from a single source. Conergy AG Annual ... - Alle jaarverslagen

Everythingfrom a singlesource.Conergy banks on solar energy alone. Atotal of about 1,600 people work to bringabout a solar world in 40 countries on fivecontinents, thus laying the foundation forharnessing the sun’s power to the benefitof humankind. Conergy is a one-stop shopfor both large-scale projects and smallsolar solutions: products, sales & distribution,services. It is what enables us to offersynchronised solar electricity systems toour customers.

SystemTechnology.A singleproducer.Conergy has several manufacturing facilities:a solar module plant in Frankfurt (Oder),an inverter plant in Bad Vilbel and twomounting systems plants, one in Rangsdorf,Germany, the other in Sacramento, USA. Atotal of around 800 employees work to producethe components of Conergy’s highlyefficient and reliable solar energy systems.

They areattractive tooIt is not just the technology ofConergy’s electronic componentsthat is state of the art; they havealso won the Red Dot, the world’smost coveted design award.

SystemServices.A singleserviceprovider.

For private and commercial roofs or solarfarms. With 12 years of experience andseven service departments we deliver allaroundcarefree system technology packagesto our customers. Our services compriseplanning, financing, installation,monitoring, maintenance, operations aswell as insurance.InternationalinstallationsConergy System Services hasalready implemented 120 projects inEurope, America and Asia Pacific.

SystemSales.A singlepoint ofcontact.A total of 24 branches worldwide delivercomprehensive services to our customersin 40 countries - pure sales being only oneof them. Our services range from partnerprogrammes to installation and sales trainingall the way to marketing support.

Connecting withcustomersWe connect with our customersthrough Conergy installer networks,wholesale installers and solarspecialists, OEM networks aswell as turnkey contractors.

Contents

ManageMent Board andsupervisory Board10 Letter to Shareholders12 The Management Board14 The Supervisory Board15 Report of the Supervisory Board22 Statement and report onCorporate Governance(Part of Group management report)31 The Conergy sharegroup ManageMent report34 The Conergy Group35 Internal control system andkey performance indicators37 Material components of the internal controland risk management system relevantto the Group’s financial reporting process38 Global economic conditions38 Development of the industry in 201039 Assets, liabilities, cash flows andprofit or loss49 Other information54 Compensation report for theManagement Board and the SupervisoryBoard of Conergy AG60 Events after the reporting period60 Risk and opportunity report74 Report of anticipated developmentsConsolidated finanCialstateMents78 Consolidated income statement of theConergy Group79 Consolidated balance sheet of theConergy Group80 Consolidated statement of cash flowsof the Conergy Group81 Consolidated statement of changes inequity of the Conergy Group132 Independent Aditors’ ReportFurther Information134 Disclaimer134 Contact and imprint

10Conergy AG I Annual Report 2010once again, an eventful year is behind us. After the world economic crisis and the slump in the solar sector, themarket was able to recover worldwide and, in large parts, showed strong growth again – not only in the, as usual,strong Germany but also in almost all foreign markets.Conergy could benefit from this market growth, both nationally and internationally. One of our biggest growthareas in 2010 was the Asia-Pacific region, whose governments now increasingly recognise the benefits of solarenergy. At the beginning of 2010 we installed the largest privately owned solar farm of Southeast Asia inAyutthaya, Thailand. A little later, in Itnal, India, we built one of the largest solar power plants of the emergingsubcontinent. In addition, we signed a contract to build the first solar plant with complete in-house system technologyin Asia towards the end of the year – a success which shows that even the very price-sensitive Asian markethas now developed an awareness of quality.The demand for Conergy quality also paid off in Europe: So, not only did we build Greece’s largest solar powerplant in 2010, we also signed the greatest framework agreement of Greek solar history. In our home market ofGermany, we also benefited significantly from the market rebound. For example, we were able to build a solarpark in Thüngen, Bavaria, which, with 19 megawatts is the largest German park ever built all with Conergy’s ownsystem technology.These operational achievements were reflected in our figures for 2010. They show: The chosen path is correct;Conergy is on the right course. Due to our strong market position, we not only increased our consolidated salesby more than 50.0 percent to EUR 914 million in the last financial year, but also, through EBITDA of EUR 30 million,were operationally in the black for the first time since 2006. Thus, in spite of negative one-time items, we evenmet our self-imposed guidelines. This improvement also contributed to the increase of our gross profit margin,which, through a plus of four percentage points, is now at almost 24.0 percent. This was due mainly to the increaseduse of self-manufactured products, which enjoyed higher demand in 2010.We could also improve our EBIT and reduce our losses from last year of almost EUR – 37 million by aroundEUR 23 million to approximately EUR – 14 million – even if there are two special circumstances putting a strainof the result, especially in the 4th quarter of 2010: On one hand, towards the end of the year, we as the boarddecided to free individual domestic and foreign subsidiaries from a substantial part of their debt to the parentcompany, Conergy AG as part of a “debt relief” scheme. This “debt relief” was implemented in the respectivecompanies in large parts through the contribution of intercompany receivables. Through this debt reduction, wemade an important contribution to enhancing the operational functionality and competitiveness of our subsidiaries.However, a need for value adjustment not affecting liquidity on goodwill and other assets arose of aroundEUR 17 million.On the other hand, now that the operational reorganisation of the company is mostly completed, it was and is ourgoal to get to work on the company’s financial restructuring. Because, three years of restructuring came with aprice for Conergy. Although we have improved our operating results a lot during this phase, the company still hadlarge debts. Since late 2009 Conergy was in continuous negotiations with its creditors, do reduce the debt andinterest burden significantly. Due to these negotiations as well as the accompanying measures, high consultancyand expert assessment cost accrued in 2010, especially in the 4th quarter, which continue to strain our EBIT.The good news coming out of all this: The efforts of recent months have led to a good result. After long andintense months, we were able to come to an agreement with our creditors on a solution of how to bring aboutthe much-needed debt reduction for our company as well as the strengthening of our equity, based on a reportprepared by PriceWaterhouseCooper.

11Top quality – from a single sourceLetter to Shareholders IManagement Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationThis solution will reduce Conergy’s debt burden by about EUR 190 million and decreases the interest burden substantially.For this purpose, a part of our creditors have agreed to get involved in the equity capital of the company.The remaining credit line amounting to EUR 135 million is agreed for a further four years at market rates. Not untilin three years time will the so-called “financial covenants” be scheduled again.The refinancing concept is initially based on the reduction of the nominal capital from just under EUR 400 millionto around EUR 50 million. Conergy then performs a capital increase of up to EUR 188 million. When this capitalincrease takes place, you, as Conergy shareholders shall be granted a subscription right. Should these subscriptionrights be exercised, Conergy will take a corresponding part of the proceeds and service the currentlyexisting debts. In the event that the subscription rights are not exercised, a part of the creditors has committedto bring in their credit claims, of up to nominally EUR 188 million, as investment in kind which for this purpose isrecognised as 60 percent of its nominal value, and in return shall receive shares. In both cases, the debt is returnedto Conergy. Therefore, we want to adjust our credit facilities of EUR 323 million today to EUR 125 millionin accordance with the performance capacity.All these measures, ladies and gentlemen, have been given the green light at the extraordinary general meetingon February 25th 2011. Their implementation will pave the way for a new start and secure Conergy’s financial future.The implementation of the refinancing concept is still subject to the terms of the partial return of the existingguarantee lines of December 31st 2010. At the end of this demanding balance sheet restructuring there will be anew Conergy.A new Conergy, which can move more flexibly in the markets of the future. Conergy is already in almost 40 countriesworldwide – and thus shows an almost unique international “footprint”. In the coming years we intend to intensifyour efforts around the world. Despite a currently competitive market environment, we are convinced that thetrend to safe energy from the sun will continue to increase. A trend that should intensify due to the increasedawareness of the risks of fossil and nuclear energy. We want to and will be a continued part of this trend.Yours Sincerely,Dr. Sebastian BiedenkopfAndreas Wilsdorf

12Conergy AG I Annual Report 2010The Management BoardDr. Sebastian Biedenkopf (CFO)Andreas Wilsdorf (CSO)Appointed from 1 September 2010 to 31 August 2013Appointed from 15 March 2010 until 14 March 2013Dr. Sebastian Biedenkopf studied law in Freiburg imBreisgau as well as Berlin. After completing his doctoratehe began his judicial career as a layer. In 1998he started working for the legal department of BertelsmannAG, Gütersloh. Initially, he was responsible for antitrust and media law until he was appointed GeneralCounsel for Bertelsmann Inc. in New York in 2001 forthree years. After that, he worked in a similar positionfor Maxingvest AG for three years.Andreas Wilsdorf holds a degree in Business Administrationand last worked as deputy managing director ofsales at SCHÜCO International KG, Bielefeld. In thisposition, he was responsible, among other things, forall sales activities in the area of solar, aluminium andPVC in Southern and Western Europe as well as inSouth America. From 2005 on, he has worked forSCHÜCO in Spain over the period of three years.Since 2008 Dr. Biedenkopf was Head of the LegalDepartment at Conergy AG. Effective as of 1 September2010 Sebastian Biedenkopf was appointed tothe company’s Management Board.Andreas Wilsdorf was appointed to the company’sManagement Board effective as of 15 March 2010.Philip von Schmeling resigned from the ManagementBoard effective at the end of 23 April 2010, Dr. Andreasvon Zitzewitz resigned from the Management Board on19 August 2010.Dr. Jörg Spiekerkötter left the Company’s ManagementBoard effective 31 October 2010. Dieter Ammer resignedfrom his position as Chairman and member of the Company’sManagement Board on 5 October 2010 becausehe was elected to the Supervisory Board of Conergy AG.

13Top quality – from a single sourceThe Management Board |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationThe members of the Management Board and their memberships(as at 31 December 2010)The members of the Management Board hold the following positions on statutory Supervisory Boards andcomparable corporate control committees:Name Member since Positions on statutory Supervisory Boards and comparable control committeesDr. Sebastian Biedenkopf 2010 Chairman of the Board of iploit AG, Zurich (until 10 January 2011)Andreas Wilsdorf 2010 –Philip von Schmeling resigned from the Management Board effective at the end of 23 April 2010, Dr. Andreas von Zitzewitz resigned from the Management Board on 19 August 2010.Dr. Jörg Spiekerkötter left the Company’s Management Board effective 31 October 2010. Dieter Ammer resigned from his position as Chairman and member of the Company’s ManagementBoard on 5 October 2010 because he was elected to the Supervisory Board of Conergy AG.

14Conergy AG I Annual Report 2010The Supervisory BoardThe members of the Supervisory Board and their memberships(as at 31 December 2010)The members of the Supervisory Board held the following positions on statutory Supervisory Boards andcomparable corporate control committees as at 31 December 2010:Name Member since Positions on statutory Supervisory Boards and comparable control committeesNorbert Schmelzle(Chairman)Self-employed management consultant2009 Statutory Supervisory Boards:Member of the Supervisory Board of J. Müller AG, BrakeDeputy Chairman of the Supervisory Board of GBK Beteiligungen AG, HamburgMember of the Supervisory Board of Detlef Hegemann AG, BremenMember of the Supervisory Board of Gesundheit Nord gGmbH, BremenComparable control committees:Chairman of the Advisory Board of KAEFER Isoliertechnik GmbH & Co. KG, BremenChairman of the Advisory Board of Bühnen GmbH & Co. KG, BremenDeputy Chairman of the Board of Directors of Stulz Holding GmbH, HamburgKlaus-Joachim Wolfgang KrauthChief Financial Officer (CFO),Santo Holding (Deutschland) GmbHCarl Ulrich Andreas de MaizièreSelf-employed Supervisory Boardmember and partnerDoertenbach & Co GmbH,Frankfurt am Main2009 Statutory Supervisory Boards:Chairman of the Supervisory Board of Hobnox AG, MunichDeputy Chairman of the Supervisory Board of InterComponentWare AG (ICW AG),WalldorfMember of the Supervisory Board of SÜDWESTBANK AG, Stuttgart2009 Statutory Supervisory Boards:Chairman of the Supervisory Board of Rheinische Bodenverwaltung AG, DüsseldorfChairman of the Supervisory Board of Fürstlich Castell’sche Bank, Credit-Casse AG,WürzburgMember of the Supervisory Board der Eisen- und Hüttenwerke AG, Köln (since March 2010)Chairman of the Supervisory Board of Jerini AG, Berlin (until March 2010)Comparable control committees:Chairman of the Supervisory Board of Arenberg-Schleiden GmbH, DüsseldorfChairman of the Supervisory Board of Arenberg-Recklinghausen GmbH, DüsseldorfDeputy Chairman of the Supervisory Board of Commerzbank (Budapest) Zrt, Budapest(until the end of 2010)Second Deputy Chairman of the Supervisory Board of Commerz Real SpezialfondsgesellschaftmbH (CRS), WiesbadenMember of the Advisory Board of Dr. Vogler GmbH & Co. KG, Bad Homburg (since theend of 2010)Oswald MetzgerIndependent publicist andpolitical consultantBernhard MilowProgramme Director for Energy,Deutsches Zentrum für Luft- undRaumfahrt e.V. (DLR)Dieter AmmerSelf-employed entrepreneur2005 –2009 –2010 Statutory Supervisory Boards:Member of the Supervisory Board of GEA Group Aktiengesellschaft, BochumMember of the Supervisory Board of Heraeus Holding AG, HanauEckhard Spoerr resigned from the Supervisory Board both as a regular member and as its Chairman on 19 July 2010 effective immediately. The term of office of the Supervisory Boardmembers Carl Ulrich Andreas de Maizière, Oswald Metzger, Bernhard Milow, Klaus-Joachim Krauth und Norbert Schmelzle ended at the end of 31 August 2010. By court order of theHamburg District Court dated 31 August 2010, the five Supervisory Board members listed above were appointed to the Supervisory Board effective 3 September 2010 until the end ofthe Annual General Meeting on 5 October 2010.On 5 October 2010, Dieter Ammer, Carl Ulrich Andreas de Maizière, Oswald Metzger, Bernhard Milow, Klaus-Joachim Krauth and Norbert Schmelzle were elected to the Company’sSupervisory Board by the Annual General Meeting. At its inaugural meeting, the Supervisory Board elected Norbert Schmelzle as its Chairman and Klaus-Joachim Krauth as its DeputyChairman.

15Top quality – from a single sourceThe Supervisory Board | Report of the Supervisory Board |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationReport of the Supervisory BoardLadies and Gentlemen,Monitoring activities of the Supervisory BoardThe Supervisory Board advised the ManagementBoard on the Company’s management in the financialyear just ended, duly and regularly monitoring theManagement Board’s conduct of business based onwritten and oral Management Board reports and jointmeetings. In addition, both the Chairman of the SupervisoryBoard and the Chairman of the Audit Committeemaintained regular contact with the ManagementBoard outside the meetings. The Management Boardprovided regular and timely information to the SupervisoryBoard about the Company’s business policies;the relevant aspects of its planning, including its financial,investment and personnel planning; the developmentof business; current revenue, earnings and liquiditydevelopments; the economic situation of boththe Company and the Group, including their exposureto risk and their risk management; intra-group compliance;the Group’s strategic realignment in connectionwith the restructuring process that the ManagementBoard designed and updates; as well as the decisionsand business transactions pivotal to the Company andthe Group. The Management Board reported to theSupervisory Board both on specific occasions at therequest or explicit demand of the Supervisory Boardand in regular intervals in accordance with the rules ofprocedure drawn up by the Supervisory Board for theManagement Board. The Supervisory Board includedexternal consultants as well as staff from various areassuch as Legal, Accounting, Controlling and InternalAuditing in its deliberations to the extent necessary inthe 2010 financial year as well. The Supervisory Boardwas involved in a timely manner in all decisions thatwere of material significance for the Company. Furthermore,the Supervisory Board was presented withtransactions requiring its approval, all of which it approvedfollowing detailed examinations and discussionwith the Management Board.Composition of the Supervisory BoardIn the 2010 financial year, Eckhard Spoerr (Chairman ofthe Supervisory Board), Norbert Schmelzle (DeputyChairman of the Supervisory Board), Klaus-JoachimWolfgang Krauth, Andreas de Maizière, OswaldMetzger and Bernhard Milow initially belonged to theCompany’s Supervisory Board, which comprises sixshareholder representatives pursuant to Section 96para. 1 and Section 101 para. 1 sentence 1 GermanStock Corporation Act (AktG) in conjunction with Article10 para. 1 of the Company’s Articles of Association.Eckhard Spoerr resigned from the SupervisoryBoard both as a regular member and as its Chairmanon 19 July 2010 for cause effective immediately. On thesame day, the Supervisory Board elected NorbertSchmelzle as its Chairman and Klaus-Joachim Krauthas its Deputy Chairman.The regular term of office of the remaining five SupervisoryBoard members ended at the end of 31 August2010. Upon application of the Company, by order dated1 September 2010, the District Court reappointedall of them to the Supervisory Board of Conergy AGuntil the end of the next Annual General Meeting.By resolution of the Annual General Meeting on 5 October2010, the five court-appointed members of theSupervisory Board as well as Dieter Ammer (who hadresigned from his appointments as both a regularmember of the Management Board and its chairman)were elected to the Supervisory Board until the end ofthe Annual General Meeting tasked with formally approvingthe actions of all Supervisory Board membersduring the Company’s 2014 financial year. At the subsequentinaugural meeting of the Supervisory Board,Norbert Schmelzle was elected Chairman of the SupervisoryBoard and Klaus-Joachim Krauth its DeputyChairman.Supervisory Board meetingsIn the 2010 financial year, the Supervisory Board helda total of 14 meetings to carry out its duties, specifically,on 24 March, 8 April, 29 April, 1 July, 19 July, 5August, 19 August, 30 August, 4 October, 5 October(two meetings), 10 November, 18 November and 9 December2010. With the exception of the meetings on 29April, 19 July, 19 August and 18 November 2010, allmeetings required members’ personal attendance; in afew cases, Supervisory Board members participatedin the deliberations and resolutions by telephone. Inurgent cases, resolutions were also adopted by telephoneand in writing outside of meetings. In additionthe Supervisory Board asked the Management Boardto keep it informed of current events by telephone.With the exception of both Eckhard Spoerr (who resignedfrom the Supervisory Board on 19 July 2010)and Dieter Ammer (who was not elected to the SupervisoryBoard until 5 October 2010), all members of theSupervisory Board attended more than one half of its

17Top quality – from a single sourceReport of the Supervisory Board |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther Informationtions. As an addendum to its meeting on 24 March2010, the Supervisory Board further adopted the additionalresolutions to be proposed to the 2010 AnnualGeneral Meeting concerning the election of SupervisoryBoard members and various capital measures. Inaddition, the Management Board reported on theCompany’s performance in 2010 and on the currentstatus of the Company’s refinancing. Moreover, theSupervisory Board dealt with Management Boardmatters and the status of the reviews of whether tobring claims for damages against former members ofthe Management Board of Conergy AG on account ofthe Company’s earnings and liquidity crisis in 2007.Terminating the appointment of Dr. Andreas von Zitzewitzto the Management Board was the main topic atthe Supervisory Board meeting on 19 August 2010.The Supervisory Board’s meeting on 30 August 2010focused on the status of the Company’s refinancing, inparticular questions related to the independent businessreview that Conergy had agreed to commission inits refinancing talks with the banks.At the Supervisory Board meeting on 4 October 2010,the Management Board reported on the developmentof the refinancing talks. The Supervisory Board alsoaddressed the Company’s current performance aswell as matters related to the Management Board.At its meeting on 5 October 2010, the SupervisoryBoard returned to the previous day’s discussion of thestatus of the Company’s refinancing concept and dealtwith the issue of appointing a Management Boardchairman. It also discussed the status of the preparationsfor the imminent Annual General Meeting as wellas various questions related to claims for damagesagainst former members of Conergy AG’s ManagementBoard in connection with the Company’s earningsand liquidity crisis in 2007.The Supervisory Board meeting on 5 October 2010,which followed the Annual General Meeting, focusedon the election of the Deputy Chairman of the SupervisoryBoard as well as on the composition of the committeesand the appointment of each committee’schairperson. In addition the Supervisory Board dealtyet again with individual aspects of the Company’s refinancing.The Supervisory Board meeting on 10 November 2010focused on various aspects of the Company’s refinancingand the current development of its business. TheSupervisory Board further addressed matters relatedto the Management Board and resolved amendmentsof the internal rules of procedure applicable to theManagement Board and the Supervisory Board. TheCompany’s current performance was also discussed.At its meeting on 18 November 2010, the SupervisoryBoard discussed various aspects of the Company’srestructuring in the Management Board’s presence.The full Supervisory Board asked a host of questionsin this regard, which it discussed in detail with theManagement Board.The Supervisory Board meeting on 9 December 2010focused mainly on the status of the Company’s refinancingand its three-year planning. The ManagementBoard reported to the Supervisory Board on the Company’sperformance, focusing on each segment, reportedon its equity interests and subsidiaries and discussedmarket shares. The resolution on carrying outan efficiency review and initiating it was an additionaltopic of importance. The Supervisory Board also resolvedto issue the Declaration of Compliance with theGerman Corporate Governance Code in accordancewith Section 161 German Stock Corporation Act. Finallythe Supervisory Board addressed the disposal ofEPURON GmbH’s wind subdivision and the Company’sequity interest in Conergy GmbH, Switzerland.Report from the committeesThe Supervisory Board has established two standingcommittees in accordance with the recommendationsof the German Corporate Governance Code with theaim of ensuring efficient fulfilment of its responsibilities:a task force charged with preparing the SupervisoryBoard’s meetings (Chairman’s Committee) and an AuditCommittee, both of which are staffed by SupervisoryBoard members. The Chairman’s Committee alsoserves as a Nomination Committee. The SupervisoryBoard has delegated decision-making authority tothese committees in individual cases, to the extent permissiblein law. At Supervisory Board meetings, thecommittee chairmen reported in detail on the committees’meetings and work, thus facilitating a comprehensiveexchange of information and close cooperation betweenthe committees and the full Supervisory Board.

18Conergy AG I Annual Report 2010Eckhard Spoerr (Chairman), Norbert Schmelzle and Andreasde Maizière comprised the Chairman’s Committeeat the beginning of the 2010 reporting year. Klaus-Joachim Krauth was elected to the Chairman’sCommittee following Eckhard Spoerr’s resignation fromthe Supervisory Board on 19 July 2010. The members ofthe Chairman’s Committee were confirmed in their officesat its constitutive meeting on 5 October 2010.In the 2010 financial year, the Chairman’s Committeeheld a total of five meetings, specifically, on 8 February,23 March, 5 August, 13 August and 23 September2010. These meetings focused on the termination ofPhilip von Schmeling’s appointment to the ManagementBoard, issues related to the composition of theManagement Board and the Management Board’s internalorganisational structure as well as compensationissues. Recommendations for Supervisory Boardresolutions were also prepared. On 8 February 2010,23 March 2010 and 5 August 2010, the Chairman’sCommittee also met in its function as the NominationCommittee. Issues related to the composition of theSupervisory Board in future were discussed. All committeemembers attended all meetings of the Chairman’sCommittee. In the 2010 financial year, the membersof the Chairman’s Committee stayed in touchoutside of meetings too, especially regarding mattersrelated to the Management Board.In the 2010 financial year, the Audit Committee consistedof Klaus-Joachim Krauth (Chairman), NorbertSchmelzle as well as Eckhard Spoerr (until he resignedfrom the Supervisory Board). Following his resignation,Andreas de Maizière was elected to the AuditCommittee.The tasks of the Audit Committee, which during the2010 reporting year met five times for meetings requiringpersonal attendance – specifically on 8 February,23 March, 10 May, 5 August, 10 September and 10 November2010 – and held one telephone conference on11 August 2010, included the preparation of the audit ofthe annual and consolidated financial statements andthe associated management reports, the engagementof the auditor including deciding on the focal points ofthe audit, the accounting, issues of risk management,compliance and internal auditing and establishment ofthe principles of the short-, medium-, and long-term financialstrategy. At the request of the full SupervisoryBoard, the committee also addressed matters pertainingto the Management Board, particularly compensationissues. With the exception of Eckhard Spoerr, whoexcused himself for the meeting on 10 May 2010, allmembers of the Supervisory Board were present at allof the Audit Committee’s meetings. The Chairman ofthe Management Board, the Chief Financial Officer andrepresentatives from specialist departments also participatedin these meetings as necessary.On 8 February 2010, the Audit Committee addressed theCompany’s preliminary earnings for the 2009 financialyear, its financial strategy and the Supervisory Board’ssuggestions to the Annual General Meeting regardingthe appointment of the auditor for the 2010 financialyear. It also discussed performing regular reviews of theCompany’s quarterly financial statements as well as issuesrelated to internal audits and compliance.At its meeting on 23 March 2010, the Audit Committeeengaged in a detailed discussion – in the presence ofthe auditors, Deloitte & Touche, and both the Chief ExecutiveOfficer and the Chief Financial Officer – of thepreliminary annual and consolidated financial statementsfor 2009 as well as the preliminary managementand Group management report as at 31 December2009; the Audit Committee asked the auditors to reporton their audits and the relevant findings as well ason the status of the groupwide implementation of riskmanagement policies In this context, the current statusof the refinancing talks with the banking syndicatewas also discussed. Preparations for the Annual GeneralMeeting, the Company’s risk management and internalcontrol systems as well as issues of intra-groupcompliance were some of the main topics. The committeealso dealt with various matters related to theManagement Board, especially compensation issues.Aside from the refinancing talks with the banks, thestatus of the audit of the 2009 financial year also hadhigh priority at the Audit Committee’s meeting on10 May 2010. The quarterly report as at 31 March 2010was also discussed. The Chief Executive Officer andthe Chief Financial Officer provided exhaustive answersto the questions that the Audit Committee raisedin this connection. Internal auditing issues were alsoaddressed by the Audit Committee.At its meeting on 5 August 2010, the Audit Committeeengaged in a final discussion – in the presence of theauditors, Deloitte & Touche, and both the Chief ExecutiveOfficer and the Chief Financial Officer – of the annualand consolidated financial statements for 2009 as

19Top quality – from a single sourceReport of the Supervisory Board |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther Informationwell as the preliminary management and Group managementreport as at 31 December 2009; the AuditCommittee asked the auditors to report on the findingof their audits and on the status of risk management.The committee prepared a recommendation for a SupervisoryBoard resolution based on this.The half-yearly financial report as at 30 June 2010 wasthe main topic of discussion at the Audit Committee’smeeting on 11 August 2010. It also dealt with the Company’srisk management, its compliance system andinternal auditing. The Management Board answered allquestions put to it in this connection.At its meeting on 10 November 2010, the Audit Committeediscussed the quarterly report as at 30 September2010 in the presence of the auditor, Deloitte & Toucheand the Chief Financial Officer and asked them toreport on the development of business both in the thirdquarter and the financial year. The questions raised bythe Audit Committee in this connection were answeredexhaustively. The deliberations also focused on theappointment of the auditor for the 2011 audit, the statusof the Company’s internal control and risk managementsystem as well as aspects of its compliance system.The committee also dealt with the status report ofthe internal auditing department and the focal pointsof the audit for the 2010 financial year that had beensuggested by the auditors, Deloitte & Touche.Discussion and audit of the annual and consolidatedfinancial statements for 2010The Company’s Annual General Meeting appointedDeloitte & Touche GmbH WirtschaftsprüfungsgesellschaftMunich, Hamburg branch, to audit the annualand consolidated financial statements and the associatedmanagement reports as at 31 December 2010 ofConergy AG for the 2010 financial year. The AuditCommittee then negotiated the audit engagement andstipulated the focal points of the audit. Subsequently,the Supervisory Board awarded the audit engagementcontract. The following items were stipulated as particularfocal points of the audit of the financial statementsfor the 2010 financial year: (i) Internal controlsystem, specifically, the unwinding of our agreementswith an importend supplier and the attendant accountingtreatment; (ii) accounting treatment of the restructuringof the liabilities of Conergy AG and its subsidiariespursuant to the agreement with the bankingsyndicate; as well as (iii) review of the internal controlsystem relevant to the financial reporting process andaccounting in the Group of its project business.Deloitte & Touche audited the annual financial statementsof Conergy AG for 2010, which were prepared inaccordance with the requirements of the GermanCommercial Code, as well as the management reportand issued an unqualified auditor’s report for each ofthem. The same applies to the IFRS consolidated financialstatements that were prepared in accordancewith Section 315a German Commercial Code (HGB)and supplemented by a Group management report.The auditor also audited the risk early warning systemin place at Conergy AG in accordance with Section 317para. 4 German Commercial Code (HGB) and foundthat the obligations of management in the areas of operationsand strategy as set out in the German Controland Transparency in Business Act are addressed.Both the financial statement documentation and theauditors’ reports had been made available to the AuditCommittee and the full Supervisory Board in due time.They were reviewed by the Audit Committee on23 March 2011 and discussed in the presence of theauditors. Subsequently, they were examined in detailby the full Supervisory Board at the financials meetingon 24 March 2011 based on the latter’s knowledge ofthe Audit Committee’s report and duly considering theauditors’ report and they were exhaustively discussedin the auditors’ presence. The auditors reported on theconduct and material findings of their audit of the financialstatements pursuant to the focal points stipulatedwith the Audit Committee and the SupervisoryBoard for 2010 and were available for questions, discussionsof the documentation and supplementary information.Notes by the auditor from the audit reportswere recorded by the Supervisory Board, discussedwith the Management Board and arrangements madefor their consideration.After its own examination of the annual financial statementsof Conergy AG together with the managementreport and the consolidated financial statements togetherwith the Group management report, the SupervisoryBoard determined that following the conclusivefindings of its examination, no objections needed to beraised. The Supervisory Board therefore concurredwith the recommendation of the Audit Committee,agreed with the result of the auditors’ audit and approvedthe annual financial statements, the consolidatedfinancial statements as well as the management

20Conergy AG I Annual Report 2010report and the Group management for the 2010 financialyear at its financials meeting on 24 March 2011.The annual financial statements of Conergy AG arehence adopted (Section 172 sentence 1 German StockCorporation Act).Declaration of Compliance and CorporateGovernanceThe Supervisory Board attaches high priority to issuesof corporate governance. It reports thereon jointly withthe Management Board in connection with the corporategovernance report, which is a part of this annualreport. Aforesaid report also contains information onaspects of the Company’s corporate governance asthey relate to the Supervisory Board.On 9 December 2010, the Supervisory Board issuedthe annual Declaration of Compliance with the GermanCorporate Governance Code pursuant to Section 161German Stock Corporation Act jointly with the Company’sManagement Board; it was made available tothe public on the Company’s website.The compensation of the Supervisory Board membersis itemised and broken down into the various componentsin the compensation report reproduced in thisannual report. In the 2010 financial year, the SupervisoryBoard also addressed potential conflicts of interestof its members, especially in conntection with therefinancing. The Supervisory Board did not find thatthere was a conflict of interest because the refinancingis equally important to the Company and its shareholdersand because the shareholders’ interest is vitalto the Company’s interests as well.At its meeting on 9 December 2010, the SupervisoryBoard resolved to conduct the efficiency review of itswork as recommended by the German Corporate GovernanceCode and subsequently started performingthe review. The self-assessment was essentially basedon a questionnaire developed by Deloitte & ToucheGmbH Wirtschaftsprüfungsgesellschaft. The findingsof the analysis of this questionnaire will be integratedinto the work of both the Supervisory Board and itscommittees.Changes on the Management Board and theSupervisory BoardAndreas Wilsdorf was appointed to the ManagementBoard effective 15 March 2010 and assumed his responsibilitiesthe same day. He took over the sales andmarketing activities of Philip von Schmeling, who tookon new challenges elsewhere after his contract expired.Philip von Schmeling resigned from the ManagementBoard effective 23 April 2010.Dr. Andreas von Zitzewitz, member of the ManagementBoard, resigned his seat on the ManagementBoard on 19 August 2010 to immediate effect.The Management Board member, Dr. Jörg Spiekerkötter,resigned from the Management Board at his ownrequest effective 31 October 2010, the expiry date ofhis contract. Dr. Sebastian Biedenkopf, who had alreadybeen appointed to the Management Board effective1 September 2010, took over his responsibilitieseffective 1 November 2010 to ensure an orderlytransition.Given his election to the Supervisory Board by the AnnualGeneral Meeting, on 5 October 2010 the Company’sformer Chief Executive Officer, Dieter Ammer, resignedto immediate effect from its ManagementBoard, both as a regular member and as its chairman.His appointment to the Management Board, which wasto expire on 31 July 2010, had earlier been extended bythree months.On 19 July 2010, Eckhard Spoerr resigned his seat onthe Supervisory Board for cause to immediate effect.The regular term of office of the remaining five SupervisoryBoard members, Norbert Schmelzle, Klaus-Joachim Krauth, Andreas de Maizière, Oswald Metzgerand Bernhard Milow duly ended at the end of 31 August2010.Upon application of the Company’s ManagementBoard, by ruling dated 1 September 2010 the RegistryCourt of the Hamburg District Court reappointed themto the Supervisory Board of Conergy AG until the endof its next Annual General Meeting.

21Top quality – from a single sourceReport of the Supervisory Board |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationBy resolution of the Annual General Meeting on 5 October2010, the court-appointed members of the SupervisoryBoard as well as Dieter Ammer were electedto the Supervisory Board until the end of the AnnualGeneral Meeting tasked with formally approving theactions of all Supervisory Board members during theCompany’s 2014 financial year.Effective 7 March 2011, Klaus-Joachim Krauth, a memberof the Supervisory Board, resigned from his positionas Deputy Chairman of the Supervisory Board, hisposition as both a member and the Chairman of theAudit Committee as well as his appointment to theChairman’s Committee. On 10 March 2011, the SupervisoryBoard elected Andreas de Maizière its new DeputyChairman. Oswald Metzger was appointed to theAudit Committee to fill the vacancy. Bernhard Milowwas appointed to the Chairman’s Committee, taking theplace of Klaus-Joachim Krauth. The Audit Committeealso elected Andreas de Maizière its new Chairman.The 2010 financial year was a very difficult one forConergy, also on account of challenges related to itsrestructuring. Yet the Company succeeded in workingout a restructuring concept in coordination with thecreditors that substantially lowers its liabilities, thuslaying the ground for its continued existence as a goingconcern. The Supervisory Board wishes to thank andexpress its appreciation to Conergy’s management, MrEckhard Spoerr, formerly a member of its SupervisoryBoard, as well as all employees for their extensivecommitment.Hamburg, 24 March 2011The Supervisory BoardNorbert SchmelzleChairman of the Supervisory Board

22Conergy AG I Annual Report 2010Statement and report on corporate governanceStatement on corporate governanceThe term “corporate governance” refers to a system ofcompany management that focuses on responsibility,transparency and sustainable value creation. It encompassesthe entire management and monitoringsystem of the Company, including its organisation,business principles and guidelines, as well as internaland external control and monitoring mechanisms. Fordomestic and international shareholders, businesspartners, financial markets, employees and the generalpublic, good corporate governance inspires trust inthe management of the company and the efficient corporationbetween the Management Board and the SupervisoryBoard, the observance of shareholder interestsas well as open and up-to-date corporatecommunications. The Management and SupervisoryBoards of Conergy AG are committed to the principlesof good corporate governance and they are convincedthat it is an essential requirement for the success ofthe Company. Conergy AG reviews and develops itscorporate governance policies on a regular basis.The Management Board of Conergy AG reports on issuesof corporate governance in this statement – alsoon behalf of the Supervisory Board – pursuant to bothItem 3.10 of the German Corporate Governance Codeand Section 289a para. 1 of the German CommercialCode (HGB).Declaration of Compliance and report on corporategovernanceSection 161 German Stock Corporation Act requires theManagement Board and the Supervisory Board of acompany listed in Germany to declare once a yearwhether they are in compliance with the recommendationsof the German Corporate Governance Code(GCGC) and, if this is not the case, which recommendationsthey did not or do not follow. The Company alsohas to provide reasons for any non-compliances. Thisdeclaration shall be kept permanently available throughpublication on the Company’s website.Both the Supervisory Board and the Management Boardof Conergy AG are committed to corporate governancepractices that are aimed at creating value in a responsible,transparent and sustainable manner.Declaration of the Management Board and theSupervisory Board of Conergy AG regarding therecommendations of the Government CommissionGerman Corporate Governance Code pursuantto Section 161 German Stock Corporation ActThe Management Board and Supervisory Board issuedthe following Declaration of Compliance on 9 December2010:“In the 2010 financial year, Conergy AG has been incompliance with all recommendations of the GermanCorporate Governance Code as amended on 18 June2009 and 26 May 2010, as applicable, with the followingexceptions:Up to now, Conergy AG has not made use of the optioncreated by the German Act Implementing the ShareholderRights Directive (ARUG) to allow postal votes(Section 118 para. 2 German Stock Corporation Act(deviation from Item 2.3.3 sentence 2 of the GermanCorporate Governance Code)). The ManagementBoard and Supervisory Board are initially planning towait and see what other quoted issuers do and whattheir experience is like before submitting a motion tothe General Shareholders’ Meeting for resolution on anamendment of the Articles of Association to allow suchpostal votes.Ever since the departure of the former Chairman of theManagement Board Dieter Ammer and his move to theSupervisory Board of Conergy AG, the ManagementBoard of Conergy AG has not had a chairman or aspokesman (deviation from Item 4.2.1 sentence 1,clause 2 of the German Corporate Governance Code).As the Management Board currently comprises onlytwo members, the Supervisory Board does not considerit necessary to appoint a chairman or spokesmanin the current constellation. The Supervisory Board islooking for a suitable candidate to succeed the chairmanof the Management Board, who stepped down inOctober.The Supervisory Board of Conergy AG has not specifiedany concrete objectives regarding its composition(deviation from Item 5.4.1 sentences 2 to 5 of the GermanCorporate Governance Code). In nominating suitablecandidates to the General Shareholders’ Meeting,the Supervisory Board will continue to comply withthe legal requirements and emphasise the candidates’expertise and personal skills irrespective of their gender.The Company’s international activities as well as

23Top quality – from a single sourceCorporate Governance |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther Informationpotential conflicts of interest and diversity will naturallyalso be taken into account. This does not require thespecification of concrete objectives, however.Conergy AG’s consolidated financial statements forthe 2009 financial year were not made publicly availablewithin 90 days of the end of the financial year(31 December) (deviation from Article 7.1.2 sentence 4,clause 1 of the German Corporate Governance Code)).Until summer 2010, Conergy AG was in talks with thefinancing banks concerning the refinancing or restructuringof the loan liabilities falling due in the 2010 and2011 financial years. The outcome of these talks wasof fundamental importance for the issue of an auditors’report by the Company’s auditors. It was only afterthe financing banks had issued a letter of respiteon 29 July 2010 that the auditors’ report could be issuedand the consolidated financial statements couldbe published on 12 August 2010.”Hamburg, 9 December 2010| For the Supervisory Board:Norbert Schmelzle| For the Management Board:Dr. Sebastian Biedenkopf, Andreas WilsdorfProcedures of the Management Board and theSupervisory BoardConergy AG is a stock corporation that was foundedunder German law. The dual management systemcomprising the Management Board and the SupervisoryBoard as corporate bodies, both of which havedistinct responsibilities, is a fundamental element ofGerman corporate law. The Management Board andSupervisory Board of Conergy AG work in partnershipfor the benefit of the Company. They pursue the samegoal, namely to contribute to the sustainable increasein value of the Company.Management BoardThe Management Board of Conergy AG comprised twomembers as at 31 December 2010: Dr. SebastianBiedenkopf (CFO, responsible for Corporate Controlling& Risk Management, Corporate Treasury, CorporateTax, Corporate Accounting, Investor Relations, CorporateLegal, Governance & Compliance, IT & Processes,Corporate Communications (Public Relations), CorporateAudit, Corporate Projects as well – until its disposalin December 2010 – EPURON) and Andreas Wilsdorf(CSO, responsible for Global Product Marketing, GlobalProject Finance, Sales Operations, Corporate HR & Administration,Global Supply Chain, Global Purchasing, GlobalLarge Projects, Components Technology, Conergy PVRegions).On 1 March 2010 Andreas Wilsdorf was appointed tothe Management Board effective 15 March 2010 andstarted working on that day. He takes the place ofPhilip von Schmeling, previously the Chief Sales Officerresponsible for sales and marketing, who took on newchallenges after his contract had ended. Philip vonSchmeling resigned from the Management Board effectiveat the end of 23 April 2010.Given his election to the Supervisory Board by theAnnual General Meeting, on 5 October 2010 the Company’sformer Chief Executive Officer, Dieter Ammer,resigned to immediate effect from its ManagementBoard, both as a regular member and as its chairman.His appointment to the Management Board, which wasto expire on 31 July 2010, had earlier been extended bythree months.The Management Board member, Dr. Andreas vonZitzewitz, left the Company’s Management Board on19 August 2010 with immediate effect. His responsibilitieswere taken over by the Management Board’sother members.The Management Board member, Dr. Jörg Spiekerkötter,resigned from the Management Board at his own requesteffective 31 October 2010, the expiry date of hiscontract. Dr. Sebastian Biedenkopf, who had alreadybeen appointed to the Management Board effective 1September 2010, took over his responsibilities effective1 November 2010 to ensure an orderly transition.The Management Board manages the Company autonomouslyand free of third-party instructions. Its dutiesinclude first and foremost defining Conergy’s strategicdirection and managing the Group, planning, aswell as implementing and monitoring a risk managementsystem. All members of the Management Boardare tied into the Company’s day-to-day business andshoulder operational responsibility. The SupervisoryBoard decided that the age limit for the members ofConergy AG’s Management Board should be 65 years.

