS

VIII) RETAINED EARNINGS

(LOSSES)

IX) PROFIT (LOSS) FOR THE YEAR TOTAL

AMOUNT AS AT 31/12/2015 2,478,429 42,466 495,686 6,275,571 561,311 - - 215,398 3,259,215 13,328,076

ALLOCATION OF INCOME - - - 1,834,651 - - - - (1,834,651) -

DIVIDEND DISTRIBUTION - - - - - - - - (2,066,662) (2,066,662)

OTHER CHANGES - - - - - - 3,514,237 (642,098) 642,098 3,514,237

PROFIT FOR THE YEAR - - - - - - - - (4,257,375) (4,257,375)

AMOUNT AS AT 31/12/2016 2,478,429 42,466 495,686 8,110,222 561,311 - 3,514,237 (426,700) (4,257,375) 10,518,276

ALLOCATION OF INCOME - - - - - - - (4,257,375) 4,257,375 -

OTHER CHANGES - - - - - 5,000,000 1,082,414 - - 6,082,414

PROFIT FOR THE YEAR - - - - - - - - (6,859,978) (6,859,978)

AMOUNT AS AT 31/12/2017 2,478,429 42,466 495,686 8,110,222 561,311 5,000,000 4,596,651 (4,684,075) (6,859,978) 9,740,712

Pursuant to Legislative Decree 139/15, the item Other changes for the year 2016 includes, in the amount of 642 thousand euro, the decrease in Shareholders’ Equity recognised as at 1 January 2016, due to fair value, less tax effect, of derivative contracts in place as at 31 December 2015 (427 thousand euro) and the payback of the contracts in place as at 31 December 2014 and terminated in 2015 (215 thousand euro), which involved a change in the result for the year 2015. The same item also includes the fair value, less tax effect, of derivatives on commodities (3,514 thousand euro), signed by the Company to hedge the electricity and gas price risk.

The item Other changes for 2017 also included the fair value, less tax effect, of derivatives on commodities (1,082 thousand euro), signed by the Company to hedge the electricity and gas price risk, which might entail changes, even significant, of

net cash flows expected for transactions that are scheduled in the future and are deemed as highly probable. The value recognised in the Shareholders’ Equity is the highly effective portion of the hedging relation. For a thorough understanding of financial derivatives subscribed by the Company, reference is made to the section related to Financial derivatives.

This item also includes a payment for future capital increases (5,000 thousand euro), made by the parent company Dolomiti Energia Holding in order to endow the Company with an adequate capitalisation with its own business.

Pursuant to Article 2427.7 bis, the table below summarises the origin, possibility of use and possibility of distribution of Equity reserves, as well as their use in the prior three years.

(VALUES IN EURO)

TYPE AND DESCRIPTION AMOUNT POSSIBILITY OF USE

AVAILABLE PORTION

SUMMARY OF USES IN THE LAST THREE YEARS

TO COVER LOSSES

OTHER REASONS

SHARE CAPITAL 2,478,429 - -

CAPITAL RESERVES

SHARE PREMIUM RESERVE 42,466 A,B,C 42,466 - -

REVALUATION RESERVE

MERGER SURPLUS RESERVE FROM CANCELLATION

MERGER SURPLUS RESERVE FROM EXCHANGE

RESERVE FOR FUTURE CAPITAL INCREASE 5,000,000 A - - -

PROFIT RESERVES

LEGAL RESERVE 495,686 B - - -

STATUTORY RESERVES

RESERVE FOR TREASURY SHARES IN PORTFOLIO

CONTRIBUTION RESERVE

EXTRAORDINARY RESERVE 8,110,222 A,B,C 8,110,222 - -

MERGER SURPLUS RESERVE FROM CANCELLATION 561,311 A,B,C 561,311 - -

RESERVE TO COVER HEDGING OPERATIONS OF CASH FLOWS 4,596,651

RETAINED EARNINGS (LOSSES CARRIED FORWARD) (4,684,075)

TOTAL 16,600,690 8,713,999

NON-DISTRIBUTABLE PORTION -

RESIDUAL DISTRIBUTABLE PORTION 8,713,999

A: for share capital increases; B: to cover losses; C: for distribution to shareholders


Pursuant to Article 2431 of the Italian Civil Code, the amount of the share premium reserve can be distributed provided that the legal reserve has

reached the limit of one-fifth of the share capital, as established by Article 2430 of the Italian Civil Code.

PROVISIONS FOR RISKS AND CHARGES

Tax provision

(VALUES IN EURO)

2) TAXES (INCLUDING DEFERRED TAXES) 31/12/2017 31/12/2016 CHANGE

TAX PROVISION 42,000 - 42,000

DEFERRED TAX PROVISION 3,178,729 3,697,704 (518,975)

TAXES (INCLUDING DEFERRED TAXES) 3,220,729 3,697,704 (476,975)

The Company was served with a tax assessment notice issued for IMU and TASI taxes for the tax periods from 2012 to 2014, included. Due to these notices, the Company deemed it suited to allocate 42 thousand euro for taxes, penalties and interest to a provision for risks. The payment of taxes was required with respect to a land under lease agreement for which DET had to take over the commitment in its role of the lessee’s grantor in 2011. The Company objected to this take-over, claiming that the lease agreement was not in force and starting a legal suit against the lessor

who, in November 2014, terminated the lease agreement and acquired all leased assets. In September 2016, a settlement agreement was signed between DET and the lessor to settle the dispute. The above claim caused no equity and economic damage to DET thanks to a convention signed with the former majority shareholder, who bore all settlement charges.

For the details on the provision for deferred taxes, see the statements on temporary differences that led to the reporting of deferred tax assets.

Derivative liabilities

(VALUES IN EURO)

3) DERIVATIVE LIABILITIES 31/12/2017 31/12/2016 CHANGE

HEDGING DERIVATIVE LIABILITIES 7,196,481 10,783,106 (3,586,625)

DERIVATIVE LIABILITIES NOT FOR HEDGE PURPOSES 20,303,153 - 20,303,153

DERIVATIVE LIABILITIES 27,499,634 10,783,106 16,716,528

The item Derivative liabilities, equal to 27,500 thousand euro (10,783 thousand euro as at 31 December 2016), includes the fair value as at 31 December 2017, amounting to 7,196 thousand euro, on derivative liabilities on commodities entered to hedge scheduled transactions that are related to the purchase and sale of electricity and gas

and will very likely occur. These derivatives, whose hedging relation with the hedge element proved to be effective, were recognised in the specific Equity reserve (Reserve to cover hedging operations of expected cash flows), less the related tax effect. As at 31 December 2017, the item included 20,303 thousand euro related to fair value of derivative

liabilities on commodities that do not meet the eligibility terms for the hedging accounting. Their fair value was recorded in the Income Statement for the year, under item “Write-downs of financial derivatives”. They include, in the amount of 507 thousand euro, the fair value of derivative liabilities entered with the affiliated company Hydro Dolomiti Energia Srl.

