Greenthesis S p A : OPINION FINANCIAL STATEMENTS

Greenthesis S.p.A.

Financial statements as at 31 December 2022

Independent auditor's report pursuant to Article 14 of Legislative Decree No. 39 of 27 January 2010 and Article 10 of Regulation (EU) No 537/2014

Independent auditor's report pursuant to Article 14 of Legislative Decree No. 39 of 27 January 2010 and Article 10 of Regulation (EU) No 537/2014

To the Shareholders of

Greenthesis S.p.A.

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Greenthesis S.p.A. (the "Company"), which comprise the statement of financial position at 31 December 2022, income statement, statement of comprehensive income, statement of changes in equity, cash flow statement for the financial year ended on the same date, and explanatory notes, including a summary of significant accounting policies.

In our opinion, the financial statements give a true and fair view of the equity and financial position of the Company as at 31 December 2022, of the results of its operations and cash flows for the financial year ended on the same date, in accordance with International Financial Reporting Standards as adopted by the European Union, as well as with implementing measures of Article 9 of Legislative Decree No. 38 of 28 February 2005.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs Italy). 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 in accordance with the ethical and independence rules and standards applicable to the audit of financial statements in Italy. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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We identified the following key audit matters:

Key matters

Audit responses

Recognition of revenue from contracts with customers concerning remediations and measurement of contract assets and liabilities

The financial statements of Greenthesis S.p.A. show a revenue from contracts with customers of Euro 93,266,000. This revenue and the related margin concern remediations for Euro 21,878,000 and are recognised based on the consideration agreed in proportion to the progress of the work, as determined in accordance with the cost-to-cost method.

The processes and methods to recognise revenue and measure contract assets and liabilities from remediations, which as at 31 December 2022 stood at Euro 7,969,000 and Euro 1,420,000, respectively, rely on assumptions, sometimes complex, which inherently require the directors to exercise judgement - namely in estimating contract costs and margin on contracts with customers, which may vary from the initial estimates depending on whether or not any higher expenses and/or costs can be recovered.

In the light of the economic and equity significance of revenue and contract assets and liabilities and considering the degree of judgement required by the complexity of the assumptions made in predicting costs to complete contracts and in dealing with contract amendments, we have identified this as a key audit matter.

Revenue recognition and measurement of contract assets and liabilities are disclosed in the financial statements under Evaluation criteria in the item "Revenues and Costs", under note 9 "Contract assets", under note 25 "Contract liabilities" and under note 29 "Revenues" to the separate financial statements.

As a response to the identified key audit matter, we performed the following audit procedures, inter alia:

1. obtained an understanding of the procedure and key controls implemented by Greenthesis S.p.A. in respect of contract planning and control and calculation of contract progress;
2. analysed, having regard to major projects, the main assumptions made in predicting costs to complete contracts and in calculating aggregate revenues, by analysing contract reports together with project managers and by examining contract documents;
3. analysed the assumptions that required the directors to exercise judgement - namely in predicting revenues from variations and significant price revisions;
4. carried out substantive procedures on contract costs on a sample basis;
5. challenged how the progress of work was calculated.

Finally, we challenged the appropriateness of the disclosure in the notes to the separate financial statements in relation to revenue recognition and measurement of contract assets and liabilities.

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Measurement of goodwill

The goodwill included in the financial statements of Greenthesis S.p.A. as at 31 December 2022 amounts to Euro 21,707,000, entirely allocated to the cash generating unit Environment.

The processes and methods to measure and calculate the recoverable amount of the cash generating unit Environment, in terms of value in use, rely on assumptions, sometimes complex, which inherently require the directors to exercise judgement - namely in forecasting future cash flows, with reference to both the period of the 2023-2027 strategic plan and beyond, in the assumptions made to estimate future increases in the order book, revenues, gross margin, growth rate of terminal values, investments and discount rate.

Considering the degree of judgement required and the complexity of the assumptions made in estimating the recoverable amount of goodwill, we have identified this as a key audit matter.

Measurement of goodwill is disclosed in the financial statements under note "Use of estimates - Recoverable amount of non-current assets" and under note 2 "Goodwill" to the separate financial statements.

As a response to the identified key audit matter, we performed the following audit procedures, inter alia:

1. analysed the procedure implemented by the Company to measure the recoverable amount of goodwill, in the light of the impairment test methodology approved by the Board of Directors;
2. analysed the reasonableness of future cash flows predicted in the 2023-2027 strategic plan approved by the Board of Directors on 06 April 2023;
3. analysed the normalised cash flows expected after the end of the plan's period;
4. analysed the key assumptions used by the directors in the impairment test;
5. assessed forecasts in the light of the historical accuracy of past forecasts;
6. challenged how the growth rate of terminal values and discount rates were calculated.

In conducting our audit, we availed ourselves of the support of our experts in valuation techniques who performed independent recalculation and sensitivity analysis of the key assumptions in order to identify any change in the assumptions that could have a significant impact on the recoverable amount.

Finally, we challenged the appropriateness of the disclosure in the notes to the separate financial statements in relation to measurement of goodwill.

Measurement of equity investments and financial receivables from subsidiaries

The financial statements of Greenthesis S.p.A. as at 31 December 2022 include equity investments in subsidiaries of Euro 121,435,000 and financial receivables from the latter of Euro 8,486,000.

Consistently with its management strategy for legal entities within the Group, the Company considers impairment indicators at least on an annual basis for each equity investment and estimates the amount of expected losses along

As a response to the identified key audit matter, we performed the following audit procedures, inter alia:

1. analysed the procedure and controls implemented by Greenthesis S.p.A. to identify and measure any impairment in the value of equity investments in subsidiaries and of financial receivables from the latter;
2. analysed forecasts of future cash flows predicted in the plans of subsidiaries;

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the entire life of financial receivables. In the presence of such indicators, equity investments in subsidiaries are subject to an impairment test; namely, no impairment losses were recorded in the financial year.

The process and methods to measure equity investments and financial receivables from subsidiaries rely on complex elements, which inherently require the directors to exercise judgement - namely in forecasting expected cash flows from subsidiaries, from using or selling their assets, and in estimating the discount rates to apply in the measurement.

Considering the degree of judgement required and the complexity of the assumptions made in estimating the recoverable amount of such assets, we have identified this as a key audit matter.

Measurement of the recoverable amount of equity investments and financial receivables from subsidiaries is disclosed in the financial statements under note "Use of estimates - Recoverable amount of non-current assets", under note 4 "Equity investments" and under note 5 "Other financial assets" to the financial statements.

1. analysed the key assumptions used by the directors in the impairment test of equity investments in subsidiaries;
2. challenged how the discount rates were calculated.

Finally, we challenged the appropriateness of the disclosure in the notes to the financial statements in relation to equity investments in subsidiaries and financial receivables from the latter.

Directors' and board of statutory auditors' responsibilities for the financial statements

Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, as well as with implementing measures of Article 9 of Legislative Decree No. 38 of 28 February 2005, and, pursuant to the 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.

Directors are responsible for assessing the Company's ability to continue as a going concern, for using the going concern basis of accounting appropriately in preparing the financial statements, and for disclosing, as applicable, matters related to going concern. Directors use the going concern basis of accounting in preparing the financial statements unless they believe that there are the conditions 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 monitoring the Company's financial reporting preparation process pursuant to the law.

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