25Top quality – from a single sourceCorporate Governance |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationThe Management Board must obtain the approval ofthe Supervisory Board for all transactions and/ormeasures that could have a material impact on the assets,liabilities, cash flows and profit or loss of theCompany and/or the Group and/or individual Groupcompanies or are otherwise of an extraordinary nature.In keeping with the statutory requirements ofSection 111 para. 4 sentence 2 AktG, the ManagementBoard’s rules of procedure contain an enumeration ofthe transactions that may only be executed with theapproval of the Supervisory Board.The Management Board must also inform the SupervisoryBoard – in a regular, timely and comprehensivemanner – of all issues relevant to the Company interms of the intended business policies, planning, performance,exposure to risk and risk management aswell as compliance. These reports are made periodicallyin accordance with the detailed requirements ofreporting rules as well as in connection with specificoccasions. In its reports, the Management Board shalladdress any deviations in the Company’s developmentfrom plans and targets, stating the reasons for suchdifferences. Management Board reports and all documentsmaterial to decision making, specifically the annualfinancial statements, the consolidated financialstatements and the audit report shall generally bemade available to the members of the SupervisoryBoard 14 days ahead of the given meeting in text form.In addition, the Chairman of the Management Boardshall brief the Chairman of the Supervisory Board atregular intervals on the performance and position ofboth the Company and its associates, verbally and inwriting, as necessary.The members of the Management Board are subject toa comprehensive non-compete clause while they arein the Company’s employ. They shall commit themselvesto the interests of both the Company and theGroup companies. In making their decisions, they maynot pursue personal interests, nor may they use businessopportunities inuring to the benefit of the Companyor Group companies for their own good. Themembers of the Management Board must immediatelydisclose any conflicts of interest to both the SupervisoryBoard and the other members of the ManagementBoard. There were no conflicts of interest in the financialyear just ended that would have had to be disclosedto the Supervisory Board without delay. Alltransactions between members of the ManagementBoard as well as parties related to them, on the onehand, and the Company or a Group company, on theother hand, must comply with industry standards. Materialtransactions require the approval of the SupervisoryBoard, and the application for approval shall setout that the transaction complies with industry standards.Company loans may only be granted to membersof the Management Board as well as parties or companiesrelated to them with the approval of the Chairmanof the Management Board as well as the SupervisoryBoard. The members of the Management Board maynot demand nor accept payments or other benefits forthemselves or for third parties in connection with theiractivities above and beyond their compensation, to theextent that this could jeopardise the interests of theCompany or Group companies. Nor may members ofthe Management Board grant unlawful advantages tothird parties. Members of the Management Board shallobtain the approval of the Chairman’s Committee ofthe Supervisory Board if they wish to accept board appointmentsto or consulting assignments from companiesthat are not Conergy AG Group companies as wellas appointments to offices in any company that entailpower of attorney and any other secondary employmentof a significant nature. During the reporting year,no member of the Management Board held more thanthree appointments to the supervisory boards of listedstock corporations not belonging to the Conergy Group.Conergy AG has purchased D&O insurance subject toa reasonable deductible for all members of its ManagementBoard and its Supervisory Board.The full Management Board may establish committeestasked with technical, commercial or financial issuesat the suggestion of the Chairman of the ManagementBoard for the purpose of conducting reviews and preparingManagement Board resolutions. No committeeswere established during the reporting year.Board appointments of Management Board membersThe appointments of the members of the Company’sManagement Board to other companies’ statutorysupervisory boards and comparable domestic andforeign corporate control committees are enumeratedin the notes to the annual financial statements as wellas in the section entitled “The Management Board”.

26Conergy AG I Annual Report 2010Supervisory BoardPursuant to Article 8 para. 1 of the Company’s Articlesof Association in conjunction with Section 95 and 96para. 1 AktG as well as Section 101 para. 1 AktG, theSupervisory Board is composed of six shareholderrepresentatives who are elected by the Annual GeneralMeeting, which is not bound by election proposals. Atthe end of 2010, the Supervisory Board of Conergy AGconsisted of Norbert Schmelzle (Chairman of the SupervisoryBoard), Klaus-Joachim Krauth (DeputyChairman of the Supervisory Board), Dieter Ammer,Andreas de Maizière, Oswald Metzger and BernhardMilow.Eckhard Spoerr resigned from the Supervisory Boardboth as a regular member and as its Chairman on19 July 2010 for cause effective immediately. The regularterm of office of the remaining five SupervisoryBoard members, Norbert Schmelzle, Klaus-JoachimKrauth, Andreas de Maizière, Oswald Metzger andBernhard Milow ended at midnight on 31 August 2010.Upon application of the Company, by order dated1 September 2010, the District Court reappointed all ofthem to the Supervisory Board of Conergy AG until theend of the next Annual General Meeting.By resolution of the Annual General Meeting on 5 October2010, Norbert Schmelzle, Klaus-Joachim Krauth,Andreas de Maizière, Oswald Metzger and BernhardMilow as well as Dieter Ammer (who had resigned fromhis appointments as both a regular member of theManagement Board and its Chairman) were electedthe new members of the Supervisory Board on an individualbasis in accordance with the recommendationsof the German Corporate Governance Code. Theyhave the same term of office, which expires at the endof the Annual General Meeting that formally approvesthe actions of the Supervisory Board during the 2014financial year.All election proposals concerning potential SupervisoryBoard members shall consider the expertise, abilitiesand professional experience that are required for carryingout the respective tasks as well as issues of diversity.With the exception of the Supervisory Boardmember, Dieter Ammer, no former members of theManagement Board of Conergy AG serve on the SupervisoryBoard. The election of Dieter Ammer to theSupervisory Board was carried out in accordance withSection 100 para. 2 no. 4 German Stock CorporationAct at the suggestion of Commerzbank AG, whichowns more than 25.0 percent of the Company’s votingshares. The Supervisory Board includes an adequatenumber of independent individuals, who do not maintainany professional or personal ties to the Companyor its Management Board. The rules of procedure alsostipulate that Supervisory Board members should resigntheir seat on the Supervisory Board effective atthe end of the Annual General Meeting that followstheir 72nd birthday.The tasks of the Supervisory Board include regularlysupporting the Management Board in managingConergy AG and the Group’s companies throughadvice and discussion, the execution of its duties inaccordance with the law and the Articles of Association,and the monitoring of the Company’s management.Among other things, the Supervisory Board isalso responsible for appointing the members of theManagement Board; for establishing the compensationsystem and determining the compensation of individualManagement Board members; and for reviewingthe Company’s annual and consolidated financialstatements, including the management and Groupmanagement reports. In terms of strategy and planning,the Supervisory Board is integrated into all issuesof fundamental significance to the Company. TheChairman of the Supervisory Board coordinates thework on the Supervisory Board and its committees,chairs its meetings and represents its interests vis-à-visexternal parties. The Chairman of the SupervisoryBoard or his deputy, if the former is unavailable, alsoissue the declarations of intent of the SupervisoryBoard and its committees. The Chairman of the SupervisoryBoard shall be in regular contact with the Chairmanof the Management Board and discuss the Company’sstrategy and performance with the latter. Heinforms all other Supervisory Board members of thereports by the Chairman of the Management Board inasmuchas they concern important events that are materialto the assessment of the Company’s position.The rules of procedure (as amended 10 November2010) contain detailed descriptions of the work of theSupervisory Board and its committees.The Supervisory Board shall convene once everycalendar quarter but must convene twice every sixcalendar months. It shall convene additional meetingsas necessary or if a member of the Supervisory Boardor the Management Board request that a SupervisoryBoard meeting be convened, stating both the purposeof and reason for such a meeting. As a rule, all Super-

27Top quality – from a single sourceCorporate Governance |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther Informationvisory Board meetings are convened by the Chairmanof the Supervisory Board or two of its members. Theyshall be convened in writing subject to a notice periodof two weeks, specifying the agenda items and anyproposed resolutions, and all required documentsshall be appended to the notice. In urgent cases, theChairman of the Supervisory Board may reasonablyshorten the notice period and convene a meeting verballyor by telephone, fax or email. The members of theManagement Board participate in the meetings of theSupervisory Board unless the Chairman of the SupervisoryBoard provides otherwise. Employees of theConergy Group and/or experts may also be invited inconnection with individual agenda items or to serve askeepers of the minutes.The Supervisory Board constitutes a quorum if all of itsmembers have been duly invited to a meeting and onehalf of the members that must comprise the SupervisoryBoard by statute but at least three members participatein the resolution. Absent Supervisory Boardmembers may participate in the resolution by means oftelephone and video conferencing or by asking otherSupervisory Board members to submit their writtenvotes on their behalf. The Supervisory Board shalladopt its resolutions by the simple majority of all votescast unless required otherwise by statute or the Company’sArticles of Association. In the event of a tie, thevote on the respective agenda item shall be repeatedupon application of the Chairman or another SupervisoryBoard member. The Chairman of the SupervisoryBoard shall have two votes in the second round if therepeat vote also ends in a tie. Resolutions on items orapplications that are not contained in the agenda andthat were not communicated to the members of theSupervisory Board at least three days ahead of themeeting may only be adopted if no Supervisory Boardmember present at the meeting objects, the absentSupervisory Board members are given the opportunityto cast their vote retroactively within a reasonable periodto be fixed by the Supervisory Board Chairmanand these Supervisory Board members do not objectto the resolution within the given period either. Resolutionsmay also be adopted outside of SupervisoryBoard meetings – in particular, if the votes are cast inwriting or by fax, telephone or email – if the Chairmanof the Supervisory Board so orders and no memberobjects thereto within the period set for the voting.Minutes of the meetings of the Supervisory Board shallbe prepared.The Supervisory Board’s rules of procedure also containdetailed provisions regarding the treatment of potentialconflicts of interest. Every member of the SupervisoryBoard has the obligation – both while theyserve on the Supervisory Board and thereafter – tomaintain secrecy in regards to confidential matters aswell as the Company’s business and trade secrets towhich they become privy in connection with their activitieson the Supervisory Board. In making their decisions,the members of the Supervisory Board shall becommitted to the interests of the Conergy Group. Theymay not pursue personal interests, nor may they usebusiness opportunities that properly inure to the benefitof the Conergy Group for their own purposes. Allconflicts of interest arising from their position on theSupervisory Board shall be disclosed to the latter immediately.In the event of unavoidable conflicts of interest,the affected Supervisory Board member shallrefrain from participating in deliberations and resolutionson matters that affect their impartiality or resignfrom the Supervisory Board in order to safeguardConergy’s interests. Supervisory Board membersmust resign their seats in case of material conflicts ofinterest that are not of a merely passing nature. Alltransactions between members of the SupervisoryBoard as well as parties related to them, on the onehand, and the Conergy Group, on the other hand,must comply with industry standards. The membersof the Supervisory Board may not demand nor acceptany payments or other benefits for themselves or forthird parties in connection with their activities on theSupervisory Board above and beyond their compensation,to the extent that doing so jeopardises the interestsof the Conergy Group.Composition and procedures of the SupervisoryBoard’s CommitteesThe Supervisory Board created two committees – theAudit Committee and the Chairman’s Committee –from among its midst that prepare and supplement itswork. The Chairman’s Committee also serves as anomination committee. There are no plans at presentto establish additional committees.The Audit Committee supports the Supervisory Boardin carrying out its monitoring duties. The Chairman ofthe Audit Committee has particular expertise and experiencein the application of accounting principlesand internal control procedures based on his professionalpractice. Among other things, the Audit Committeeis tasked with preparing the audit of the annual

28Conergy AG I Annual Report 2010and consolidated financial statements, including themanagement and the Group management report, aswell as the Management Board’s proposal for the appropriationof earnings; commissioning the auditor,which includes determining the audit’s focal points; issuesrelated to and reviews of the Company’s accountingon the whole; monitoring the accountingprocess; issues related to the structure, task and efficacyof the internal control system; issues related tothe management and monitoring of the risk managementsystem on the whole as well as its effectiveness;issues of internal auditing and compliance; generalmanagement and review issues as well as reviewingthe independence of the auditor of the financial statementsand the additional services provided by the auditor;and both reviewing and determining the principlesthat govern the Company’s financial strategy inthe short, medium and long term.The Audit Committee convenes at least twice percalendar year and includes the auditor and/or theCompany’s tax adviser in its deliberations as necessary.It only constitutes a quorum if at least three of itsmembers participate in its resolutions. For the rest, theprovisions of both the Company’s Articles of Associationand the Supervisory Board’s rules of procedureapply analogously to the work of the committee.In the 2010 financial year the Audit Committee consistedof Klaus-Joachim Krauth (Chairman), NorbertSchmelzle as well as Eckhard Spoerr (until he resignedfrom the Supervisory Board). Following his resignation,Andreas de Maizière was elected to the AuditCommittee.The Chairman’s Committee is in constant touch withthe Management Board, coordinates the work of theSupervisory Board and prepares the latter’s meetings.In addition, the Chairman’s Committee is responsible,among other things, for granting the SupervisoryBoard’s approvals to the Management Board as requiredby law, the Company’s Articles of Associationor the rules of procedure, as amended (unless excludedpursuant to Section 107 para. 3 sentence 2 and 3German Stock Corporation Act); approving ManagementBoard members’ requests to accept board appointmentsto or consulting assignments from companiesin which the Company has no stake as well asappointments to offices in any company that entailpower of attorney and other secondary employment ofany significance; granting loans to members of theManagement Board and members of their families; determiningand monitoring personnel matters related tothe Management Board; preparing the appointmentand dismissal of Management Board members; preparingproposals related to the compensation of ManagementBoard members and reviews thereof; representingthe Company vis-à-vis members of theManagement Board in court and out of court; regularmonitoring of the efficiency of the Supervisory Board’swork; approving contracts made between the Companyand members of the Supervisory Board in accordancewith § 114 German Stock Corporation Act; as wellas for special tasks that the full Supervisory Board assignsto the Chairman’s Committee on a case-by-casebasis. In its capacity as a nomination committee theChairman’s Committee makes recommendations tothe Supervisory Board for the election of SupervisoryBoard members at the Annual General Meeting. TheChairman’s Committee constitutes a quorum if all itsmembers participate in its resolutions. For the rest, theprovisions of both the Company’s Articles of Associationand the Supervisory Board’s rules of procedureapply analogously to the work of the committee.In the 2010 financial year, the Chairman’s Committeecomprised Norbert Schmelzle (Chairman), Andreas deMaizière as well as Eckhard Spoerr (until he resignedfrom the Supervisory Board on 19 July 2010). Klaus-Joachim Krauth was elected to the Chairman’s Committeein his stead.Board appointments of the Supervisory Board membersThe appointments of the members of the Company’sSupervisory Board to other companies’ statutorysupervisory boards and comparable domestic andforeign corporate control committees are enumeratedin the notes to the annual financial statements as wellas in the section entitled “The Supervisory Board”.Relevant practices of corporate governanceThe Management Board has enacted a Code of BusinessConduct and Ethics for employees of the ConergyGroup that goes above and beyond legal requirements.This Code provides guidelines for dealing withbusiness partners and government institutions, for assuringconfidentiality, independence and objectivity,and for handling conflicts of interest. Compliance withthese standards is monitored by a Compliance Committeeorganised by the Governance & Compliance department.Detailed information on the Code of Business

29Top quality – from a single sourceCorporate Governance |Management Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationConduct and Ethics is available on the Company’s website(www.conergy-group.com) in the Investor Relationssection under the heading Corporate Governance.Compensation for the Management Board and theSupervisory BoardThe compensation report shows the compensation ofthe Management and Supervisory Boards in compliancewith the recommendations of the German CorporateGovernance Code and is an integral part ofthe management report. The compensation report alsoincludes information on the shareholdings of the ManagementBoard and Supervisory Board members.Shareholders and General Shareholders’ MeetingThe shareholders of Conergy AG exercise their codeterminationand control rights at the Company’s AnnualGeneral Meeting, which takes place at least once ayear. It resolves all matters that are within its purview bystatute with binding effect on all shareholders and theCompany. One share grants one vote in all resolutions.The Annual General Meeting elects the members ofthe Supervisory Board and formally approves the actionsof the members of the Management Board andthe Supervisory Board. It also decides on the allocationof the accumulated profits and capital measures,and approves corporate contracts; it also fixes thecompensation of the Supervisory Board and resolvesamendments of the Company’s Articles of Association.The Management Board and the SupervisoryBoard account for their actions and the Company’sperformance in the prior financial year at the AnnualGeneral Meeting. The German Stock Corporation Actprovides for the convening of an extraordinary Shareholders’Meeting in special cases.Every shareholder who registers in due time and evidencestheir right to attend the Annual General Meetingand exercise their voting right may participate in theAnnual General Meeting. Specific evidence of shareholdingsin text form, which has been prepared by therespective shareholder’s depository bank as at the beginningof the 21st day prior to the Annual GeneralMeeting and is made available to the Company no laterthan six days before the Annual General Meeting – notcounting the day of the Meeting and the day of receipt –suffices to establish a shareholder’s rights. Shareholderswho cannot or do not want to attend in person havethe option of appointing a bank, a shareholders’ associationor any other agent as their proxy to exercisetheir voting right. In order to make it easier for shareholdersto exercise their rights in accordance with theGerman Corporate Governance Code, the Companyalso offers those shareholders not interested in exercisingtheir voting right themselves the option of votingat the Annual General Meeting through proxies whoare appointed by Conergy and are bound by instructions.Conergy AG provides further details thereon inthe notice convening the Annual General Meeting.The notice of the Annual General Meeting as well asthe reports and information required for the resolutionsare published in accordance with the requirementsof German corporate law and are also madeavailable on Conergy AG’s website.Risk managementThe responsible handling of business risks is an integralpart of all good corporate governance. Comprehensive,cross-divisional and company-specific reportingand control systems that make it possible to record,assess and control these risks are available to both theManagement Board of Conergy AG and the managementof the Conergy Group. These systems are continuouslyrefined and adjusted to the constantly changingenvironment. The Management Board informs theSupervisory Board on a regular basis of existing risksand their development. The Audit Committee in particularmonitors the accounting process, including the reportingsystem, as well as the efficacy of the internalcontrol system, the risk management system, the internalaudit system, compliance and the audits of theannual accounts.Please see the risk and opportunity report for detailson risk management within the Conergy Group. It containsthe report on the internal control and risk managementsystem relevant to the financial reporting processas required under the German Accounting LawModernisation Act (Bilanzrechtsmodernisierungsgesetz– BilMoG).

30Conergy AG I Annual Report 2010Accounting and audit of financial statementsConergy AG prepares its consolidated financial statementsand its interim consolidated financial statementsin accordance with the International Financial ReportingStandards (IFRS) as applicable in the European Union.The annual financial statements of Conergy AG are preparedin accordance with the provisions of the GermanCommercial Code. The annual financial statements andthe consolidated financial statements are prepared bythe Management Board and examined by the auditorand Supervisory Board. The audit committee discussesthe quarterly financial statements with the ManagementBoard prior to publication.The Company’s auditors were elected by the GeneralShareholders’ Meeting in accordance with the regulationsof the German Stock Corporation Act. Deloitte &Touche GmbH Wirtschaftsprüfungsgesellschaft, Munich,Hamburg branch office, were appointed as auditors forthe 2009 consolidated financial statements and the 2009annual financial statements of Conergy AG according tothe German Commercial Code. The Supervisory Boardobtained the statement by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaftregarding its independence,as required under the German Corporate GovernanceCode, before it submitted its election proposal. The auditswere conducted in accordance with German auditingstandards and taking the generally accepted Germanstandards for the audit of financial statements promulgatedby the Institute of Public Auditors (IDW) into account.The International Standards on Auditing were also takeninto account. They also included the risk managementand compliance with the reporting duties related tocorporate governance under Section 161 AktG.We also entered into a contract with the auditor pursuantto which they must notify the Supervisory Boardimmediately, while the audit is in progress, of anygrounds for excluding them, any partiality on their partas well as any material findings and events.TransparencyThe Conergy Group complies with the principle ofnon-discrimination under capital market legislation. Inorder to implement this policy, the same informationmust be available at the same time. Both institutionalinvestors and private investors can use the Conergywebsite (www.conergy-group.com) to obtain informationon significant dates and current corporate developments(including ad-hoc releases) in a timely manner.Relevant corporate news items are also announcedby means of press releases in German and English,which are also published on the website.The fact that individual shareholdings attain, exceed orfall below 3, 5, 10, 15, 20, 25, 30, 50 or 75.0 percent ofthe Company’s voting shares is published in a pan-European information system immediately after theCompany receives the respective notification pursuantto Section 21 German Securities Trading Act (WpHG).In accordance with Section 15a WpHG, certain individualsmust disclose the acquisition and disposal ofCompany shares and of any associated financial instruments.Such individuals include members of theManagement and Supervisory Board for Conergy AG,as well as certain members of managerial staff andpersons with whom they have close relationships.Conergy AG was not informed of any reportable securitiestransactions under Section 15a German SecuritiesTrading Act in the reporting period (1 January to31 December 2010).Service and information for shareholders ofConergy AGConergy AG uses a financial calendar to inform itsshareholders as well as analysts, shareholders’ associations,the media and the interested public on a regularbasis. This calendar is published in the annual reportand in interim reports, and is also available on theCompany website. In preparation for the GeneralShareholders’ Meeting, and to make it easier for themto exercise their rights, shareholders are informedcomprehensively on the past financial year as well asthe upcoming agenda prior to the meeting by way ofthe annual report and the invitation to the GeneralShareholders’ Meeting itself. All documents and informationreferring to the General Shareholders’ Meetingare also published on the Company website, includingthe annual report.

31Top quality – from a single sourceCorporate Governance | The Conergy Share IManagement Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationThe Conergy shareThe global economy clearly recovered in 2010, oneyear after the serious economic crisis. Particularly theGerman economy developed significant momentum inthe financial year just ended. These positive developmentswere also reflected in the stock marketsthroughout the year even though the upturn sloweddown intermittently due to the euro debt crisis or theongoing recession in the United States.The DAX (Deutsche Börse AG’s leading stock index)succeeded in closing the financial year just ended withsubstantial gains on the strength of positive economicdata – especially from Germany – as well as good corporatenews. Having opened the year at 5,976 points,the DAX passed the threshold of 6,000 points as earlyas in March. It closed the year at 6,914 points (afterbreaching the 7,000 point threshold in December) for again of 16.0 percent.The TecDAX, an index of technology stocks, closed at851 points on 30 December 2010, a gain of only4.0 percent on the year’s opening of 818 points. Theyear 2010 was a very difficult one for the solar companieslisted on the TecDAX owing to the debate onChinese competition, reduced or adjusted feed-intariffs in numerous countries as well as market observers’constrained outlook for the industry in the comingyears. Conergy AG’s stock closed the 2010 financialyear at EUR 0.50 per share, a loss of 24.24 percentfrom the year’s opening price of EUR 0.66. The Company’smarket capitalisation was EUR 199.04 million.As part of its routine review of the composition of itsstock indexes, Deutsche Börse AG notified ConergyAG on 3 March 2011 that the Company’s share wouldno longer be listed in the TecDAX. The delisting occurredon 21 March 2011.Price chartShare price performance 2010 (indexed; 100 = XETRA opening price on 4 January 2010)140120100806040200January February March April May June July August September October November DecemberConergy Restated TecDAX Restated ÖkoDAX Restated

32Conergy AG I Annual Report 2010Key figures of the Conergy shareShareholder structure (as at 31.12.2010)Free float 52.18 %Commerzbank AG 29.08 %Athos Service GmbH 14.95 %Dieter Ammer 3.79 %2010 2009Nominal capital in EUR 398,088,928 398,088,928Number of shares (as at 31.12.) 398,088,928 398,088,928Market capitalisation(as at 31.12.) in EUR million * 199.04 262.27Closing share price(as at 31.12.) in EUR * 0.50 0.66High in EUR* 0.93 1.65Low in EUR* 0.38 0.34Daily average tradingvolume (shares) * 3,656,993 4,763,017*XetraShare: no-par value shareSecurities identification number 604002International Securities Identification Number(ISIN) DE 00060 40025Reuters symbolCGYG.DEBloomberg symbolCGY GRStock exchangesXetraFrankfurt (Main)StuttgartDüsseldorfHamburgMunichHanoverBerlin-BremenShareholder structureThe total number of Conergy AG shares was 398,088,928at year’s end. Of these, Commerzbank AG owned29.08 percent at the reporting date, Athos Service GmbH14.95 percent and Dieter Ammer 3.79 percent. The freefloat at the close of the year thus was 52.18 percent.Investor relations activitiesOpen, transparent and timely communications with institutionaland private investors as well as analysts arehighly significant to the work of our investor relationsteam. All capital market participants need a lot of informationto make their investment decisions. Conergy’sinvestor relations department and Management Boardalways endeavour to engage in this open dialogue withall market players in order to fulfil these requirements.As usual we made ourselves available at national andinternational trade fairs for discussions with investors,participated in road shows as well as conferences andhad numerous meetings with shareholders at ourHamburg headquarters in 2010. All presentations, adhoc and press releases as well as other information onthe Company’s shares are available to our shareholderson the Conergy Group’s website.Annual General MeetingConergy held its Annual General Meeting on 5 October2010 at the Congress Centrum Hamburg. Approximately350 shareholders were in attendance, as in theprevious year. At the Annual General Meeting, theywere informed of the 2009 financial year, the Company’sstrategy as well as the actions it plans to take. Theshareholders used the general discussion to ask boththe Management Board and the Supervisory Boardspecific questions. Subsequently, the shareholders ofConergy AG adopted all of the management’s proposedresolutions by large majorities.Conergy AG invited its shareholders to an ExtraordinaryGeneral Meeting in the Hamburg Congress Centre on25 February 2011. For further details on this GeneralMeeting please see the chapter “Events after thereporting period.”Annual Document pursuant to Section 10 of theGerman Securities Prospectus ActSection 10 of the German Securities Prospectus Act requiresConergy AG to publish an annual document thatcontains all of Conergy AG’s publications in the previous12 months. We make this document available to ourshareholders on our website, www.conergy-group.com,in the Investor Relations section. We will be happy tosend you a hard copy of the document if you are unableto access or download it.

33Group management report34 The Conergy Group35 Internal control system andkey performance indicators37 Material components of the internal controland risk management system relevantto the Group’s financial reporting process38 Global economic conditions38 Development of the industry in 201039 Assets, liabilities, cash flows andprofit or loss49 Other information54 Compensation report for theManagement Board and the SupervisoryBoard of Conergy AG60 Events after the reporting period60 Risk and opportunity report74 Report of anticipated developments

34Conergy AG I Annual Report 2010Group management report 2010The Conergy GroupOrganisational and legal parametersAs a systems manufacturer, Conergy produces allcomponents required for a solar energy system anddelivers all attendant solar services from a singlesource. Since its founding in 1998, the Company(which is listed on the Frankfurt/Main Stock Exchange)and its currently 1,700 employees have producedplants with an output of 1.5 gigawatts of clean solarenergy – surpassing the energy that Germany’s largestnuclear power plant or two large coal power plants togethercan generate.Conergy’s comprehensive competence in all matterspertaining to solar energy is its unique selling proposition.Conergy’s modules, inverters and mounting systemsare the building blocks of its Conergy systemstechnology – synchronised solar energy systems forprivate and commercial on-roof systems as well asmegawatt solar electricity farms. The Company manufacturesthe premium components required to this endat five plants. Conergy’s solar modules are made inFrankfurt (Oder). The Company’s matching invertersand electronic monitoring systems are manufacturedin Hamburg and Bad Vilbel, and its mounting systemsare produced in Rangsdorf (near Berlin) and Sacramento(California). This comprehensive portfolio ofsystems and products is complemented by a largenumber of solar energy services, the so-called ConergySystem Services. From system design and funding, toinstallations, all the way to monitoring, maintenance,plant management and insurance: Conergy’s servicepackages offer all services imaginable for one’s ownsolar energy system. Conergy arguably offers its customersnot just the industry’s broadest services portfoliobut also a team of service experts with a wealth ofexperience spanning more than 12 years. The Companyis an expert in the field of solar electricity, and itsConergy System Sales have already satisfied morethan 10,000 customers worldwide since it was founded.Conergy markets its products in 40 countries on fivecontinents and maintains discrete sales & distributionteams in 14 markets. This is where Conergy’s sales &distribution personnel ensure real customer proximity– on site, day in and day out. Conergy’s tight sales &distribution network supports installers, wholesalers,commercial customers, companies and investors enroute to harnessing the sun’s power. This ensures thatits customers can enjoy their sustainable solar energysystems in the long term.As one of Europe’s highest-grossing solar companies,Conergy is well positioned in all its divisions. Conergyalready possesses state-of-the-art production facilities,innovative products, good business relationshipswith the most important suppliers of crystalline andthin film solar modules, an established network of industrypartners as well as a broad, international customerbase and a strong premium brand.Conergy will continue to expand its expertise as a fully-integratedsystems manufacturer in future. It willfurther strengthen the positioning of its brand, furtheroptimise its systems, expand its production and partnernetwork in the marketplace and most importantlycontinue to strengthen its customer relationships withinstallers, wholesalers, strategic marketing partnersand financial investors.Conergy AG is domiciled in Hamburg. This is wherethe corporate departments of both Conergy AG and itssubsidiaries are located. In addition to its productionsites, the Group also maintains other business premisesin Germany, among them its Central EuropeanWarehouse in Zweibrücken (Rhineland-Palatinate). Atotal of 1,091 employees (full time equivalents) wereemployed by the German subsidiaries at these sitesand the Group’s head office in Hamburg as at 31 December2010. In addition to Conergy AG, the parentcompany, the Conergy Group comprises 32 fully consolidatedsubsidiaries worldwide.As at the end of 2010, Conergy AG was managed bya two-member Management Board comprising Dr.Sebastian Biedenkopf and Andreas Wilsdorf.Conergy possesses highly developed know-how inphotovoltaics (PV), established sales structures andcustomer relationships as well as independent brandworlds staffed with people who know precisely whatthe relevant target groups want. Our staff continuouslymonitor the development of demand and develop offersthat are tailored to the relevant customers’ needs. TheCompany leverages its growing, bundled knowledgeof regionally diverse customer needs with the aim ofenhancing its photovoltaics products. This sales- andcustomer-focused strategy puts Conergy in a good positionto develop new markets with matching products.