For a thorough understanding of financial derivatives subscribed by the Company, reference is made to the section related to Financial derivatives.

EMPLOYEE TERMINATION BENEFITS

This provision represents the actual indemnity accrued towards employees in accordance with

the law, the employment contracts in force and the additional contracts agreed with the Company. The provision corresponds to the total of the individual indemnities accrued towards the Company's employees as at the closing date of the financial statements, net of the advances paid, the amounts paid into supplementary retirement benefit plans and into the INPS Treasury fund. It equals what would be due to employees if their employment were to end on that date.

This liability is subject to revaluation, as provided for by the regulations in force.

During the year, the following changes occurred in the provision for employee termination benefits.

(VALUES IN EURO)

C) EMPLOYEE TERMINATION BENEFITS 31/12/2017 31/12/2016 CHANGE

OPENING BALANCE 93,620 198,515 (104,895)

ALLOCATIONS DURING THE YEAR 50,016 39,916 10,100

DECREASES (25,511) (16,985) (8,526)

OTHER CHANGES - (127,826) 127,826

EMPLOYEE TERMINATION BENEFITS 118,125 93,620 24,505

The above table show the item Other changes, as at 31 December 2016, which included the net value of the employee termination benefits related

to the commercial and trading business units that were transferred with the related BU disposal and purchase transactions.

PAYABLES

Due to banks

(VALUES IN EURO)

4) DUE TO BANKS 31/12/2017 31/12/2016 CHANGE

CURRENT ACCOUNT OVERDRAFTS - 276,387 (276,387)

DUE TO BANKS - 276,387 (276,387)

The Company has fully redeemed its short-term exposure to banks in place at year end.


Trade payables

(VALUES IN EURO)

7) TRADE PAYABLES 31/12/2017 31/12/2016 CHANGE

PAYABLES FOR INVOICES RECEIVED 13,312,300 12,333,646 978,654

GAS 5,026,942 6,053,172 (1,026,230)

ELECTRICITY 8,219,002 6,254,320 1,964,682

OTHER SERVICES 66,356 26,154 40,202

PAYABLES FOR INVOICES TO BE RECEIVED 47,080,360 90,419,978 (43,339,618)

GAS 24,197,201 18,510,841 5,686,360

ELECTRICITY 22,700,427 70,921,042 (48,220,615)

OTHER SERVICES 182,732 988,095 (805,363)

TRADE PAYABLES 60,392,660 102,753,624 (42,360,964)

The item Trade payables refers to commercial payables mostly related to the purchase of energy and gas, in addition to goods and services intended for the Company's business. The significant decrease, compared to the previous year, is due to a strong reduction in payables for invoices to the issued on the electricity commodity, related to lower

transactions performed in the second two-month period of 2017, compared to the same period of the previous year.

A total of 2,947 thousand euro of the financial statement payables as at 31 December 2016 are due to foreign counterparties.

Due to parent companies

(VALUES IN EURO)

11) DUE TO PARENT COMPANIES 31/12/2017 31/12/2016 CHANGE

PAYABLES FOR INVOICES RECEIVED 53,163,720 22,200,725 30,962,995

OTHER SERVICES 53,163,720 22,200,725 30,962,995

PAYABLES FOR INVOICES TO BE RECEIVED 404,987 3,373,235 (2,968,248)

ELECTRICITY 404,987 3,291,705 (2,886,718)

OTHER SERVICES - 81,530 (81,530)

DUE TO PARENT COMPANIES 53,568,707 25,573,960 27,994,747

OF WHICH

DUE TO PARENT COMPANIES DUE TO CASH POOLING 52,549,145 21,780,982 30,768,163

DUE TO PARENT COMPANIES DUE TO TAX/INTEREST 285,363 232,721 52,642

The item Due to parent companies includes financial payables generated by the cash pooling arrangement of 52,549 thousand euro (21,781 thousand euro as at 31 December 2016), in addition to payables of 285 thousand euro for interest

expense resulting from the aforementioned arrangement. Amounts due for the issue of guarantees, totalling 101 thousand euro, were also included. The residual amount results from commercial transactions and service contracts

signed between the parties.The increase for the year is mainly due to both the

greater use of indebtedness through cash pooling due to the Company’s higher financial needs.

Due to companies subjected to the control of parent companies

(VALUES IN EURO)

11 BIS) PAYABLES TO ASSOCIATES 31/12/2017 31/12/2016 CHANGE

PAYABLES FOR INVOICES RECEIVED 134,398 3,083,897 (2,949,499)

ELECTRICITY 122,402 3,083,181 (2,960,779)

OTHER SERVICES 11,996 716 11,280

PAYABLES FOR INVOICES TO BE RECEIVED 20,769,489 21,585,685 (816,196)

ELECTRICITY 20,041,026 21,507,639 (1,466,613)

OTHER SERVICES 728,463 78,046 650,417

PAYABLES TO ASSOCIATES 20,903,887 24,669,582 (3,765,695)

The item Due to companies subjected to the control of the parent company mainly includes payables for electricity supply and related services rendered

by the Group production companies, as well as payables resulting from service contracts.

Tax payables

(VALUES IN EURO)

12) TAX PAYABLES 31/12/2017 31/12/2016 CHANGE

IRPEF 36,221 28,353 7,868

TAX PAYABLES 36,221 28,353 7,868

As at 31 December 2017, the item Tax payables included payables amounted to 36 thousand euro

due to the Tax Authority for withholding taxes on income from employees and self-employed persons.

Social security payables

(VALUES IN EURO)

13) SOCIAL SECURITY AND WELFARE PAYABLES 31/12/2017 31/12/2016 CHANGE

DUE TO INPS 36,710 37,143 (433)

DUE TO INAIL 1,311 587 724

DUE TO OTHERS 7,395 5,572 1,823

SOCIAL SECURITY AND WELFARE PAYABLES 45,416 43,302 2,114


The item Social security and welfare payables, primarily related to INPS contributions to employees, paid in January 2018, is substantially

in line with the previous year. Payables due to others refer to contribution charges to be paid to supplementary retirement benefit plans.