35Top quality – from a single sourceManagement Board and Supervisory BoardGroup | Internal Indicators |Group Management ReportConsolidated Financial StatementsFurther InformationConergy’s areas of operation are divided into the followingsegments: Germany, Europe without Germany,Americas, Asia-Pacific, Components and Holding.Segment classification for the 2010 financial year waschanged compared to the consolidated financial statementsas at 31 December 2009. The previous year’sfigures were adjusted accordingly. Since the ManagementBoard in December 2009 resolved to sell thenon-PV business of its EPURON segment, the EPURONsegment, which mainly focuses on wind and bioenergyprojects, has been shown as a discontinued operation.The Components segment develops and manufacturessystem components such as solar cells, solarmodules, module frames, and mounting systems, aswell as electronic components. Whilst Conergy producessolar cells and solar modules in its Frankfurt(Oder) solar factory, the Company develops electroniccomponents such as inverters, connection boxes,monitoring systems, and tracking systems in Hamburgand Bad Vilbel, and has these built to order by variouscompanies, most of them European. Mounting systemsand module frames are developed and manufacturedin Rangsdorf near Berlin. Electrical componentsand mounting systems are developed and producedby our subsidiaries voltwerk electronics GmbH andMounting Systems GmbH and are also sold separatelyunder their respective brand names.The segments Germany, Europe without Germany,Americas and Asia-Pacific sell the products manufacturedby the Components segment and the completesystems and components purchased by Conergy, towholesalers, installers and end customers (primarilyfarmers, private households, and investors). The Company’sdistribution activities also include the planning,construction as well as operations management andmaintenance of photovoltaic systems (known as EPCactivities: engineering, procurement, and construction).Conergy offers several different types of service: thesale of individual components or the sale of completesystems with coordinated components and/or planningand engineering services, as well as turnkey plantconstruction with or without operations managementand maintenance. The services that Conergy offersrange from construction planning to component procurement,all the way to the construction of photovoltaicplants.Conergy also develops, finances, implements and operateslarge-scale PV projects in these segments.Conergy’s range of products and services includessite inspection and development; contracting for, coordinating,and monitoring plant construction; negotiationof project agreements; the creation of projectbasedoperating companies; and commercial andtechnical management of plants. Conergy also arrangesdebt and equity financing for these operating companiesand the marketing of equity interests to investors.Companies included in the consolidated financialstatementsAside from Conergy AG, a total of 10 domestic and 22foreign subsidiaries – the majority of whose votingshares are held by Conergy – were included in theCompany’s consolidated financial statements at the endof the reporting period (31 December 2010). Fourteensubsidiaries were no longer included in consolidation inthe 2010 financial year either as a result of mergers orsales in connection with the Conergy Group’s reorganisationor because they were insignificant.Internal control system and keyperformance indicatorsThe Management Board of Conergy AG has implementedan internal management control system thatprovides for groupwide planning, managing and reportingprocesses with the aim of enabling value-orientatedcontrol and ensuring the development of both the Groupand its individual companies. Achieving profitablegrowth, increasing operational efficiency, optimisingtied-up capital, ensuring liquidity and reaching a healthycapital structure are the elements of this managementcontrol system. This system also helps to coordinatethe activities of the Group’s subsidiaries and thusstrengthen operations.Budgets and forecasts are an integral part of the relevantinformation systems. The forecasts cover a periodof three years and are revised annually as part of acomprehensive planning process. The groupwide reportingsystem requires all subsidiaries to preparemonthly IFRS financial statements that are consolidatedfor the purposes of both management reporting andthe Company’s published quarterly and annual financialstatements. Likewise, the subsidiaries providetheir own assessments of current business trends andthe expected profit for the year at regular intervals. KeyPerformance Indicator (KPI) reports assist managementin controlling segments and regions, individual

36Conergy AG I Annual Report 2010subsidiaries as well as operating processes. Sales andgross profit serve as the key performance indicators fordetermining corporate success. Conergy also uses thegross profit margin, which shows gross profit relativeto sales. The Company’s performance is measuredbased on earnings before interest, taxes, depreciationand amortisation (EBITDA) and earnings before interestand taxes (EBIT). Conergy uses earnings before interestand taxes (EBIT) and earnings before interest, taxes,depreciation and amortisation (EBITDA) to measurethe success of individual business units. In addition tothese two parameters, the Group also utilises both theEBIT and the EBITDA margin that present these earningsmeasures as a ratio of sales. These relative performanceindicators make it possible to compare theprofitability of profit-oriented divisions of various sizes.The table below shows the KPI that are monitored on acontinuous basis and constitute the core of theGroup’s optimisation efforts:Key performance indicators 2010 2009Sales EUR million 913.5 600.9Germany EUR million 416.6 280.8Abroad EUR million 496.9 320.1Gross profit EUR million 216.9 117.6Gross profit margin in percent 23.7 19.6EBITDA EUR million 30.1 – 10.7EBITDA margin in percent 3.3 – 1.8EBIT EUR million – 13.8 – 36.8EBIT margin in percent – 1.5 – 6.1The Conergy Group’s controlling system has a particularlyimportant role to play in that the annual variablecompensation paid to top management for the 2010financial year was linked to the aforementioned earnings-basedperformance indicators, notably EBITDA.Conergy was able to lower the amount of tied-up capitalthrough efficient working capital management in connectionwith its restructuring programme. Streamliningreceivables management by shortening accounts receivableaging cycles and reducing receivables outstandingwere substantial factors in this success.Hence the amount of capital tied up in receivables, liabilitiesand inventories was further optimised. Workingcapital is defined as the total of inventories and tradeaccounts receivable less trade accounts payable andpresented as a ratio relative to the sales of the comparativeperiod.Working capital development 31.12.2010 31.12.2009Sales EUR million 913.5 600.9Inventories EUR million 169.5 107.5Trade receivables EUR million 103.2 113.4Trade payables EUR million 161.7 116.5Working Capital EUR million 111.0 104.4Working Capital/Sales in percent 12.2 17.4In addition to bringing about a sustained increase inthe enterprise value, managing the finances of theConergy Group is also aimed at maintaining an adequatecapital structure. Gearing thus serves as anadditional financial ratio in Conergy’s managementcontrol system. It is defined as the ratio of net liabilities(borrowings less liquid funds) to equity. Repaying borrowingsas well as boosting the equity base throughretained earnings and/or capital increases serve ascontrolling instruments. Conergy aims to achieve agearing of at least 100.0 percent in the medium term,i. e. at least a 1:1 ratio of equity to net financial liabilities.Gearing developed as follows in the reporting period:Net liabilities to equity 31.12.2010 31.12.2009Borrowings EUR million 291.6 293.6Liquid funds EUR million 36.7 52.1Net liabilities EUR million 254.9 241.5Equity EUR million 71.4 116.0Gearing in percent 357.0 208.2As before, it is our foremost economic goal in the 2011financial year to improve the key performance indicatorsEBITDA, EBIT, working capital and gearing.In this context, Conergy AG agreed to a refinancingconcept with its creditors on 17 December 2010. Theagreement provides for a capital increase of up toEUR 188 million. Conergy’s shareholders will have asubscription right in connection with this capitalincrease. If these subscription rights are exercised,Conergy will use the proceeds to discharge the correspondingamount of the loans outstanding. If thesubscription rights are not exercised, some of thecreditors have undertaken to contribute their loanreceivables from Conergy as an in-kind contributionup to nominally EUR 188 million in exchange forshares; to this end, the loan receivables shall be measuredat 60.0 percent of their nominal value. Conergy’sdebt will be reduced in both cases. These measureswere adopted by an Extraordinary General Meeting on25 February 2011. The implementation of the refinancingconcept is still subject to the condition requiring

37Top quality – from a single sourceManagement Board and Supervisory BoardInternal Indicators |Group Management ReportConsolidated Financial StatementsFurther Informationthe extinguishment of a portion of the credit linesexisting as at 31 December 2010. Certification bya court-appointed auditor for the in-kind contributionthat the value of the loan liabilities to be contributed ina non-cash capital increase corresponds to at least60.0 percent of their nominal value is another requirement.Material components of the internalcontrol and risk management systemrelevant to the Group’s financialreporting processThe Management Board of Conergy AG is responsiblefor drawing up the consolidated financial statements inaccordance with the International Financial ReportingStandards (IFRS), the group management report aswell as the quarterly and half-yearly reports. An adequateinternal control and risk management systemwas established by the Management Board in order toensure the accuracy and completeness of the figuresand disclosures in the external reporting system aswell as the propriety of the accounting on the whole.The internal control and risk management systemguarantee timely, uniform and accurate accounting forall business processes and transactions. It ensurescompliance with legal standards, accounting principlesand the Group’s internal accounting guidelinesthat are binding on all subsidiaries that are included inthe consolidated financial statements. Amendments oflaws and revisions of accounting standards as well asother types of announcements are immediately analysedin terms of their relevance to and impact on ourconsolidated financial statements, and the guidelinesare adjusted to reflect the resulting changes. Unequivocalspecifications are intended to limit the discretionavailable to employees in connection with the recognition,measurement and presentation of assets and liabilitiesand thus the risk of inconsistent bookkeepingand accounting practices within the Group. Theseguidelines are available to all employees involved inbookkeeping and accounting via the groupwide intranet.The internal control system is also rooted in a numberof process-integrated monitoring activities. Theseprocess-integrated monitoring activities comprise organisationalsafeguards, ongoing automated procedures(separation of functions, restrictions on access,organisational instructions such as for instance powersof representation) and controls that are integratedinto the workflows. In addition, monitoring activitiesthat are uninvolved in business processes such as forinstance the Internal Audit and monthly reporting ensurethat the internal control system is effective. Theexternal auditor audits specific internal controls andjudges their efficacy as part of the audit of the annualfinancial statements. Certain elements of the IT systemsused are also audited. Any weaknesses in the internalcontrol system are communicated to the appropriatesupervisory and management bodies in thatconnection. However, not even appropriate and functionalsystems can provide absolute security.The centralised departments, Corporate Accountingand Corporate Controlling, are tasked with managingthe Group’s bookkeeping and accounting process.Besides these two, the Tax, Treasury and Legal departmentsare also fully integrated into a variety of separateprocesses serving to identify, measure, manage, monitorand communicate risks related to financial reporting.All subsidiaries prepare their financial statements locally.In Germany, the Group’s own Shared ServiceCenter within Corporate Accounting provides theseservices to both Conergy AG and most of its Germansubsidiaries. The IT systems utilised for all significantcompanies in Germany are based on SAP while ERPsoftware based on Navision is utilised for most of theother subsidiaries. All financial systems used are protectedfrom abuse by means of appropriate authorisationprocesses and limitations on access. The GroupIT department uses centralised management andmonitoring of almost all IT systems, centralised managementof change processes as well as regular systemback-up processes to minimise both the risk ofdata loss and the failure of IT systems relevant tobookkeeping and accounting.All companies included in the consolidated financialstatements of Conergy AG transmit their financialstatements to the Company on a monthly basis using auniform groupwide data model that is subject to theGroup’s IFRS accounting guidelines. All Group companiesare responsible for complying with the guidelinesand procedures that apply groupwide as well asfor ensuring that their bookkeeping and accountingprocesses are orderly and timely. All employees involvedin the Group’s bookkeeping and accountingprocess are trained to that end on a regular basis.Contact persons at Conergy AG’s headquarters, whocan answer and resolve special questions and complexissues, are available to support our local subsidiariesthroughout the bookkeeping and accounting process.

38Conergy AG I Annual Report 2010The consolidated figures are drawn up centrally using thefinancial statements provided by the companies includedin the consolidated financial statements. A separate consolidationdepartment within centralised Corporate Accountingis tasked with carrying out the consolidationprocess and certain aspects of reconciliation, monitoringall requirements related to deadlines and processes andensuring compliance with reporting duties and deadlines.The employees also monitor technical aspects of thecontrols and supplement them through manual reviews,correcting any defects and reporting them back to thesubsidiaries. In addition, Conergy also possesses agroupwide reporting and controlling system, whichmakes it possible to detect deviations from targets andaccounting inconsistencies regularly and early on.The economic recovery has already progressed tosuch an extent in key emerging countries that the givengovernments must now take measures to prevent theireconomies from overheating. China recorded economicgrowth of more than 10.0 percent. The ChineseCentral Bank raised the prime rate in the autumn forthe first time in three years.Stock markets continued to recover in 2010. Some ofthe main drivers in this regard were the strong economicdata coming out of China, the mild outcome of thebanks’ stress tests as well as the Federal Reserve’spurchase of treasury bonds. What is clear worldwideis that the structural problems that came to light in thefinancial crisis have not yet been solved.The Audit Committee of Conergy’s Supervisory Boardis responsible for regularly monitoring the effectivenessof the Company’s control and monitoring systems.It requires both the Management Board and theauditors to report to it on a regular basis.The euro fell substantially relative to the US dollar in thecourse of 2010. On an annualised basis, the commoncurrency declined from USD 1.43 against the euro atthe start of the year to USD 1.34 against the euro at theend of the year.For details on the features of the risk managementsystem, please see the disclosures in the “Risk andopportunity report” on page 60 ff.Global economic conditionsCommodities markets’ bull run, which had started theprevious year, continued unabated. The price of crudeoil for example rose from USD 79.3 per barrel toUSD 91.3 per barrel at the close of the year whilst theprice of gold climbed to a new high of USD 1,418 perfine ounce, up from USD 1,096 at the start of the year.The global economy further recover in the course of2010, continuing the development that had started inthe second half of 2009. But the momentum of theglobal economic recovery began to falter over time,following its strong start into the reporting year due tothe crisis of the euro as well as the continued weakeconomic data coming out of the United States. Inglobal terms however, the upswing remained strong inmany countries, especially compared to the previousyears. Emerging countries did best.The debt crisis in Europe, along with the intense level ofspeculative activity aimed at the future of countries suchas Greece, Ireland, Portugal and Spain, dampened theeconomic momentum. The news of the EUR 750 billionrescue package for EU states that had run into difficultiesas well as individual rescue packages also heightenedthe uncertainty. At 109.9 points however, the IfoIndex rose to its 20-year high despite the crisis of theeuro. The German economy on the whole surprised theexperts by recording growth of more than 3.0 percent. Itis clear by now that exports alone cannot explain Germany’seconomic recovery. Indeed, the marked increaseis also rooted in both private consumption andcorporate investments.Development of the industry in 2010The positive regulatory environment was undiminishedand continued to stimulate demand in the financialyear just ended. According to initial estimates, unitsales doubled worldwide, with all markets basicallybeing driven by the same sustained momentum. Onceagain Europe acted as the growth engine, with Germanyheading the list of the world’s largest markets. A previouslyunplanned reduction in the feed-in tariffs for solarelectricity by up to 13.0 percent effective 1 July triggeredpull-forward effects in the year’s first half. Thiscaused demand in Germany to decline correspondinglyat the start of the year’s second half but it acceleratedagain in September owing to yet another previouslyunplanned reduction in the feed-in tariffs by anadditional 3.0 effective 1 October. After a short cooling-offperiod in October, at year’s end demand beganto rise yet again, this time due to yet another plannedreduction in the feed-in tariffs effective 1 January2011. It is estimated that the volume of the German solarmarket in 2010 soared by up to 100.0 percent to between7 and 8 gigawatts – a new high. At the sametime the remaining European markets climbed from

39Top quality – from a single sourceManagement Board and Supervisory BoardGlobal Economy | Industry | Assets, Liabilities, Cash Flows, P & L |Group Management ReportConsolidated Financial StatementsFurther Information1.9 gigawatts to just under 4 gigawatts – a doubling ofthe market. The Italian and the Czech markets in particulargenerated above-average growth owing to attractiveconditions.The North American market also managed to stay on apositive trajectory in 2010, as in recent years. Both theUnited States and Canada demonstrated their healthin this area by doubling the volume of newly installedPV systems.The forward momentum in Asia’s markets has continuedundiminished for a number of years, almost reachingthe 2 gigawatt level in 2010. Japan and China are thetwo dominant markets here, together accounting forabout 75.0 percent of the newly installed volume inAsia in 2010.Prices for photovoltaic products stabilised in 2010, afterhaving crumbled dramatically in 2009.Assets, liabilities, cash flows andprofit or lossIncome statement of the Conergy Group 1. - 4. quarter in overview (short version)EUR million 4. quarter 2010 3. quarter 2010 2. quarter 2010 1. quarter 2010Sales 248.5 275.3 239.4 150.3Gross profit 46.8 64.1 58.9 47.1Earnings before interest, taxes, depreciation andamortisation (EBITDA ) – 3.4 7.7 18.5 7.3Earnings before interest and taxes (EBIT) – 26.8 1.0 11.7 0.3Financial result – 3.9 – 3.0 – 3.7 – 4.1Earnings before taxes (EBT) – 30.7 – 2.0 8.0 – 3.8Income taxes – 12.0 – 2.3 – 0.1 0.9Income from continuing operations after taxes – 42.7 – 4.3 7.9 – 2.9Income from discontinued operations after taxes 2.9 – 2.3 – 1.3 – 2.2Result after taxes – 39.8 – 6.6 6.6 – 5.1Thereofto the sharesholders of Conergy AG – 39.8 – 6.6 6.6 – 4.9to minority shareholders 0.0 0.0 0.0 – 0.2

40Conergy AG I Annual Report 2010Basis of presentationSegment reporting for the 2010 financial year is basedon the organisational structure of the Conergy Group.The individual organisational units are allocated to theoperating segments solely according to economic criteria,irrespective of their ownership structure underGerman corporate law.Segment classification for the 2010 financial year waschanged compared to the consolidated financialstatements as at 31 December 2009. The previousyear’s figures were adjusted accordingly.Since the Management Board in December 2009resolved to sell the non-PV business of its EPURONsegment, the EPURON segment, which mainly focuseson wind and bioenergy projects, has been shown as adiscontinued operation. In December 2010 Conergysold EPURON’s German and French wind projectbusiness (including the respective operating assets) toan investment fund of Impax Asset Management Ltd.,one of the leading specialists for listed and private equityfunds in the European renewable energies market.The following major projects based on concentratedsolar power (CSP) technology were sold in Spain in thefirst quarter of 2011. Aside from the remaining windenergy project business in Australia, as well as the biogasproject business that was sold to RES ProjectsGmbH (a leading, Munich-based specialist for thedevelopment and implementation of biomethane plants)in early February 2011, all other activities were discontinuedin 2010. The plan is to dispose of the windenergy project business in Australia by the end of June2011 at the latest.The disclosures in this Group management reportsolely concern continuing operations unless they expresslyrefer to discontinued operations. Discontinuedoperations are combined in the income statement, thebalance sheet and the statement of cash flows as separateline items.Continuing operations are divided into the operatingsegments Germany, Europe without Germany, Americas,Asia-Pacific and Components.The Components segment develops and manufacturessystem components such as solar cells, solarmodules, module frames, and mounting systems, aswell as electronic components. Whilst Conergy producessolar cells and solar modules in its Frankfurt(Oder) solar factory, the Company develops electroniccomponents such as inverters, connection boxes,monitoring systems, and tracking systems in Hamburgand Bad Vilbel, and has these built to order by variouscompanies, most of them European. Mounting systemsand module frames are developed and manufacturedin Rangsdorf near Berlin. Electrical components andmounting systems are developed and produced by oursubsidiaries voltwerk electronics GmbH and MountingSystems GmbH and are also sold separately undertheir respective brand names.The segments Germany, Europe without Germany,Americas and Asia-Pacific sell the products manufacturedby the Components segment and the completesystems and components purchased by Conergy, towholesalers, installers and end customers (primarilyfarmers, private households, and investors). The Company’sdistribution activities also include the planning,construction as well as operations management andmaintenance of photovoltaic systems (known as EPCactivities: engineering, procurement, and construction).Conergy offers several different types of service: thesale of individual components or the sale of completesystems with coordinated components and/or planningand engineering services, as well as turnkey plantconstruction with or without operations managementand maintenance. The services that Conergy offersrange from construction planning to component procurement,all the way to the construction of photovoltaicplants.Conergy also develops, finances, implements andoperates large-scale PV projects in these segments.Conergy’s range of products and services includessite inspection and development; contracting for, coordinating,and monitoring plant construction; negotiationof project agreements; the creation of projectbasedoperating companies; and commercial andtechnical management of plants. Conergy also arrangesdebt and equity financing for these operating companiesand the marketing of equity interests to investors.The “Reconciliation” and “Holding” columns areshown separately. During reconciliation, intra-Groupbusiness transactions are eliminated and income andexpenses not directly attributable to the segments aredisclosed. The Holding segment essentially comprisesthe activities of the Conergy Holding company’sShared Services as well as purchasing and logistics.In the 2010 financial year, the assets and liabilities ofGüstrower Wärmepumpen GmbH, which belonged tothe Components segment, were classified as “held forsale”. In the first quarter of 2011, Conergy sold thissubsidiary, which is specialised in the production and

41Top quality – from a single sourceManagement Board and Supervisory BoardAssets, Liabilities, Cash Flows, P & L |Group Management ReportConsolidated Financial StatementsFurther Informationsale of heat pumps, to SmartHeat Inc. This NASDAQlistedcompany is a leading provider of heat transferand energy conservation solutions in the Chinese market.Conergy’s entire equity interest in GüstrowerWärmepumpen was transferred to SmartHeat Inc. underthe sale. In addition, Güstrower Wärmepumpen GmbHalso takes over Conergy’s land, which also was classifiedas “held for sale”.The assets and liabilities of Conergy’s Swiss subsidiary,Conergy (Schweiz) GmbH, were also classified as“held for sale” in the 2010 financial year. In the firstquarter of 2011, Conergy sold its Swiss solar thermalproducts business to Capital Stage AG, a private equitycompany specialising in companies and projects in theclean-tech sector. Conergy’s entire equity interest inits Swiss subsidiary was transferred to Capital Stage.The assets and liabilities of the Company’s Cypriotsubsidiaries in the European segment were also classifiedas “held for sale”. This change in presentation isrooted in the Company’s plan to discontinue its activitiesin Cyprus.Profit or lossIncome statement of the Conergy Group (short version)EUR million 2010 2009 4. quarter 2010 4. quarter 2009Sales 913.5 600.9 248.5 244.5Gross profit 216.9 117.6 46.8 51.8Earnings before interest, taxes, depreciationand amortisation (EBITDA ) 30.1 – 10.7 – 3.4 37.1Earnings before interest and taxes (EBIT) – 13.8 – 36.8 – 26.8 28.2Financial result – 14.7 – 21.8 – 3.9 – 5.1Earnings before taxes (EBT) – 28.5 – 58.6 – 30.7 23.1Income taxes – 13.5 – 22.5 – 12.0 – 22.7Income from continuing operations after taxes – 42.0 – 81.1 – 42.7 0.4Income from discontinued operations after taxes – 2.9 1.8 2.9 – 0.7Result after taxes – 44.9 – 79.3 – 39.8 – 0.3Thereofto the sharesholders of Conergy AG – 44.7 – 79.9 – 39.8 – 1.2to minority shareholders – 0.2 0.6 0.0 0.9

42Conergy AG I Annual Report 2010Key figures by regionQuarterly salesEBITEUR million Q4 2010 Q4 2009 Q4 2010 Q4 2009Germany 49.3 97.0 – 2.8 4.9Europe * 113.4 87.3 – 7.3 – 9.8Americas 26.6 23.1 – 9.1 – 0.1Asia-Pacific 31.7 23.0 0.3 2.0Components 27.5 14.1 5.6 4.7Holding – – – 14.4 27.6Reconciliation – – 0.8 – 1.1Continuing operations 248.5 244.5 – 26.9 28.2*Excluding GermanyKey figures by regionAnnual sales EBIT FTEEUR million 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Germany 328.2 255.4 – 2.8 – 9.8 94 138Europe * 323.7 191.0 – 5.0 – 18.0 253 261Americas 63.0 52.4 – 10.3 – 6.0 77 72Asia-Pacific 110.2 76.7 7.4 7.5 144 159Components 88.4 25.4 27.9 – 10.3 762 580Holding – – – 27.4 0.4 239 219Reconciliation – – – 3.6 – 0.6 – –Continuing operations 913.5 600.9 – 13.8 – 36.8 1.569 1.429*Excluding GermanySalesThe Conergy Group is pleased that sales in the 2010financial year were EUR 913.5 million (2009:EUR 600.9 million) – a year-on-year increase of52.0 percent or EUR 312.6 million. On the whole, businesshas developed positively in all segments. Crosssegmentsales in Germany were EUR 416.6 millioncompared to EUR 280.8 million the previous year, anincrease of just under 50.0 percent. Germany thus accountedfor 45.6 percent of overall sales (2009:46.7 percent). Sales abroad rose by 54.4 percent toEUR 496.9 million (2009: EUR 320.1 million).Conergy recorded strong sales growth to EUR 328.2 millionin the Germany segment (2009: EUR 255.4 million).This is especially due to the positive development ofthe wholesale business. Moreover, the announcementof or rather the debate on the reduction in the feed-intariff, which was enacted as part of the amendment ofthe German Renewable Energy Sources Act (EEG),boosted demand in Germany, especially in the firsthalf of 2010. Among other things, the construction of a19 megawatt solar farm in the Bavarian town of Thüngenand a six megawatt solar farm in Tarp (in the state ofSchleswig-Holstein) contributed to the positive developmentof sales.Sales in Europe – excluding Germany – increased toEUR 323.7 million (2009: EUR 191.0 million). Sales developedpositively especially in the Czech Republic,Italy, France and Greece. In the Czech Republic salesrose from EUR 1.8 million in financial year 2009 toEUR 18.9 million in financial year 2010. The Companysucceeded in further expanding its position in thewholesale market in Greece and France. As a result,sales in Greece increased to EUR 17.6 million (2009:EUR 9.5 million). Among others, this was due to one ofthe largest open-field projects in Greece near the cityof Thessaloniki, where an area of 19 hectares hasbeen equipped with Conergy’s proprietary systemtechnology. The project was completed in the 2010 financialyear Sales in France rose to EUR 49.2 million(2009: EUR 33.1 million). Given the improvement instatutory programmes aimed at end consumers inItaly, sales in that country rose to EUR 151.0 million(2009: EUR 74.3 million), especially due to the solidperformance of the wholesale business. The constructionof solar power systems with a total output of3.6 megawatts for the Italian hotel chain BluSerenaalso contributed to this positive development in the2010 financial year. Conergy also succeeded in liftingsales in Spain to EUR 49.5 million (2009: EUR 43.4 million)in the 2010 financial year, indicating that the market is

43Top quality – from a single sourceManagement Board and Supervisory BoardAssets, Liabilities, Cash Flows, P & L |Group Management ReportConsolidated Financial StatementsFurther Informationgradually recovering at a low level after poor salesin 2009.In the Americas, sales rose to EUR 63.0 million (2009:EUR 52.4 million). Whilst sales in the United Stateswere EUR 39.4 million (2009: EUR 45.8 million) andthus below the previous year’s level, sales in Canadaincreased to EUR 23.6 million (2009: EUR 6.7 million).The Company assumes that the Canadian solar industryis still in its infancy. The Canadian solar industry associationhas said that the installed output could risefrom about 80 MWp in 2009 to about 300 to 400 MWp.At EUR 110.2 million, sales in the Asia-Pacific regionrose by 43.7 percent (2009: EUR 76.7 million). In Australia,the wholesale business was instrumental in liftingsales to EUR 86.3 million (2009: EUR 52.5 million).The intensified promotion of solar thermal energy isgenerating new growth momentum in that country.Conergy also established one of the largest PV farmsin India. The three megawatt solar farm in South Indiacontributes to the rural population’s power supply.Conergy also completed the construction of the largestcommercial PV farm in Thailand, which had begun inMarch 2010. This three megawatt solar farm, whichwas constructed outside of the country’s capital,Bangkok, helped Conergy strengthen its position inthe emerging Asian solar market.At EUR 88.4 million, the external sales of the Componentssegment were much higher year-on-year (2009:EUR 25.4 million), driven especially by the rise in contractproduction for third parties at Conergy’s solarmodule factory in Frankfurt (Oder) as well as the strongexpansion of mounting system sales.Gross profitThe Conergy Group posted a gross profit of EUR 216.9 millionin the 2010 financial year, up 84.4 percent from theEUR 117.6 million recorded in the previous year. Thegross profit margin rose significantly by 4.1 percentagepoints to 23.7 percent (2009: 19.6 percent). The grossprofit margin was driven by the Components segmentThe start-up of additional solar cell and module lines atthe solar module factory in Frankfurt (Oder) has almostdoubled the production volume of Conergy PowerPluspremium modules. The resulting change in the modulemix, unit cost degression that is linked to the ramp-upof production and additional cost-cutting measuresare allowing the Conergy Group to benefit from anintegrated value chain which, in turn, has a positiveeffect on the Group’s gross profit margin. Limitedvolumes were manufactured in contract production forthird parties in order to increase capacity utilisation.For the rest, almost all module sales are conductedsolely through Conergy’s sales channels.Personnel expensesAs at 31 December 2010, the Conergy Group had1,569 employees in its continuing operations (all figuresFTE), 140 employees more than as at 31 December2009. Of these, 852 employees worked for ourGerman subsidiaries, 478 employees worked for theGroup’s foreign subsidiaries, and 239 employeesworked for the holding company. The average numberof employees in the 2010 financial year was 1,496(2009: 1,561 employees). Of the 1,569 employees inthe Conergy Group, 67.0 percent were salaried employeesand 33.0 percent were hourly-paid workers asat 31 December 2010. Including discontinued operations,a total of 1,600 staff were employed worldwideby the Conergy Group as at 31 December 2010 (31 December2009: 1,553 employees).At EUR 85.3 million, personnel expenses rose slightlyyear-on-year (2009: EUR 82.1 million). This figure comprisedwages and salaries of EUR 67.6 million (2009:EUR 65.6 million) as well as social security contributionsand other pension costs of EUR 17.7 million(2009: EUR 16.5 million).Earnings before interest, taxes, depreciation andamortisation (EBITDA)Earnings before interest, taxes, depreciation and amortisation(EBITDA) – a measure of operating income –were EUR 30.1 million (2009: EUR – 10.7 million) andthus substantially higher year-on-year. The EBITDAmargin was 3.3 percent. At – 1.8 percent, it had beennegative in the previous year.Other income was EUR 33.7 million (2009: EUR 65.1 million).Other income included net currency gains ofEUR 13.9 million (2009: EUR 3.8 million) and incomefrom write-ups of receivables previously written downamounting to EUR 6.8 million (2009: EUR 1.8 million).The previous year’s figure also included an additionalone-off income of EUR 34.2 million in connection withthe out-of-court settlement of the dispute with the USbasedwafer manufacturer, MEMC Electronics Materials,Inc. Additional income of EUR 5.2 million (2009:EUR 11.8 million) was generated from the reversal ofprovisions initially recognised in connection with warrantyand contract risks related to the project business.

44Conergy AG I Annual Report 2010Other operating expenses amounted to EUR 135.2million (2009: EUR 111.3 million). They included, in particular,rental and lease expenses of EUR 27.5 million(2009: EUR 26.9 million). At EUR 21.0 million (2009:EUR 12.1 million), selling expenses were substantiallyhigher than the previous year owing to strong salesgrowth. Likewise, warranty costs rose by EUR 8.3 millionto EUR 15.7 million (2009: EUR 7.4 million). AtEUR 21.5 million (2009: EUR 18.0 million), legal andconsulting expenses were EUR 3.5 million higher yearon-year.This increase is due in particular to consultingservices provided in connection with the syndicatedloan and the refinancing concept. Other expenses forthird-party services rose to EUR 18.8 million (2009:EUR 12.9 million). The other expenses for third-partyservices primarily concern expenses for contract andtemporary workers that the Components segment incurredin connection with the increased capacity utilisationat the Frankfurt (Oder) solar module factory.Earnings before interest and taxes (EBIT)Taking EUR 43.9 million (2009: EUR 26.1 million) in depreciation,amortisation and impairment losses intoaccount, earnings before interest and taxes (EBIT) inthe 2010 financial year were EUR – 13.8 million (2009:EUR – 36.8 million) and thus EUR 23.0 million higherdespite the increase in depreciation, amortisation andimpairment losses. This increase is essentially dueto impairment losses recognised on goodwill andproperty, plant and equipment, which amounted toEUR 17.0 million (2009: EUR 2.3 million).Earnings before taxes (EBT)The non-operating result of the Conergy Group in2010 improved to EUR – 14.7 million compared toEUR – 21.8 million in the previous year. This is due primarilyto the lower expenses from the measurement ofinterest rate swaps. Non-operating expenses ofEUR 15.9 million (compared to EUR 22.5 million in theprior-year period) arose mainly from interest expensesrelated to borrowings that comprise both interest paymentsand accrued interest. Contrast the non-operatingexpenses with EUR 1.2 million in non-operating income(2009: EUR 0.7 million). Taking into account thenon-operating result, at EUR – 28.5 million, earningsbefore taxes (EBT) improved substantially (2009:EUR – 58.6 million).Income after taxesAfter accounting for income tax expense of EUR 13.5 million(2009: EUR 22.5 million), the income from continuingoperations after taxes in 2010 was EUR – 42.0 million(2009: EUR – 81.1 million), an improvement of EUR 39.1million. The tax expense arose from the writedown ofdeferred tax assets for loss carryforwards, amongother things.At EUR – 2.9 million, the discontinued operations of theEPURON segment depressed income after taxes; in theprevious year, this segment had still posted a positiveresult of EUR 1.8 million. This means that income aftertaxes in the 2010 financial year was EUR – 44.9 million(2009: EUR – 79.3 million). Earnings per share from continuingoperations were EUR – 0.11 (2009: EUR – 0.20).Assets and liabilitiesConsolidated balance sheet of the Conergy Group (short version)EUR million 31.12.2010 31.12.2009Non-current assets 213.2 266.1Current assets 377.9 344.6Assets held for sale 22.3 38.4Total current assets 400.2 383.0Total assets 613.4 649.1Total equity 71.4 116.0Non-current borrowings 55.1 127.0Current borrowings 484.0 378.6Liabilities from assets heldfor sale 2.9 27.5Total current borrowings 486.9 406.1Total equity and liabilities 613.4 649.1Structure of the balance sheetTotal assets of the Conergy Group as at 31 December2010 amounted to EUR 613.4 million, downEUR 35.7 million from the end of the 2009 financialyear (31 December 2009: EUR 649.1 million).Non-current assetsEUR million 31.12.2010 31.12.2009Goodwill 1.0 14.9Intangible assets 10.2 12.6Property, plant and equipment 164.4 183.9Financial assets 1.6 8.2Other assets 0.9 0.9Deferred tax assets 35.1 45.6Non-current assets 213.2 266.1

45Top quality – from a single sourceManagement Board and Supervisory BoardAssets, Liabilities, Cash Flows, P & L |Group Management ReportConsolidated Financial StatementsFurther InformationNon-current assets from continuing operations declinedby EUR 52.9 million to EUR 213.2 million compared tothe end of the previous year (31 December 2009:EUR 266.1 million). This was partially due to the decreaseof EUR 35.8 million in property, plant and equipment,intangible assets and goodwill, essentially as aresult of depreciation and amortisation of EUR 26.9million and impairment losses of EUR 17.0 million.Non-current financial assets decreased by EUR 6.6 million.At the same time, deferred tax assets declined. At35.1 million, deferred tax assets were down EUR 10.5 millioncompared to the end of the 2009 financial year(31 December 2009: EUR 45.6 million).Current assetsEUR million 31.12.2010 31.12.2009Inventories 169.5 107.5Trade accounts receivable 103.2 113.4Financial assets 4.6 3.1Other assets 63.9 68.5Cash and cash equivalents 36.7 52.1Current assets 377.9 344.6Current assets from continuing operations as at 31 December2010 increased by EUR 33.3 million to EUR 377.9million (31 December 2009: EUR 344.6 million), causedmainly by the increase in inventories to EUR 169.5 million(31 December 2009: EUR 107.5 million). Cash andcash equivalents fell at the same time to EUR 36.7 million(31 December 2009: EUR 52.1 million). At EUR 103.2 million(31 December 2009: EUR 113.4 million), tradeaccounts receivable decreased slightly, as did othercurrent assets at EUR 68.5 million (31 December 2009:EUR 71.6 million). The other current assets mainly includedVAT receivables, receivables from MEMC ElectronicMaterials, Inc. in connection with a wafer deliverycontract as well as purchase price receivables relatedto the disposal of our German and French wind energyproject business.Assets and liabilities from discontinued operations arenot shown in individual balance sheet items but ratheras a combined item under “non-current assets held forsale and discontinued operations” and recognised inthe corresponding liabilities and equity item of the balancesheet. This concerns the activities of the EPURONsegment that had been classified as “held for sale” theprevious year. In December 2010 Conergy soldEPURON’s German and French wind project business(including the respective operating assets) to an investmentfund of Impax Asset Management Ltd., oneof the leading specialists for listed and private equityfunds in the European renewable energies market. Thefollowing major projects based on concentrated solarpower (CSP) technology were sold in Spain in the firstquarter of 2011. Aside from the remaining wind energyproject business in Australia, as well as the biogasproject business that was sold to RES Projects GmbH(a leading, Munich-based specialist for the developmentand implementation of biomethane plants) inearly February 2011, all other activities were discontinuedin 2010. The plan is to dispose of the wind energyproject business in Australia by the end of June 2011 atthe latest.In the 2010 financial year, the assets and liabilities ofGüstrower Wärmepumpen GmbH, which belonged tothe Components segment, were classified as “held forsale”. In the first quarter of 2011, Conergy sold thissubsidiary, which is specialised in the production andsale of heat pumps, to SmartHeat Inc. This NASDAQlistedcompany is a leading provider of heat transferand energy conservation solutions in the Chinesemarket. Conergy’s entire equity interest in GüstrowerWärmepumpen was transferred to SmartHeat Inc. underthe sale. In addition, Güstrower Wärmepumpen GmbHwill also take over Conergy’s land.The assets and liabilities of Conergy’s Swiss subsidiary,Conergy (Schweiz) GmbH, were also classified as“held for sale” in the 2010 financial year. In the firstquarter of 2011, Conergy sold its Swiss solar thermalproducts business to Capital Stage AG, a private equitycompany specialising in companies and projects in theclean-tech sector. Conergy’s entire equity interest inits Swiss subsidiary was transferred to Capital Stage.The assets and liabilities of the Company’s Cypriotsubsidiaries in the European segment were also classifiedas “held for sale”. This change in presentation isrooted in the Company’s plan to discontinue its activitiesin Cyprus.In addition to the loss after taxes of EUR 44.9 million asat 31 December 2010, equity fell by another EUR 1.8million to EUR 71.4 million compared to the 2009 reportingdate (31 December 2009: EUR 116,0 million).This was due to negative currency effects that wererecognised directly in equity. The equity ratio thus fellto 11.6 percent compared to 17.9 percent on 31 December2009.Liabilities from continuing operations increased byEUR 33.5 million to EUR 539.1 million compared to theclose of the 2009 financial year (31 December 2009:EUR 505.6 million).

46Conergy AG I Annual Report 2010Non-current liabilitiesEUR million 31.12.2010 31.12.2009Current liabilitiesEUR million 31.12.2010 31.12.2009Provisions 41.5 35.7Borrowings 11.1 88.8Other liabilities 2.0 2.5Deferred tax liabilities 0.5 0.0Non-current liabilities 55.1 127.0Non-current liabilities as at 31 December 2010 fell toEUR 55.1 million compared to the end of the 2009 reportingperiod (31 December 2009: EUR 127.0 million).This is essentially due to the reclassification of noncurrentborrowings to current borrowings. The reclassificationis related to the refinancing concept that wasagreed upon on 17 December 2010. In this context,Conergy AG agreed to a refinancing concept with itscreditors on 17 December 2010. The agreement providesfor a capital increase of up to EUR 188 million.Conergy’s shareholders will have a subscription rightin connection with this capital increase. If these subscriptionrights are exercised, Conergy will use theproceeds to discharge the corresponding amount ofthe loans outstanding. If the subscription rights arenot exercised, some of the creditors have undertakento contribute their loan receivables from Conergy asan in-kind contribution up to nominally EUR 188 millionin exchange for shares; to this end, the loan receivablesshall be measured at 60 percent of their nominalvalue. Conergy’s debt will be reduced in both cases.These measures were adopted by an ExtraordinaryGeneral Meeting on 25 February 2011. The implementationof the refinancing package is still subject to thecondition requiring the extinguishment of a portion ofthe credit line existing as at 31 December 2010. Certificationby a court-appointed auditor for the in-kindcontribution that the value of the loan liabilities to becontributed in a non-cash capital increase correspondsto at least 60.0 percent of their nominal valueis another requirement. As at 31 December 2010, noncurrentborrowings were EUR 11.1 million (31 December2009: EUR 88.8 million). Non-current provisions asat 31 Dezember 2010 increased by EUR 5.8 million toEUR 41.5 million (31 December 2009: EUR 35.7 million).At EUR 2.0 million (31 December 2009: EUR 2.5 million),the other non-current liabilities fell slightly.Provisions 10.8 13.2Current portion of non-currentborrowings – 18.8Borrowings 280.5 186.0Trade accounts payable 161.7 116.5Other liabilities 28.1 43.5Current income tax liabilities 2.9 0.6Current liabilities 484.0 378.6Current liabilities from continuing operations as at31 December 2010 were EUR 484.0 million (31 December2009: EUR 378.6 million). This was caused in particularby the increase in borrowings to EUR 280.5 million(31 December 2009: EUR 186.0 million) as wellas the increase in trade accounts receivable toEUR 161.7 million (31 December 2009: EUR 116.5 million).The change in borrowings is due to the refinancingpackage which was already explained in the disclosureson the change in non-current borrowings. At thesame time, other current liabilities fell to EUR 28.1 million(31 December 2009: EUR 43.5 million), mainly due toa reduction in VAT liabilities. At EUR 10.8 million(31 December 2009: EUR 13.2 million), current provisionswere down EUR 2.4 million year-on-year.Cash flowsConsolidated statement of cash flows of the Conergy Group (short version)EUR million 2010 2009Result from operating activitiesbefore changes in net working capital 34.5 – 37.5Cash generated from operatingactivitiescontinuing operations 17.1 53.1discontinued operations – 9.2 15.4Net cash generated from operatingactivities (total) 7.9 68.5Net cash generated from investingactivities – 9.1 – 14.9Net cash generated from financingactivities – 15.2 – 27.2Change in cash from operatingactivities (total) – 16.4 26.4Cash and cash equivalents at beginningof period 54.4 28.0Exchange rate changes 0.0 0.0Cash and cash equivalents atend of period 38.0 54.4from continuing operations 36.7 52.1from discontinued operations 1.3 2.3

47Top quality – from a single sourceManagement Board and Supervisory BoardAssets, Liabilities, Cash Flows, P & L |Group Management ReportConsolidated Financial StatementsFurther InformationThe statement of cash flows describes the source andutilisation of the cash flows in the reporting period.Hence it is central to the assessment of the changes inthe Company’s financial position.Based on operating income (EBIT) of EUR – 13.8 millionin the 2010 financial year (2009: EUR – 36.8 million),adjusted for non-cash items such as depreciation,amortisation and impairment losses, changes in noncurrentprovisions as well as other non-cash incomeand expenses such as, for instance, portions of the netgain/loss from currency translation, and writedownsof inventories and receivables, the cash flow from operatingactivities before changes in net working capital(gross cash flow) increased considerably to EUR 34.5million year on year (2009: EUR – 37.5 million).At EUR 17.1 million, the cash flow generated in the2010 financial year from operating activities related tocontinuing operations was EUR 36.0 million lower yearon-year(2009: EUR 53.1 million), especially due to theoutflow of EUR 22.8 million in funds from the increasein working capital despite the major improvement ingross cash flow. In contrast, there had been an inflowof EUR 97.9 million in related funds the previous year.The increase in the working capital stems in particularfrom the relatively large increase in inventories ofEUR 73.3 million (2009: decrease in inventories ofEUR 89.6 million). At the same time, trade accountspayable rose by EUR 41.8 million (2009: EUR 17.6 million).Trade accounts receivable rose by EUR 9.3 millionin the same period the previous year but fell by EUR 8.7million in the 2010 financial year. The other net assetschanged by EUR 4.9 million (2009: EUR – 9.9 million).Tax refunds in the 2010 financial year were EUR 0.5 million(2009: EUR 2.6 million).The cash flow from operating activities related to thediscontinued operations of the EPURON segment –bio mass, biogas, wind energy projects and CSP – inthe 2010 financial year was EUR – 9.2 million (2009:EUR 15.4 million). This figure is shown in a separateitem in the statement of cash flows. Overall, the cash inflowfrom operating activities amounted to EUR 7.9 million(2009: EUR 68.5 million).In the first 2010 financial year, EUR 9.1 million in net cashwere used for investing activities (2009: EUR 14.9 million).The Group invested a net total of EUR 14.6 million (prioryearperiod: EUR 12.3 million) in property, plant and equipmentas well as intangible assets. The inflow of funds fromfinancial assets was EUR 4.2 million (2009: outflow ofEUR 3.4 million). The Conergy Group received interestpayments of EUR 0.9 million (2009: EUR 0.8 million).The Conergy Group’s net cash flow from financingactivities in the 2010 financial was EUR – 15.2 million(2009: EUR – 27.2 million). This net cash outflow is theresult of new borrowings of EUR 22.4 million (2009:EUR 48.7 million) under the syndicated loan and the repaymentof borrowings in the amount of EUR 20.7 million(2009: EUR 55.5 million). This concerned a partial paymentin the first quarter under the syndicated loan thatwas used to finance the solar factory in Frankfurt (Oder).We also made a separate payment of EUR 1.9 millionin August 2010. Add to that interest payments ofEUR 16.9 million, which were down year-on-year (2009:EUR 20.4 million).The net change in cash and cash equivalents in thefirst 2010 financial year was therefore EUR – 16.4 million(2009: EUR 26.4 million).Cash and cash equivalents and net liabilitiesThe Conergy Group had cash and cash equivalents ofEUR 36.7 million as at 31 December 2010 (31 December2009: EUR 52.1 million).As at 31 December 2010, borrowings amounted toEUR 291.6 million, compared to EUR 293.6 million atthe close of the 2009 financial year. The Group’s netliabilities as at the end of the 2010 financial yearthus were EUR 254.9 million (31 December 2009:EUR 241.5 million).Net liabilities and gearing 31.12.2010 31.12.2009Non-current borrowings EUR million 11.1 88.8Current borrowings EUR million 280.5 204.8Borrowings EUR million 291.6 293.6Cash and cashequivalents EUR million 36.7 52.1Net liabilities related tocontinuing operations EUR million 254.9 241.5Equity EUR million 71.4 116.0Gearing in percent 357.0 208.2As a result, the gearing ratio, i.e. the ratio of net borrowings(borrowings less liquid funds) to equity as at31 December 2010 increased to 357.0 percent (31 December2009: 208.2 percent). The development of gearingagainst a backdrop of slightly higher net liabilitiesis essentially due to the reduction in equity as a resultof the loss incurred in the 2010 financial year.In a deviation from the presentation in the consolidatedbalance sheet, the cash holdings shown in the statementof cash flows as at 31 December 2010 containEUR 1.3 million in cash and cash equivalents attribut-

48Conergy AG I Annual Report 2010able to assets held for sale. A total of EUR 2.3 millionwas recognised under discontinued operations as at31 December 2009.To ensure sufficient operating liquidity, on 31 July2007 Conergy AG, the Momentum Renewables GmbH(former EPURON GmbH), Conergy SolarModuleGmbH & Co. KG and Conergy Deutschland GmbHclosed a syndicated loan for a total of EUR 600 millionfrom originally 23 banks under the leadership ofCommerzbank AG, Dresdner Bank AG and WestLB AG(EUR 400 million cash loan and EUR 200 million guaranteeand documentary credit facility). The cash loan isdivided into two tranches and is intended for financingthe construction of the production facility in Frankfurt(Oder) (Tranche A) and for financing Conergy Group’sworking capital requirements (Tranche B with a revolvingfacility of EUR 250 million). In addition, the syndicatedloan provides a guarantee and documentarycredit facility of EUR 200 million. Originally, Tranche Afor EUR 150 million had to be paid back in half-yearlyinstalments until 31 December 2011, starting in 30 June2008. A total of 37.5 million were repaid in 2008 and atotal of EUR 18.8 million were repaid in 2009 as agreedwith the banks. An additional loan payment of EUR 18.8million was made once the out-of-court settlementwith MEMC Electronic Materials, Inc. regarding the deliveryof solar wafers for the Frankfurt (Oder) plant wasexecuted in mid-February 2010. A special payment ofEUR 1.9 million was made in August 2010. Tranche Bin the amount of EUR 250 million was originally scheduledfor repayment by 31 July 2010. On 29 July 2010,Conergy originally had reached an agreement with itsfinancing banks to extend all loans until the end of2011. The parties had also agreed that the three instalmentsoutstanding on the term loan (Tranche A) wouldalso be suspended until the end of 2011. These agreementswere subject to certain terms. Conergy and thebanking syndicate had agreed in this connection tocommission an independent auditing firm to prepare anindependent business review. This independent businessreview came to the conclusion that follow-up financingfor the current credit facility beyond 31 December2011 would be rather unlikely unless the Company’scapital base was strengthened. This conclusion triggereda suspensive condition, and as a result the maturitydate of all loans was accelerated to 21 December 2010.On 17 December 2010, the creditors reached anagreement with Conergy AG to reduce the Company’sdebt substantially, with some creditors providing equitycapital. The refinancing concept as a prerequisite forthe granting of a new loan agreement that was signedin December 2010 will reduce Conergy’s debt byEUR 188 million, markedly lowering the Company’s futureinterest burden. It also provided for extending theremaining loans until the refinancing concept hasbeen implemented but at most until 31 July 2011.The parties also agreed on 17 December 2010 thatsome of the members of the existing banking syndicatewill make available a new cash loan of up to approximatelyEUR 135 million to discharge the currentcredit facility as part of the restructuring as well as acredit line of up to approximately EUR 141 million forfour years at market terms. The new syndicated loanagreement will provide for financial covenants afterthree years.For the rest, among other things the refinancing conceptprovides for a reduction of the Company’s capitalstock of roughly EUR 398 million by approximatelyEUR 348 million to approximately EUR 50 million, aswell as a capital increase of up to EUR 188 million.Conergy’s shareholders will have a subscription rightin connection with this capital increase. If these subscriptionrights are exercised, Conergy will use theproceeds to discharge the corresponding amount ofthe loans outstanding. If the subscription rights arenot exercised, some of the creditors have undertakento contribute their loan receivables from Conergy asan in-kind contribution up to nominally EUR 188 millionin exchange for shares; to this end, the loan receivablesshall be measured at 60.0 percent of their nominalvalue. Conergy’s debt will be reduced in both cases.In the meantime these measures were resolvedaccordingly by the Extraordinary General Meeting on25 February 2011 and are being implemented. Finalimplementation of the refinancing concept is stillsubject to the condition that the credit lines existing as at31 December 2010 is reduced to roughly EUR 141 million.Certification by a court-appointed auditor for the inkindcontribution that the value of the loan liabilities tobe contributed in a non-cash capital increase correspondsto at least 60 percent of their nominal value isanother requirement; all other terms of the new loanagreement have been fulfiled.The existing applicable loan agreement imposes operatinglimitations on both Conergy and its subsidiariesas well as extensive disclosure requirements and theobligation to comply with specific financial indicators.Conergy has undertaken thereunder to ensure thatcertain balance sheet and earnings ratios, such as theratio of consolidated net borrowings to consolidatedEBITDA (in each case with and without contingent liabilities),a specific ratio of consolidated EBITDA toconsolidated net interest expense and a specific eq-

49Top quality – from a single sourceManagement Board and Supervisory BoardAssets, Liabilities, Cash Flows, P & L | Other |Group Management ReportConsolidated Financial StatementsFurther Informationuity ratio do not exceed or fall below a specific figure.The agreed upon value for the equity-ratio could notbe met since 31 December 2010. But this correspondswith the restructuring concept that was agreed uponon 17 December 2010.Certain other requirements do apply during the term ofthe agreement. Among other things, these requirementscrimp the ability of the Conergy Group to provide assetsas collateral, sell assets, participate in joint ventures,acquire additional companies or business units, incuradditional debt, make loans, provide guarantees, incurleasing liabilities or undertake specific restructuringmeasures. Any noncompliance with these stipulations –or if the financial figures agreed upon are not reached –may trigger an extraordinary right of termination on thelenders’ part, which would give them the right to callthe loan immediately. The lenders also have other customaryrights to terminate, for example, if a German orother significant subsidiary files for insolvency.Other informationNon-financial performance indicatorsA company’s non-financial performance indicatorsmake a major contribution to its success in the longterm. We treat the non-financial performance indicatorsthat we established and expanded as part ofthe Company’s realignment in the past few years asleverage that makes Conergy not just more efficientbut also more attractive.Employees as agents of successConergy AG’s employees are its bedrock and key to itssuccess. Many a success in recent years would havebeen inconceivable absent their identification with theCompany and their commitment to its aims. Enhancingthe skills and qualifications of our employees and executivesalike through purposeful on- and off-the-jobtraining thus is key. At the same time, this serves tofoster our employees’ potential by giving them a lot ofindividual responsibility among other things. Internalpersonnel programmes as well as the annual employeedevelopment review and dialogue support this process.We are also recruiting highly qualified and experiencedprofessionals as necessary. Remuneration modelsthat reward individual performance through variable,performance-based compensation enhance employeemotivation.Code of ConductThis Code, which is binding for all Conergy employees,is the ethical foundation of all business activities anddescribes the values, principles and practices of theConergy Group. In addition, it describes the fundamentalethical and legal duties of the Conergy Group’semployees and corporate bodies as they conduct theirbusiness. Compliance with these standards is monitoredby a Compliance Committee organised by the centralGovernance & Compliance department, which was establishedin 2010. The Compliance Committee worksto ensure that absolutely everybody in the Companyabides by the same high ethical and legal standards. Itis responsible for publicising the Code of Conduct andits aims among the Company’s employees, trainingthem and ensuring compliance with the guidelines. Italso serves as a point of contact for the employees. Allcompliance officers can also be contacted individually.Extensive experience in project management andproject financingConergy is one of the most experienced project developersand engineers in the field of regenerative energies.The Company offers its customers the completevalue chain from planning to construction to plantstart-up, and it consider its comprehensive expertiseto be a key competitive strength. Conergy also possessesmany years of experience in project financing.Product and technology strength, flexibility andqualityConergy has access to different state-of-the-art technologiesin photovoltaics that it manufactures on itsown or purchases from third parties. Whilst thick-filmtechnology accounts for the largest share of businessin both the residential and the commercial market segment,Conergy can also equip power plants with economicalthin film technology in the power plant marketsegment. It is not just the availability of diverse PVtechnologies that attract customers to Conergy in itscapacity as a systems manufacturer but also the excellentquality of the products it manufactures as such.Extensive references and engineering expertiseA provider’s experience and references are highlysignificant to customers and investors alike. The Company’sexcellent reputation thus is pivotal to its success.The construction of a multitude of PV units both athome and abroad has given Conergy’s engineers avast well of experience to draw from. They ensure theinstallations’ optimal operation over their entire useful

50Conergy AG I Annual Report 2010life with the help of a far-flung installation and servicesnetwork. Conergy’s many years of experience as asystem manufacturer allows it to develop and implementoptimally coordinated components and systems.Even the tiniest efficiency gains per system can generatenoticeable benefits for customers.Broad and internationally diversified customerbase, customer access and customer proximityConergy has consistently worked to internationaliseits customer base in order to reduce any dependenceon individual local markets, legislative models promotingrenewables or individual customer groups andthus has established a presence in all core photovoltaicsmarkets. In future too Conergy will carefully analysenew markets as it pursues its internationalisationto decide whether or not to enter the given market. TheCompany’s insight into central customer groups in theB2B business as well as into financial investors andtheir respective expectations and needs are a centralcomponent in building economic success in the PVmarket. Many years of working with a multitude ofcustomers in these segments have led to broadknowledge of these customer groups, greatly facilitatingservices to these target groups while at the same timeenhancing customer loyalty.Corporate communicationsOpen and transparent communications, both internal andexternal, aim to help our employees, customers, businesspartners and investors place their trust in us. We initiatedan internal suggestion system as a complement toour internal communications in order to tap into employees’ideas and experience and promote a dialogue betweenstaff and top management on issues related to theCompany’s operating business. Credible external communicationsserve to create trust among our customers,suppliers and business partners. Openness and transparencyinform Conergy’s ongoing dialogue with its customers,for an open information policy coupled with a strongbrand have a positive impact on customer loyalty.Research and developmentConergy has one of the world’s most modern productionfacilities for solar modules in Frankfurt (Oder), a city inthe German state of Brandenburg. From the productionlines occupying a total manufacturing space of 35,000 m 2more than 900,000 high-performance modules rolledoff in 2010 and were delivered to 9 countries. The valuechain runs through three fully automated productionareas that are fully integrated under a single roof –from silicon (the raw material), to the wafer, to the cell,all the way to the finished module.Its factory is a state-of-the-art production facility yetConergy is already looking ahead to the technologiesof tomorrow. New selective emitter technology was integratedinto one of four existing solar cell productionlines during the 2010 financial year. We are aiming forsolar cell efficiency gains of at least 0.3 percent as perbinding manufacturer warranties.Conergy and the renowned Leibniz Institute for InnovativeMicroelectronics have been jointly researchingsince 2010 how to use novel silicon derived from avariety of manufacturing processes in production. Theraw material for crystalline solar modules that we areresearching is much more inexpensive compared tothe silicon that is known and used today. In so doingConergy aims to continue reducing the raw materialand manufacturing costs of its premium modules.The Conergy PowerPlus modules that are manufacturedin Frankfurt (Oder) repeatedly demonstratedtheir quality in 2010. For one, these modules did best inthe ammonia test of the German Agricultural Society(Deutsche Landwirtschafts-Gesellschaft). Moreover,measurements conducted by the TÜV (German CertificationOrganisation) confirmed the modules’ excellentweak light behaviour – instead of decreasing, theirefficiency actually increases as solar irradiation weakens.The Conergy PowerPlus module also received topmarks performed best in the first major hail test worldwideconducted by Cetecom ICT Services. The moduleswithstood large, 55 millimetre-wide hailstones –equivalent to the diameter of a billiard ball – that hitthem with a velocity of 122 km/h.In February 2010 TÜV Rheinland certified our solarfactory pursuant to ISO 9001:2008 and 14001:2004.The Frankfurt (Oder) production site thus possesses adocumented quality assurance and environmentalmanagement system across all departments that ensuresconsistent quality at the highest level.Mounting Systems GmbH, a wholly-owned subsidiaryof Conergy AG, is one of the largest manufacturers ofmounting systems and module frames for both photovoltaicsand solar thermal systems. In Rangsdorf (nearBerlin), construction and mechanical engineers workcontinuously to optimise these mounting systems inaccordance with applicable standards and tailor themto customers’ needs. Their top priority is never tocompromise the products’ quality.

51Top quality – from a single sourceManagement Board and Supervisory BoardOther |Group Management ReportConsolidated Financial StatementsFurther InformationThe engineers of Mounting Systems thus designed anovel mounting system for solar modules in 2010. Thebase rail for the SIGMA ground-mount system adheresto the principles of conventional constructive engineeringas it applies to large roofs. The advantages: it reducesthe need for materials and lowers costs while atthe same time enhancing both its stability and its span.This also applies to the ZETA in-roof mounting system,an equally new design from Mounting Systems. Thisvisually attractive mounting system was designed specificallywith the French market in mind. ZETA ismounted directly on the roof battens, thus replacingthe conventional roof cladding. The module divertsrain water and is as waterproof as a traditional tiledroof. No additional supportive structure is required.Novel installation options are being developed in closecoordination with the Company’s other segments – aclear advantage of Conergy’s position as a systemsmanufacturer. For instance, our specialists for mountingsystems and modules jointly developed QuickFix, amounting system for the Conergy PowerPlus Solarmodule that does not require any screws at all.All mounting systems manufactured in Rangsdorf providemaximum safety because the ISO-9001-certifiedfactory only uses high-quality materials. In terms ofstability and statics, these mounting systems complywith the state of the art and thus come with ten-yearwarranties.The mounting systems of Conergy’s subsidiary aresent out into the world from the German state ofBrandenburg. This is why Mounting Systems opened itsown sales office in France and launched the process ofestablishing its own production facility in Sacramento,CA, USA, in 2010.In October 2010, Mounting Systems was awarded theCAI Prize of the Chamber of Commerce and Industry inPotsdam, Germany, in the growth category.The product portfolio of our wholly-owned subsidiary,voltwerk electronics GmbH, continued to expand in2010. It now ranges from 3 KW inverters all the way to1.2 MW stations including high-performance monitoringsystems for all user groups as well as the relatedservices. Voltwerk thus offers essential electronic solarcomponents from a single source.Its new three-phase 8 kW, 11 kW and 15 kW string inverterswere successfully brought to market and areconsidered among the most efficient devices around.Photon, a leading trade magazine, gave the product a“very good +” ranking as well as its “red dot design” and“iF product design” awards – prestigious prizes both.Voltwerk’s new central inverter series and new centralinverter station are adding even more powerful productsto its line-up of products for major PV power plants.The central inverter series concerns devices in the200 kW and 300 kW performance class that areequipped with an integrated touch display which is usedfor all settings as well as to carry out yield analyses,both on site and remotely. The new central inverterstations have a peak efficiency factor of 97.7 percent,making them the most efficient on the market. Theyconstitute complete solutions for major PV farms in themegawatt class that significantly reduce both planningand installation costs. Thanks to their modular design,these stations can be offered in nine performanceclasses from 400 kW up to 1.2 megawatts in 100 kWincrements. The stations comprise central inverters,the monitoring system, a special highly efficient mediumvoltage transformer as well as the necessary mediumvoltage switching station.Development work on the Sol-ion project, a combinationof solar inverter, energy management system andlithium-ion battery, continued. The first devices arebeing tested in a comprehensive field test.Voltwerk electronics GmbH was certified underISO 9001 in June 2010. Under this standard, managementsystems must satisfy internationally acceptedrequirements regarding the quality of production,services and development. The auditors were particularlytaken by the Company’s customer focus, processoptimisation and cost reduction. More than one millioncertified companies – including all suppliers that workwith voltwerk – use the globally accepted ISO 9001standard as a tool for managing their companies andcontinuously improving their performance.Disclosures related to acquisitionsThe following disclosures contain the disclosuresrelated to acquisitions in accordance with Section 315para. 4 German Commercial Code:Summary of subscribed capitalThe Company’s subscribed capital (capital stock) as at31 December 2010 balance sheet date wasEUR 398,088,928. It is denominated in 398,088,928no-par bearer shares with a pro rata interest in capital

52Conergy AG I Annual Report 2010of EUR 1.00 per no-par share. Each share grants identicalrights and one vote at the Annual General Meeting.New shares are issued as bearer shares unlessthe Annual General Meeting resolves otherwise.Equity interests in excess of 10.0 percent of thevoting sharesThe following direct and indirect equity interests inConergy AG surpassed the 10.0 percent threshold ofvoting shares:Athos Service GmbH, Munich, notified Conergy AG on16 December 2008 pursuant to Section 21 para. 1German Securities Trading Act that its interest in thevoting shares of Conergy on 11 December 2008 fellbelow the threshold of 15.0 percent and subsequentlywas 14.95 percent (corresponding to 59,514,296shares out of a total of 398,088,928 voting shares).Athos Service GmbH, Munich, notified Conergy AG on22 March 2011 that its interest in the shares of Conergyon 15 March 2011 fell below the threshold of 10.0 percentand subsequently was 9.42 percent on that day(corresponding to 37,514,296 shares). FurthermoreAthos Service GmbH, Munich, notified Conergy AG on22 March 2011 that its interest in the shares of Conergyon 18 March 2011 fell below the threshold of 5.0 and3.0 percent and subsequently was 2.91 percent onthat day (corresponding to 11,588,096 shares).Commerzbank AG, Frankfurt (Main), notified Conergy AGon 4 August 2010 pursuant to Section 21 para. 1 GermanSecurities Trading Act that its interest in the votingshares of Conergy AG on 3 August 2010 fell below thereporting threshold of 30.0 percent and at that datewas 29.08 percent (corresponding to 115,762,187 outof a total of 398,088,928 voting shares).Appointment and dismissal of ManagementBoard members; amendment of the Company’sArticles of AssociationUnder Article 6 para. 1 of Conergy’s Articles of Association,its Management Board must comprise at leasttwo members. Exercising its authority under Article 6para. 1 sentence 2 of the Company’s Articles of Association,the Supervisory Board determined by meansof the rules of procedure amended on 10 November2010 that the Management Board must have a minimumof two members at this time. Management Boardmembers are always appointed and dismissed by theSupervisory Board pursuant to Section 84 and 85German Stock Corporation Act in conjunction with Article6 para. 1 Articles of Association. For the rest, theArticles of Association do not contain any deviationsfrom statutory requirements.Pursuant to Section 119 para. 1 no. 5 and section 179 ff.German Stock Corporation Act, the Annual GeneralMeeting is charged with resolving amendments of theArticles of Association. Unless required otherwise bymandatory law or the Articles of Association, the resolutionsof the Annual General Meeting are adopted bythe simple majority of all votes cast and, to the extentthat the law requires a majority of the capital, by thesimple majority of the capital stock represented; Sections179 ff. German Stock Corporation Act are applicable.The law prescribes absolute majorities of threefourthsof the capital stock present at the time therelevant resolutions are adopted in connection withcertain amendments of the Company’s Articles ofAssociation (e.g. amendment of its business purpose),capital measures subject to the exclusion of shareholders’subscription right as well as certain other particularlysignificant items subject to formal resolution.The Supervisory Board is authorised under Article 22of the Articles of Association to amend them to the extentthat such modification affects solely the wording.It is also authorised under Article 5 para. 3 Articles ofAssociation to amend the relevant wording insofar asauthorised capital in accordance with Article 5 para. 3and para. 9 of the Articles of Association (AuthorisedCapital 2009 and 2010) has been utilised at the giventime or upon expiry of the authorisation deadline. Ifnew shares are issued in accordance with Article 5para. 8 of the Articles of Association using contingentcapital, the Supervisory Board is authorised thereunderto amend the wording of the Articles of Associationsuch that it reflects the number of the new no-parbearer shares issued in each case, as well as to adoptany other related amendments of the Articles of Associationthat affect solely the wording. The same shallapply analogously if the authorisation to issue bondswith warrants or convertible bonds is not exercisedupon expiration of the authorisation period as well asif the contingent capital is not used upon expiration ofthe deadlines for exercising options and conversionrights or for fulfiling conversion obligations or options.Authority of the Management Board to issueshares and to buy-back sharesPursuant to Article 5 para. 3 of the Articles of Association,the Management Board is authorised, subject tothe approval of the Supervisory Board, to increase theCompany’s capital stock until 9 June 2014 by a total of

53Top quality – from a single sourceManagement Board and Supervisory BoardOther |Group Management ReportConsolidated Financial StatementsFurther Informationup to EUR 100,000,000 by once or repeatedly issuingup to 100,000,000 new no-par bearer shares in returnfor contributions in cash and/or in kind (“AuthorisedCapital 2009”). In principle, the shareholders are granteda subscription right. The new shares may also beacquired by one or more banks, subject to the obligationto offer them to the shareholders for subscription.The Management Board is authorised hereby to excludeshareholders’ subscription right with the approval ofthe Supervisory Board, once or repeatedly: (a) to theextent necessary in order to exclude fractional shares,if any, from shareholders’ subscription right; (b) to theextent necessary in order to grant to the holders of optionsor conversion rights or obligations arising frombonds with conversion rights and/or options or a conversionobligation a subscription right to new shares inthe scope to which they would be entitled as shareholdersonce they exercised the option or conversionright or fulfiled the conversion obligation; (c) to the extentthat the new shares are issued in return for cashcontributions and the pro rata amount of the capitalstock attributable to all of the newly issued sharesdoes not exceed the total of EUR 39,808,892 or, if lower,10.0 percent of the capital stock extant both at thetime this authorisation takes effect and at the time it isexercised for the first time (“maximum amount”) andthe issue price of the shares to be newly issued is notsubstantially lower than the market price of the Company’slisted shares of the same class at the time theissue price is finally fixed; [and] (d) to the extent thatthe new shares are issued in return for in-kind contributions(especially in the form of companies, businessunits, equity stakes in companies or receivables).The pro rata amount of the capital stock attributable tonew or previously acquired treasury shares that areissued or sold in accordance with or under Section 186para. 3 sentence 4 German Stock Corporation Actwhile this authorisation is in effect, subject to the exclusionof shareholders’ subscription right, shall beoffset against the maximum amount set forth in item(c) of the forgoing paragraph, as well as the pro rataamount of the capital stock attributable to shares thatare or must be issued to satisfy bonds with conversionrights and/or options or a conversion obligation, to theextent that these bonds are issued while this authorisationis in effect subject to the exclusion of shareholders’subscription right in analogous application ofSection 186 para. 3 sentence 4 German Stock CorporationAct.The Management Board is further authorised, subjectto the approval of the Supervisory Board, to determineadditional details of the capital increase and the conditionsof the share issuance.The Management Board is also authorised pursuant toArticle 5 para. 9 of the Company’s Articles of Association,as amended by the resolutions of the Annual GeneralMeeting on 5 October 2010, which were recordedin the Commercial Registry on 23 February 2011, to increasethe Company’s capital stock until 4 October 2015,with the approval of the Supervisory Board, by a totalof EUR 99,044,464.00 by issuing a total of up to99,044,464.00 new no-par bearer shares (no-parshares), once or repeatedly, in return for contributionsin cash and/or in kind (Authorised Capital 2010). Inprinciple, the shareholders are granted a subscriptionright. The new shares may also be acquired by one ormore banks, subject to the obligation to offer them tothe shareholders for subscription.The Management Board is authorised in this connectionto exclude shareholders’ subscription right withthe approval of the Supervisory Board, once or repeatedly:(a) to the extent necessary in order to excludefractional shares, if any, from shareholders’ subscriptionright; (b) to the extent necessary in order to grantto the holders of options or conversion rights or obligationsarising from bonds with conversion rights and/oroptions or a conversion obligation a subscription rightto new shares in the scope to which they would be entitledas shareholders once they exercised the option orconversion right or fulfiled the conversion obligation; (c)to the extent that the new shares are issued in return forin-kind contributions (especially in the form of companies,business units, equity stakes in companies, receivablesor for the purpose of satisfying conversion oroption rights or obligations). The Management Board isauthorised, subject to the approval of the SupervisoryBoard, to determine additional details of the capital increaseand the conditions of the share issuance.Pursuant to Article 5 para. 8 of the Company’s Articlesof Association, as amended by the resolutions of theAnnual General Meeting on 5 October 2010, whichwere recorded in the Commercial Registry on 23 February2011, the Company’s capital stock was increasedby up to EUR 199,044,464.00 by issuing 199,044,464.00new no-par bearer shares (no-par shares) with a prorata interest in the capital stock of EUR 1.00 per share(contingent capital). This contingent capital increaseserves to grant no-par bearer shares to the holders orcreditors of convertible bonds and/or bonds with warrants,profit participation rights and/or income bonds(or combinations of these instruments) that are issuedby the Company or its direct or indirect associates un-

54Conergy AG I Annual Report 2010der the authorisation granted by the Annual GeneralMeeting on 5 October 2010 pursuant to Agenda item 7in return for cash contributions and establish a conversionright or option to the Company’s new no-parbearer shares or a conversion obligation. This contingentcapital increase shall be executed only insofar asthe options or conversion rights are exercised or insofaras the holders or creditors obligated to convert actuallyfulfil their conversion obligation and providedthat no treasury shares or new shares issued underauthorised capital are used to satisfy same.The new no-par bearer shares shall participate in theCompany’s profit from the start of the financial year inwhich they are created through the exercise of optionsand/or conversion rights or through the fulfilment ofconversion obligations. The Management Board is authorizedto determine other details relating to the executionof the Contingent Capital Increase.The Management Board has the right under Section71 para. 1 German Stock Corporation Act to purchasethe Company’s treasury shares in the followingcases: (a) if such purchase is necessary in order toavert severe, imminent harm to the Company; (b) if theshares are to be offered for purchase to persons whowere or are employed with the Company or one of itsassociates; (c) if the purchase is made in order to compensateshareholders using shares in specific situationsprescribed by law; (d) if the purchase does notentail any consideration; (e) by virtue of universalsuccession; and (f) pursuant to a resolution of theCompany’s Annual General Meeting to retire stock inaccordance with the requirements regarding a reductionin the capital stock. The shares bought back underitems (a) through (c) above, along with the Company’sother treasury shares, which it already purchased orstill retains, may not account for more than 10.0 percentof the capital stock.At this time, Conergy AG is not authorised to purchasetreasury shares under any resolution of its AnnualGeneral Meeting pursuant to Section 71 para. 1 no. 8German Stock Corporation Act.Key agreements of the CompanyThe key agreements that will be affected by a changeof control at Conergy AG concern the existing syndicatedloan agreement that gives the financing banksthe right to terminate the agreement in the event of achange of control in accordance with its relevant provisionsif an individual or a group of people acting in concertwith each other (under an agreement or by anyother means) gain control over the Company. All investorsnot known as existent major shareholders underthe syndicated loan agreement are regarded as thirdpartyinvestors.The employment contract of one member of the ManagementBoard gives him the right to terminate hiscontract for cause in the event of a defined change ofcontrol of Conergy AG.Compensation report for the ManagementBoard and the SupervisoryBoard of Conergy AGThe compensation report below is part of the Groupmanagement report. The report explains the structureand the level of compensation applicable to theManagement Board and the Supervisory Board. Thecompensation report was prepared in accordancewith the recommendations of the German CorporateGovernance Code and contains all disclosures thatmust be made an integral part of the notes pursuant toSections 285 no. 9, 314 para. 1 no. 6 German CommercialCode and the (Group) management reportpursuant to Sections 289 para. 2 no. 5 and 315 para. 2no. 4 German Commercial Code and the ManagementBoard Compensation Disclosure Act (Gesetz über dieOffenlegung der Vorstandsvergütung – VorstOG). Informationabout the shareholdings of the ManagementBoard and the Supervisory Board will also be presentedin this compensation report.The following sets out the principles governing theManagement Board’s compensation and, in accordancewith the recommendations of the German CorporateGovernance Code, discloses the compensationpaid to the Management Board on the whole and onan individualised basis.Compensation of the Management BoardIn keeping with the recommendations of the GermanCorporate Governance Code, the total compensationpaid to the members of the Company’s ManagementBoard comprises both fixed and variable components,with the variable compensation differing among individualmembers of the Management Board. In particular,this distinction stems from the introduction inearly 2010 of a compensation system applicable tonew director’s contracts with members of the Company’sManagement Board. Not only does this satisfy therequirement that the compensation be based on severalyears of performance, it also takes into account

55Top quality – from a single sourceManagement Board and Supervisory BoardOther | Compensation |Group Management ReportConsolidated Financial StatementsFurther Informationthe recommendation of the German Corporate GovernanceCode that negative developments ought to affectthe variable compensation as well.1. Responsibility for fixing the Management Board’scompensationThe Supervisory Board is tasked with fixing the compensationof each individual member of the ManagementBoard. Its determination of adequate compensationis based on a performance appraisal, taking allpayments from the Group into account. Criteria for determiningthe appropriateness of compensation are, inparticular, the tasks of the respective member of theManagement Board, his personal performance, theoverall performance of the Management Board as wellas the economic situation, the performance and outlookof the enterprise taking into account its peer companies.2. Elements of the compensation of ManagementBoard membersThe compensation of the Management Board comprisesboth fixed and variable elements.All members of the Management Board receive basiccompensation not contingent on performance that ispaid monthly as a salary. In addition, all members ofthe Management Board receive benefits in the form ofnon-cash compensation such as the option to usecompany cars for private purposes as well as contributionsto their retirement plans as well as to insuranceexpenses; In general these benefits are paid to allmembers of the Management Board equally but theactual amounts vary according to their personalneeds. Individual members of the Management Boardare also reimbursed for outlays such as flights home orrelocation expenses. All non-cash benefits are part oftheir compensation and thus taxable. No ManagementBoard member was granted loans or advances in thereporting year, nor did the Company incur any contingentliabilities on their behalf.In 2010, Conergy AG put in place a new compensationstructure that applies to Management Board members’new director’s contracts. Thereunder the members ofthe Management Board are paid variable compensationequivalent to 100.0 percent of their annual fixed compensationif they achieve absolutely all performancetargets that the Supervisory Board fixes in advance atits discretion. If goal achievement exceeds the target,the variable compensation is raised to a maximum of150.0 percent of the fixed compensation; if goalachievement falls short of the target, it is lowered. Thevariable compensation comprises a component that isdisbursed and a component that is converted intophantom stock options. No more than 45.0 percent ofthe variable compensation are paid in cash at the endof the Annual General Meeting tasked with formallyapproving the actions of the Management Board duringthe given financial year for which the variable compensationis owed. The remaining and thus larger portionof the variable compensation is converted into phantomstock options on an annual basis. The number ofphantom stock options is determined at the time thevariable compensation is fixed based on the weightedaverage share price on the last 30 trading days of thefinancial year for which the compensation is owed. Thephantom stock options are paid out at the end of aholding period of up to four years from the date onwhich the number of shares is determined at the timethe variable compensation is converted. The value ofthe phantom stock options to be paid out upon expiryof the holding period is limited to 200.0 of the variablecompensation that was converted into phantom stockoptions but may not fall below 50.0 percent thereof.The phantom stock options are measured on the basisof the weighted average share price during the 30 tradingdays preceding the payment date.Aside from setting the contractually owed compensation,the Supervisory Board also has the option at itsdiscretion to grant individual Management Boardmembers a special bonus or a retroactive bonus inrecognition of outstanding performance based on apreviously stipulated performance target.Under the new compensation system, AndreasWilsdorf is entitled to variable compensation ofTEUR 350 if all performance targets are met in full. Itshall be increased to a maximum of TEUR 525 if hisgoal achievement surpasses the baseline and decreasedif he falls short of the targets. 45.0 percent ofthe variable compensation is paid in cash, and the balanceis converted into phantom stock options subjectto a four-year holding period. These phantom stocksconstitute cash-settled share based payments as definedby IFRS 2. The Black Scholes Option PricingModel was used to measure the phantom stocks. Thehistorical volatility of Conergy’s share was used to determinevolatility because the implicit volatility shownby Bloomberg is calculated using short-term options.The measurement of the phantom stocks was basedon 216 weeks of historical volatility in order to take intoaccount that the phantom stocks still had a remainingterm of approximately 1,080 days as at 31 December2010 (assuming that the Supervisory Board determinesthe variable compensation by 31 March 2011).As at 31 December 2010, the value of the phantomstocks was EUR 0.32 and the number of phantom

56Conergy AG I Annual Report 2010stocks outstanding was 308,798. Provisions of TEUR100 were recognised for this reason at the reportingdate. As at the 15 March 2010 grant date, the fair valueof the share-based payments was TEUR 152 and thenumber of the phantom stocks granted on a pro ratabasis was 182,923. Andreas Wilsdorf was also paid aone-off signing bonus of TEUR 100 in the 2010 financialyear. In return, he agreed to being appointed to theManagement Board effective 15 March 2010 already(instead of 1 July 2010 as originally planned and stipulatedby contract).well as 50.0 percent of their most recent variable compensationnot including the portion that is convertedinto phantom stock options. The Company may waivecompliance with the post-signing noncompete clause.Given the introduction in 2010 of the variable compensationsystem for new Management Board members,deviations to the foregoing explanations arise for theManagement Board members who resigned during thereporting year: Dieter Ammer, Dr. Andreas von Zitzewitz,Dr. Jörg Spiekerkötter and Philip von Schmeling.Dr. Sebastian Biedenkopf was only paid basic compensationnot contingent on performance due to thebrevity of his term of office during the reporting year.In addition to his monthly fixed compensation, startingin the 2011 financial year Dr. Sebastian Biedenkopf willbe paid variable compensation contingent on both hispersonal performance and the degree to which financialtargets are met. If he meets the performance targets infull, Dr. Sebastian Biedenkopf shall be entitled togross variable compensation of up to TEUR 205, andTEUR 410 in each of 2012 and 2013. It shall be increasedto a maximum of TEUR 307.5 for the 2011 financialyear if goal achievement surpasses the baselineand TEUR 615 for each of the 2012 and 2013financial years, and shall decrease if goal achievementfalls short of the baseline. Forty percent of the variablecomponent of his compensation shall be paid in cashand 60.0 percent shall be converted into phantomstock options subject to a three-year holding period.Dr. Sebastian Biedenkopf shall also be paid a one-offbonus in the amount of gross TEUR 205 related to theCompany’s restructuring. The Supervisory Board decidesat its discretion if the requirements for receivingthis one-off bonus have been met.The director’s contracts of Dr. Sebastian Biedenkopfand Andreas Wilsdorf provide for severance pay iftheir respective activities on the Management Boardare terminated early; such severance pay shall correspondat most to two years’ worth of annual compensationsubject to full target achievement (severancecap) as well as the compensation for the remainingterm of their individual director’s contracts. In a departurefrom the foregoing, maximum severance payequivalent to 150.0 percent of the severance pay caphas been stipulated with Dr. Sebastian Biedenkopf ifhe terminates his contract due to a change of control.In return for a one-year post-signing noncompeteclause, both Dr. Sebastian Biedenkopf and AndreasWilsdorf shall be paid separate compensation amountingto 50.0 of their most recent fixed compensation asThe former members of the Management Board werealso paid an annual performance bonus, the amountof which is contingent on the achievement of goalsthat the Supervisory Board fixes in advance at its discretion.If 100.0 percent of these targets were met, therespective member of the Management Board was entitledto an annual performance bonus equivalent tohis fixed annual compensation. The annual performancebonus was raised in increments relative to thefixed annual compensation for each 10.0 percentagepoints by which goal achievement surpassed thebaseline, up to a maximum of 50.0 percent; it was reducedin increments relative to the fixed annual compensationfor each 10.0 percentage points by whichgoal achievement fell short of the baseline. The variablecomponent also contained share-based compensationelements in the form of stock appreciation rights(phantom stock options).Mr Dieter Ammer was entitled to an annual performancebonus of TEUR 500 if the goals were met in full.His annual performance bonus was raised in incrementsof TEUR 50 for each additional 10.0 percentagepoints by which goal achievement surpassed the baseline,up to a maximum of TEUR 750; it was reduced in incrementsof TEUR 50 for each 10.0 percentage pointsby which goal achievement fell short of the baseline.In addition, Dieter Ammer also participated in a sharebasedcompensation programme in the form of stockappreciation rights with a three-year term starting1 September 2008. These stock appreciation rightswere divided into two tranches of 50.0 percent each.The first tranche could be exercised at the earliest uponexpiration of a waiting period of six months, and thesecond tranche at the earliest upon expiration of awaiting period of one year and six months from 1 September2008. Furthermore, the exercisability of stockappreciation rights was also tied to the positive developmentof Conergy AG’s share price. The first tranchecould be exercised only if and as soon as the Company’sshare exceeded a price of EUR 1.27 (which was