Other payables

(VALUES IN EURO)

14) OTHER PAYABLES 31/12/2017 31/12/2016 CHANGE

OTHER PAYABLES 27,621 52,851 (25,230)

DUE TO EMPLOYEES 107,758 106,618 1,140

- PAYABLE WITHIN 12 MONTHS 135,379 159,469 (24,090)

GUARANTEE DEPOSITS 98,000 - 98,000

- PAYABLE BEYOND 12 MONTHS 98,000 - 98,000

OTHER PAYABLES 233,379 159,469 73,910

Payables to employees mainly refer to employee bonuses to be paid in 2018 and amounting to 68 thousand euro (77 thousand euro in 2016), as well as to amounts due and still unpaid (holidays and leave not taken, gross of the relative social security contributions), amounting to 37 thousand euro.

During the year, the Company collected guarantee deposits from sales companies, in the amount of 98 thousand euro.

As required by point 6) of Article 2427 of the Italian Civil Code, payables with a duration of more than five years have not been posted, and there are no payables secured by collateral on corporate assets.

Income statement

PRODUCTION VALUE

Revenue from sales and services

(VALUES IN EURO)

1) REVENUE FROM SALES AND SERVICES 31/12/2017 31/12/2016 CHANGE

REVENUE FROM ELECTRICITY 588,103,089 438,062,154 150,040,935

REVENUE FROM GAS 134,708,699 87,769,439 46,939,260

SUNDRY REVENUE 26,762,720 1,133,835 25,628,885

REVENUE FROM SALES AND SERVICES 749,574,508 526,965,428 222,609,080

Revenue from sales and services for 2016 included sales to both end users (for the first quarter of 2016) and wholesalers. Conversely, in 2017, this item included only revenue from sales to marker operators (wholesalers, electricity stock exchange and sales companies). Therefore, revenue resulting from the sale of energy and gas commodities strongly increased, compared to 2016, due to the Company’s changed core business, and were related to companies of the Dolomiti Energia Group in the amount of 243,527 thousand euro and 115,109 thousand euro, respectively (it should be noted that DET is the only company within the Dolomiti Energia Group that has commercial relations with wholesalers, the only company that has an

incoming despatching contract with Terna, and the only supplier for all gas and electricity needs of the company Dolomiti Energia SpA).

Sundry revenue referred primarily to income resulting from the sale on the market of Energy Efficiency Certificates and Origin Certificates, amounting to 26,755 thousand euro (865 thousand euro in 2016). This activity is clearly growing and developing in view of both seizing market chances and meeting the needs of Group companies subjected to the mandatory regime of primary energy savings for electricity and natural gas distributors (revenue for the amount of 18,146 euro in 2017).

Other revenue and income

(VALUES IN EURO)

5) OTHER REVENUE AND INCOME 31/12/2017 31/12/2016 CHANGE

SUNDRY REVENUE 35,597 197,700 (162,103)

DE GROUP REVENUE 40,000 637,075 (597,075)

SECONDED PERSONNEL - 4,153 (4,153)

CONTINGENT ASSETS - NORMAL OPERATIONS 722,797 809,910 (87,113)

OTHER REVENUE AND INCOME 798,394 1,648,838 (850,444)


The item Sundry revenue reported a remarkable drop compared to 2016, when non-recurring revenue from indemnities was included for the amount of 180 thousand euro.

Revenue from services to the DE Group is also strongly decreasing and includes revenue resulting from service agreements, in the amount of 40 thousand euro (in 2016 the item included income from the transfer of the electricity procurement contract signed with the affiliated company Dolomiti Trading Srl,

in liquidation, amounting to 583 thousand euro).

Contingent assets are mostly related to positive adjustments made in previous years with reference to the management of electricity and gas businesses.

PRODUCTION COSTS

Raw materials, consumables and merchandise

(VALUES IN EURO)

6) FOR RAW MATERIALS, CONSUMABLES AND MERCHANDISE 31/12/2017 31/12/2016 CHANGE

PURCHASES OF RAW MATERIALS, ELECTRICITY 591,582,151 406,944,542 184,637,609

PURCHASES OF RAW MATERIALS, GAS 120,952,967 72,685,803 48,267,164

PURCHASE OF FUELS 8,482 10,332 (1,850)

PURCHASE OF OTHER MATERIALS 899 305 594

OTHER PURCHASES 24,919,412 6,089,098 18,830,314

RAW MATERIALS, CONSUMABLES AND MERCHANDISE 737,463,911 485,730,080 251,733,831

Costs from the purchase of electricity and gas commodities strongly increased compared to 2016 due to the Company’s changed core business, as already described in the note on item “Revenue from sales and services”, and are adjusted to the value of differentials on hedging derivative contracts, in the amount of 17,338 thousand euro (assets for the Company) and 114 thousand euro (liabilities for the Company), respectively. Purchases of electricity from companies within the Dolomiti Energia Group totalled 184,531 thousand euro, while differentials on hedging derivatives, signed with the DE Group, amounted to 16,079 thousand euro (assets for the Company). No intercompany transactions were carried out for the natural gas commodity.

The item Other purchases refers primarily to costs resulting from the purchase on the market of energy efficiency certificates and origin certificates, amounting to 24,696 thousand euro (5,730 thousand euro in 2016). This procurement is aimed at the subsequent sale of certificates, which is clearly growing and developing in view of both seizing market chances and meeting the needs of Group companies subjected to the mandatory regime of primary energy savings for the electricity and natural gas distributors. This item also includes contingent liabilities, equal to 224 thousand euro (359 thousand euro in 2016), related primarily to negative adjustments of estimates, made in the previous years, with reference to the management of electricity and gas businesses.

Services

(VALUES IN EURO)

7) SERVICE COSTS 31/12/2017 31/12/2016 CHANGE

EXTERNAL MAINTENANCE SERVICES 6,433 11,689 (5,256)

INSURANCE, BANKING AND FINANCIAL SERVICES 384,091 421,041 (36,950)

OTHER SERVICES 394,902 1,282,498 (887,596)

COMMERCIAL SERVICES 17,387,373 44,760,755 (27,373,382)

GENERAL SERVICES 77,090 87,321 (10,231)

LEGAL AUDIT 36,000 40,800 (4,800)

BOARD OF STATUTORY AUDITORS 36,400 36,400 -

DIRECTORS 35,200 35,200 -

SERVICE COSTS 18,357,489 46,675,704 (28,318,215)

In general, the remarkable decrease in costs for services resulted from the transfer of the commercial business unit, as from 1 April 2016, which, amongst other, led to a cancellation of costs for dispatching, services connected with the sale of electricity and gas to end users (28,928 thousand euro in 2016), as well as cost reduction related to sales workforce (507 thousand euro in 2016). In the previous year these costs were included under items “commercial services” and “other services”, respectively.