57Top quality – from a single sourceManagement Board and Supervisory BoardCompensation |Group Management ReportConsolidated Financial StatementsFurther Informationfixed as the base price) by at least 10.0 percent, on thethirtieth trading day, at the earliest, at the Frankfurt(Main) Stock Exchange prior to expiration of the waitingperiod of the stock appreciation rights and no laterthan prior to the expiration of the overall maturity. Thesecond tranche could only be exercised if the shareprice exceeded the base price by at least 20.0 percentunder the same conditions. Any exercise of the stockappreciation rights was ineffective absent the fulfilmentof these performance targets. Stock appreciationrights had to be exercised no later than by the stock’sfinal maturity; if not, they were forfeited outright withoutcompensation. For every stock appreciation rightexercised to legal effect, Mr Dieter Ammer had a claimagainst the Company for payment in cash of an amountcorresponding to the difference between the unweightedclosing price of Conergy AG’s share in Deutsche BörseAG’s Frankfurt (Main) XETRA trading on the last 30consecutive trading days preceding the exercise dateof the stock appreciation right (limited to a specificmaximum price) and the base price. The SARs wereforfeited outright without compensation once his employmentended because the exercise conditions hadnot been met.In connection with the renewal of Dieter Ammer’s director’scontract effective 1 August 2010, the SupervisoryBoard agreed to variable compensation that divergesfrom the new compensation system owing to his short,three-month term of office. His compensation alsocomprised a fixed and a variable component. The fixedcompensation was not contingent on performanceand was raised from monthly TEUR 41.6 to TEUR 42.The variable component was based on both personalperformance and achievement of qualitative goals thatthe Supervisory Board had fixed in advance. DieterAmmer was entitled to a performance bonus of nomore than TEUR 99 if the targets were met in full.Dr. Jörg Spiekerkötter was entitled to an annual performancebonus of TEUR 500 if all performance targets weremet. His annual performance bonus was raised in incrementsof TEUR 50 for each additional 10.0 percentagepoints by which goal achievement surpassed the baseline,up to a maximum of TEUR 750; it was reduced in incrementsof TEUR 50 for each 10.0 percentage points bywhich goal achievement fell short of the baseline.Dr. Jörg Spiekerkötter also participated in a sharebasedcompensation programme entailing stock appreciationrights embodied in phantom stock optionswith a term of three years overall. These phantom optionswere divided into three tranches with terms ofone, two and three years. Three exercise dates havebeen set; on each date, a third of the Phantom StockOptions granted could be exercised. After three years,all of the Phantom Stock Options are exercisable. Unexercisedoptions could be carried over to the next twotranches. At the time the Phantom Stock Options wereexercised, Conergy AG was obligated to pay the differencebetween the base price that was fixed at theinception of the stock option programme and thevolume-weighted average share price during the last85 trading days prior to the end of the relevant serviceperiod. The difference was increased or decreased by10.0 to 20.0 percent depending on the development ofConergy’s share relative to the Öko-Dax reference index.The gross amount paid out was restricted to amaximum total amount even if the calculation principlesused would technically have resulted in a higher amount.The share-based payment programme expired on31 October 2010.Dr. Andreas von Zitzewitz was entitled to an annualperformance bonus of TEUR 400 if all performancetargets were met. His annual performance bonus wasraised in increments of TEUR 40 for each additional10.0 percentage points by which goal achievementsurpassed the baseline, up to a maximum of TEUR 600;it was reduced in increments of TEUR 40 for each10.0 percentage points by which goal achievement fellshort of the baseline. Dr. Andreas von Zitzewitz wasalso be included in any stock option plan or sharebasedpayment plan that the Company might establishin future. Effective 1 January 2011, Dr. Andreas vonZitzewitz shall also be paid noncompete compensationof TEUR 300 for a period of nine months, to be disbursedin nine equal instalments.Philip von Schmeling was entitled to an annual performancebonus of TEUR 180 if all performance targetswere met. His annual performance bonus was raised inincrements of TEUR 18 for each additional 10.0 percentagepoints by which goal achievement surpassedthe baseline, up to a maximum of TEUR 270; it was reducedin increments of TEUR 18 for each 10.0 percentagepoints by which goal achievement fell short of thebaseline. The extent to which targets were met wasdetermined to be 110.0 percent at the time he resignedfrom the Management Board.The contracts with Philip von Schmeling and Dr. JörgSpiekerkötter as Management Board members providedfor compensation corresponding to no more than theseverance pay cap specified in item 4.2.3 of the GermanCorporate Governance Code in case of early terminationof their respective activities as such. In a deviationfrom the foregoing sentence however, maximum sev-

58Conergy AG I Annual Report 2010erance pay corresponding to the higher level underitem 4.2.3 of the German Corporate Governance Codewas stipulated with Dr. Jörg Spiekerkötter if he terminatedhis contract in the event of a change of control.If Dr. Andreas von Zitzewitz terminated his activitiesfor the Management Board early, his contractuallystipulated severance pay was limited to an amountthat was equivalent to two full years of compensation,provided 100.0 percent of the performance targetshave been met, up to a maximum of the compensationpayable for the remainder of his director’s contract.With the exception of the aforementioned cases, nomember of the Management Board was promised additionalpayments in the event of termination. Nor didany member of the Management Board receive bonuspayments or corresponding commitments from a thirdparty in the reporting year with respect to their activityas Management Board members.The Company has not made any additional promisesabove and beyond the aforementioned payments with respectto corporate contributions toward retirement plans.General contractual provisions (term, termination)The director’s contracts of two Management Boardmembers, Dr. Sebastian Biedenkopf and AndreasWilsdorf, both have a term of three years. The decisionas to whether they shall be reappointed shall be madenine months but no later than six months prior to theexpiry of their terms of office subject to a review of thefixed and variable components of their compensation.Their director’s contracts shall expire no later than atmidnight on the last day of the month in which theyturn 65. Given this limitation, the contracts do not providefor a regular right to termination. However, eitherparty may terminate the respective director’s contractto immediate effect for cause.Former Members of theManagement BoardCurrent Members of theManagement BoardTEURDieterAmmer 3)Dr. Andreasvon Zitzewitz 4)Dr. JörgSpieker kötter 5)Philip vonSchmeling 6)Sub-totalAndreasWilsdorf 7)Dr. SebastianBiedenkopf 8)TotalFixed annual compensation 382 400 417 200 1,399 379 272 2,050Compensation in kind / otherbenefits 1) 20 316 9 16 361 32 6 399Non-performance-basedcompensation 402 716 426 216 1,760 411 278 2,449Short-term variable compensation 2) 391 400 417 165 1,373 125 – 1,498Directly paid compensation 793 1,116 843 381 3,133 536 278 3,947Fair value of newly granted sharebasedpayment (SAR) – – – – – 152 – 152Total compensation accordingto HGB 9) 793 1,116 843 381 3,133 688 278 4,099Long-term variable compensation(benefits vested in the current year) – – – – – 100 – 100Change in value of existingbenefits – 73 – – – – 73 – – – 73Share-based payment – 73 – – – – 73 100 – 27Total directly paid compensation 793 1,116 843 381 3,133 536 278 3,947Long-term variable compensation(benefits vested in the current year) – – – – – 100 – 100Change in value of existingbenefits – 73 – – – – 73 – – – 73Total compensation accordingto IFRS 720 1,116 843 381 3,060 636 278 3,9741)The other compensation components especially comprise non-cash compensation(e. g. company car, insurance) and allowances for pension insurance (relief fund) aswell as reimbursement of homeward flights and relocations expenses; in the caseof Dr. von Zitzewitz also the waiting allowance.2)These figures are principally based on provisions, assuming full target achievement.Mr. von Schmeling’s variable compensation was paid upon termination of hisdirector’s contract, and TEUR 99 were paid to Mr. Ammer in connection with therenewal of his director’s contract.3)Member of the Management Board until the conclusion of the Annual GeneralMeeting on 5 October 2010.4)Member of the Management Board until 19 August 20105)Member of the Management Board until the conclusion of 31 October 20106)Member of the Management Board until the conclusion of 23 April 20107)Member of the Management Board since 15 March 20108)Member of the Management Board since 1 September 20109)This includes compensation of TEUR 553 for former members of the ManagementBoard for the period after their resignation.

59Top quality – from a single sourceManagement Board and Supervisory BoardCompensation | Supplementary Report |Group Management ReportConsolidated Financial StatementsFurther InformationCompensation of the Supervisory BoardThe policy for the compensation of the SupervisoryBoard was established by the Annual General Meeting in2009 based on the joint proposals of the ManagementBoard and the Supervisory Board. The compensation ofthe Supervisory Board takes into consideration the responsibilitiesand duties of each of the SupervisoryBoard members as well as the Company’s economicperformance. Accordingly, Supervisory Board membershave been paid a fixed compensation of TEUR 25 perannum since the 2010 financial year. They also receiveperformance-based components in addition to this fixedcompensation. Members of the Supervisory Board arethus paid an additional EUR 500 per one-million euro incrementof annual net income up to a maximum ofTEUR 11 in performance-based compensation. TheChairman of the Supervisory Board is paid two-and-ahalftimes and the Deputy Chairman one-and-a-halftimes the fixed and variable compensation paid to regularmembers of the Supervisory Board. Each member ofthe Supervisory Board also receive an attendance fee ofEUR 1,000 for each meeting in which the member participates.Each member of the Supervisory Board is alsopaid fixed compensation of TEUR 10. The chairman of acommittee is paid two and one half times the compensationpaid to regular committee members unless theposition was assigned to him by virtue of the Company’sArticles of Association or the rules of procedure for theSupervisory Board. In addition, committee members arepaid EUR 1,000 for every committee meeting they attend.TEURFixed CompensationSupervisoryBoardAttendanceCompensationSupervisoryBoardFixed CompensationAuditCommitteeAttendanceCompensationAuditCommitteeFixed CompensationChairman’sCommitteeAttendanceCompensationChairman’sCommitteeVariableCompensationTotalEckhard Spoerr(Chairman until 19 July 2010) 34 4 5 2 5 2 – 52Norbert Schmelzle(Deputy Chairman until 19 July 2010,Chairman since 19 July 2010) 48 13 10 6 10 5 – 92Klaus-Joachim Krauth(Deputy Chairman from 19 July 2010until 7 March 2011) 30 14 24 6 4 3 – 81Andreas de Maizière(Deputy Chairmansince 10 March 2011) 25 14 4 3 10 5 – 61Oswald Metzger 25 13 – – – – – 38Bernhard Milow 25 14 – – – – – 39Dieter Ammer(since 5 October 2010) 6 4 – – – – – 10193 76 43 17 29 15 – 373In addition to their compensation, the Supervisory Board members also received TEUR 21 in reimbursements for outlays (especially travel expenses) during the reporting period.Shareholdings of the Management Boardand the Supervisory Board membersNo shares were held by members of the ManagementBoard as at the 31 December 2010 closing date. Themembers of the Supervisory Board held a total of15,074,082 shares as at 31 December 2010.Number of shares heldManagement Board 22,871Dr. Sebastian Biedenkopf –Andreas Wilsdorf –Dr. Jörg Spiekerkötter (until 31 October 2010) –Dr. Andreas von Zitzewitz (until 19 August 2010) 7,840Philip von Schmeling (until 23 April 2010) 15,031Supervisory Board 15,074,082Norbert Schmelzle –Klaus-Joachim Krauth –Andreas de Maizière –Oswald Metzger –Bernhard Milow –Dieter Ammer (since 5 October 2010) 15,074,082Eckhard Spoerr (until 19 July 2010) –

60Conergy AG I Annual Report 2010Events after the reporting periodOn 23 February 2011 Conergy AG sold its Swiss solarthermal products business to Capital Stage AG, a privateequity company specialising in companies and projectsin the clean-tech sector. Conergy’s entire equity interestin its subsidiary, Conergy (Schweiz) GmbH, was transferredto Capital Stage in connection with the disposal.Conergy (Schweiz) GmbH is a local market leader in thesolar thermal systems sector; it is also engaged locally inother areas of regenerative energies. The company willbe renamed Helvetic Solar GmbH in future.On 2 March 2011 Conergy sold its subsidiary, GüstrowerWärmepumpen GmbH, which is specialised in the productionand sale of heat pumps, to SmartHeat Inc. asplanned. This NASDAQ-listed company is a leadingprovider of heat transfer and energy conservationsolutions in the Chinese market. Conergy’s entire equityinterest in Güstrower Wärmepumpen was transferred toSmartHeat under the sale. In addition, Güstrower WärmepumpenGmbH will also take over Conergy’s land.At the Extraordinary General Meeting on 25 February 2011,the Company’s shareholders voted to reduce the capitalstock of Conergy AG by about EUR 400 million to aboutEUR 50 million and thus for an 8:1 reverse stock split.The General Meeting also resolved simultaneously toincrease the capital stock by means of a capital increaseby up to EUR 188 million. Both agenda items wereadopted by majorities of 99.5 percent in each case.Effective 7 March 2011, Klaus-Joachim Krauth, amember of the Supervisory Board, resigned from all ofhis offices at his own request: that of Deputy Chairmanof the Supervisory Board, his position as both amember and the Chairman of the Audit Committee aswell as his appointment to the Chairman’s Committee.On 10 March 2011, the Supervisory Board elected Andreasde Maizière its new Deputy Chairman. OswaldMetzger was appointed to the Audit Committee to fillthe vacancy. Bernhard Milow was appointed to theChairman’s Committee, taking the place of Klaus-Joachim Krauth. The Audit Committee also electedAndreas de Maizière its new Chairman.Risk and opportunity reportRisk managementAll entrepreneurial activity is inextricably bound torisks and rewards. This is why effective managementof risks and opportunities is critical to success.Risk management is an integral part of the Company’sinternal control system (ICS). For one, the ICS comprisesprocess-integrated controls such as for instanceseparation of functions or IT process controls and, foranother, controls that are uninvolved in business processessuch as for example regular audit proceduresaimed at ensuring compliance with internal guidelinesand accounting principles; the reliability of the dataused in the preparation of the consolidated financialstatements and for the internal reporting system; aswell as compliance with material legal requirements.The Management Board of Conergy AG has establisheda management control system within groupwiderisk management for purposes of early detection, assessmentand management of relevant risks and forpurposes of fulfiling statutory requirements. Risk managementthus is an integral part of the groupwideplanning, managing and reporting processes andserves to systematically identify, assess, control anddocument risks. The audit of the annual financial statementsalso entails reviewing the general suitability ofConergy AG’s early warning system for identifyingsubstantial risks that have a direct impact on the Company’sfinancial reporting.A groupwide risk management manual, centralisedCorporate Risk Management, the Risk Committee aswell as regular and uniform risk reporting at the level ofthe operating units are material elements of our riskmanagement system. The risk management manualdescribes the groupwide approach to risk managementand fixes functions, processes and responsibilitiesthat are binding on both the employees and theoperating units of Conergy. This approach is alignedwith Conergy’s corporate structure and is designed toensure that all risks are detected in due time such thatthey can be counteracted, immediately and adequately.The respective organisational units are responsible foridentifying risks and reporting them to Corporate RiskManagement. Corporate Risk Management for its partcoordinates the groupwide recording of risks and theirsystematic assessment based on uniform standards.Risks are identified and quantified as part of internalrisk reporting. The initial risk assessment is made for aone-year planning period. Taking defined risk categoriesinto account, the risks are assessed based on theprobability of their occurring and the loss amount, inparticular their possible impact on EBIT. New risks areanalysed and included in risk management if they arerelevant. Corporate Controlling of Conergy AG alsoanalyses the difference between the Company’s actualand targeted performance in order to identify any risks

61Top quality – from a single sourceManagement Board and Supervisory BoardSupplementary Report | Risks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther Informationthat could jeopardise its performance. Individually adjustedstrategies and measures designed to avoid,mitigate or hedge risks are initiated in cooperation withthe responsible departments. Risks that exceed a specificmaximum value are communicated to the RiskCommittee, which is tasked with monitoring theGroup’s material risks and initiating appropriate countermeasuresas necessary.Material risksConergy’s business model presupposes functioningmarket mechanisms in its capital and sales markets. Inthe long term, systematic and/or structural disruptionscould substantially hamper the development of theCompany’s business and lead to unforeseeable businessdevelopments.Besides the obligation to report new, relevant risks immediately,both Corporate Risk Management and theRisk Committee regularly assess and adjust the Company’sexposure to risk in cooperation with the responsibledepartments in the Group. Corporate RiskManagement and the Risk Committee report existingmaterial risks to the Management Board. In addition,the Management Board regularly informs the SupervisoryBoard of material risks and their development. Wedefine material risks as those whose impact is seriousenough to jeopardise the existence of the ConergyGroup as a going concern.In Conergy’s view, the risk management system is aprocess that is adjusted on an ongoing basis to theCompany’s structural and process organisation, marketsand current developments, with the result that it iscontinuously improved. Hence Corporate Risk Managementwill continually refine the Company’s riskmanagement system. The effectiveness of the riskmanagement system is also monitored by the SupervisoryBoard’s Audit Committee.Whilst Conergy AG’s risk management system providesfor the complete recording and processing of mattersrelevant to the Company, personal judgments, defectivecontrols, criminal acts and other circumstances cannotbe fully precluded. As a result, the Company’s risk managementsystem cannot offer absolute certainty as towhether or not the disclosures in the Group’s accountingare accurate, complete and timely.What follows is a description of the risks that couldhave considerable negative effects on the assets, liabilities,cash flows and profit or loss of the ConergyGroup, its share price and our reputation. These arenot necessarily the only risks to which Conergy is exposed.Risks that are presently unknown to Conergy orthat it deems insignificant at this time might also undermineits business activities.For more information, please see the section on anticipateddevelopments.| Project financingGiven the current situation in the markets for capital andsales, there is the risk that neither borrowings nor equityfrom Conergy’s customers for specific projects might beavailable as planned, This could be rooted in unrealisticexpectations of achievable yields as well as in non-fulfilmentof contractual obligations regarding the provisionof equity or debt capital. We cannot assure that the contractuallystipulated financing will actually materialiseeven though the contracts are in place. In turn, this couldchange, delay or completely cancel contractually stipulatedprojects, with the attendant effects on Conergy’sassets, liabilities, cash flows and profit or loss.| Working capital management, default risksConergy is creating inventories of PV modules, rawmaterials and consumables as well as of mountingsystems and inverters under long-term delivery contracts– and pursuant to conservative planning rootedin functional market mechanisms – in order toachieve planned and projected sales. Conergy wouldbe unable to use these asset inventories, or theymight be subject to writedowns, if orders andprojects are cancelled because of regulatory cuts –as described in the section development of the industryin the report on anticipated developments. Besidesincreasing the quantity of inventories, such adevelopment might require valuation adjustments toinventories as part of working capital managementor selling prices that are below cost. There is also agreater risk that customers might no longer be ableto fulfil their contractual payment obligations, giventheir own financial situation. In turn, this could leadto unplanned allowances for doubtful accounts. Furthermore,we cannot always guarantee that Conergywould be able to retrieve the goods it delivered subjectto reservation of title by enforcing its security interestbecause it is an international business and becausegoods are resold.

62Conergy AG I Annual Report 2010| Property, plant and equipment and intangibleassetsImpairment losses might have to be recognised onintangible assets – but also on significant items ofproperty, plant and equipment such as – for example– the production plant in Frankfurt (Oder) – pursuantto statutory accounting standards if fair valuesfall below carrying amounts. Such a situation mayarise if income is lower than planned due to regulatorycuts or the fact that the Company’s productioncosts exceed those of its competitors, causing theloss of a broad cross-section of consumers. Regulatoryinterventions but also exceedingly high productioncosts intensify the risk that Conergy’s assets, liabilitiesand profit or loss might be substantiallyaffected by accounting losses on property, plant andequipment as well as intangible assets.Terms and conditions of the syndicated loanagreementTo ensure sufficient operating liquidity, on 31 July2007 Conergy AG, the Momentum Renewables GmbH(former EPURON GmbH), Conergy SolarModule GmbH &Co. KG and Conergy Deutschland GmbH closed asyndicated loan for a total of EUR 600 million from originally23 banks under the leadership of Commerzbank AG,Dresdner Bank AG and WestLB AG (EUR 400 millioncash loan and EUR 200 million guarantee and documentarycredit facility). The cash loan is divided intotwo tranches and is intended for financing the constructionof the production facility in Frankfurt (Oder)(Tranche A) and for financing Conergy Group’s workingcapital requirements (Tranche B with a revolvingfacility of EUR 250 million). In addition, the syndicatedloan provides a guarantee and documentary credit facilityof EUR 200 million. Originally, Tranche A forEUR 150 million had to be paid back in half-yearly instalmentsuntil 31 December 2011, starting in 30 June2008. Tranche B in the amount of EUR 250 million wasoriginally scheduled for repayment by 31 July 2010. On29 July 2010, Conergy originally had reached anagreement with its financing banks to extend all loansuntil the end of 2011. The parties had also agreed thatthe three instalments outstanding on the term loan(Tranche A) would also be suspended until the end of2011. These agreements were subject to certain terms.Conergy and the banking syndicate had agreed in thisconnection to commission an independent auditingfirm to prepare an independent business review. Thisindependent business review came to the conclusionthat follow-up financing for the current credit facilitybeyond 31 December 2011 would be rather unlikelyunless the Company’s capital base was strengthened.This conclusion triggered a suspensive condition, andas a result the maturity date of all loans was acceleratedto 21 December 2010.On 17 December 2010 the creditors reached an agreementwith Conergy AG to substantially ease the Company’sliabilities. The willingness of some of the creditorsto contribute their loan receivables as in-kindcontributions is a cornerstone of this accord. The refinancingpackage that was signed in December 2010 asa prerequisite for the new loan agreement is designedto lower Conergy’s financial liabilities by a total ofEUR 188 million, thus substantially lowering the Company’sfuture interest burden. It also provided for extendingthe remaining loans until the refinancing measureshave been implemented but at most until 31 July 2011.The parties also agreed on 17 December 2010 thatsome of the members of the existing banking syndicatewill make available a new cash loan of up to approximatelyEUR 135 million to discharge the currentcredit facility as part of the restructuring as well as acredit line of up to approximately EUR 141 million forfour years at market terms. The new syndicated loanagreement will provide for financial covenants afterthree years.For the rest, among other things the refinancing conceptprovides for a reduction of the Company’s capitalstock of roughly EUR 398 million by approximatelyEUR 348 million to approximately EUR 50 million, aswell as a capital increase of up to EUR 188 million.Conergy’s shareholders will have a subscription rightin connection with this capital increase. If these subscriptionrights are exercised, Conergy will use theproceeds to discharge the corresponding amount ofthe loans outstanding. If the subscription rights arenot exercised, some of the creditors have undertakento contribute their loan receivables from Conergy as anin-kind contribution up to nominally EUR 188 million inexchange for shares; to this end, the loan receivablesshall be measured at 60.0 percent of their nominal value.Conergy’s debt will be reduced in both cases.In the meantime these measures were resolved accordinglyby the Extraordinary General Meeting on25 February 2011 and are being implemented. Finalimplementation of the refinancing concept is still subjectto the condition that the credit lines existing as at31 December 2010 is reduced to roughly EUR 141 million.Despite the constraints related and the initial delaysthe management board expects to implement theconcept according to the agreement. Certification bya court-appointed auditor for the in-kind contribution

63Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther Informationthat the value of the loan liabilities to be contributed ina non-cash capital increase corresponds to at least60.0 percent of their nominal value is a further requirement– next to the reduction of the credit lines; all otherterms of the new loan agreement have been fulfiled.The existing loan agreement imposes operating limitationson both Conergy and its subsidiaries as well asextensive disclosure requirements and the obligationto comply with specific financial indicators. Conergyhas undertaken thereunder to ensure that certain balancesheet and earnings ratios, such as the ratio ofconsolidated net borrowings to consolidated EBITDA(in each case with and without contingent liabilities), aspecific ratio of consolidated EBITDA to consolidatednet interest expense and a specific equity ratio do notexceed or fall below a specific figure. The agreed uponvalue for the equity-ratio could not be met since31 December 2010. But this corresponds with therestructuring concept that was agreed upon on17 December 2010.Certain other requirements do apply during the term ofthe agreement. Among other things, these requirementscrimp the ability of the Conergy Group to provideassets as collateral, sell assets, participate in jointventures, acquire additional companies or businessunits, incur additional debt, make loans, provide guarantees,incur leasing liabilities or undertake specificrestructuring measures. Any non-compliance withthese stipulations – or if the financial figures agreedupon are not reached – may trigger an extraordinaryright of termination on the lenders’ part, which wouldgive them the right to call the loan immediately. Thelenders also have other customary rights to terminate,for example, if a German or other significant subsidiaryfiles for insolvency.Availability and procurement prices of preproductsSilicon blocks or silicon wafers, which Conergy AGturns into PV modules at its Frankfurt (Oder) factory,are a preproduct that is key to the Company’s business.Insufficient deliveries of silicon blocks and silicon waferswould prevent Conergy from fully or adequatelyutilising the production capacities in Frankfurt (Oder)and thus from attaining the targeted and requiredeconomies of scale, with the result that productioncosts would exceed those of competitors with bettercapacity utilisation. Moreover, this could also undermineConergy’s ability to make deliveries to the buyersof its products. Conergy will be unable – absent sufficientsupplies of silicon blocks and silicon wafers fromexisting and/or future suppliers – to manufacture,process and sell photovoltaic modules in the necessaryquantities. Conergy addresses this risk by furtherreducing its high dependence on suppliers of PV modulesby focusing on reliable strategic suppliers. Anyfailure on the part of Conergy to satisfy its delivery obligationsvis-à-vis buyers would trigger fines andclaims for damages. While the current market situationallows Conergy to secure procurement of silicon for itsFrankfurt (Oder) plant, it cannot be precluded that thismarket situation could change in the short term.The risk described above also exists for all otherprocurement contracts, for instance those for preproductsfor the manufacture of PV components orcomponents, or for purchased finished products.Raw material and component suppliesConergy depends on its suppliers for different raw materialsand high-quality components such as solarmodules, inverters, silicon wafers, silane gas, aluminium,glass and foil in the required quantities and atfixed times. For the most part, all components and rawmaterials are covered by general agreements, withseveral providers in some cases. Nonetheless, evenwhen Conergy’s suppliers have undertaken to makethe requisite deliveries to Conergy in the long term,this does not guarantee that these deliveries will bemade in full, on time as well as at the stipulated qualityand at the market prices prevailing at that time. Thereis no guarantee – if suppliers do not fulfil their deliverycontracts at all or only in part or not in time, or if the componentsand raw materials delivered do not possessthe quality owing under the contract – that Conergywould be able on short notice to procure the requiredcomponents and raw materials from other suppliers insufficient quantities and at the required quality as wellas at a reasonable price and in due time. Insufficientdeliveries of the materials required for the productionprocess would make it impossible for Conergy to utiliseits production capacities, thus undermining its ownability to make deliveries. The availability of these materialsat adequate prices thus is pivotal to Conergy’sassets, liabilities, cash flows and profit or loss.Production plant in Frankfurt (Oder)Conergy established one of the world’s most state-ofthe-artproduction plants for PV modules in Frankfurt(Oder). The value chain in Frankfurt (Oder) entails thecutting of silicon blocks into silicon wafers, turningsilicon wafers into solar cells and processing the latterinto PV modules. Operating the production plant givesrise to risks especially in the following areas:

64Conergy AG I Annual Report 2010Conergy is faced with the risk that the degree to whichexisting capacities are under-utilised could shrink dueto market conditions and that the unit cost of manufacturingwill not fall as planned or might even rise.Aside from issues of capacity utilisation, the coststructure or profitability of the production plant is alsosubstantially contingent on the achievement of productionyields and efficiencies. The possibility remainsthat technical problems might depress yieldsand/or efficiencies in future and, in the final analysis,lead to higher costs than planned.At present, the Frankfurt (Oder) plant is procuringsilicon from various providers. Procurement termshave substantially improved due to capacities in themarket, as have procurement terms related to manyother necessary materials and services. However, it ispossible that the supply of silicon and other commoditieswill shrink once again in future due to tighteningdemand and, in turn, spark delivery bottlenecks and/or cost increases in regards to materials and services.Long-term procurement contracts for the Frankfurt(Oder) plant account for a fairly large portion of transactionsin US dollars (USD). The Conergy Group hasundertaken to purchase goods in exchange for USD.Changes in the respective currency relations can intensifyor counteract fluctuations in commodities prices.A decline in the value of the euro vis-à-vis the USdollar can have a negative impact on the gross profitmargin. Unfavourable conditions (notably rising commoditiesprices due to the rising US dollar) can triggeradditional expenses in the procurement of raw materialsin the short term, in turn substantially affectingearnings and liquidity.1 July 2011. The construction of PV units on agriculturalland is no longer being subsidised whilst the installationof units on roofs as well as open air projects and thoseusing converted land will be subsidised at lower rates.In contrast, solar electricity used for own consumptionwill be subsidised at a higher rate than solar electricityfed into the grid. Also in other European markets subsidyreductions have been implemented or announced.Additional fields of riskIndustry-specific risksPhotovoltaics competes with other processes forgenerating power from conventional and renewablesources of energy such as wind power, bioenergy andgeothermal energy as well as CSP (“ConcentratedSolar Power”). These sources of energy might developbetter than photovoltaics for a variety of reasons andthus hamper its continued development. This couldthen cause investments in photovoltaics to dry up inwhole or in part or, at a minimum, to decline by a substantialmargin, in turn triggering a strong downturn inthe demand for Conergy’s products and services.Conergy expects energy from conventional sources tocontinue to become more scarce and more expensive;in future the prices for conventional energy might fallagain, however, causing the demand for regenerativeenergy to decline.Conergy expects to face increasing competition infuture as a result of the growing professionalisation ofthe PV industry. This trend and the increasing numberof suppliers in technologies that are relevant forConergy could further intensify price pressures, loweringthe growth rate of Conergy’s sales.Subsidies for photovoltaicsConergy’s business activities depend to a large degreeon government grants for photovoltaics – especially inthe core markets. Absent these grants, photovoltaicswould generally not be profitable for customers at thistime because the cost of generating electricity usingPV still exceeds both attainable market prices and thecost of generating electricity from conventional sourcessuch as nuclear power, coal or gas. Any deteriorationor even elimination of statutory subsidies for electricityfrom renewable energies could have significantly adverseeffects on the Company’s assets, liabilities,cash flows and profit or loss. This also applies againstthe backdrop of possible EU initiatives aimed atchanging EU-wide subsidies for renewables. Such areduction was enacted for the German market effectiveFurthermore, changing demand for products andservices – for example, if the reputation of siliconbasedor thin film products were to suffer – couldcause margins to tighten or earnings to fall.Conergy’s ability to install and maintain solar energysystems also depends on the given climate and weather.Inclement weather could delay assembly work, causetransportation to be stopped or prevent units from beinginstalled on schedule, in turn increasing costs due tothe resulting delays.Nevertheless, Conergy expects laws promoting renewablesprojects to be expanded to an ever-increasingnumber of regions and range of technologies.

65Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther InformationResearch and developmentThere is the risk that competitors might launch alternativeproducts or technologies that are more economical,of a higher quality or more attractive for other reasonsthan Conergy’s products, improve their currentproducts and technologies, or obtain exclusive rightsto new technologies, effectively blocking Conergy’saccess to them. There is also the risk that Conergy’sproducts might be unable to comply with existing orfuture certification requirements both nationally andinternationally.The ability to adjust the product and services portfolioto current trends, developments and customer needsin individual markets is an important component in theGroup’s future success. Our research and developmentprojects serve to continuously improve our productportfolio, thus responding to the market’s steadily risingrequirements. Development projects might not becompleted at all, might be delayed or might incur costoverruns — all of which could undermine the Company’scompetitive position. The market launch of new developmentsmight also be delayed. Hence there is no certaintythat all products currently in the developmentpipeline will reach market maturity as planned and willbe able to successfully gain a foothold in the market.Conergy performs regular analyses of markets, customersand competitors in order to make certain that itdoes not miss trends and developments in individualmarkets and applies the findings to the developmentand sale of its products and projects.Legal risksConergy might be exposed to factors when workingoutside Germany that could pose increased risk. Inparticular, this includes foreign exchange controls,limits on trade, insufficiently developed and/or definedlegal and administrative systems, war or terrorism.Furthermore, the business of Conergy AG generally entailsthe risk that customers might sue due to defects inour products, plants, or services, be it in connectionwith entire installations or individual components.Conergy AG and some of its subsidiaries are party to anumber of proceedings under civil and public law ofwhich the following are expressly disclosed here:Conergy SolarModule GmbH & Co. KG and Roth & RauAG entered into an agreement in June 2006 regardingthe delivery and installation of four solar cell productionlines for the Frankfurt (Oder) factory. Conergy Solar-Module GmbH & Co. KG believed that Roth & Rau AGwas late in delivering the cell production lines and thatthey did not fulfil the specifications under the contract.Under the delivery contract, Conergy SolarModuleGmbH & Co. KG must still pay the remaining purchaseprice, a seven-figure sum, to Roth & Rau AG under certainconditions. As Conergy SolarModule GmbH & Co.KG sees it however, these conditions have not beenmet. Following the failure of the settlement talks thatwe conducted with Roth & Rau AG from mid-2008 untilJune 2010, Conergy SolarModule GmbH & Co. KGgave Roth & Rau AG a deadline to fulfil its contractbased on a comprehensive expert opinion of a prestigiousinstitute – to no avail. Conergy SolarModule GmbH &Co. KG and its attorneys undertook a detailed reviewof the damage caused by Roth & Rau AG and in February2011 filed claims for damages in the HamburgRegional Court (Landgericht Hamburg) regarding thedamage due to the delay, the defective performance orthe defects, the resulting loss of income as well as afew breaches of ancillary duties. Pursuant to the examinationof all loss items, the amount in controversyis in the lower three digit millions. Any counterclaims thatRoth & Rau might bring will be negligible in numericalterms. Given the extent of the claims and general litigationrisks, Conergy SolarModule GmbH & Co. KGdoes not expect to recoup its claims for damages fromRoth & Rau AG in full. By the same token, Conergy Solar-Module GmbH & Co. KG does not expect to incur anyfinancial losses in future on account of this matterbecause just the collectible amount of the claims farexceeds any counterclaims Roth & Rau AG may have.Not to mention that Conergy could offset the counterclaimsof Roth & Rau AG in any litigation. The parties’settlement talks that were broken off at the time haveresumed by now. Given general litigation risks, we cannotfully preclude that Conergy Solar Module GmbH &Co. KG faces a residual risk in this matter.In November 2006, Conergy SolarModule GmbH & Co.KG and M+W Zander FE GmbH entered into an agreementregarding the construction of a production plantfor the Frankfurt (Oder) factory. On 4 May 2009, M+WZander FE GmbH filed suit for payment of approximatelyEUR 3.0 million in outstanding compensationplus interest. Conergy SolarModule GmbH & CO. KGfiled countersuit, bringing claims for damages substantiallyin excess of the petitioner’s claims. By courtruling dated 17 August 2010, M+W Zander FE GmbHwas ordered to pay EUR 730,233.92 plus interest toConergy SolarModule GmbH & Co. KG and to paymost of the court costs related to the dispute. M+WZander FE GmbH has appealed the ruling. ConergySolarModule GmbH & Co. KG for its part will file a

66Conergy AG I Annual Report 2010cross appeal. Particularly given the successful outcomeof the litigation in the court of first instance,Conergy SolarModule GmbH & Co. KG is not expectedto incur any financial loss in this matter in future. Thiscannot be precluded with absolute certainty givengeneral litigation risks.In a total of currently 20 claims, several claimants areseeking damages totalling EUR 3.5 million from theCompany for their own rights or for rights assignedbased essentially on incorrect capital market informationin connection with the Company’s revision of salesand profit forecasts for 2007 on 25 October 2007. TheCompany is essentially contesting the claimants’ claims.Eighteen of these lawsuits that were filed between Octoberand December 2008 are pending before the HamburgRegional Court. The court issued an order for referenceunder the German Capital Markets Model CaseAct (KapMuG) in one of these proceedings with the aimof having the Hamburg Upper Regional Court(Hanseatisches Oberlandesgericht) bring about a testcaseruling with respect to certain questions regardingthe claims for damages. The other proceedings weresuspended until a ruling is issued in the test case becausethey are contingent on that outcome; portions ofthis decision are still outstanding. Aside from these 18proceedings pending before the Hamburg RegionalCourt, yet another matter is pending before the HamburgUpper Regional Court. The respective investor suitwith an amount in dispute of EUR 61,912.73 was dismissedat first instance. The petitioner in that matter hasappealed. At the turn of 2010/2011, yet another suit wasfiled with a Hamburg District Court in connection withthe aforementioned matters. The court has not yet issuedany procedural rules.The district attorney’s office searched the offices ofConergy in June 2009. Its investigations are aimed atseveral individuals who were members of the Company’sbodies at the time and who are accused of violatingthe German Commercial Code and the German SecuritiesTrading Act between November 2006 and April 2007.Third-party claims against the Company cannot be precludedif the accusations turn out to be true.In July 2009, three shareholders jointly filed an actionwith the Commercial Division of the Hamburg Landgericht(Regional Court) to vacate shareholder resolutionsthat were adopted at the Annual General Meetingof Conergy AG on 10 June 2009 or, in the alternative,to have them declared null and void, specifically,agenda item 3 (Resolution regarding formal approvalof the actions of the members of the ManagementBoard in the 2008 financial year); agenda item 4 (Resolutionregarding formal approval of the actions of themembers of the Supervisory Board in the 2008 financialyear); agenda item 5 (Resolution regarding formalapproval of the actions of individual members of theManagement Board in the 2007 financial year); agendaitem 8 (Resolution regarding the creation of new authorisedcapital, an amendment of § 5.3 of the Articlesof Association and the exclusion of shareholders’ subscriptionright); and agenda item 10 (Resolution regardingapproval of a profit and loss transfer agreementwith Mounting Systems GmbH, Rangsdorf). In its decisiondated 18 January 2010, the court dismissed thecomplaints in their entirety and ordered the petitionersto pay all costs of the dispute. The petitioners appealedthe ruling that dismissed their complaint. Thecourt has yet to set the dates for trying the case or forhanding down its ruling.Concurrently to the matter pending at first instance,the Company also initiated proceedings to obtain a releaseunder the German Stock Corporation Act regardingthe resolutions under agenda item 8 and 10. Inthese proceedings the Hamburg Upper RegionalCourt handed down a ruling on 11 December 2010which granted the Company’s applications for releasein full and found that the filing of the lawsuit did notpre-empt the recording of the resolutions in theCommercial Registry. The resolutions in question havebeen recorded in the Commercial Registry in themeantime.In November 2010, a total of eight shareholders jointlyfiled an action in the Commercial Division of the HamburgLandgericht to challenge and alternatively vacateresolutions adopted at the Annual General Meeting ofConergy AG on 5 October 2010, specifically, agendaitem 2 (Resolution regarding formal approval of theactions of the members of the Management Board forthe 2009 financial year); agenda item 3 (Resolutionregarding formal approval of the actions of the membersof the Supervisory Board for the 2009 financialyear); agenda item 7 (Resolution regarding the authorisationto issue convertible bonds and/or bonds withwarrants as well as profit participation rights and/orincome bonds (or combinations of these instruments));and agenda item 8 (Resolution regarding the creation ofnew authorised capital). The court has scheduled a conciliationhearing and oral arguments for 14 March 2010.Three additional shareholders have joined the matteras intervenors, two of them on the part of Conergy AG;the third intervenor has not yet filed an application.Concurrently to the matter pending at first instance, theCompany also initiated proceedings to obtain a releaseunder the German Stock Corporation Act re-

67Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther Informationgarding the resolutions under agenda item 7 and 8. Inthese proceedings the Hamburg Upper RegionalCourt handed down a ruling on 4 February 2011 whichgranted the Company’s applications for release in fulland found that the filing of the lawsuit did not pre-emptthe recording of the resolutions in the CommercialRegistry. The resolutions in question have been recordedin the Commercial Registry in the meantime.Product and production risksWhile the services that Conergy offers and the productsthat it manufactures must satisfy highest qualityrequirements, quality defects can never be ruled out,no matter what precautions are taken. Any failure onthe part of Conergy’s products to satisfy the requirementsstipulated with the customer can result in the lossof such customer and thus in the loss of sales as wellas give rise to supplementary claims (particularly underwarranties). Given Conergy’s long-term production andservice contracts, such quality-related risks could alsojeopardise the profitability of its production and services.As far as self-produced products are concerned, thesepotential risks are lowered through quality managementthat is integrated into production. In the 2007 financialyear, quality standards in the plants were improvedsuch that production facilities of the ConergyGroup – for example, its plant for producing aluminiumframes for solar modules and the quality standards ofvoltwerk electronics GmbH – were certified under ISO9001. Additional certifications of other production facilities,such as the solar factory in Frankfurt (Oder),were completed in March 2010.The quality of the units that Conergy sells is largelycontingent on the quality of the (pre)products used.Defective performance or sales counterfeit goods bysuppliers could make it impossible for Conergy to provideits own contractual services, in turn triggeringclaims under warranties or product liability. Conergy isthus dependent on the quality of the products that aredelivered to it. This also applies to components thatthe suppliers develop in cooperation with Conergyand/or that are produced for Conergy under constructioncontracts.Although Conergy generally has a right of recourseagainst its suppliers if its customers bring claims underwarranty and for damages due to defective (pre)products, its claims may not be enforceable in everycase nor can all related contracts be reversed.Conergy counters these risks with a standardised purchasingand product control process that serves to verifyboth performance and quality. The Company limitsguarantee risks by stipulating guarantees with its suppliersessentially in accordance with the agreements itmakes with its customers. However, these measures onlyapply to future contracts but not to plants already built.Customary provisions have been recognised to meet futureand known claims under warranties. Any claims underwarranty by Conergy’s customers in excess of customaryprovisions could negatively affect Conergy’sassets, liabilities, cash flows and profit or loss.Business interruptions can not be precluded despite thefact that we use high standards of technology and securityin the construction, operation and maintenance ofConergy’s production facilities. Furthermore, Conergyproduction facilities have been subject to acts of sabotageand damage in the past. These risks are compoundedby the fact that in all these cases people, thirdpartyproperty and/or the environment might be harmed,in turn triggering considerable financial costs, evencriminal liability.Conergy is subject to a large number of constantlychanging and increasingly challenging regulations regardingenvironment and health protections. These requirementshave already sparked a need for capital investmentsin the past and the Company anticipatesexpending substantial funds in future as well in order tofulfil all applicable statutory requirements. This applies, inparticular, in connection with the expansion of Conergy’sproduction facilities or whenever applicable requirementsare substantially tightened. Nor can we precludethat producing and/or transporting liquid substancesthat are hazardous to water might be limited in future bymeans of statutory or regulatory requirements in light ofthe risk they pose to the environment.In building, modifying and operating its plants, Conergyis dependent on public permits, particularly permissionsgranted by the authorities under the German Federal ImmissionsControl Act (Bundes-Immissionsschutzgesetz),relevant state building codes and laws concerningwater and waterways (Wasserrecht).The Conergy Group engages in proactive insurancemanagement in order to cover all significant risks. Thiscomprises property, business interruption, liability andtransport insurance policies as well as insurance policiesthat cover losses of goods and buildings. However,certain risks are excluded under these insurance policies.In particular, possible warranty obligations (e.g., forseries defects) are not completely covered by insurance.

68Conergy AG I Annual Report 2010Protecting its industrial property rights, especially itsknow-how, is of major significance to Conergy. Anyloss of know-how can limit Conergy’s ability to profitfrom innovative technological developments. Moreover,insufficient protection of its know-how could also leadto a reduction in future income if other players were tosucceed in marketing or manufacturing products usingprocesses similar to those that Conergy developed. Thiscould adversely affect Conergy’s competitive position.Project risksRisks specific to the project business arise from theneed for prefinancing as well as the projects’ verylarge order volume. Difficulties and delays in carryingout these projects could harm Conergy’s reputationand give rise to substantial damages payable to theprojects’ principals under the Company’s liability aswell as to loss of sales and liquidity shortfalls. Implementingits project business also exposes the ConergyGroup companies to the customary risks of a generalcontractor. Conergy regularly stipulates fixedprices for fixed performance in its project business.Any planning or budgeting mistakes in connectionwith a project as well as any defective or delayed executioncould preclude carrying out the project inquestion such that it is profitable or at least coversour cost. Finally, Conergy also provides advanceservices as part of its project development work thatare not remunerated if the given project fails.Every project undergoes a fixed planning and decisionmakingprocess in order to ensure that all parameterscritical to its success have been considered in theproject selection process.In addition, we already issued a directive for Conergy’sproject management in the 2007 financial year, whichestablishes binding guidelines with respect to processes,decision making and controlling during individualproject phases. These are reviewed and enhancedregularly. The most recent updating of approval andworkflow processes was completed in February 2011.Personnel risksGiven that Conergy’s success is largely dependent on itsmanagement and employees, it is crucial that Conergyprovides incentives to ensure executive and employeeloyalty and recruits additional highly qualified personnel.Conergy might fall behind its competitors if it is unableto recruit experienced professionals as needed in futureand to find adequate replacements for experienced staffwho currently leave the Company.Works Councils at both Conergy AG and ConergyDeutschland GmbH were established in 2008. Furthermore,Works Councils were established at voltwerkelectronics GmbH in January 2009 and at ConergySolarModule GmbH & Co. KG in March 2009. Therefore,Conergy AG, Conergy Deutschland GmbH, voltwerkelectronics GmbH and Conergy SolarModule GmbH &Co. KG have to observe the statutory rights of the respectiveWorks Councils to participate in future decisionmaking.This could delay the execution of necessaryoperational changes and thus cause the affectedcompany to incur greater costs.The members of the Supervisory Board of Conergy AGare elected by the shareholders. An expert opinion hascome to the conclusion that Conergy AG normally hasfewer than 500 employees and thus that these employeesdo not have a co-determination right on theSupervisory Board pursuant to Section 1 para. 1 no. 1of the German One-Third Co-Participation Act (Drittelbeteiligungsgesetz).The Company assumes thereforethat its Supervisory Board need not have employeerepresentatives comprising one-third of its members.Information technology risksEnsuring smooth business processes requires efficientand continuous operation of data processing systemsgiven that Conergy’s operations (e. g. production,sales, logistics, controlling and accounting) are largelycomputerised. Failures of existing systems can have asmuch of an adverse effect as introducing new systems.Conergy outsourced its computer centre operations toan external service provider back in 2007 in order tominimise relevant risks of loss. This ensures that the ITinfrastructure is maintained at a high standard at alltimes and that all requirements regarding both the securityand the availability of data are satisfied. ConergyAG and Conergy Deutschland GmbH introduced SAPas their ERP system in early 2009 in order to improvetransparency within the companies. Furthermore, theCompany initiated projects that involved the migrationin 2010 and 2011 to the latest version of the MicrosoftDynamics NAV (Navision) ERP software, which is beingused in addition to SAP. It cannot be precluded thatthese release changes cannot be implemented asplanned or later than planned or not at all. Furthermore,errors in using the systems might increase in thestart-up phase in spite of intensive training and the coordinationof work processes due to the introductionof new IT systems; additional quality assurance anderror correction could lead to delays and shifts inschedules. Conergy’s IT security was defective in the

69Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther Informationpast and its emergency planning was insufficient. TheCompany has taken measures aimed at largely eliminatingthe shortcomings regarding access rights, authenticationand master data management. Backupsystems were updated at the time the Company’scomputer centres were outsourced and the emergencyprotocols have been revised as well.Financial risksLiquidity risksPlease see the section entitled “Terms and conditions ofthe syndicated loan agreement” on page 62 f. in regardsto the material earnings and liquidity risks arising fromthe syndicated loan agreement.The loan agreement contains a change of control provision.Any change of control – i. e. a situation where anindividual or a group of people acting in concert witheach other (pursuant to an agreement or by othermeans) gain control over the Company – would givethe lenders the individually exercisable right to terminatethe loan for cause. The Company’s ability to manoeuvrewould be eliminated if the loan was called immediatelyand would probably lead to its insolvency.Based on the insights gained with respect to theliquidity situation from groupwide financial planningtools, Conergy now utilises liquidity planning thatcovers a period of 13 weeks and is rolled over on aweekly basis as well as an ongoing planning updatethat covers the period until year’s end. Advanced controllingtools and IT systems will be introduced tosupport the planning process.According to the Company’s planning and based onthe existing credit lines and guarantees, the liquidity ofConergy AG and the Group is basically ensured in boththe short and medium term through cash inflows fromoperating activities. This is contingent on the implementationof the refinancing concept. Among otherthings, this concept provides for a reduction of theCompany’s capital stock of roughly EUR 398 millionby approximately EUR 348 million to approximatelyEUR 50 million, as well as a capital increase of up toEUR 188 million. Conergy’s shareholders will have asubscription right in connection with this capitalincrease. If these subscription rights are exercised,Conergy will use the proceeds to discharge the correspondingamount of the loans outstanding. If thesubscription rights are not exercised, some creditorscommitted theirselves to contribute their loan receivablesfrom Conergy as an in-kind contribution up tonominally EUR 188 million in exchange for shares; tothis end, the loan receivables shall be measured at60.0 percent of their nominal value. Conergy’s debt willbe reduced in both cases.In the meantime these measures were resolvedaccordingly by the Extraordinary General Meeting on25 February 2011 and are being implemented. Finalimplementation of the refinancing concept is stillsubject to the condition that the guarantee facilitiesexisting as at 31 December 2010 are reduced to roughlyEUR 141 million. Despite the operational constraintsrelated and the initial delays the management boardexpects the implementation of the concept accordingto the agreement. Certification by a court-appointedauditor for the in-kind contribution that the value of theloan liabilities to be contributed in a non-cash capitalincrease corresponds to at least 60.0 percent of theirnominal value is a further requirement – next to the reductionof the credit lines; all other terms of the newloan agreement have been fulfiled.Please see the section entitled “Terms and conditionsof the syndicated loan agreement” on page 62 f. in regardsto details of the syndicated loan agreement.If, in addition to that, there are substantial shortfallsin sales and income as well as in the expected cashinflows from operating activities compared to targetfigures, both the Company’s and the Group’s existenceas a going concern might be jeopardised ifthey are unable to offset the relevant effects throughother actions.Interest rate and currency risksA large part of the Conergy Group’s purchasing andsales volume in the 2010 financial year was effected invarious currencies – in particular, euros and US dollar.The Company is thus exposed to substantial currencyrisks.A currency management process was implemented inthe 2009 financial year because exchange rate fluctuationscan materially affect the net earnings of theConergy Group. It systematically records as well asregularly analyses, measures and controls the Group’scurrency risks. Appropriate strategies are designedand executed based on the Group’s exposure to currencyrisks and its expectations. The ManagementBoard has established clear guidelines for continuousmonitoring of currency risks, compliance with which isregularly verified by a committee. The correspondingshort-term and long-term interest rate positions have

70Conergy AG I Annual Report 2010also been centrally recorded, analysed and measuredsince the start of the second half of 2009. The committeemonitors the fixed hedging strategies.On principle, the Corporate Treasury department hedgesboth interest rate and currency risks in close collaborationwith the operating units using hedges that involvederivative financial instruments, such as currencyoptions, as set out in the Company’s “Treasury Guideline”.Treasury also hedges currency and interest raterisks related to the project business, as necessary. Furthermore,the Conergy Group optimises its currencyrisks by pushing natural hedging measures – i. e. bymatching cash outflows under delivery contracts withcash inflows from external revenue in the same currency.Interest rate swaps and options currently are the primarymeans of hedging interest rate risks.Sales of Conergy’s products and services are contingenton the willingness of its current and potentialcustomers to make investments. This willingness to investdepends on the growth of demand for photovoltaicunits. Grid-connected PV units are often financedthrough extensive borrowings. This applies to bothsmall and medium-sized units that are installed by individuals,SMEs or government authorities as well asto major PV plants that are acquired by investors. Lowinterest rates in recent years and hence low borrowingcosts have had a positive effect on the profitability ofphotovoltaic units, stimulating the demand for solarpower systems that is already being fed by statutorysubsidies. Given otherwise unchanged general conditions,any increase in interest rates would raiseborrowing costs and thus reduce the profitability ofphotovoltaic units, undermining demand for them.Restrictions on the availability of credit particularly inconsequence of the crisis on the financial and salesmarkets and higher expectations of investors as regardstheir return on investment could also depressthe number of PV units that are installed.Default risksDefault risks from trade or financial receivables entailthe risk that the receivables are paid late, not in full ornot at all.Customers wanting to do business with the ConergyGroup are subject to various credit checks. In addition,the Company’s central working capital managementcontinuously monitors all receivables outstandingworldwide in terms of their aging structure. Measuresaimed at collecting receivables are determined in cooperationwith the decentralised units. Business withmajor customers is subject to separate credit monitoringin connection with the Group’s central working capitalmanagement as part of receivables management.There is no guarantee nonetheless – especially againstthe backdrop of the situation on the capital and salesmarkets as well as the process of consolidation amongsuppliers – that the Company will actually be able to collectreceivables. It is also becoming increasingly difficultto obtain receivables coverage from credit insurers.Risks related to the utilisation of governmentsubsidiesConergy Group companies have received publicsubsidies in the past. These subsidies are subject tospecific requirements and strict controls aimed atverifying whether or not the standards for publicsubsidies have been met. Any noncompliance with therequirements carries the risk that the subsidies mighthave to be repaid. We can not preclude that the modifiedplans or political changes in connection withConergy’s factory in Frankfurt (Oder) or parts of thisfactory or other Group companies will entail a greatercut than expected in the subsidies made available toConergy and that the Company might face repaymentdemands by the authorities, especially on groundsthat it did not comply with the requirements.But the Company’s project business is also closelylinked to developments in the capital markets and thusdepends on current interest rates. Rising interest ratesor the banks’ growing unwillingness to provide loanswould make project financing more expensive or evencause it to fail because Conergy’s customers tend tofinance through borrowing, in particular for major PVplants; the resulting effects on demand for projects orits attainable margins would be highly detrimental. It isfor this reason that Conergy is increasingly looking foralternative means of funding.Conergy plans to continue applying for governmentsubsidies in future. Whether or not subsidies aregranted is usually at the discretion of the public sectorentity or authority making the grant subject to theavailability of budgeted funds. Grants are frequentlymade available, provided the relevant budget has earmarkedfunds for a specific programme and providedall relevant requirements are met. But there are no optionsfor obtaining and claiming subsidies by recourseto the courts.

71Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther InformationTax risksConergy and its domestic subsidiaries are subject toroutine government tax audits. The Group’s foreignbusinesses are also subject to similar tax audits. Themost recently completed tax audit of the companies inGermany concerned corporate income, municipaltrade and value-added taxes in the 2000 to 2003 assessmentperiods. Tax assessments for the followingyears are subject to subsequent audits and thus canbe changed, particularly in the wake of a comprehensivetax audit.The tax authorities have decided to eliminate a totalof about EUR 7.8 million in loss carryforwards forConergy AG, the Momentum Renewables GmbH(former EPURON GmbH) and SunTechnics GmbH(today: Conergy Deutschland GmbH) as a result of thecomprehensive tax audit of the 2000 to 2003 assessmentperiods. The companies have already receivedrevised tax assessments, which they have appealed.Conergy has not yet recognised any provisions forthe taxes expected to be owed pursuant to the comprehensivetax audit because internal and externalexperts alike believe that Conergy stands a goodchance of winning its appeals and applicable losscarryforwards exist.Conergy and the tax authorities are disputing additionalalbeit monetarily less significant issues in connectionwith the comprehensive tax audit, namely thetreatment of the costs related to the IPO, which wasinitially planned for 2001, as well as issues in connectionwith a wage tax audit.loss carryforwards can not be used in the foreseeablefuture. The changed shareholder structure followingthe completion of the December 2008 capital increaseas well as the takeover of Dresdner Bank AG (in January2009) and the merger of Dresdner Bank AG withCommerzbank AG (in May 2009) eliminated additionaltax loss carryforwards on a pro rata basis under Section8c para. 1 German Corporate Income Tax Act.Conergy continues to review whether the restructuringprovision in Section 8c para. 1a German Corporate IncomeTax Act – which was introduced as part of theso-called Bürgerentlastungsgesetz-Krankenversicherungfor the purpose of enhancing the deductibility ofhealth insurance premiums on 16 July 2009 – affectsthe December 2008 capital increase and applies to theindirect changes in the shareholder structure in 2009and the extent to which the remaining existing lossescan be carried forward.By its ruling dated 26 January 2011, the EuropeanCommission decided in a formal investigation (C 7/10)that the restructuring provision under Section 8cpara. 1a German Corporate Income Tax Act constitutesan unlawful government grant. The letter of theGerman Ministry of Finance dated 30 April 2010already made it unlawful to apply the restructuringprovision. In the German government’s view, this is nota harmful grant. A press release dated 9 March 2011 ofthe German Ministry of Finance announced that theGerman government would file suit to vacate the rulingof the EU Commission. The outcome of this procedureis uncertain. Along with internal and external experts,Conergy is currently reviewing its legal options.A comprehensive tax audit of both Conergy AG andthe Conergy Group’s German subsidiaries started inNovember 2009; it concerns the years 2004 through2008. The underlying tax assessments are subject tosubsequent audits and thus can be changed. Significantfindings of the comprehensive tax audit of theyears 2004 through 2008 which result in a tax burdenfor the companies have not yet been made available.Given the complexity of tax laws – e. g. with respect tointragroup pricing or VAT – current or future comprehensivetax audits can always trigger demands foradditional payments, both at home and abroad.As at 31 December 2010, the Company has deferredtax assets of EUR 35.1 million primarily from tax losscarryforwards. Conergy assumes that these tax losscarryforwards will be available for offsetting againstfuture income before they expire. These deferred taxassets will have to be written down if the underlyingThe tax loss carryforwards of both the Company anddomestic subsidiaries could no longer be utilised if theruling on the restructuring provision is final. If the taxloss carryforwards can no longer be utilised, this wouldhave a substantially negative impact on Conergy’sassets, liabilities, cash flows and profit or loss. Theruling of the EU Commission will not give rise to anyclaims for refunds. This possible elimination of losscarryforwards was already taken into account in thedetermination of the deferred tax assets on loss carryforwardssuch that it will not affect the extent of thedeferred tax assets recognised in 2010.Indirect or direct acquisitions of equity interests in thecapital stock of Conergy AG may result in the applicationof Section 8c German Corporate Income Tax Actand hence the elimination of tax loss carryforwards afterthe reporting date.

72Conergy AG I Annual Report 2010Supplemental tax claims for past periods or the eliminationof the loss carryforwards could considerablyincrease Conergy’s future tax burden. In addition,changes in the tax law, such as the interest deductionceiling introduced in 2008, which severely limits thetax deductibility of interest payments, could also raisethe Company’s taxes.Conergy works closely with internal and externalexperts in order to arrive at reliable and predictableassessments of its tax risks and reduce possible taxburdens by taking appropriate action and decisions.Management risksConergy operates in the world’s most important solarmarkets. The Company generally pursues its businessthrough subsidiaries whose managing directors aregiven extensive decision-making authority in order tobe able to act and react autonomously in proximity tothe relevant market.These executives are committed to responsible management.Nevertheless, given the responsibility andlatitude that is granted to these executives, the risk ofabuse can not be fully precluded despite fully developedand multi-stage review and controlling mechanisms.Directors & Officers insurance policies (D&O insurance)that provide for suitable deductibles as definedin the German Corporate Governance Code have beenpurchased on behalf of all Group companies’ Managementand Supervisory Board members as well as executivesfor the purpose of hedging the risk of liabilityclaims against the Group’s management.Other risksThe Conergy Group might become the target of atakeover by a competitor or vulture company and, as aresult, be taken over and/or broken up.OpportunitiesAside from resulting in the risks described above, therelevant scenarios can also give rise to opportunities.In the past, the Conergy Group positioned itself primarilyas a downstream provider in the PV market whilemaintaining its access to upstream know-how throughits Frankfurt (Oder) solar factory, voltwerk electronicsGmbH in Hamburg, which manufactures electroniccomponents such as tracking systems, intelligentconnection boxes and string and central inverters, andMounting Systems GmbH, which develops and manufacturesmounting systems and module frames. In2010 Conergy successfully positioned itself as a fullyintegratedsystems manufacturer with a leading qualitybrand, superior system performance, top-notch servicesand a well-organised production and partner network.Hence Conergy has occupied almost all stages of thesolar value chain, further strengthening the positioningof its brand. This enables us to broaden our customerrelationships to installers, wholesalers of electricalequipment and strategic marketing partners as well asfurther expand the development, financing and executionof major photovoltaics projects.This could result in at least the following opportunitiesthat might have a positive effect on the Company’ssales, earnings or liquidity. Note that the opportunitiesdescribed below may not bear fruit at all or in full andthat the occurrence of one or more of the aforementionedrisks might make it partly or wholly impossibleto tap into the positive effects of these opportunities.Conergy is exposed to risks arising from potentialradical changes in the political, legal and social environment.Likewise, possible terror attacks or naturaldisasters theoretically pose a risk to the Company’snet assets, financial position and profit or loss.Conergy is exposed to the risk of competitors orothers engaging in industrial espionage given itshighly visible activities in an attractive market with apromising future and its own high-tech productionfacility in Frankfurt (Oder). This concerns process andproduction know-how as well as any other proprietaryknow-how.Increased profitability of PV unitsFalling prices for solar modules and other systemcomponents can lead to a noticeable reduction in thecost of investments in PV units per kWp of installedoutput. If the reduction in systems prices were to noticeablyoutpace any renewed amendment of lawspromoting renewables – existing promotions being thesame – the profitability of PV units in certain marketsmight noticeably improve, provided current interestrates are cut and reasonable refinancing options areavailable. If this development were to occur simultaneouslywith the availability of sufficient funds, PV unitscould be turned into attractive and secure investmentoptions for end customers and investors alike.

73Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities |Group Management ReportConsolidated Financial StatementsFurther InformationRising demand momentumThe demand for systems in the end customer market isalso subject to the elasticity of demand, a factor thathas not been adequately analysed to date in regards toPV systems. However, any decline in systems prices isexpected to have a substantial impact on the demandfor photovoltaic units. High price elasticity could substantiallystimulate demand, in turn tightening supplies.There is no doubt that lower investment costs per kWpand alternative investment options would attract manymore customer groups and turn PV systems into areality for everybody not just in the core photovoltaicsmarkets but also in emerging markets such as China orIndia. Given this backdrop, there is the chance that yetanother sharp drop in systems prices could cause demandto soar, provided price elasticity remains high.This also depends on customers’ confidence in thefuture, the stability of their own financial situation aswell as their access to adequate own funds and/orfunding options.Renewables as an increasingly attractiveseparate asset classThe uncertainty in the capital markets has unsettledmany investors. By definition, alternative energy projectsoffer considerable advantages in these times. In stablecountries, photovoltaics projects for instance arelargely embedded in a statutory framework and protectedfrom external effects such as commoditiesprices, interest rate trends etc.Depending on a project’s financing structure, photovoltaicssystems can offer a return on equity of between8.0 percent and 14.0 percent over a useful life of 20 years.Thanks to the uninterrupted cash streams they generate,statutory schemes aimed at promoting PV systems –whether by means of statutory feed-in tariff systems ortax incentives – create a framework for investment andfinancing that is stable and above all does not rely on thecapital market. This means that we may expect continuedstrong demand from institutional and financial investorsas well as banks for such investment opportunities.This could have a positive effect on the Company’sassets, liabilities, cash flows and profit or loss.The photovoltaics market developed into a mass marketin recent years largely thanks to the expansion of governmentalmarket incentive programmes. Key factorsthat have contributed to the large reduction in PV systemcosts comprise the expansion of production capacitiesand the related realisation of economies of scale as wellas improvements in plant performance through gains inpeak efficiency factors. BSW Solar proves that the priceof PV units has declined by 45.0 percent since 2006. Themarket thus continued to grow in 2010 as well despitethe reduction in the feed-in tariffs by double-digit percentages.In its market assessment, Bank Sarasin expectsnewly installed PV output to grow by 87.0 percentbetween 2009 and 2010. According to the preliminaryfigures of the German Federal Network Agency on theinstallation volume, Germany is the most important ofthe largest markets, achieving an installed output ofmore than 6.2 GWp in the first eleven months of 2010.Sarasin forecasts growth of 86.0 percent for Europe in2010. Yet the number of installed units outside of Europe– in the Americas and APAC for instance – has alsogrown exponentially. In 2010, numerous markets alreadyattained a level where growth in newly installed PV systemsexceeds 500 MWp per annum. This helps to mitigatethe risk from changed parameters in individual keymarkets such that it has less of an impact on internationallyaligned players in the PV market. Sarasin expectsthe growth of such a globally positioned photovoltaicsindustry to stabilise for that reason and forecasts an annualaverage growth rate of 28.0 percent between 2009and 2020.But the solar industry faces major challenges in 2011. Allplayers must prepare for further reductions in solar energygrants, especially in Europe. In Germany, yet anotherreduction in the feed-in tariff by approximately 12.0 to15.0 percent is slated to take effect by mid-2011. The finalamount of the reduction will be contingent on the volumenewly installed between March and May 2011. Italy,Spain, the Czech Republic and France will also reducesubsidies for solar energy in 2011. Discussions in Franceregarding the introduction of a cap, retroactive restrictionsin Spain on the number of hours during which solarelectricity from previously installed units will be compensatedas well as the introduction in the Czech Republicof a tax of 26.0 percent on all photovoltaic unitsinstalled since 2009 are also unsettling investors.Conergy’s international positioning helps to cushion theimpact of the markets’ economic fluctuations. The positiveand stable development of the market in the UnitedStates is being reinforced by the “renewable energy grantprogram”, which was extended for another year. Up to30.0 percent of the costs of solar projects will be directlyreimbursed thereunder in 2011 too. Conergy will thus beable to benefit from the U.S. market’s expected positivedevelopment thanks to both its presence in that marketand its experience. Installed PV output is expected tomore than double between 2010 and 2012 in the UnitedStates. This could have a positive effect on Conergy’sassets, liabilities, cash flows and profit or loss.

74Conergy AG I Annual Report 2010Conergy’s presence in the APAC region, which continuesto grow at stable rates, as well as the developmentof new markets such as the United Kingdom, could alsohave a positive effect on the assets, liabilities, cashflows and profit or loss of Conergy.Yet photovoltaics are at a crossroads as far as the developmentof the market in future is concerned. Owing to thereduction in system costs, in the next few years the costof generating electricity from photovoltaics will reach thelevel of the rates charged to end consumers for energyfrom conventional sources and thus become competitive.Different market surveys forecast that grid parity willbe achieved at the household level within the next two tothree years in sunny countries such as Italy, Spain orCalifornia. Starting in 2013, solar electricity should matchthe cost of electricity from conventional sources in otherCentral European countries too. The current increase inelectricity prices resulting from the sharp increase in coalprices may bring about grid parity at an earlier date. Earlygrid parity would have a positive effect on consumerdemand for photovoltaic systems and installations,which could benefit Conergy. Consumers would be presentedwith a choice as to the provenance of their gridpower. This would increase the number of projects andindividual demand as well as sustainably boost demandfor photovoltaic system components in general, which inturn would also have a positive effect on Conergy’s earningsas a supplier of photovoltaic systems.Report of anticipated developmentsGlobal economic developmentsThere are increasing signs of impediments that willweaken the strong momentum of the global economy’spowerful recovery that started a year ago due, amongother things, to individual countries’ significantly tightenedfiscal policies. Economic research institutesexpect global production to expand by 3.6 percent in2011 and by 4.0 percent in 2012. The forecasts of theInternational Monetary Fund are even higher: 4.4 percentfor 2011 and 4.5 percent for 2012.The growth of manufacturing activities in emergingeconomies, which was very strong this past year, willcontinue at a high level for the foreseeable future albeitat a slower pace because exports to industrialisedcountries will weaken owing to the latter’s lower growth.Experts predict that China’s economy will grow by9.6 percent in 2011 and India’s by 8.4 percent. In contrastto several economic boom years, Brazil is expectedto grow by only 4.5 percent in 2011.Unlike the trend in emerging economies, in industrialisedcountries manufacturing is still below pre-crisislevels. The experts of the Kiel Institute for the WorldEconomy expect GDP in the industrialised countries togrow by 1.9 percent in 2011, specifically, by 2.5 percentin the United States, 1.5 percent in Japan and 1.3 percentin the United Kingdom. Growth in the industrialisedcountries will remain modest in 2012 as well.The leading economic research institutes expect Germany’supward momentum to continue in the next fewyears even though its expansion will lose much of itsmomentum. Exports are expected to weaken, in turndampening growth in the domestic manufacturingsector. Domestic demand is expected to continue unabatedhowever.The German government has raised its growth outlookfor 2011 to 2.3 percent in the light of Germany’s robusteconomic growth. This corresponds to the expectationsof the economic research institutes even thoughthey already expect growth to decline to 1.3 percent in2012. The German government expects the economicmomentum to weaken worldwide next year, causingimports and exports to expand by only 6.5 percent.The leading economic research institutes also pointout that their economic forecasts are fraught with certainrisks. This includes the potential slowdown in thepace of the U.S. economy’s recovery as well as theEuropean debt crisis which has not subsided by anymeans. Recourse to the European financial stabilisationmechanism by a European country could also have anegative impact on Germany’s strong economy.Dampening effects might also arise from banks’ ongoingneed to write off bad debts as well as the developmentof commodities prices.Development of the industryIn terms of newly installed volume worldwide, 2010was a record year for the solar industry. The prevailingclimate for solar energy is expected to remain favourablegiven the global economy’s continued upturn.The demand for solar electricity systems, which remainsas strong as ever, is being propelled particularlyby statutory incentive programmes worldwide that aimto raise the share of solar energy in the electricity mixon a continuous basis.

75Top quality – from a single sourceManagement Board and Supervisory BoardRisks & Opportunities | Report of anticipated developments |Group Management ReportConsolidated Financial StatementsFurther InformationYet growth is expected to slow down dramaticallynonetheless, owing in particular to the planned regulatorycuts in Germany by mid-year and in the CzechRepublic for the year on the whole. Nor can we precludethat the volume of newly installed PV systemswill fall for the first time ever in 2012 mainly due to thedownturn in the German market. Europe, which stillaccounted for roughly 80.0 percent of the world marketin 2010, is likely to experience a slight decline to about70.0 percent in 2011 whilst North America and Asia willcontinue to grow. In all likelihood this trend will continuein 2012 also.Additional cost-cutting measures are planned for 2011,and they will contribute to the ongoing improvement inthe operating result provided the gross profit marginremains stable. This year too both earnings and cashflow will be weighed down by restructuring expensesthough to a lesser extent than in 2010. Conergy expectsto post EBITDA in the mid-double-digit millions in 2011.Assuming that general conditions for solar energy willremain positive on the whole, as long as cash flow isstable sales will continue to rise in 2012 and earningswill improve.As a result the installed volume will shift to the marketsoutside of Europe in the medium term because theirgrowth rates are expected to be higher – above all theUnited States, China, India and Japan.Hamburg, 22 March 2011Conergy AktiengesellschaftThe Management BoardOutlookConergy’s planning is based on the assumption thatmost of the markets for PV systems will develop alonga positive trajectory. It also anticipates the usualamount of reductions in the volume of grants in its establishedforeign markets. Moreover a trend towardsetting caps is beginning to take hold in some Europeanmarkets. After two years of record growth, in Germanythe market volume is expected to decline in 2011due to the cuts in feed-in tariffs. Conergy plans to enterinto new markets as local schemes aimed at promotingregenerative energies are put in place.It does not expect any bottlenecks in silicon supplies;on the contrary, excess supplies will force down prices.The prices of other commodities and raw materials arelikely to remain stable or rise slightly. In the solar modulemarket, supplies are expected to satisfy demand, possiblytriggering a general pressure on prices. Conergybelieves that it will be able to weather such price pressuresthanks to its premium products.Whilst Conergy expects sales to continue climbing tomore than EUR one billion in 2011 on the heels ofstrong growth in the year just ended because generalconditions (except in Germany) will remain largelyunchanged, it is clear that last year’s growth momentumcannot be repeated. This forecast is rooted in thecontinuous decline of module prices.