External maintenance services, equal to 6 thousand euro, include primarily maintenance services of company cars.

Banking services include 352 thousand euro for the cost of bank guarantees and surety policies (383 thousand euro in the previous year), of which 331 thousand euro borne with regard to the Parent Company for the services provided by it.

The item Other services includes, but is not limited to legal, notary and technical-informatics fees

for 147 thousand euro (189 thousand euro in the previous year), as well as cost adjustments of previous years, totalling 208 thousand euro (519 thousand euro in 2016), primarily attributable to electricity Business Units.

Commercial services include, in the amount of 15,805 thousand euro, services related to the sale of electricity and gas commodities, as well as to stocks and transportation of natural gas (14,629 thousand euro in 2016), as well as the cost for administration/logistics services supplied by Group companies to support the corporate structure and organisation, equal to 1,009 thousand euro (1,157 thousand euro in 2016), reduced due to the reorganisation of the Company’s business.

General services include services supporting administration activities, for 35 thousand euro, fees to trade associations and membership fees, for 18 thousand euro, phone costs, for 9 thousand euro, and utilities, for 2 thousand euro.

Use of third party assets

(VALUES IN EURO)

8) FOR USE OF THIRD PARTY ASSETS 31/12/2017 31/12/2016 CHANGE

RENTAL EXPENSES 29,000 58,031 (29,031)

RENTAL FEES 15,699 15,145 554

OTHER COSTS 9,780 1,228 8,552

USE OF THIRD PARTY ASSETS 54,479 74,404 (19,925)


The rental contracts of buildings where the Company carries out its business were transferred on 1 April 2016 and this involved a significant

decrease in rental expense.Rental fees refer primarily to expenses incurred for the rental of company cars, in line with the previous year.

Personnel

(VALUES IN EURO)

9) PERSONNEL COSTS 31/12/2017 31/12/2016 CHANGE

A) WAGES AND SALARIES 835,348 699,703 135,645

B) SOCIAL SECURITY COSTS 232,359 198,969 33,390

C) EMPLOYEE TERMINATION BENEFITS 50,016 39,916 10,100

E) OTHER COSTS 12,114 62,425 (50,311)

PERSONNEL COSTS 1,129,837 1,001,013 128,824

The increase in the aggregate cost of employees results from the Company’s reorganisation following the extraordinary operations related to the transfer of the commercial business unit, as from 1 April 2016, and the acquisition of the trading business unit, which involved an increase in personnel and the organization of employees.

The other personnel costs decreased due to costs related to Group personnel that is no longer

seconded at the Company (31 thousand euro in 2016) and to contingent liabilities that were charged in the previous year and amounted to 27 thousand euro.

The following table shows Dolomiti Energia Trading's workforce broken down by category. For the changes in employees during the year, see the section ‘human resources’ in the Report on Operations.

STAFF 31/12/2017 31/12/2016 CHANGE

EXECUTIVES 1 1 -

MANAGERS 2 2 -

EMPLOYEES 16 15 1

TOTAL 19 18 1

Amortisation, depreciation and write-downs

(VALUES IN EURO)

10) AMORTISATION, DEPRECIATION AND WRITE-DOWNS 31/12/2017 31/12/2016 CHANGE

A) AMORTISATION OF INTANGIBLE ASSETS 109,527 118,741 (9,214)

B) DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT 1,202 4,022 (2,820)

D) WRITE-DOWN OF RECEIVABLES RECOGNISED TO CURRENT ASSETS - 592,384 (592,384)

AMORTISATION, DEPRECIATION AND WRITE-DOWNS 110,729 715,147 (604,418)

Amortisation and depreciation are calculated in compliance with the criteria described in the section on valuation criteria. Their decrease was due to the completion of amortisation/depreciation process for some intangible and property, plant and equipment.

In 2017, the Company borne no credit losses and did not allocate any further amount to the bad debt provision as it was deemed adequate with respect to the remote risk of insolvency for the Company.

Changes in inventories of raw materials, consumables and merchandise and others

(VALUES IN EURO)

11) CHANGES IN INVENTORIES OF RAW MATERIALS AND OTHERS 31/12/2017 31/12/2016 CHANGE

CHANGES IN INVENTORY OF GAS 1,749,486 1,131,845 617,641

OTHER INVENTORIES (372,636) (4,854,028) 4,481,392

CHANGES IN INVENTORIES OF RAW MATERIALS AND OTHERS 1,376,850 (3,722,183) 5,099,033

Changes in inventories refer, for 1,749 thousand euro, to the decrease in the inventories of methane gas compared to the previous year, and

to 373 thousand euro to costs related to energy certificates purchased and not yet sold at year end.

Other operating expenses

(VALUES IN EURO)

14) OTHER OPERATING EXPENSES 31/12/2017 31/12/2016 CHANGE

OTHER EXPENSES 279,213 325,328 (46,115)

CREDIT LOSSES - 1,698 (1,698)

CONTINGENT LIABILITIES - NORMAL OPERATIONS 134,397 415,608 (281,211)

OTHER TAXES 9,446 22,573 (13,127)

OTHER OPERATING EXPENSES 423,056 765,207 (342,151)


The total decrease reported in this item, compared to the previous year, is primarily due to minor contingent liabilities, recognised over the period, and the lack of charges for specific tariff payments (56 thousand euro in 2016), which were cancelled due to the transfer of the commercial Business Unit.

Other charges include the annual contribution paid to the AREPA (former AEEGSI) of 174 thousand euro, as well as the annual contribution paid to the Authority for Guarantees in Communication of 21 thousand euro.

FINANCIAL INCOME AND CHARGES

The balance includes financial income of 30 thousand euro and financial charges of 822 thousand euro. The breakdown is shown below.

Other financial income

(VALUES IN EURO)

16) OTHER FINANCIAL INCOME 31/12/2017 31/12/2016 CHANGE

D) FINANCIAL INCOME OTHER THAN THE ABOVE 30,065 27,653 2,412

OTHER FINANCIAL INCOME 30,065 27,653 2,412

The item Other income refers mainly to the revaluation of cash investments in capitalisation certificates (22 thousand euro) and to interest (7

thousand euro) collected in relation to 2016 VAT and repaid by Tax Authorities.