Consolidated financial statementsas at 31 December 2010

77Consolidated financialstatements78 Consolidated income statement of theConergy Group79 Consolidated balance sheet of theConergy Group80 Consolidated statement of cash flowsof the Conergy Group81 Consolidated statement of changes inequity of the Conergy GroupNotes to the consolidatedfinancial statements of theConergy Group82 1. Reportable segments82 2. General comments82 3. Key accounting policies99 4. Assumptions and exercise in judgment101 5. Management of financial risks104 6. Changes in the consolidated group106 7. Segment disclosuresDisclosures and commentson the income statement107 8. Sales107 9. Personnel costs108 10. Other operating income108 11. Other operating expenses109 12. Amortisation, depreciation andimpairment of intangible assets andproperty, plant and equipment109 13. Non-operating result109 14. Income taxes112 15. Earnings per shareDisclosures and commentson the consolidated balance sheet113 16. Intangible assets and goodwill114 17. Property, plant and equipment115 18. Financial assets115 19. Other assets115 20. Inventories115 21. Trade accounts receivable116 22. Grants received117 23. Cash and cash equivalents117 24. Equity119 25. Provisions120 26. Stock options programme120 27. Borrowings122 28. Trade accounts payable122 29. Other liabilities122 30. Reporting on financial instrumentsOther disclosures126 31. In- and outflow of cash and cashequivalents127 32. Contingent liabilities and other financialobligations128 33. Related parties130 34. Number of employees130 35. Auditing fees130 36. Declaration of compliance130 37. Events after the reporting period132 Independent Auditor’s Report

78Conergy AG I Annual Report 2010Consolidated income statement of the Conergy Group *EUR million Note 2010 2009Sales 8 913.5 600.9Changes in inventories of finished goods and work in progress 19.1 – 38.8Cost of materials – 715.7 – 444.5Gross profit 216.9 117.6Personnel expenses 9 – 85.3 – 82.1Other own work capitalised 0.1 0.3Other operating income 10 33.6 64.8Other operating expenses 11 – 135.2 – 111.3Earnings before interest, taxes, depreciation and amortisation (EBITDA ) 30.1 – 10.7Depreciation and amortisation 12 – 43.9 – 26.1Earnings before interest and taxes (EBIT) – 13.8 – 36.8Non-operating income 1.2 0.7Non-operating expenses – 15.9 – 22.5Non-operating result 13 – 14.7 – 21.8Earnings before taxes (EBT) ** – 28.5 – 58.6Income taxes 14 – 13.5 – 22.5Income from continuing operations after taxes – 42.0 – 81.1Income from discontinued operations after taxes 6 – 2.9 1.8Income after taxes – 44.9 – 79.3Changes in value recognised in equityExchange differences from the translation of foreign subsidiaries – 1.8 – 1.5Comprehensive loss *** – 46.7 – 80.8Income after taxes – 44.9 – 79.3Thereof attributable to:Shareholders of Conergy AG (Group profit or loss) – 44.7 – 79.9Minority shareholders – 0.2 0.6Comprehensive loss *** – 46.7 – 80.8Thereof attributable to:Shareholders of Conergy AG – 46.5 – 81.4Minority shareholders – 0.2 0.6Earnings per share (in EUR) 15Basic – 0.11 – 0.20Diluted – 0.11 – 0.20Earnings per share (in EUR) from continuing operations 15Basic – 0.11 – 0.20Diluted – 0.11 – 0.20*Consolidated statement of comprehensive income**Corresponds to earnings from ordinary activities***Corresponds to the sum of income after taxes and changes in value recognised in equity

79Consolidated income statement | Consolidated balance sheet |Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationConsolidated balance sheet of the Conergy GroupEUR million Note 31.12.2010 31.12.2009Non-current assetsGoodwill 16 1.0 14.9Intangible assets 16 10.2 12.6Property, plant and equipment 17 164.4 183.9Financial assets 18 1.6 8.2Other assets 19 0.9 0.9Deferred tax assets 14 35.1 45.6213.2 266.1Current assetsInventories 20 169.5 107.5Trade receivables 21 103.2 113.4Financial assets 18 4.6 3.1Other assets 19 63.9 68.5Cash and cash equivalents 23 36.7 52.1377.9 344.6Assets held for sale and discontinued operations 6 22.3 38.4400.2 383.0Total assets 613.4 649.1Equity attributable to the shareholders of Conergy AGShare capital 398.1 398.1Capital reserve 323.9 321.8Other reserves – 650.4 – 603.971.6 116.0Non-controlling interests – 0.2 0.0Total equity 24 71.4 116.0Non-current liabilitiesProvisions 25 41.5 35.7Borrowings 27 11.1 88.8Other liabilities 29 2.0 2.5Deferred tax liabilities 14 0.5 0.055.1 127.0Current liabilitiesProvisions 25 10.8 13.2Current portion of non-current borrowings 27 – 18.8Borrowings 27 280.5 186.0Trade payables 28 161.7 116.5Other liabilities 29 28.1 43.5Current income tax liabilities 14 2.9 0.6484.0 378.6Liabilities from assets held for sale and discontinued operations 6 2.9 27.5486.9 406.1Total equity and liabilities 613.4 649.1

80Conergy AG I Annual Report 2010Consolidated statement of cash flows of the Conergy GroupEUR million Note 2010 2009Operating result from continuing operations – 13.8 – 36.8Depreciation and amortisation 43.9 25.5Change in non-current provisions 5.0 2.6Other non-cash income (–) / expenses (+) – 1.1 – 29.0Gains (–) / losses (+) from disposal of fixed assets 0.5 0.2Result from operating activities before changes in net working capital 34.5 – 37.5Increase (–) / decrease (+) in inventories – 73.3 89.6Increase (–) / decrease (+) in trade receivables 8.7 – 9.3Increase (+) / decrease (–) in trade payables 41.8 17.6Change in other net assets / Other non-cash items 4.9 – 9.9Income taxes paid (–) / received (+) 0.5 2.6Cash generated from operating activities, continuing operations 17.1 53.1Cash generated from operating activities, discontinued operations 6 – 9.2 15.4Cash generated from operating activities (total) 31 7.9 68.5Cash receipts from disposal of property, plant and equipment and other assets – –Cash payments for investments in property, plant and equipment and intangible assets – 14.6 – 12.3Acquisition of subsidiaries less cash acquired – –Cash receipts from the sale of subsidiaries 0.4 –Change in financial assets 4.2 – 3.4Interest received 0.9 0.8Net cash generated from investing activities (total) 31 – 9.1 – 14.9Cash receipts from issuance of share capital – –Cash payments in connection with the acquisition of equity – –Cash receipts from borrowings 22.4 48.7Cash payments for repayment of borrowings – 20.7 – 55.5Interest paid – 16.9 – 20.4Cash payments for dividends – –Net cash generated from financing activities (total) 31 – 15.2 – 27.2Change in cash from operating activities (total) – 16.4 26.4Cash and cash equivalents as at 01.01. 54.4 28.0Change from exchange rate changes 0.0 0.0Cash and cash equivalents as at 31.12. 23 38.0 54.4Thereof cash and cash equivalents from discontinued operations / assets held for sale 1.3 2.3

81Consolidated statement of cash flows | Consolidated statement of changes in equity |Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther InformationConsolidated statement of changes in equity of the Conergy GroupEquity attributable to the shareholders of Conergy AGOther reservesValuation adjustmentsrecognized directly inshareholders’ equityEUR millionSharecapitalCapitalreserveRetainedearnings *CurrencychangesCashflowhedgesTotalNoncontrollinginterestsTotalequityAs at 01.01.2009 398.1 321.8 – 524.9 2.4 – 197.4 – 0.6 196.8Owner-based changein capitalCapital contributions – – – – –Dividend payments – – – –Taxes on items recognizeddirectly in equity – – – –Other changesNon-owner changesin equityComprehensive income / loss – 79.9 – 1.5 – – 81.4 0.6 – 80.8As at 31.12.2009 398.1 321.8 – 604.8 0.9 – 116.0 0.0 116.0As at 01.01.2010 398.1 321.8 – 604.8 0.9 – 116.0 0.0 116.0Owner-based changein capitalCapital contributions – – – – –Dividend payments – – – –Taxes on items recognizeddirectly in equity – 1.0 – 1.0 – – 1.0Other changes 3.1 3.1 3.1Non-owner changesin equityComprehensive income / loss – 44.7 – 1.8 – – 46.5 – 0.2 – 46.7As at 31.12.2010 398.1 323.9 – 649.5 – 0.9 – 71.6 – 0.2 71.4*Including Group profit or loss

82Conergy AG I Annual Report 2010Notes to the consolidated financial statements of the Conergy Group1. Reportable segmentsSegments Germany Europe * AmericasEUR million 2010 2009 2010 2009 2010 2009External sales 328.2 255.4 323.7 191.0 63.0 52.4Intersegment sales 0.5 0.5 1.4 1.4 0.0 2.0Segment sales (total) 328.7 255.9 325.1 192.4 63.0 54.4Other operating income 3.4 6.2 7.6 5.5 1.5 2.7Segment result (EBIT) – 2.8 – 9.8 – 5.0 – 18.0 – 10.3 – 6.0Segment investments 0.2 0.1 0.5 0.6 0.1 1.5Depreciation /amortisation – 1.8 – 0.5 – 3.1 – 2.1 – 9.1 – 0.2Thereof impairment losses – 1.4 – 0.1 – 2.4 – 0.8 – 8.9 –Employees FTE ** (as at 31.12.) 94 138 253 261 77 72*Excluding Germany**Full time equivalents2. General commentsConergy AG (hereinafter also referred to as “Conergy”or the “Company”) along with its subsidiaries (the“Conergy Group”) is an integrated systems manufacturerand supplier in the field of renewable energies.The Conergy Group develops, produces and sellsplants and plant components for renewables. In addition,Conergy is also a market leader in the field ofproject development and structured finance for majorrenewable energies projects.Conergy is a listed German stock corporation. Its sharesare traded on the Frankfurt (Main) Stock Exchange inDeutsche Börse’s Prime Standard, which is subject toadditional listing requirements. The Company, whichis registered with the Commercial Registry of theHamburg Local Court under the number HRB 77717,has its headquarters at Anckelmannsplatz 1, 20537Hamburg, Germany. Its consolidated financial statementsare available at the Company’s seat and/or arepublished in the electronic Federal Gazette.On 22 March 2011, the Management Board of Conergyreleased the Company’s consolidated financial statementsfor purposes of submitting them to its SupervisoryBoard (release for publication). The con solidatedfinancial statements were submitted to the SupervisoryBoard’s Audit Committee on 23 March 2011; they wereapproved by the Supervisory Board at its meeting on24 March 2011. Under German law, the consolidatedfinancial statements according to IFRS may bechanged only in exceptional cases and subject to theapproval of the Supervisory Board.Conergy is obligated under Section 315 a GermanCommercial Code (Handelsgesetzbuch) to prepareconsolidated financial statements in accordance withthe International Financial Reporting Standards (IFRS)and the related interpretations of the International AccountingStandards Board (IASB), as applicable withinthe European Union, as well as a management report.3. Key accounting policiesAccounting principlesConergy prepared its consolidated financial statementsin accordance with the IFRS and the related Interpretationsof the International Accounting StandardsBoard (IASB), London, as applicable within the EU,and the additionally applicable provisions of Section315 a para. 1 German Commercial Code.All requirements under the standards and interpretationsadopted by the EU that had to be applied at31 December 2010 were satisfied in full. There wereprincipally no changes in the periods presented to theconsolidated accounting principles underlying recognitionand measurement as well as the ex planationsand disclosures related to the IFRS consolidated financialstatements. Recognition and measurementmethods correspond to the methods applied a yearago unless indicated otherwise. The annual financialstatements of the consolidated companies are basedon consistent and uniform accounting principles andmethods.In order to make the presentation more precise, itemsin the consolidated balance sheet and in the con­

83Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationContinuingAsia-Pacific Components Holding Reconciliationoperations2010 2009 2010 2009 2010 2009 2010 2009 2010 2009110.2 76.7 88.4 25.4 – – – – 913.5 600.90.4 1.2 401.3 168.3 588.8 316.0 – 992.4 – 489.4 – –110.6 77.9 489.7 193.7 588.8 316.0 – 992.4 – 489.4 913.5 600.96.3 9.4 5.1 8.1 38.7 67.6 – 29.0 – 34.7 33.6 64.87.4 7.5 27.9 – 10.3 – 27.4 0.4 – 3.6 – 0.6 – 13.8 – 36.80.7 1.1 12.2 10.6 0.8 1.8 – – 14.5 15.7– 0.6 – 0.6 – 22.1 – 18.8 – 7.2 – 3.9 – – – 43.9 – 26.1– – – 0.2 – 0.7 – 4.1 – 0.7 – – – 17.0 – 2.3144 159 762 580 239 219 – – 1,569 1,429solidated statement of comprehensive income werecombined and explained as necessary in these notes.The statement of comprehensive income has beenprepared using the nature of expense method. Assetsand liabilities are classified as non-current (for maturitiesof more than one year) and current (for maturitiesof less than one year). Deferred taxes are generallytreated as non-current.We distinguish between continuing and discontinuedoperations in accordance with IFRS 5 Non-Current AssetsHeld for Sale and Discontinued Operations. Discontinuedoperations are combined in the balancesheet, the income statement and the statement ofcash flows as separate line items in regard to cashflowsfrom operating activities. Assets and liabilitiesheld for sale are summarised in an aggregate balancesheet item. Unless stated otherwise, the disclosures inthe notes concern the Company’s continuing operations.Discontinued operations are described in note 6.Conergy’s financial year corresponds to the calendaryear. Its consolidated financial statements are generallyprepared using the historical and production costsystem. This does not apply, however, to derivative financialinstruments, which are measured at fair value.All amounts, including those related to the previousyear, are stated in millions of euros (EUR million) unlessindicated otherwise. All figures were commerciallyrounded to one decimal place. The percentage changesgiven in both the text and the tables were also commerciallyrounded to one decimal place.The following new and amended standards and interpretationshad to be applied for the first time by Conergyin the 2010 financial year:| IFRS 1 (Amendment), Additional Exemptions forFirst-time Adopters (1 January 2010)These amendments concern the retrospective applicationof IFRS upon initial preparation of annual financialstatements in conformance with IFRS andexempt companies in the oil and gas industry fromcomplete application of IFRS in regards to the respectiveoil and gas assets as well as companieswith existing leases from reassessment of thesecontracts in terms of their classification under IFRIC 4if at an earlier reporting date an assessment was alreadymade in accordance with national accountingstandards that are comparable to the requirementsof IFRIC 4. Given that Conergy already publishesIFRS financial statements, these amendments donot have any effect on the assets, liabilities, cashflows and profit or loss of the Conergy Group.| IFRS 2 (Amendment), Group Cash-settled SharebasedPayment Transactions (1 January 2010)These amendments clarify how to account for cashsettledshare-based payments in the consolidated financialstatements. A company that receives goods orservices under a share-based payment arrangementmust account for these goods or services irrespectiveof which Group company fulfils the related obligationor whether or not the obligation is settledbased on shares or cash. Since share-based paymentsexist only in connection with the compensation of

84Conergy AG I Annual Report 2010the Management Board at the level of Conergy AG(see note 26), these amendments do not have anyeffect on the assets, liabilities, cash flows and profitor loss of the Conergy Group.| IFRS 3 rev. 2008, Business Combination andIAS 27 (Amendment), Consolidated and SeparateFinancial Statements (1 July 2009)Revised IFRS 3 now governs accounting for businesscombinations. Material changes under therevised standard concern the option to measurenon-controlling interests at fair value in future. Inaddition, acquisition-related costs may no longer beincluded in the acquisition cost but must be expensedinstead. Qualified components of the acquisitioncost must be recognised at the acquisition-date fairvalue while subsequent changes in estimates mustbe recognised in income. Acquisitions of non-controllinginterests and disposals of ownership intereststhat do not result in a loss of control must beaccounted for as equity transactions pursuant toIAS 27 rev. 2008. Compared to previous transactions,the revised standard will affect the futurepresentation of business combinations in Conergy’sconsolidated financial statements in ways that cannotbe estimated at this time.| IFRS 5, Non-current Assets Held for Sale andDiscontinued Operations (1 July 2009)The amendments of IFRS 5 in connection with theimprovements to IFRSs 2008 clarify that subsidiaries’assets and liabilities must be classified asavailable for sale if the Group is not selling all sharesin the given subsidiary but if the sale leads to a lossof control and the remaining classification requirementsof IFRS 5 have been met. The amendment ofthe standard will not have any effect on the assets,liabilities, cash flows and profit or loss of the ConergyGroup because it does not have any such plans as atthe reporting date to sell equity interests in subsidiariesthat would result in a loss of control.| Various Standards, Improvements to IFRSs 2009(1 July 2009 or 1 January 2010)In April 2009, the IASB published the document entitled“Improvements to IFRSs” containing a total of15 amendments to 12 standards. The most importantof these concern– the clarification that the disclosures required in respectof non-current assets (or disposal groups)held for sale and discontinued operations arisesolely from the requirements of IFRS 5 (IFRS 5);– the clarification that the potential settlement of aliability by issuing equity instruments does notaffect the classification of the liability as current ornon-current;– the clarification that the assets of the segment as awhole must only be disclosed in numerical termsonly if this disclosure is an integral part of theregular reporting to an entity’s chief operatingdeci sion maker (IFRS 8);– the requirement that leases of land and/or theland component of leases that combine buildingsand land are measured in accordance with thegeneral criteria governing the classification ofleases (IAS 17);– additional guidelines on the determination whetheror not an entity acted as the principal or the agentin a transaction (IAS 18); and– the clarification that a cash generating unit may notbe larger than the operating segment pursuant toIFRS 8.5, i. e. prior to the aggregation of operatingsegments into reportable segments (IAS 36).The first-time application of the amendment did nothave a significant effect on the Group’s assets, liabilities,cash flows and profit or loss or its presentationand disclosures.| IAS 39 (Amendment), Eligible Hedged Items(1 July 2009)In July 2008, the IASB published an amendment toIAS 39 that clarifies under which conditions or forwhich risks hedge accounting may be applied tospecific components of a change in fair value or achange in cash flow hedges. The amendments didnot have a material effect on the assets, liabilities,cash flows and profit or loss of the Conergy Group.In addition, the following interpretations also had to beapplied in the 2010 financial year for the first time butthey did not give rise to any changes in the ConergyGroup’s accounting policies:| IFRIC 15, Agreements for the Construction of RealEstate (1 January 2009)| IFRIC 16, Hedges of a Net Investment in a ForeignEntity (1 October 2008)

85Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Information| IFRIC 17, Distributions of Non-Cash Assets toOwners (1 July 2009)| IFRIC 18, Transfers of Assets from Customers(transactions that took place on or after 1 July 2009)All IFRS/IAS and interpretations to be applied for thefirst time in the 2010 financial year had already beenadopted by the EU at the time Conergy AG’s consolidatedfinancial statements were released.The following revised and new standards and interpretations,which had been adopted by the IASB by thetime the annual financial statements were prepared,must be applied for the first time in sub sequent financialyears:| IFRS 1 (Amendment), Limited exemptions fromComparative IFRS 7 Disclosures for First-timeAdopters (1 July 2010) and Severe Hyperinflationand Removal of Fixed Dates for First-Time Adopters(1 July 2011)These two amendments contain exemptions for firsttimeadopters of the IFRSs. Given that Conergy alreadypublishes IFRS financial statements, these amendmentsdo not have any effect on the assets, liabilities,cash flows and profit or loss of the Conergy Group.| IFRS 7 (Amendment), Disclosures –Transfer of Financial Assets (1 July 2011)On 7 October 2010, the IASB published an amendmentof IFRS 7 regarding the required disclosures onfinancial instruments. This amendment requiresadditional disclosures on the transfer of financialassets, e. g. in securitisation transactions. These disclosuresbasically concern the type of transfer, therisks that might remain with the transferring companyas well as additional disclosures if a disproportionatelylarge number of transfers were effected at theend of the reporting period. This amendment is notexpec ted to have significant effects on the assets, liabilities,cash flows and profit or loss of the ConergyGroup because this is purely a disclosure standard.Conergy is examining at this time whether the amendmentwill give rise to additional disclosure obligationsin future.| IFRS 9 Financial Instruments (1 January 2013)This standard is an aspect of the project that will replaceIAS 39 with the aim of simplifying the accountingfor financial instruments. The project has been dividedinto three stages and is scheduled to be completed bymid-2011. Upon completion of the project’s firstphase, IFRS 9 will provide for amended requirementsre gar ding the classification of financial assets. Insteadof the four different measurement categories used todate, the amendment will only contain the measurementcategories, “amortised cost” and “fair value”.This classification is based on both the characteristicsof the instrument and an entity’s business model relativeto the corresponding instruments. Financial instrumentsthat do not meet the definitions of the “amortisedcost” category must be measured at fair value throughprofit or loss. Selected equity instruments may be recognised at fair value directly in equity. As designed,this new category does not correspond to the previouscategory, “available-for-sale financial assets”. We donot expect the new standard to apply until 2013. TheConergy Group is reviewing at present how applicationof the new standard will affect the Group’s assets,liabilities, cash flows and profit or loss.| IAS 12 (Amendment), Deferred Tax –Recovery of Underlying Assets (1 January 2012)Under IAS 12, the measurement of deferred tax as setsor liabilities recognised on temporary differenc esrelated to assets is contingent on whether or not theCompany expects to realise the carrying amount bya disposal of the asset or its ongoing use. Such anassessment can be difficult, especially in regards toproperty that is held as a financial investment andmeasured at fair value. The amendment of IAS 12thus leads to the assumption that the carryingamount is realised by means of a disposal. The ConergyGroup is reviewing at present how appli cationof the new standard will affect the Group’s assets,liabilities, cash flows and profit or loss.| IAS 24 rev. 2009 (amendment), Related PartyDisclosures (1 January 2011)The amendment of IAS 24 simplifies the reportingduties of government-related entities. Certain relatedparty transactions that arise from a government’sequity interests in private companies are exempt fromsome of the disclosure obligations contained in the revisedstandard. In addition, the definition of relatedparties was fundamentally revised and in con sis ten cieswere removed. These amendments will not affect theassets, liabilities, cash flows and profit or loss of theConergy Group because this is purely a disclosurestandard. The effects on the delineation of relatedparties and/or the reportable relationships and transactionsare currently reviewed.

86Conergy AG I Annual Report 2010| IAS 32 (Amendment), Classification of RightsIssues (1 February 2010)This amendment concerns the accounting for subscriptionrights as well as options and warrants denominatedin a foreign currency at the issuer. Suchrights must now be recognised as equity and nolonger as liabilities if both the number of the instrumentsto be obtained and the foreign currencyamount were fixed in advance and all previous ownersof equity securities of the same class are grantedthis right on a pro rata basis. The Conergy Groupcurrently does not expect these amendments to havean effect on its consolidated financial statements.– the option of presenting the other comprehensiveincome as required under IAS 1 either in the statementof changes in equity or in the notes.The majority of the amendments must be applied forthe first time to financial years beginning on or after1 January 2011. The Conergy Group is cur rently reviewingwhat effects individual amend ments could have onits assets, liabilities, cash flows and profit or loss andon their presentation.| IFRIC 14 (Amendment), IAS 19 – The Limit on aDefined Benefit Asset, Minimum Funding Requirementsand Their Interaction (1 January 2011)| Various Standards, Improvements to IFRSs 2010(1 July 2010 and 1 January 2011)In May 2010, the IASB published the document relatedto the third cycle of the improvements to IFRSsthat contains a total of 11 amendments to sevenstandards. The most important of these concern:– the clarification that the option to measure noncontrollinginterests either at the acquisition-datefair value or at the proportionate share of the acquiree’sidentifiable assets relates only to noncontrollinginterests that are present ownershipinstruments (generally shares). Derivatives classi fiedas equity are not affected by this option. They mustalways be measured at the acquisition-date fairvalue subject to different requirements in otherIFRSs (IFRS 3);– the clarification that share-based transactions ofan acquiree that are not replaced by the sharebasedpayment transactions of the acquirer shallalso be measured in accordance with the marketbasedvalue at the acquisition date as defined inIFRS 2. The fair value is allocated to the considerationfor the acquisition of control and futureservices irrespective of whether or not the acquireris obligated to replace the share-based paymentaward or replaces it voluntarily (IFRS 3);– the clarification that the rules for financial instrumentsdo not apply to contingent consideration relatedto transactions that occurred before theapplication date of IFRS 3 (as revised in 2008). Thisamendment is not expected to have any effect onthe assets, liabilities, cash flows and profit or lossof the Conergy Group because Conergy does notrecognise contingent consideration in accordancewith the rules applicable to financial instruments;This amendment of IFRIC 14 is relevant in those caseswhere an entity is subject to minimum funding requirementsand makes prepayments in order to fulfil theseminimum funding requirements. It allows entitiesin such cases to recognise the benefit from such anadvance payment as an asset. The Conergy Groupcurrently does not expect these amendments to havean effect on its consolidated financial state ments.| IFRIC 19, Extinguishing Financial Liabilities withEquity Instruments (1 July 2010)According to the interpretation, equity instrumentsissued by a debtor to a creditor to extinguish all orpart of the financial liability shall be treated as considerationpaid in accordance with IAS 39.41. Thedebtor thus shall remove the financial liability (orpart of the financial liability) from its statement of financialposition. Subsequently, the equity instrumentsshall be measured at the fair value of theex tinguished liability. If only part of the financial liabilityis extinguished, the entity shall assess whethersome of the consideration paid relates to a modificationof the terms of the liability that remains outstanding.The difference between the carrying amountof the financial liability extinguished and the initialmeasurement amount of the equity instruments issuedshall be recognised in profit or loss. The ConergyGroup is currently reviewing what effects in di vidualamendments could have on its assets, liabilities,cash flows and profit or loss and on their presentation.With the exception of IFRS 7, IFRS 9, IAS 12 and IFRS 1,Severe Hyperinflation and Removal of Fixed Dates forFirst-Time Adopters, these revised and new standardsand interpretations had been adopted by the EU by thetime the Company’s consolidated financial statementswere completed. No voluntary early application of thestandards and interpretations already adopted was made.

87Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationConsolidation principlesAll significant subsidiaries are included in the con solidatedfinancial statements. The Conergy Group doesnot have any significant joint ventures or associatedcompanies.SubsidiariesAll companies (including special purpose entities),whose financial and business policies are controlledby the Conergy Group, are considered subsidiaries. Asa rule, an ownership interest of more than 50.0 percentof the voting shares entails control. Currently exercisableor convertible potential voting shares are consideredin any assessment of whether or not an enterpriseholds a controlling interest. Subsidiaries are fully consolidatedfrom the date on which control is transferredto the controlling group entity and deconsolidated atthe time the control ends.The Conergy Group focuses on long-term project developmentwork, among other things. Project developmentencompasses both the planning and constructionof energy farms, as well as marketing them to investorsthat invest in project companies established specificallyfor project development from a certain point intime. The first two stages of the project business entailproject development and financing. The constructionof the unit – which comprises engineering, procurementand construction (“EPC”) – is carried out with thehelp of subcontractors which, in the case of photovoltaicsunits, are usually Conergy Group companies.Several IFRS standards apply to the accounting treatmentof major projects. For example, IAS 27 concernsthe presentation of a parent/subsidiary relationshipsubject to the special rules in SIC 12 for special purposeentities. According to these rules, a partial profitfrom services rendered to the project companies shallbe eliminated in the consolidated financial statementsif the relationship between Conergy and the projectcompany is one of parent to subsidiary.It is Conergy’s view that the measurement of projectcompanies must be based – in terms of IAS 27 as wellas in terms of their economic risks and rewards(SIC 12) – on whether or not they are controlled by theCompany as at the balance sheet date and thus mustbe included in its consolidated financial statements.This requires weighing all aspects of the relationshipin connection with the question which party enjoysthe majority of the benefits or the question how themajority of opportunities and risks are distributed underSIC 12. Hence the opportunities arising from the realisationof a project are considered in relation to therisks; in turn, this requires weighing the question whichparty benefits from or incurs the majority of the opportunitiesand risks arising from the project’s realisationand at what point in time it does so. Risks from legislativechanges and performance that falls short of targetsshall also be considered. It is Conergy’s view that theproject company’s banks and other creditors shall alsobe included in the analysis of opportunities and risks.In particular, the criterion of equity distribution amongthe project companies may be decisive to the transferof opportunities and risks. In this regard, placement ofthe entire targeted partnership share volume by theproject companies, which are generally constituted aslimited partnerships, is a material indicator that such atransfer of opportunities and risks has occurred.When weighing opportunities and risks, measuringthem based on monetary performance criteria andweighting each criterion with a probability of occurrence,it is necessary therefore to examine in each individualcase who benefits from and incurs themajority of the opportunities and risks, and when. TheCompany believes that this assessment shall be effectedin accordance with individual contractual requirements,taking historical data into account. If Conergyno longer controls the project company, con tracts providingfor the development, planning and constructionof solar power installations in accordance with customerspecifications are accounted for as con structioncontracts pursuant to IAS 11 Construction Contracts.The goods and services that the Conergy Group deliversand renders to the relevant project companyduring the period the latter is controlled by the formerdo not lead to the recognition of sales revenue butinstead are treated merely as work in progress thatincreases inventories. Upon deconsolidation, i. e. atthe time at which the project company is no longercontrolled by Conergy, a reduction in inventories ismatched by the corresponding increase in receivablesand the recognition of revenue. In contrast, the treatmentfollows the percentage-of-completion method,i. e. IAS 11, if goods and services are delivered and renderedto an already deconsolidated project company.An acquired subsidiary has been accounted for usingthe purchase method under IFRS 3 by offsetting thecost of the ownership interest against the pro rata remeasuredequity of the subsidiary. Accordingly, the costof the ownership interest corresponds to the fair valueof the assets acquired, the equity instruments issued

88Conergy AG I Annual Report 2010and the liabilities created or assumed at the transactiondate. Since the 2010 financial year, acqui sitionrelatedadditional costs are expensed irrespec tive ofwhether they are directly attributable to the acquisitionsor not. Contingent acquisition costs are recognisedat the acquisition-date fair value. On initialconsolidation, identifiable assets, liabilities and contingentliabilities that were acquired in connection witha business combination are measured at their acquisition-datefair value. Non-controlling interests may beaccounted for either at the fair value (i. e. includinggoodwill) or at the pro rata identifiable net assets.Goodwill is recognised if the acquisition cost of theownership interest exceeds the pro rata net assetsmeasured at fair value. It is not amortised but subjectto an annual impairment test instead. Any excess ofthe acquired subsidiary’s pro rata net assets that havebeen measured at fair value over the acquisition costis recognised directly in income. Intra-Group profitsand losses, sales, expenses, and income as well as receivablesand payables between the consolidatedcompanies are eliminated. Unrealised losses are alsoeliminated unless the transaction indicates an impairmentof the assets transferred. Deferred tax assets orliabilities are recognised pursuant to IAS 12 in theevent of consolidation measures that are recognisedto profit or loss. The accounting policies used by subsidiarieswere adjusted as necessary to the ConergyGroup’s uniform accounting methods.Acquisition and sale of non-controlling interestsChanges in the proportion of the ownership interest insubsidiaries are treated as equity transactions andthus taken directly to equity as long as the parentcom pany controls the subsidiary. As a result, increasesand decreases in an existing majority interest aretreated as transactions between equity investors. Disposalsof an ownership interest in a subsidiary that donot result in a loss of control thus do not generate again or loss on disposal that is recognised in theGroup’s net profit or loss for the period. Acquisitionsof NCIs in subsidiaries therefore also do not lead to therecognition of goodwill corresponding to the differencebetween the cost of the ownership interest andthe corresponding carrying amount of the acquiredpro rata net assets of the subsidiary.for using the equity method. Just as in the previousyear, Conergy AG did not have such shareholdings asat 31 December 2010.Companies included in the consolidated financialstatementsBesides Conergy AG as the parent company, the consolidatedfinancial statements also comprise 10 domesticand 22 foreign subsidiaries. Additional requiredinformation regarding ownership interests pursuant toSection 313 para. 2 German Commercial Code is includedin the list of shareholdings, which is part of thenotes and which is published together with the consolidatedfinancial statements and the Group managementreport in the electronic Federal Gazette.In the 2010 financial year, the following changesoccurred with respect to the companies included inConergy’s consolidated financial statements:2010 2009Number of fullyconsolidatedsubsidiaries Germany Abroad Total TotalAs at 01.01. 12 32 44 67Additions – 2 2 3Disposals 1 6 7 10Additions / Disposalsthrough changes inconsolidated Group – 1 – 6 – 7 – 16As at 31.12. 10 22 32 44Fourteen companies were no longer included in consolidationin the 2010 financial year either as a result ofmergers or sales in connection with the Conergy Group’sreorganisation or because they were insignificant.The 32 fully consolidated subsidiaries of Conergy AGcontain one company attributable to the discontinuedoperations. A further three entities are classified as adis posal group held for sale in accordance with IFRS 5.Associated companiesCompanies over which the Group generally exercises asignificant influence based on its ownership interest ofbetween 20.0 percent and 50.0 percent are accounted

89Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationThe following table lists the significant subsidiaries includedin consolidation:or loss and equity is less than one percent of theGroup’s consolidated sales, profit or loss and equity.GermanyDomicilePercentage ofshares ownedConergy Deutschland GmbH Hamburg 100.0Rest of EuropeConergy Italia S. p. A. Vicenza (Italy) 100.0Conergy M. E. P. E. Athens (Greece) 100.0Conergy S. A. S. Brignoles (France) 100.0EPURON Spain S L U Madrid (Spain) 100.0AmericasConergy Inc. Santa Fe (USA) 100.0Conergy Inc. Alberta (Canada) 100.0Asia-PacificConergy Pty. Limited Sydney (Australia) 100.0Conergy Renewable EnergySingapore Pte. Ltd. Singapore (Singapore) 100.0Sun Technics EnergySystems Private Limited Bangalore (India) 100.0ComponentsConergy SolarModuleGmbH & Co. KG Frankfurt (Oder) 100.0Mounting Systems GmbH Rangsdorf 100.0voltwerk electronics GmbH Hamburg 100.0The following subsidiaries were not included in theconsolidated financial statements for reasons ofmateriality:As already disclosed in the note on the Company’saccounting policies, the Conergy Group focuses onlong-term project development work, among otherthings. Project development encompasses both theplanning and construction of energy farms, as well asmarketing them to investors that invest in project companiesestablished specifically for project developmentfrom a certain point in time. In this context, thereare basically two types of project companies. For one,project companies that were founded in order to carryout the construction of energy farms and, for another,so-called intermediate holding companies that have astake in the operating project companies. Projectcompanies that serve as intermediate holding companieswere not consolidated in the 2010 financial yeargiven their insignificance to the Conergy Group’s assets,liabilities, cash flows and profit or loss. Operatingproject companies are generally consolidated as soonas construction begins. Please see the disclosures onthe principles governing the consolidation of subsidiariesfor additional details on the general approach to thedeconsolidation or consolidation of project companies.The number of intermediate holding companies existentas at 31 December 2010 developed as follows duringthe financial year:2010 2009Number of intermediateholdingcompanies Germany Abroad Total TotalCompanyDomicileShareholdinginpercentCap-Aus Pty. Limited Australia 100.0Conergy Austria GmbH Austria 100.0Conergy Energia Solar Ltda. Brazil 100.0Conergy (Shanghai) Trading Co., Ltd. China 100.0Conergy Real Estate Verw. GmbH Germany 100.0Conergy SolarModule Verw. GmbH Germany 100.0Conergy (Thailand) Ltd. Thailand 99.9EPURON Pte. Ltd. Singapore 100.0EPURON Renewable Energy PrivateLimited India 99.9EPURON Yenilenebilir Enerji ProjeleriLimited Sirketi Turkey 100.0SunTechnics (China) Limited China 100.0VoltSol SL Spain 100.0These companies essentially discontinued their operations.Conergy plans to either liquidate them or mergethem into existing subsidiaries. Their total sales, profitAs at 01.01. 14 12 26 43Additions – – – 12Disposals 4 8 12 29As at 31.12. 10 4 14 26The number of project companies existent as at 31 December2010 developed as follows during the financialyear:2010 2009Numberof projectcompanies Germany Abroad Total TotalAs at 01.01. 89 178 267 325Additions – 4 4 84Disposals 45 39 84 142As at 31.12. 44 143 187 267Thereof fullyconsolidated 1 13 14 17

90Conergy AG I Annual Report 2010A total of 14 (previous year: 17) out of the 187 (previousyear: 267) project companies were consolidated as at31 December 2010.See note 6 with respect to the changes arising fromacquisitions and disposals by sales.Conergy Deutschland GmbH, Hamburg, ConergySolarModule GmbH & Co. KG, Frankfurt (Oder), ConergyServices GmbH, Hamburg, and Mounting SystemsGmbH, Rangsdorf, utilise the exemption rules pursuantto Section 264 para. 3 and Section 264b of the GermanCommercial Code (exemption from the preparation,auditing and disclosure of annual financial statements).Currency translationAll receivables and liabilities in a currency other than thefunctional currency are recognised in the single-entityfinancial statements of the Group companies at the reporting-dateexchange rate regardless of whether or notthey are hedged through foreign exchange contracts.Foreign currency translation differences arising from themeasurement of foreign currency positions are recognisedin income. Derivatives are recognised at fair value.The functional currency of the Conergy Group companiescorresponds to the relevant local currency becausethey run their businesses independently in financial,economic and organisational terms.Assets and liabilities of the foreign subsidiaries aretranslated into euros both at the start and end of theyear using the relevant end of period exchange ratewhile all changes during the year as well as expensesand income are translated into euros at average annualexchange rates. Equity components are translated athistorical rates at the time they are deemed to have beenacquired from the Group’s viewpoint.The differences relative to the translation at end ofperiod exchange rates are recognised under equity incomprehensive income and separately as “currencychanges” in the tables in the notes. Differences fromcurrency translation previously recognised in equitywhile a Group company was consolidated are reversed toincome at the time the relevant entity is deconsolidated.The following significant exchange rates were materialto currency translation:31.12.2010 31.12.20091 EUR Closing rate/Average exchange rateUSD (USA) 1.34/1.33 1.44/1.39AUD (Australia) 1.31/1.44 1.60/1.77SGD (Singapore) 1.71/1.81 2.02/2.02Accounting policiesIntangible assetsPurchased intangible assets with a determinable usefullife are recognised at cost, less pro rata straight-lineamortisation based on their estimated useful life. Theloss of value or wear and tear is recognised in the incomestatement under amortisation and depreciationof intangible assets and property, plant and equipment.Impairment losses are recognised as necessary.The following useful lives were applied to the amortisationof intangible assets:Useful lifeIndustrial property rights4 – 20 yearsCapitalised development costs5 yearsSoftware3 – 5 yearsIntangible assets whose estimated useful life can not bedetermined are not subject to amortisation; an annualimpairment test is conducted instead. The ConergyGroup does not possess such assets.Development costs are capitalised if it is sufficientlyprobable that the development activity will lead to futureinflows of funds that cover not only current costsbut also the respective development costs. Directlyattributable personnel expenses and received servicesare only recognised at the time the technical and economicfeasibility of the project can be demons tra tedand the costs can be reliably assessed.All capitalised development costs are subjected to animpairment test at least once a year and more often ifcertain indications of impairment are present until therelevant development project has been completed.Following the project’s completion, they are subject tostraight-line depreciation based on their estimateduseful life from the completion date. An impairmentloss on the intangible assets is recognised if there isany indication of impairment and if the recoverable

91Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationamount is less than the amortised cost. The loss ofvalue or wear and tear is recognised in the incomestatement under amortisation and depreciation of intangibleassets and property, plant and equipment.Pursuant to IAS 38.54, research costs are expensed inthe period in which they are incurred. An insignificantamount of research costs was expensed in the 2010 financialyear.GoodwillThe excess of the cost of an acquisition over the value ofthe Group’s pro rata share in the acquired net assets –which arises from the remeasurement of the assets acquiredand the liabilities assumed in connection withthe business combination – is recognised as goodwill.In subsequent periods, goodwill is recognised at costless cumulative impairment losses. Reversals of impairmentlosses in periods after the balance sheetdate are not recognised.Goodwill is not subject to amortisation; instead, it istested for impairment at least once a year and moreoften if certain indications of impairment are present.To this end, the goodwill is allocated to those cashgenerating units at the acquisition date that are expectedto benefit from the business combination. TheConergy Group’s strategic units (subsidiaries andcountry entities) that are classified as reporting unitsunder the operating segments are always defined asthe cash generating unit for purposes of testing goodwillfor impairment.Upon disposal of a business unit or a cash generatingunit to which goodwill was allocated, the goodwillattributable to such departing business unit is treatedas a disposal and thus recognised in income from disposals.The disposal value is always determined at theratio of the value of the business unit being sold to thevalue of the entire cash generating unit.If the impairment of the cash generating unit exceedsthe carrying amount of the goodwill allocated to it,then the excess impairment loss must be recognisedby writing down the carrying amounts of the assets allocatedto the cash generating unit on a pro rata basis.The recoverable amount of a cash generating unit isdefined as the value in use or the net realisable value,whichever is greater. The recoverable amount determinedfor the cash generating unit in connection withan impairment test corresponds to its value in use. It isdetermined using the discounted cash flow methodbased on planned future cash flows that are discountedusing a weighted average of the cost of capital. Thesecalculations are based on detailed plans for the nextthree annual periods of the type that are also used forinternal purposes. Please see the section on expecteddevelopments (outlook) in the Group managementreport for information on the underlying planning assumptions.Thereafter, the net present value (NPV) isdetermined based on sustained income achievable onaverage in the form of a perpetual yield, with no growthrate being assumed.The discount rate reflects the capital costs. Capitalcosts are calculated as the weighted average of theequity and borrowing costs, their share in total capitalbeing the decisive factor.The base rate represents an alternative risk-free investmentwith a matching maturity. The interest rate curvefor government bonds was used as a basis for determiningthe base rate because the factors related to zerocoupon bonds with matching maturities derived from theinterest rate curve to ensure compliance with the matchingmaturity requirement. The base rate is always determinedbased on the circumstances of the currency areawhere the cash generating unit generates its cash flows.The capital-market driven market risk premium isdetermined by establishing the differential return oninvestments in a representative market portfolio comprisingequity stakes (shares) and risk-free investments.Application of a uniform market risk premiumfor all countries with developed capital markets is donewith the assumption that the market risk premiums inthese countries generally are comparable. This marketrisk premium is supplemented by an adequate countryrisk premium as necessary in the case of less developedcountries. The country risk premium considersrisks such as political, legal or regulatory risks, defaultrisks and risks under tax law.The beta factor is determined based on historicalbeta factors (e. g. Bloomberg data) of relevant peergroup companies. Listed companies with comparableproduct and service offerings as well as markets weredeemed to be peer group companies.The peer group companies’ credit spreads were determinedto ascertain the borrowing costs using the ratingof bonds the peer group companies had issued, if applicable.In cases where no rating was available, the creditspread was approximated based on a typified peergroup rating. This credit spread is added to the respectiverisk-free base rate to determine the borrowing costs.