Interest and other financial charges

(VALUES IN EURO)

17) INTEREST AND OTHER FINANCIAL CHARGES 31/12/2017 31/12/2016 CHANGE

C) FROM PARENT COMPANIES (808,294) (700,594) (107,700)

D) FROM OTHERS (13,362) (13,440) 78

INTEREST AND OTHER FINANCIAL CHARGES (821,656) (714,034) (107,622)

EXCHANGE GAINS AND LOSSES (10) 378 (388)

17 BIS) EXCHANGE GAINS AND LOSSES (10) 378 (388)

Interest due to the parent companies was generated by the cash pooling arrangement in place with the Parent Company, an increase compared to the previous year due to the increased financial requirements.

In relation to provisions set out by Article 2427.11 of the Italian Civil Code, please note that there is no income from equity investments.

VALUE ADJUSTMENTS OF INVESTMENTS AND FINANCIAL LIABILITIES

(VALUES IN EURO)

D) VALUE ADJUSTMENTS OF INVESTMENTS AND FINANCIAL LIABILITIES 31/12/2017 31/12/2016 CHANGE

D) FINANCIAL DERIVATIVES 20,310,587 - 20,310,587

REVALUATIONS 20,310,587 - 20,310,587

D) FINANCIAL DERIVATIVES (20,342,210) (2,051,294) (18,290,916)

WRITE-DOWN (20,342,210) (2,051,294) (18,290,916)

VALUE ADJUSTMENTS OF INVESTMENTS AND FINANCIAL LIABILITIES (31,623) (2,051,294) 2,019,671

The items Revaluations and write-downs of financial derivatives include the fair value of derivatives on commodity assets (20,240 thousand euro) and liabilities (20,303 thousand euro), in place as at 31 December 2017, which do not meet the eligibility terms for the hedging accounting.

The items also included income, equal to 70 thousand euro, and charges, equal to 39 thousand euro, related to differentials accrued and settled over the year for derivatives on commodities that do not meet the eligibility terms for the hedging accounting.

INCOME TAXES FOR THE YEAR

(VALUES IN EURO)

20) INCOME TAXES FOR THE YEAR 31/12/2017 31/12/2016 CHANGE

B) TAX RELATING TO PRIOR PERIODS 322,357 (26,501) 348,858

C) PREPAID (DEFERRED) TAX 8,263 (276,971) 285,234

D) GAINS FROM TAX CONSOLIDATION 2,176,075 1,408,500 767,575

INCOME TAXES FOR THE YEAR 2,506,695 1,105,028 1,401,667

In 2017 and 2016, the Company reported a tax loss and no current taxes for the year were recognised. Taxes related to previous years include the positive adjustment of the tax loss for 2016, determined upon submission of the annual tax return.

In compliance with provisions set out by OIC 25, credits for prepaid taxes were recognised in the amount of 32 thousand euro and prepaid taxes, calculated on previous years, were released in the amount of 24 thousand euro.

The tax consolidation income includes, in the amount of 2,137 thousand euro, the fee pertaining to the Company following the transfer of the tax on the tax loss for the year to the consolidating company, less 3% for discounting, in addition to 39 thousand euro for the transfer of ACE, year 2017.

Pursuant to Article 2427.14 a) of the Italian Civil Code, the timing differences that led to the reporting of deferred tax assets and liabilities are shown below.


(VALUES IN EURO)

PREPAID TAXES 2016 RE-ABSORPTION 2017 ALIGNMENTS 2017 INCREASES 2017 TAX FOR THE YEAR(E=B+C+D)

PREPAID TAXES 2017

TAXABLE AMOUNT

RATE TAX (A)

TAXABLE AMOUNT

RATE TAX (B)

TAXABLE AMOUNT

RATE TAX (C)

TAXABLE AMOUNT

RATE TAX (D)

TAXABLE AMOUNT

RATE TAX (F=A+E)

IRES

BONUSES TO EMPLOYEES 77,748 24.00% 18,660 (77,748) 24.00% (18,660) - 0.00% - 67,820 24.00% 16,277 (2,383) 67,820 24.00% 16,277

REGULATORY AUDIT FEE 40,800 24.00% 9,792 - 24.00% - - 0.00% - - 24.00% - - 40,800 24.00% 9,792

DIRECTORS' FEES 5,200 24.00% 1,248 (5,200) 24.00% (1,248) - 0.00% - 5,200 24.00% 1,248 - 5,200 24.00% 1,248

DERIVATIVES 10,783,106 24.00% 2,587,944 (10,783,106) 24.00% (2,587,945) - 0.00% - 7,196,481 24.00% 1,727,156 (860,789) 7,196,481 24.00% 1,727,156

GOODWILL 46,582 24.00% 11,180 - 24.00% - - 0.00% - 46,582 24.00% 11,180 11,180 93,164 24.00% 22,359

TOTAL PREPAID IRES TAX 2,628,824 (2,607,853) - 1,755,861 (851,992) 7,403,465 1,776,832

IRAP

BONUSES TO EMPLOYEES 77,748 3.90% 3,032 (77,748) 3.90% (3,032) - 0.00% - 67,820 2.68% 1,818 (1,214) 67,820 2.68% 1,818

GOODWILL 46,582 3.90% 1,817 - 3.90% - (46,582) 1.22% (568) 46,582 2.68% 1,248 680 93,164 2.68% 2,497

TOTAL PREPAID IRAP TAX 4,849 (3,032) (568) 3,066 (534) 160,984 4,315

TOTAL PREPAID TAXES 2,633,673 (2,610,885) (568) 1,758,927 (852,526) 1,781,147

OF WHICH:

- PREPAID TAXES FOR THE YEAR TO INCOME STATEMENT 8,263

- PREPAID TAXES FOR THE YEAR TO SHAREHOLDERS’ EQUITY (2016 DERIVATIVES) (860,789)

(VALUES IN EURO)

DEFERRED TAXES 2016 RE-ABSORPTION 2017 INCREASES 2017 TAX FOR THE YEAR(D=B+C)

DEFERRED TAXES 2017

TAXABLE AMOUNT

RATE TAX(A)

TAXABLE AMOUNT

RATE TAX (B)

TAXABLE AMOUNT

RATE TAX (C)

TAXABLE AMOUNT

RATE TAX (E=A+D)

IRES

IRES 15,407,102 24.00% 3,697,704 (15,407,102) 24.00% (3,697,704) 13,244,706 24.00% 3,178,729 (518,975) 13,244,706 24.00% 3,178,729

DERIVATIVES 3,697,704 (3,697,704) 3,178,729 (518,975) 13,244,706 3,178,729

TOTAL DEFERRED IRES TAX 3,697,704 (3,697,704) 3,178,729 (518,975) 3,178,729

OF WHICH:

- DEFERRED TAXES FOR THE YEAR TO INCOME STATEMENT -

- DEFERRED TAXES FOR THE YEAR TO SHAREHOLDERS’ EQUITY (2016 DERIVATIVES) (518,975)


STATEMENTS OF RECONCILIATION BETWEEN BALANCE SHEET AND THEORETICAL TAX CHARGE

(VALUES IN EURO)

DESCRIPTION AMOUNT EUR IRES 24.00% % CHARGE

PROFIT BEFORE TAX (9,366,674)

THEORETICAL TAX CHARGE: - 24.00%

PERMANENT INCREASES

TRANSPORT COSTS - MIXED VEHICLE USE 17,254

TELEPHONE COSTS 1,747

ORDINARY AND EXTRAORDINARY CONTINGENT LIABILITIES 79,758

OTHER 9,633

TOTAL PERMANENT INCREASES 108,392

TEMPORARY DIFFERENCES - INCREASES

BONUSES TO EMPLOYEES 67,820

DEDUCTIBLE GOODWILL 46,582

DIRECTORS' FEES 5,200

TOTAL TEMPORARY DIFFERENCES - INCREASES 119,602

PERMANENT DECREASES

SUPPLEMENTARY RETIREMENT PLANS 1,265

TOTAL PERMANENT DECREASES 1,265

TEMPORARY DIFFERENCES - DECREASES

BONUSES TO EMPLOYEES 77,748

DIRECTORS' FEES 5,200

TOTAL TEMPORARY DIFFERENCES - DECREASES 82,948

TAX BASE (TAX LOSS) (9,222,893) - -

(VALUES IN EURO)

DESCRIPTION AMOUNT EUR IRAP TAX % CHARGE

NET PRODUCTION VALUE (7,413,612)

THEORETICAL TAX CHARGE: - 2.68%

PERMANENT INCREASES

NON-DEDUCTIBLE CONTINGENT LIABILITIES FROM NORMAL OPERATIONS 79,758

PERSONNEL COSTS 4,746

OTHER 39,565

TOTAL PERMANENT INCREASES 124,069

PERMANENT DECREASES

TOTAL PERMANENT DECREASES -

TEMPORARY DIFFERENCES - INCREASES

DEDUCTIBLE GOODWILL 46,582

PRODUCTION BONUS 67,820

TOTAL TEMPORARY DIFFERENCES - INCREASES 114,402

TEMPORARY DIFFERENCES - DECREASES

PRODUCTION BONUS 77,748

TOTAL TEMPORARY DIFFERENCES - DECREASES 77,748

TAX BASE (7,252,889) - -

PROFIT FOR THE YEAR

The loss for the year 2017 amounted to 6,860 thousand euro, net of income taxes.

These financial statements, comprising the Balance Sheet, Income Statement, Cash Flow Statement and Explanatory Notes provide a truthful and fair view of the equity and financial position and of the economic result for the period, and match compulsory accounting records.

Other information

COMMITMENTS, GUARANTEES GIVEN AND CONTINGENT LIABILITIES NOT DISCLOSED IN THE BALANCE SHEET

Pursuant and by the effects of Article 2427, paragraph 9 of the Italian Civil Code, the following

commitments, guarantees given and contingent liabilities not disclosed in the Balance Sheet are shown hereunder:

Sureties and collateralsThe Company has no collaterals that were not recognised in the financial statements. Bank guarantees/surety policies were however issued on behalf of Dolomiti Energia Trading and in favour of third parties, in the amount of 8,162 thousand euro (14,724 thousand euro as at 31 December 2016). The parent company Dolomiti Energia Holding undertook financial commitments in favour of third parties and on behalf of the Company for the total amount of 93,756 thousand euro (109,155 thousand euro as at 31 December 2016), partly to guarantee the release of bank guarantees.

As at 31 December 2016, the Company had guarantees in place to undertake commitments, equal to 169 thousand euro, undertaken by


third-party companies which discontinued operations in 2017.

CommitmentsThe Company has undertaken no commitments that were not recognised in the financial statements.

Contingent liabilitiesThe Company has undertaken no contingent liabilities that were not recognised in the financial statements.

REVENUE OR COST ELEMENTS WITH AN EXCEPTIONAL EXTENT OR IMPACT

Pursuant to Article 2427.13, of the Italian Civil Code, it is noted that no revenue or cost elements were recorded with an exceptional extent or impact.

FEES TO DIRECTORS, STATUTORY AUDITORS AND INDEPENDENT AUDITOR

Information regarding fees paid to Directors and Auditors is shown hereunder, pursuant to Article 2427.16 of the Italian Civil Code.

(VALUES IN EURO)

ROLE FINANCIAL YEAR 2017 FINANCIAL YEAR 2016

DIRECTORS 35,000 35,000

BOARD OF STATUTORY AUDITORS 35,000 35,000

Moreover, it is noted that the Company granted no advance payments and loans to Directorsand Auditors.

Pursuant to Article 2427.16-bis), the total amount

of the fees pertaining to the independent auditors for the audit of accounts and the total amount of fees for other tax consultancy services and other services other than the audit rendered to the Company, are shown hereunder:

(VALUES IN EURO)

ROLE FINANCIAL YEAR 2017 FINANCIAL YEAR 2016

REGULATORY AUDIT 26,000 26,000

OTHER AUDIT SERVICES 5,000 5,000

SERVICES OF TAX CONSULTING - -

OTHER SERVICES OTHER THAN AUDIT - -

RELATIONS WITH RELATED PARTIES

As regards the information required by Article 2427.22-bis) of the Italian Civil Code, no operations with related parties, which had not been performed at arm’s length, were reported. With regard to the details on relations with other Group companies, reference is made to the Report on Operations.

AGREEMENTS NOT DISCLOSED IN THE BALANCE SHEET

Pursuant to Article 2427.22-ter) of the Italian Civil Code, there are no agreements not disclosed in the Balance Sheet that might have a significant impact on the Company’s financial and equity position and the economic result for the year.

SIGNIFICANT EVENTS OCCURRED AFTER YEAR-END

With reference to information required by Article 2427, item 22-quarter, of the Italian Civil Code, it is noted that no significant events occurred after the reporting date of these financial statements.Name and registered office of the company that prepares the consolidated financial statementsWith reference to information required by Article 2427.22-quinquies and sexies of the Italian Civil Code, it is noted that the company Dolomiti Energia Holding SpA, with registered office in Via Manzoni 24, Rovereto (TN), provides for the drawing up of the consolidated financial statements of the smaller Group of which the Company is part, as subsidiary. It is also noted that the same are available at the Company’s

headquarters, on the Company’s website (www.gruppodolomitienergia.it) and through the usual institutional channels. Moreover, the company Findolomiti Energia Srl., with registered office in Via Vannetti 18/A Trento, provides for the drawing up of the consolidated financial statements of the larger Group, of which the Company is part. The same are available through the usual institutional channels.

FINANCIAL DERIVATIVES

Pursuant to Article 2427-bis, paragraph 1 of the Italian Civil Code, the information on the fair value of financial instruments underwritten on 31 December 2017 are reported hereunder. The following table shows financial derivatives broken down by category.

(VALUES IN EURO)

FAIR VALUE OF DERIVATIVES 31/12/2017 31/12/2016 CHANGE

DERIVATIVE ASSETS DESIGNATED AS HEDGING INSTRUMENTS 13,244,706 15,407,102 (2,162,396)

DERIVATIVE ASSETS NOT DESIGNATED AS HEDGING INSTRUMENTS 20,239,537 - 20,239,537

DERIVATIVE ASSETS 33,484,243 15,407,102 18,077,141

DERIVATIVE LIABILITIES DESIGNATED AS HEDGING INSTRUMENTS (7,196,481) (10,783,106) 3,586,625

DERIVATIVE LIABILITIES NOT DESIGNATED AS HEDGING INSTRUMENTS (20,303,153) - (20,303,153)

DERIVATIVE LIABILITIES (27,499,634) (10,783,106) (16,716,528)

FAIR VALUE OF DERIVATIVES 5,984,609 4,623,996 1,360,613

Financial instruments underwritten on 31 December 2017 are derivatives on commodities (swaps and futures), signed with banks and on regulated markets in order to both hedge the expected cash flows related to highly probable scheduled transactions, and to implement transactions that are aimed at optimising the portfolio and that, due to their characteristics, do not meet the eligibility terms for the hedging accounting.

The fair value of derivatives was determined by the Company by applying a valuation model based on the observation of price curves of commodities to which the instrument refers, in the time range

elapsing between the delivery date and the redemption date.

The fair value of instruments designated as hedges at end 2017 was charged to the Reserve to cover hedging operations of expected cash flows, less the related tax effect. The fair value of non-hedging derivatives was charged to the Income Statement under item Value adjustments of investments and financial liabilities.

As regards the changes in fair value reserves, reference is made to changes in the Shareholders’ Equity.


MANAGEMENT AND COORDINATION ACTIVITIES

Pursuant to Article 2497 bis, paragraph 4 of the Italian Civil Code, the basic data from the most

recent financial statements of the Parent Company Dolomiti Energia Holding SpA, which carries out management and coordination activities on Dolomiti Energia Trading SpA, are reported below.

DOLOMITI ENERGIA HOLDING SPA

BALANCE SHEET - IFRS FORMAT(values in euro)

ASSETS LIABILITIES

31.12.2016 31.12.2016

NON CURRENT ASSETS SHAREHOLDERS' EQUITY

OTHER INTANGIBLE ASSETS 13,285,706 SHARE CAPITAL 411,496,169

PROPERTY, PLANT AND EQUIPMENT 48,379,802 RESERVES 43,435,600

EQUITY INVESTMENTS 766,815,323 NET PROFIT FOR THE YEAR 46,710,985

ASSETS FOR PREPAID TAXES 5,006,640 TOTAL SHAREHOLDERS' EQUITY 501,642,754

OTHER NON-CURRENT ASSETS 9,779,567

TOTAL OTHER NON-CURRENT ASSETS 843,267,038 LIABILITIES

NON-CURRENT LIABILITIES

CURRENT ASSETS PROVISIONS FOR NON-CURRENT RISKS AND CHARGES 1,495,053

TRADE RECEIVABLES 13,365,357 BENEFITS TO EMPLOYEES 3,848,912

INVENTORIES 277,372 LIABILITIES FOR DEFERRED TAXES 242,198

CASH AND CASH EQUIVALENTS 2,498,445 NON-CURRENT FINANCIAL LIABILITIES 168,705,506

INCOME TAX CREDITS 18,222,668 OTHER NON-CURRENT LIABILITIES 1,087,309

OTHER CURRENT LIABILITIES 94,574,168 TOTAL NON-CURRENT LIABILITIES 175,378,978

TOTAL CURRENT ASSETS 128,938,010

CURRENT LIABILITIES

TRADE PAYABLES 11,842,455

CURRENT FINANCIAL LIABILITIES 262,178,774

OTHER CURRENT LIABILITIES 21,162,087

TOTAL CURRENT LIABILITIES 295,183,316

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS - LIABILITIES HELD FOR SALE AND

DISCONTINUED OPERATIONS -

TOTAL ASSETS 972,205,048 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 972,205,048

DOLOMITI ENERGIA HOLDING SPA

RECLASSIFIED INCOME STATEMENT (values in euro)

FINANCIAL YEAR 2016

REVENUES AND OTHER INCOME 41,315,568

COSTS (43,938,793)

INCOME AND CHARGES FROM EQUITY INVESTMENTS 50,814,258

OPERATING PROFIT 48,191,033

FINANCIAL INCOME AND CHARGES (1,899,324)

PROFIT BEFORE TAX 46,291,709

TAXES 419,276

NET RESULT FOR THE YEAR (A) OF CONTINUING OPERATIONS 46,710,985

DISCONTINUING OPERATIONS -

NET RESULT FOR THE YEAR (B) OF DISCONTINUING OPERATIONS -

PROFIT FOR THE YEAR 46,710,985

COMPONENTS OF THE COMPREHENSIVE INCOME STATEMENT THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED IN THE INCOME STATEMENT

ACTUARIAL PROFIT/(LOSS) FOR BENEFITS TO EMPLOYEES 39,136

TAX EFFECT ON ACTUARIAL PROFIT/(LOSS) FOR BENEFITS TO EMPLOYEES (11,211)

TOTAL COMPONENTS OF THE COMPREHENSIVE INCOME STATEMENT THAT WILL NOT BE SUBSEQUENTLY RECLASSIFIED IN THE INCOME STATEMENT 27,925

TOTAL RESULT FOR THE YEAR 46,738,910

For an adequate and thorough understanding of the equity and financial position of Dolomiti Energia Holding SpA as at 31 December 2016, as well as of the economic results obtained by the Company for the year ended on that date, reference is made to the reading of the financial statements which, together with the Independent Auditors’ Report, are available in the formats and modalities set out by Law.

PROPOSED ALLOCATION OF PROFITS OR LOSS COVERAGE

With reference to information required by Article 2427.22-septies of the Italian Civil Code, the proposal to the Shareholders’ Meeting is that the loss for the year, amounting to 6,859,978 euro, be carried forward.


On behalf of the Board of DirectorsThe ChairmanMarco Merler

Copy corresponding to the documents kept at the Company.

68 | 2017 Report Dolomiti Energia Trading SpA Financial statements 2017 | 69

Dolomiti Energia Trading SpA–Report


Board of Statutory Auditors' report

Dear Shareholders,

This Meeting has been convened in order to approve the Financial Statements for the year ended 31 December 2017.We hereby fulfil our duties in reporting on the activities carried out, as set forth by Article 2429 of the Italian Civil Code and as envisaged by the Code of Conduct, sections 3.7 and 7.1, issued by the CNDCEC (Consiglio nazionale dei dottori commercialisti e degli esperti contabili – Italian Board of Chartered Accountants), noting that the Board of Statutory Auditors is responsible for the control functions envisaged by Article 2403 of the Italian Civil Code, except for the audit pursuant to Article 14 and Italian Legislative Decree no. 39 of 27 January 2010, assigned to the independent auditors PriceWaterhouseCoopers SpA, to whose Report we expressly refer.

1. Supervisory activityWe monitored compliance with the law, with the articles of association and with the principles of sound administration.

We attended the Shareholders' Meetings and Board of Directors' Meetings, in relation to which, based on information available, no breaches to the law and articles of association, nor overtly imprudent, risky actions or in potential conflict of interest or such to jeopardise the integrity of the Company’s equity are to be reported.

On the occasion of meetings held, we obtained information from the CEOs on the general performance of operations and on the business outlook, as well as on the more significant transactions in terms of extent or characteristics performed by the Company and, based on information available, no remarks are to be reported.

We met the independent auditor, and significant data or information, which merits mention in this report did not come to light.We met the person in charge of the internal control system, and significant data or information, which merits mention in this report did not come to light.We met the Supervisory Body and no critical issues with respect to the correct implementation of the organizational model that are worth mentioning in this report came to light.

We became acquainted with and supervised the suitability and operation of the organisational structure of the Company to the extent of our responsibility, also by collecting information from the function managers, and to this regard we have no particular comments to report.

We became acquainted with and supervised the suitability and operation of the administrative and accounting system to the extent of our responsibility, as well as the reliability of the latter in correctly representing the operational transactions, by obtaining information from the function managers and the party appointed to carry out the accounting control, and by examining the company documents. We have no particular comments to make to this regard.

No claims were received as per Article 2408 of the Italian Civil Code.

During the year, the Board of Statutory Auditors did not issue any opinion as provided for by law.

During the course of our supervision, as described above, no other significant events emerged that would require mention in this report.

2. Financial StatementsWe examined the draft financial statements closed as at 31 December 2017, which were made available in accordance with Article 2429 of the Italian Civil Code, on which we comment below.

Since we are not responsible for auditing the financial statements, we supervised their general formulation, general compliance with the law with respect to their formation and structure, and to this regard, we have no particular comments to report.We checked compliance with the law regarding the preparation of the Report on Operations, and to this regard we have no particular comments to report.As far as we are aware, in preparing the financial statements the directors did not deviate from regulations pursuant to Article 2423, paragraph 4 of the Italian Civil Code.

3. ConclusionsConsidering, among other, the results of the activity carried out by the independent auditor in charge of the audit, included in the Report on Operations of the financial statements, the Board of Statutory Auditors proposes the Shareholders’ Meeting to approve the financial statements ended 31 December 2017, as prepared by the Directors.

4.FarewellIn consideration of the expiry of the three-year office of the Board of Statutory Auditors, we deem it necessary to invite the Shareholders’ Meeting to provide for the appointment of the same in order to avert its prorogatio, and we wish to conclude this report by expressing our most sincere thanks to the Shareholders for the trust they have placed in us, to the Board of Directors for the cordial and timely cooperation, as well as to all Group employees for the valuable support provided.

Trento, 10 April 2018

The Board of Statutory AuditorsAlbino Leonardi

Sara BrunelliMauro Caldonazzi

Independent auditor’s report in accordance with article 14 of Legislative Decree No. 39 of 27 January 2010

To the shareholders of Dolomiti Energia Trading SpA Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Dolomiti Energia Trading SpA (the Company), which comprise the balance sheet as of 31 December 2017, the income statement and statement of cash flows for the year then ended and related notes. In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2017, and of the result of its operations and cash flows for the year then ended in compliance with the Italian laws governing the criteria for their preparation. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of this report. We are independent of the Company pursuant to the regulations and standards on ethics and independence applicable to audits of financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the directors and the board of statutory auditors for the Financial Statements The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with the Italian laws governing the criteria for their preparation and, in the terms prescribed by law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors are responsible for assessing the Company’s ability to continue as a going concern and, in preparing the financial statements, for the appropriate application of the going concern basis of

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accounting, and for disclosing matters related to going concern. In preparing the financial statements, the directors use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The board of statutory auditors is responsible for overseeing, in the terms prescribed by law, the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of our audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercised our professional judgement and maintained professional scepticism throughout the audit. Furthermore: We identified and assessed the risks of material misstatement of the financial statements,

whether due to fraud or error; we designed and performed audit procedures responsive to those risks; we obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

We obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control;

We evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors;

We concluded on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern;

We evaluated the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicated with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit.


Independent Auditor's report

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Report on Compliance with other Laws and Regulations Opinion in accordance with Article 14, paragraph 2, letter e), of Legislative Decree No. 39/10 The directors of Dolomiti Energia Trading SpA are responsible for preparing a report on operations of Dolomiti Energia Trading SpA as of 31 December 2017, including its consistency with the relevant financial statements and its compliance with the law. We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to express an opinion on the consistency of the report on operations with the financial statements of Dolomiti Energia Trading SpA as of 31 December 2017 and on its compliance with the law, as well as to issue a statement on material misstatements, if any. In our opinion, the report on operations is consistent with the financial statements of Dolomiti Energia Trading SpA as of 31 December 2017 and is prepared in compliance with the law. With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree No. 39/10, issued on the basis of our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have nothing to report. Verona, 10 April 2018 PricewaterhouseCoopers SpA Signed by Alexander Mayr (Partner) This report has been translated into English from the Italian original solely for the convenience of international readers

74 | 2017 Report

Dolomiti Energia Trading SpA - Trento, Via Fersina 23 - www.dolomitienergiatrading.it

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