92Conergy AG I Annual Report 2010The country-specific interest rate after taxes that wasused to discount the estimated series of payments wasbetween 8.8 and 12.5 percent (previous year: between9.8 and 11.2 percent). The determination of the rate ofreturn on capitalisation after taxes as part of the goodwillimpairment test was based on the assumption thatdiscounting pre-tax cash flows using a pre-tax discountrate leads to the same result as discounting after-taxcash flows using an after-tax discount rate. The aftertaxinterest rates listed above correspond to pre-taxinterest rates of 8.8 to 15.8 percent.Goodwill capitalised on acquisition is allocated amongthe Conergy Group’s cash generating units under theoperating segments.The following schedule provides a summary of thegoodwill per cash generating unit classified accordingto reportable segments:2010EUR million Germany Europe Americas Asia-Pacific Components Holding TotalGermany – – – – – – –USA – – – – – – –Switzerland – 2.6 – – – – 2.6Canada – – – – – – –Rest of World – 1.3 – 0.8 – – 2.1Reclassification to current assets – – 2.9 – – 0.8 – – – 3.7– 1.0 – – – – 1.02009Mio. EUR Germany Europe Americas Asia-Pacific Components Holding TotalGermany 0.8 – – – – – 0.8USA – – 7.1 – – – 7.1Switzerland – 3.7 – – – – 3.7Canada – – 1.7 – – – 1.7Rest of World – 1.9 – 0.8 – – 2.7Reclassification to current assets – 0.3 – – – 0.8 – – – 1.10.5 5.6 8.8 – – – 14.9All goodwill was tested for impairment in the fourthquarter of 2010, as usual, in the light of our financialplanning for 2011 through 2013. The forecast resultedin a material adjustment of the expected future cashinflows of individual cash generating units due to boththe decline in selling prices and lower volumes in themajor project business. The value in use serves to determinewhether there is any need to recognise an impairmentloss on a cash generating unit. The expec ted netrealisable value was used for a company in Switzerland.An impairment loss of EUR 10.9 million was recognisedon existing goodwill as a result of the impairmenttest that was conducted during the financial year.This impairment loss essentially concerns the UnitedStates (EUR 7.1 million), Canada (EUR 1.7 million), Switzerland(EUR 1.1 million) and Germany (EUR 0.5 million).

93Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationProperty, plant and equipmentProperty, plant and equipment are recognised at costless pro-rata straight-line depreciation over their estimateduseful life. The cost of an item of property, plantand equipment comprises its purchase price, includingall directly attributable costs of bringing the asset to alocation and working condition for purposes of its intendeduse.Subsequent purchase or production costs are recognisedas part of the cost of the respective asset oras a separate asset if it is probable that the Companywill derive economic benefits from such subsequentcosts and if they can be reliably estimated. Ongoingmaintenance costs are recognised as an expensewhen they arise.Depreciation on property, plant and equipment is essentiallybased on the following planned useful lives:Useful lifeMachinery and tools3 – 20 yearsMotor vehicles5 – 6 yearsFurniture, fixtures and office equipment4 – 10 yearsIT equipment3 – 5 yearsThe carrying amounts and the useful lives of items ofproperty, plant and equipment are reviewed at the givenbalance sheet date and adjusted as necessary. An impairmentloss on the items of property, plant andequipment is recognised if there is any indication ofimpairment and if the recoverable amount is less thanthe amortised cost. Corresponding write-ups are madeif the reasons for the impairment no longer exist. Theloss of value or wear and tear is recognised in the incomestatement under amortisation and depreciation ofintangible assets and property, plant and equipment.If the property, plant or equipment is disposed of orscrapped, then any gain or loss arising on its disposalis recognised in the income statement.Borrowing costsBorrowing costs are generally recognised as expensesin the period in which they have incurred. UnderIAS 23.11 (Borrowing Costs), directly attributable borrowingcosts are shown as part of the costs if the relevantasset is considered a qualifying asset. Financingcosts not directly attributable to the assets are includedin the costs of the manufactured or acquired asset ona pro-rated basis. In the financial year just ended,EUR 14.6 million in borrowing costs (previous year:EUR 21.1 million) were recognised as an expense.LeasesPursuant to IAS 17, leases must be classified as financeleases or operating leases. This classification is essentiallycontingent on who has the significant risksand rewards of the leased property. Conergy AG isthe lessee in basically all leases maintained by theConergy Group.Assets utilised under operating leases are not capitalised.The material portion of the benefit and risk fromthe leased property remains with the lessor. Paymentsmade under an operating lease are recognised in theincome statement for the relevant period as they areincurred.A finance lease is a lease where essentially all risksand rewards arising from ownership of an asset aretransferred to the lessee. Assets subject to financeleases are recognised at the lower of the fair value orthe present value of the minimum lease payments.Lease payments to be made must be divided into principaland interest. The resulting leasing liability isshown under the borrowings and is subject to a fixedinterest rate. The interest element of the lease paymentis recognised in the non-operating result. Depreciationis recognised based on the useful life of theleased assets or the lease term, whichever is shorter.Payments received from possible operating leases,with Conergy being the lessor, are recognised in profitor loss pro rata temporis over the lease period.Financial instrumentsA financial instrument is an agreement simultaneouslygiving rise to a financial asset in one company and afinancial liability or an equity instrument in anothercompany. In particular, financial assets include cashand cash equivalents, trade accounts receivable,loans and receivables, investments held to maturity aswell as primary and derivative financial assets held fortrading. Financial liabilities always give rise to a claimfor repayment in cash or by means of another financialasset. In particular, this includes bonds and other securitisedliabilities, liabilities to banks, liabilities underfinance leases, borrower’s note loans and derivativefinancial liabilities. Financial instruments are alwaysrecognised as soon as Conergy becomes a party to theterms governing the financial instrument. The settlementdate, i. e. the date on which the asset is delivered

94Conergy AG I Annual Report 2010to or by Conergy, is relevant to the initial recognition ofpurchases or sales of non-derivative financial instrumentsmade at market rates. Whether it is derecogniseddepends on whether or not all risks and opportunitieswere transferred. As a rule, financial assets and financialliabilities are not offset; they are offset only if thereis a right to set off the amounts at the present time andif there is a plan to settle on a net basis.Financial instruments measured at fair value can beclassified and allocated to measurement levels accordingto the materiality of the factors and informationunderlying the respective measurement. A financial instrumentis allocated to a level in accordance with themateriality of the input factors to their overall measurement,specifically, according to the lowest levelmaterial to their measurement on the whole. The measurementlevels are broken down according to a hierarchyof input factors:Level 1 – the prices in active markets for identical assetsor receivables that are applied unchanged;Level 2 – input factors that do not concern the listedprices considered in Level 1 but instead are observablefor the asset or the receivable, either directly (i. e. in theform of a price) or indirectly (i.e. derived from prices);andLevel 3 – factors used in the measurement of the assetor receivable that are not based on observable marketdata (input factors that cannot be observed).With the exception of money market funds and otherlisted securities that are measured at Level 1, the financialinstruments recognised at fair value in theconsolidated balance sheet (as well as the disclosuresregarding the fair values of financial instruments) arebased on the Level 2 information and input factors describedabove. No reclassifications from or into anothermeasurement level were made.Financial assetsFinancial assets are divided into the following measurementcategories:| Financial assets measured at fair value through profitor loss,| Held-to-maturity investments,| Loans and receivables,| Available-for-sale financial assets.The classification depends on the reason for purchasinga given financial asset.Financial assets measured at fair value throughprofit or lossFor one, this comprises financial assets held for tradingand, for another, financial assets designated on initialrecognition as financial assets measured at fair valuethrough profit or loss. Derivative financial assets mustbe allocated to this category unless hedge accountingis applied.Money market funds and other listed securities arecategorised as held for trading, recognised as at thecontract date and measured at their fair value on bothinitial recognition and subsequent measurements.Transaction and other additional costs as well as gainsand losses on subsequent measurements at fair valueare posted to other operating income or other operatingexpenses. The fair value of shares in funds correspondsto the market price that is determined on eachmarket trading day and to the offering price of othersecurities.Held-to-maturity investmentsThis concerns non-derivative financial assets withfixed or determinable payments and fixed maturities,which the enterprise wants and can hold to maturity.They are recognised at amortised cost. Conergy’s portfolioscurrently do not contain financial assets of thisnature.Loans and receivablesLoans and receivables are non-derivative financialassets with fixed or determinable payments that arenot quoted on any active market. On initial recognition,they are recognised at their fair value as at the contractdate plus transaction costs directly attributable tothe purchase of the financial asset. Subsequent measurementsare made at amortised cost using the effectiveinterest method. This includes, in particular, tradeaccounts receivable as well as other financial assets.If there is objective evidence that an impairment losson the asset has occurred as a result of one or moreevents after its initial measurement, the amount of theloss is measured as the difference between the receivable’scarrying amount and the present value of theexpected future cash flows discounted at the originaleffective interest rate. A flat rate method is used inconnection with insignificant receivables.

95Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationAvailable-for-sale financial assetsAvailable-for-sale financial assets are non-derivativefinancial assets that are classified as such or not allocatedto any of the foregoing categories. On initial recognition,they are recognised at their fair value plustransaction costs directly attributable to the purchaseof the financial asset. Subsequent measurements areexecuted at fair value and unrealised gains and lossesare recognised directly in other provisions under equity.The Conergy Group did not have any material inventoriesof such financial assets at the balance sheet date.Derecognition of financial assetsThe Group derecognises a financial asset if contractualrights to cash flows from the financial asset expire or ifall significant risks and rewards arising from ownershipof the financial asset were transferred to a third party.If the Conergy Group does not transfer essentially allrisks and rewards arising from ownership, nor retainsand continues to control the right to dispose of thetransferred asset, then both its remaining share in theasset and a corresponding liability equivalent to theamounts that might have to be paid are recognised. Incases where the Group essentially retains all risks andrewards arising from ownership of a transferred financialasset, it must continue to recognise the financial assetas well as a secured loan for the consideration received.Derivative financial instruments and hedgeaccountingDerivative financial instruments are recognised as atthe contract date and measured at fair value, both atthe time they are posted and thereafter. Any resultingtransaction costs are expensed as at time they arise.Recognition of any changes in value of derivative financialinstruments is contingent on whether or notthere is a hedging relationship and which hedging relationshipis concerned.The Conergy Group utilises hedging relationshipssolely to hedge foreign exchange and interest raterisks from firm commitments or highly probable transactions.If the requirements of IAS 39 are fulfiled,exchange rate risks related to firm commitments aretreated as cash flow hedges or fair value hedges,depending on the hedging relationship.Both the hedging relationship and the Company’s riskmanagement objectives and strategies are formallydesignated and documented with respect to the hedgeat its inception. The documentation contains the determinationof the hedging instrument, the underlyingtransaction or the transaction being hedged as well as thetype of risk hedged and a description of how Conergydetermines the effectiveness of the hedging instrumentwhen offsetting risks from changes in the fairvalues of or cash flows from the hedged underlyingtransaction. Such hedging relationships are consideredhighly effective in offsetting risks from fair valueor cash flow changes. The effectiveness of a hedge ismeasured through a prospective test conducted at thetime the hedging transaction is executed as well asthrough both prospective and retrospective tests ateach reporting date.In fair value hedges, the underlying transaction is recognisedin profit or loss at fair value and the profit orloss from the measurement of the hedge is recognisedin profit or loss.In a cash flow hedge, the portion of the changes in thevalue of the hedging instrument that is determined aseffective is recognised directly in equity; the ineffectiveportion of the changes in the value of the hedginginstrument must be recognised in profit or loss. Allchanges in the value of the hedging instrument recognisedin equity are transferred to the income statementin the period during which the hedged transaction hasan impact on the profit or loss for the period, e. g. at thetime hedged finance income or expenses are recognisedor an expected sale is executed. If a hedge resultsin the recognition of a non-financial asset or a nonfinancialliability, then the amounts recognised in equityare allocated to the cost of the non-financial asset ornon-financial liability as at the acquisition date.These cash flow hedges are derecognised upon expiration,disposal, termination, or exercise of the hedginginstrument. This also applies if the conditions requiringhedge accounting no longer exist or if the (intended)transaction underlying the requirement is no longer expectedto occur. All gains or losses from subsequentfair value measurements of derivatives not designatedas hedges are recognised in profit or loss.The fair value of interest rate swaps is derived fromcustomary measurement models that take indicativemarket interest rates and volatilities into account.The fair values of derivative financial instruments withresidual maturities of less than 12 months are recognisedin current financial assets or financial liabilitieswhereas those with residual maturities of more than12 months are recognised in non-current financialassets or financial liabilities.

96Conergy AG I Annual Report 2010As in the previous year, the special rules applicable tohedge accounting were not applied during the reportingyear; as a result, all changes in the value of derivativehedging instruments were recognised in profit or loss.InventoriesInventories are recognised at the lower of cost or netrealisable value. The first-in, first-out (FIFO) method isused to determine the cost of raw materials, consumablesand merchandise. The cost of completed workand work in progress comprises expenses directlyattributable to the manufacturing process (direct productioncosts) as well as appropriate portions of generaloverheads related to manufacturing. The presumablyrealisable proceeds from a sale less any costs incurreduntil such sale is the realisable selling price.Construction contractsContracts providing for the planning, design, productionand assembly of complex solar or wind energy installationsin accordance with customer specifications areaccounted for as construction contracts pursuant toIAS 11 Construction Contracts.The percentage of completion (PoC) to be recognisedis determined as follows: In case of major projects,the percentage of completion is always determinedon the basis of the completion of pre-defined projectsegments (milestone method). The milestones are definedin coordination with the responsible engineersbased on construction and production processes.Sales and partial profits are recognised depending onthe degree of completion. Profits are recognised onlyif the result of the contract work can be reliably estimated.If not, sales in the amount of the contract costsare recognised.In case of small and medium orders, the percentage ofcompletion is always determined by the ratio of thecost incurred to the projected total cost (cost-to-costmethod). The contract costs incurred – which encompassthe directly attributable costs of labour andmaterials as well as both production-related overheadcosts and estimated costs for follow-up work andwarranties – are recognised as sales revenue based onthe pro rata share of the revenue corresponding to theestimated stage of completion. Losses from constructioncontracts are immediately recognised in full in thefinancial year during which the losses become apparent,irrespective of the stage of completion achieved.The construction contracts are shown in trade accountsreceivable or payable. Contract work is recognised astrade accounts receivable to the extent that in individualcases the cumulative performance (order costs andincome) is higher than the payments received on invoicesfor partial deliveries. Any negative balance remainingafter deduction of the advances is recognisedin trade accounts payable as a liability from constructioncontracts.The goods and services that the Conergy Group deliversand renders to the relevant project companyduring the period the latter is controlled by the formerdo not lead to the recognition of sales revenue butinstead are treated merely as work in progress thatincreases inventories. Upon deconsolidation, i. e. at thetime at which the project company is no longer controlledby Conergy, a reduction in inventories is matchedby the corresponding increase in receivables and therecognition of revenue. In contrast, the treatment followsthe PoC method, i. e. IAS 11, if goods and services aredelivered and rendered to an already deconsolidatedproject company.Cash and cash equivalentsCash and cash equivalents include cash, sight depositsand financial assets that can be converted into cashand cash equivalents at any time and are subject toonly minor fluctuations in value; they are measured atamortised cost.Non-current assets (or disposal groups)held for saleNon-current assets (or disposal groups) are classifiedas held for sale and recognised at the lower of the carryingamount or fair value less costs to sell if the respectivecarrying amount will be realised largely froma disposal transaction and not from ongoing use. Suchassets are no longer amortised. If the carrying amountof the non-current assets and asset groups held forsale exceeds their fair value less costs to sell, then animpairment loss corresponding to the difference mustbe recognised. The previously recognised impairmentloss must be reversed if the fair value less costs to sellincreases at a later date. The write-up must be limitedto the impairment loss previously recognised for therelevant assets or their amortised cost.

97Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationDiscontinued operationsDiscontinued operations (see note 6) concern businessunits that were disposed of or are being classified asheld-for-sale and (a) represent a separate, materialdivision or geographic segment; (b) are an integralpart of an individual, coordinated plan to dispose ofa separate, material division or geographic segment;or (c) constitute a subsidiary acquired solely for resalepurposes.outflow of resources and if the amount of the provisioncan be reliably determined.Other provisions are measured in accordance withIAS 37 using the best estimate of the scope of the obligation.In each case, this amount is the most likely forindividual risks. Provisions with a residual maturity ofmore than one year are discounted at an interest rateappropriate to both the risk and the maturity.EquityThe Company’s no-par bearer shares must be classifiedas equity. Costs incurred in connection with the issuingof new shares are recognised directly in equity oncerelated taxes have been offset, reducing the issuingproceeds.Treasury shares purchased by Conergy AG itself orby one of its subsidiaries are deducted directly fromequity. Costs arising from the acquisition of treasuryshares are added to the consideration paid once relatedtaxes have been offset. The consideration receivedin connection with the issuing of new sharesless related after-tax costs is recognised in equity.No gain or loss is generated by the purchase or issuanceof treasury shares.BorrowingsOn initial recognition, borrowings are measured attheir fair value, which normally corresponds to theamount of funds received. In subsequent periods,borrowings are measured at amortised cost using theeffective interest method. Subsequently, every differencebetween the issue amount less transaction costsand the repayment amount is recognised in the incomestatement under net finance income over the relevantterm of the loan using the effective interest method.The effective interest rate is the interest rate whereestimated future in- and outflows related to the borrowingsare discounted exactly to the issue amountover the expected term of the loan.A financial liability is derecognised upon satisfaction,termination, or expiration of the underlying obligation.ProvisionsProvisions are liabilities of uncertain timing or amount.They are recognised if the Group currently has a legalor constructive obligation toward third parties and if itis probable that settling the obligation will lead to anProvisions for other risks from sales and procurementbasically relate to imminent losses from executorycontracts. Conergy measures provisions for expectedlosses at the lower of the expected cost upon fulfilmentof the contract and the cost upon termination ofthe contract.Provisions for expected expenses under warranty obligationsare recognised at the time the respective productsare sold using the management’s best estimate ofthe expenses required for settling the obligation.A provision for restructuring expenses is recognised ifthe Group has prepared a detailed formal restructuringplan which, in turn, has raised a valid expectation inthe minds of the affected individuals that the restructuringmeasures will be executed, and starts toimplement the plan or announces its material components.Solely the direct expenditures arising from therestructuring are considered in the measurement of arestructuring provision. Hence this only concernsamounts arising from the restructuring that are not associatedwith the Company’s continuing operations.Deferred taxesUsing the liabilities method, deferred tax assets andliabilities are recognised for all temporary differencesbetween the tax basis of the assets/liabilities and theircarrying amounts in the IFRS financial statements.Deferred tax assets for temporary differences as wellas for tax loss carryforwards are recognised at theamount at which it is probable that the temporary differenceor the tax losses not yet used can be offsetagainst future taxable income.Deferred tax assets and liabilities are measured inaccordance with both the tax rates and tax regulationsthat were applicable at the balance sheet date or haveessentially been adopted into law in the respectivecountries and that are expected to apply at the timethe deferred tax asset is realised or the deferred taxliability is settled. A tax rate of 31.3 percent applies to

98Conergy AG I Annual Report 2010the German Group companies; aside from the uniformcorporate income tax rate and the solidarity surtax,this rate also includes the average trade tax rate. Thetax rate of Conergy SolarModule GmbH & Co. KG is28.1 percent.stage of completion, provided all requirements underIAS 11 have been met, particularly when the revenue,total cost and stage of completion can be reliablymeasured. For further details, please see the disclosuresin the section discussing construction contracts.Contingent liabilities and receivablesContingent liabilities are possible obligations arisingfrom past events, the existence of which will only beconfirmed by the occurrence or non-occurrence ofuncertain future events, or current obligations arisingfrom past events that are unlikely to result in an outflowof resources or the amount of which can not bemeasured with sufficient reliability. Pursuant to IAS 37,contingent liabilities are generally not recognised. Accordinglycontingent assets are possible assets thatarise from past events and whose existence will beconfirmed only by the occurrence or non-occurrenceof one or more uncertain future events not wholly withinthe control of the entity. Pursuant to IAS 37, contingentassets are not recognised as long as the economic benefitand thus the realisation of income is virtually certain.Recognition of revenueRevenue is measured at the fair value of the considerationreceived or receivable. Bonuses, cash discounts,or rebates reduce revenue.Conergy recognises revenue from the sale of goods atthe time the significant risks and rewards of ownershipto the goods have been transferred to the buyer, theamount of the revenue can be reliably determined andif it is probable that economic benefits associatedwith the transaction will flow to the Company as wellas if the costs incurred or to be incurred in connectionwith the sale can be reliably determined. No revenueis recognised if there are significant risks in connectionwith receipt of the consideration or a possible returnof the goods.Revenue from service contracts is recognised in accordancewith the stage of completion. Considerationfor services that is included in the price of the productsold is recognised at the ratio of its share in the totalconsideration attributable to the product sold, basedon past trends regarding the services provided in connectionwith products sold. Revenue from contractssettled on the basis of time or materials are recognisedat the contractually stipulated rates for hours workedand costs directly incurred. Income in connection withconstruction contracts is recognised according to theEmployee benefitsPostemployment benefitsThe Group’s pension plan largely is a defined contributionplan. This means that Conergy makes statutory,contractual, or voluntary contributions to statutoryand private pension insurance entities. Conergy AGdoes not have any other material payment obligationsabove and beyond these contributions. The contributionsare recognised as at the due date in the incomestatement under the item, personnel expenses. Prepaymentsof contributions are recognised as assets to theextent that there is a right to repayment or reduction offuture payments.Share-based paymentsAll obligations under share-based payment transactionsare recognised – as required for cash-settledshare-based payments under IFRS 2. All work obtainedin return for the options is recognised in staffcosts. The expense to be recognised is calculatedbased on the fair value of the options at the balancesheet date, multiplied by the best estimate of thenumber of options exercisable at the end of the serviceperiod. The fair value of the options is determined atevery balance sheet date on the basis of option pricingand binominal models. All market conditions that aretied to the exercise flow into the calculation of the fairvalue. However, exercise conditions are not consideredat the time the fair value of the options is determinedbut instead at the time the number of exercisable optionsis estimated. The amount to be expensed thusdetermined is distributed over the service period. Aliability corresponding to the expense incurred is recognisedbecause the options entail a cash settlement.Adjustments resulting from changes in the estimatesof the number of exercisable options or changes intheir fair values are recognised in income in the periodduring which the estimate was changed by adjustingthe liability item accordingly.Government grantsGovernment grants received in connection with investmentsin property, plant and equipment are de­

99Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationducted from the cost of the asset in accordance withIAS 20.24 Government Grants Related to Assets andresult in a commensurate reduction in depreciation insubsequent periods.4. Assumptions and exercise in judgmentManagement’s material margin in judgmentApplication of the aforementioned accounting principlesrequires the Management Board to assess facts,perform estimates and make assumptions with respectto the carrying amounts of assets and liabilities thatcannot be readily determined from other sources. Boththe estimates and their underlying assumptions arebased on past experience as well as on other factorsdeemed to be relevant. Actual results may vary fromthese estimates, however. This also applies to contractsthat raise the question whether they should be treated asderivatives or as pending transactions. The assumptionsunderlying the estimates are regularly reviewed.Changes in the estimates that occur in a specific periodare considered solely in that period; if the changeconcerns both the current and subsequent reportingperiods, then it is considered in all relevant periods.Management wishes to point out that future eventsfrequently deviate from forecasts and that estimatesfrequently require routine adjustments. In this connection,please also see the disclosures in the risk reportof Conergy’s Group management report.Estimates and assumptionsBelow is a description of the judgment the ManagementBoard exercised in decisions concerning the applicationof the Company’s accounting policies whichhad an effect on the amount of the assets and liabilitiesrecognised in the balance sheet. The following providesa summary of key forward-looking assumptions aswell as the other main causes for uncertainties in estimatesat the balance sheet date which can trigger aconsiderable risk that the assets and liabilities recognisedmight have to be adjusted during the subsequentfinancial year.| Construction contractsThe Conergy Group’s business is based in part oncustomer-specific construction contracts. In thesecases, revenue is recognised pursuant to the percentageof completion method (PoC). Under thismethod, the assessment of the stage of completion,total contract costs, total revenues and contractrisks substantially affect both the amount of revenuethat is recognised and pro rata earnings. Changes inplanned costs and the profitability of the individualconstruction contracts lead to modifications ofthe estimates that are recognised in the periodduring which they occur. As at 31 December 2010,EUR 12.3 million (previous year: EUR 24.6 million) inreceivables from construction contracts were recognisedin trade accounts receivable.| Trade accounts receivableAllowances for doubtful receivables require substantialassessments of individual receivables based onthe creditworthiness of the respective customer,current economic developments and an analysis ofhistorical loan charge-offs. As at 31 December 2010,bad debt allowances were EUR 14.6 million (previousyear: EUR 14.7 million).| Impairment of goodwillThe Group tests goodwill for impairment at leastonce a year (see note 12). This requires estimatingthe recoverable amount of those cash generatingunits to which the goodwill has been allocated. Therecoverable amount is the higher of fair value lesscosts to sell and the cash generating unit’s value inuse. The Group must estimate the expected futurecash flows from the cash generating unit in order toestimate the value in use and, furthermore, select areasonable discount rate in order to determine thepresent value of these cash flows. As at 31 December2010, the carrying amount of the goodwill wasEUR 1.0 million (previous year: EUR 14.9 million).| Impairment of assetsThe Group must assess at every reporting datewhether there is any indication that the carryingamount of an item of property, plant and equipmentor an intangible asset might be impaired. If so, therecoverable amount of the relevant asset is estimated.The recoverable amount corresponds to the higherof the fair value less costs to sell and the value inuse. The value in use is determined based on the discountedfuture cash flows of the relevant asset. Estimatingthe discounted future cash flows entailsmaking material assumptions, especially with respectto future selling prices and volumes as well as to thediscounting rates. As at 31 December 2010, the carryingamount of the Company’s property, plant andequipment – which essentially concerns the Frankfurt(Oder) production site – was EUR 164.4 million(previous year: EUR 183.9 million).

100Conergy AG I Annual Report 2010| Assets held for saleAssets slated for disposal require determinations asto whether they can be sold in their current conditionand whether their sale is highly probable. If this isthe case, then the assets and the related liabilitiesmust be measured and recognised at the lower ofcarrying amount and realisable value less costs tosell as assets held for sale or as liabilities related toassets held for sale.| Income taxesCorporate income taxes must be estimated for everytax jurisdiction where the Group engages in businessactivities. This entails calculating the expectedactual income tax for each taxpayer and the temporarydifferences from the divergent treatment ofspecific balance sheet items in the IFRS consolidatedfinancial statements and the tax accounts. Temporarydifferences, if any, generally lead to therecognition of tax assets and tax liabilities in theconsolidated financial statements. Managementmust make assessments in calculating current anddeferred taxes. Deferred tax assets are recognisedto the extent that it is probable that they can beused. Whether deferred tax assets are used dependson the Group’s ability to earn sufficient taxableincome under the relevant tax type and jurisdiction,if necessary, taking into account statutory limits onthe maximum periods allowed for tax loss carryforwards.Various factors must be considered toassess the likelihood that deferred tax assets will beused in future, such as, for instance, past earnings,operational plans, tax loss carryforward periods andtax planning strategies. Any difference betweenactual results and these estimates or any need toadjust these estimates in future periods could havenegative effects on the Company’s assets, liabilities,cash flows and profit or loss. The deferred taxassets previously recognised must be written downto profit and loss if they are impaired. As at 31 December2010, recognised tax loss carryforwardsfor corporate income and municipal trade tax purposes,respectively, were EUR 63.7 million andEUR 66.5 million (previous year: EUR 100.2 millionand EUR 78.3 million, respectively). No deferred taxassets were recognised for tax loss carryforwards ofEUR 156.7 million (previous year: EUR 350.1 million)in corporate income taxes and EUR 78.5 million(previous year: EUR 241.9 million) in municipal tradetax because it is currently unlikely that the tax losscarryforwards can be utilised within the frameworkof the Company’s medium-term, tax-related earningsplanning. These loss carryforwards can essentiallybe utilised for an unlimited period of time.The changed shareholder structure following thecompletion of the December 2008 capital increaseas well as the takeover of Dresdner Bank AG (in January2009) and the merger of Dresdner Bank AG withCommerzbank AG (in May 2009) eliminated tax losscarryforwards on a pro rata basis under Section 8cpara. 1 German Corporate Income Tax Act. Conergycontinues to review whether the restructuring provisionin Section 8c para. 1a German CorporateIncome Tax Act – which was introduced as part ofthe so-called Bürgerentlastungsgesetz-Krankenversicherungfor the purpose of enhancing the deductibilityof health insurance premiums on 16 July 2009– affects the December 2008 capital increase andapplies to the indirect changes in the shareholderstructure in 2009 and the extent to which the remainingexisting losses can be carried forward.By its ruling dated 26 January 2011, the EuropeanCommission decided in a formal investigation (C 7/10)that the restructuring provision under Section 8cpara. 1a German Corporate Income Tax Act constitutesan unlawful government grant. The letter ofthe German Ministry of Finance dated 30 April 2010already made it unlawful to apply the restructuringprovision. In the German government’s view, this is nota harmful grant. A press release dated 9 March 2011of the German Ministry of Finance announced thatthe German government would file suit to vacatethe ruling of the EU Commission. The outcome ofthis procedure is uncertain. Along with internal andexternal experts, Conergy is currently reviewing itslegal options.The tax loss carryforwards of both the Company anddomestic subsidiaries could no longer be utilised ifthe ruling on the restructuring provision is final. Ifthe tax loss carryforwards can no longer be utilised,this would have a substantially negative impact onConergy’s assets, liabilities, cash flows and profit orloss. The ruling of the EU Commission will not give riseto any claims for refunds. This possible elimination ofloss carryforwards was already taken into account inthe determination of the deferred tax assets on losscarryforwards such that it will not affect the extent ofthe deferred tax assets recognised in 2010.Indirect or direct acquisitions of equity interests inthe capital stock of Conergy AG may result in the applicationof Section 8c German Corporate IncomeTax Act and hence the elimination of recognisedand unrecognised tax loss carryforwards after thereporting date.

101Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationFor further details, please see the information providedin note 14.| ProvisionsThe determination of provisions for warranties andlitigation substantially depends on assessments.Recognition and measurement of provisions and theamount of contingent liabilities related to pending litigationor other outstanding claims under settlement,mediation, arbitral, or statutory proceedingsand other contingent liabilities are substantially tiedto assessments. Hence any assessment of the likelihoodthat pending litigation will be successful or giverise to a liability, or any quantification of the possibleamount of the payment obligation, depends on theevaluation of the given situation. The amount of theprovisions for warranties is also based on estimatesrooted largely in historical data. Provisions are recognisedif losses are anticipated from pending transactions,a loss is probable and such loss can bereliably determined. Owing to the uncertainties arisingfrom such assessments, actual losses might deviatefrom the initial estimates and thus from the amountof the provision. Moreover, determining provisions fortaxes, environmental liabilities and legal risks requiressubstantial estimates that can change over time as aresult of new information. These estimates maychange as a result of new information becomingavailable. The Company avails itself of internal expertsand of the services of external advisors to obtainnew information. Changes in estimates can have asubstantial impact on future profits or losses.| Estimate of the fair value of financial assets andliabilitiesThe fair value of financial assets and liabilities is calculatedas follows:The fair value of financial assets and liabilities withstandard maturities and conditions that are traded inactive liquid markets is determined by reference to thelisted market prices. The fair value of other financialassets and liabilities is determined in accordancewith generally accepted measurement methods basedon discounted cash flow analyses using pricesachieved in observable current market transactions.5. Management of financial risksFinancial risk factorsThe international nature of the Conergy Group’s activitiesand its financing exposes it to a variety of financialrisks, in particular, market, credit and liquidity risks. Itsgroupwide risk management focuses on the unforeseeabilityof developments in the financial markets andaims to minimise their potentially negative impact onthe Group’s cash flows.Financial risks are managed by the Corporate Treasurydepartment in accordance with the ManagementBoard’s groupwide guidelines. Corporate Treasuryidentifies, measures and hedges financial risks inclose collaboration with the Conergy Group’s operatingunits. A front office system that enables daily analysesof all open interest and currency risks and that canperform simulations of worst case scenarios is availableto our employees in this connection. Maximumamounts that greatly limit the risk from hedging transactionsare defined as part of interest and currencyrisk management. The Management Board providesrisk management guidelines and precepts for specificdivisions in connection with, for example, currencyrisks, interest rate risks and credit risks as well asthe utilisation of derivative and non-derivative financialinstruments. In addition, solely derivative financial instrumentsthat can be mapped and measured in the riskmanagement system are used for hedging purposes.Both the Management Board and the SupervisoryBoard are regularly apprised of the financial risk factorsto which the Group is exposed.Market risksCurrency risksThe Group is exposed to foreign currency risks due tothe international nature of its business.Currency risks on the one hand arise from the fact thata number of the Group’s consolidated companies reporttheir figures in currencies other than the euro,which means that Conergy has to convert the relevantitems into euro when preparing its consolidated financialstatements (“translation risk”). On the other hand,currency risks can also arise if sales of a certain memberof the Conergy Group are recognised in currenciesdifferent from those of the associated costs (“transactionrisk”). A significant portion of transactions is carriedout in US dollars (USD). The risks from US dollars stemmainly from long-term procurement contracts in therelevant currency, pursuant to which the Conergy

102Conergy AG I Annual Report 2010Group has undertaken to accept goods against paymentin US dollars. Changes in the respective currencyrelations can intensify or counteract fluctuations incommodities prices. A decline in the value of the eurovis-à-vis the US dollar can have a negative impacton Conergy’s gross profit margin. Unfavourable conditions(notably rising commodities prices due to therising US dollar) can trigger additional expenses in theprocurement of raw materials in the short term, in turnsubstantially affecting Conergy’s earnings and liquidity.rates. Five fixed-rate swaps (of EUR 15.0 million each),including redemption for securing the term loan, andone fixed-rate swap for EUR 100 million were enteredinto to hedge the interest rate risk from the Company’srevolving facility. The latter expired on 31 July 2010and was not renewed. No interest rate risk arises becausechanges in the value of both the loans and thehedging transaction due to interest rates offset eachother almost entirely during the period presented inthe income statement.Usually, the Corporate Treasury department hedgesboth interest rate and currency risks in close collaborationwith the operating units using hedges that involvederivative financial instruments as set out in theCompany’s “Treasury Guideline”. Treasury also hedgescurrency and interest rate risks related to the projectbusiness, as necessary. Furthermore, the ConergyGroup optimises its currency risks by pushing naturalhedging measures – i. e. by matching cash outflowsunder delivery contracts with cash inflows from externalrevenue in the same currency.Interest rate risksRisks from changes in interest rates arise from interestrate fluctuations due to market conditions. Such fluctuationsgive rise to changes in the interest expenserelated to liabilities subject to variable interest ratesand to changes in the fair value related to liabilitiessubject to fixed interest rates. The aim is to minimisethe future risk of fluctuating interest expenses.Currently, all borrowings under the syndicated loandated 31 July 2007 are subject to variable interestrates. Borrowings in the 2010 financial year generallywere structured in euros. The Conergy Group is exposedto additional interest rate risks in connectionwith the project business. Here, Corporate Treasury’sresponsibility is to monitor current interest rate trendsand adjust the interest portfolio as necessary. This entailsmonitoring all critical interest rate curves in orderto be able to react to short-term changes or shifts inthe relevant interest rate curve as well, focusingmainly on the United States and Europe. CorporateTreasury develops additional short, medium and longterminterest rate forecasts to this end and subsequentlyaligns the relevant hedging strategies tothese forecasts. Primarily interest rate derivatives – inparticular, interest rate swaps – are used to implementthese hedges.Six fixed-rate swaps were originally entered into forvariable interest rate loans to hedge rising interestLiquidity risksThe Conergy Group centrally manages its liquidity risk –i. e. the risk of being unable to fulfil current or futurepayment obligations for lack of adequate cash andcash equivalents. Based on the insights gained withrespect to the liquidity situation from groupwide financialplanning tools, Conergy now utilises liquidity planningthat covers a period of 13 weeks and is rolled overfrom week to week as well as an ongoing planning updatethat covers the period until year’s end. Cash andcash equivalents are available to ensure the Group’ssolvency and ability to fulfil payment obligations whendue. They consist of operating payment streams aswell as of changes in current financial liabilities. Furthermoreprovisions are recognised for unplannedcash inflows or outflows that fall short of or exceedtargets. Liquidity is mainly assured by means of overnightmoney and term deposits. A syndicated creditline is also available.To ensure sufficient operating liquidity, on 31 July 2007Conergy AG, the Momentum Renewables GmbH(formerly EPURON GmbH), Conergy SolarModuleGmbH & Co. KG and Conergy Deutschland GmbHclosed a syndicated loan for a total of EUR 600 millionfrom originally 23 banks under the leadership of CommerzbankAG, Dresdner Bank AG and WestLB AG(EUR 400 million cash loan and EUR 200 million guaranteeand documentary credit facility). The cash loan isdivided into two tranches and is intended for financingthe construction of the production facility in Frankfurt(Oder) (Tranche A) and for financing Conergy Group’sworking capital requirements (Tranche B with a revolvingfacility of EUR 250 million). In addition, the syndicatedloan provides a guarantee and documentarycredit facility of EUR 200 million. Originally, TrancheA for EUR 150 million had to be paid back in halfyearlyinstalments until 31 December 2011, starting in30 June 2008. A total of 37.5 million were repaid in2008 and a total of EUR 18.8 million were repaid in2009 as agreed with the banks. An additional loanpayment of EUR 18.8 million was made once the out-

103Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationof-court settlement with MEMC Electronic Materials, Inc.regarding the delivery of solar wafers for the Frankfurt(Oder) plant was executed in mid-February 2010.Furthermore, a special loan payment of EUR 1.9 millionwas made in August 2010. Tranche B in the amount ofEUR 250 million was originally scheduled for repaymentby 31 July 2010. On 29 July 2010, Conergy originallyhad reached an agreement with its financingbanks to extend all loans until the end of 2011. The partieshad also agreed that the three instalments outstandingon the term loan (Tranche A) would also besuspended until the end of 2011. These agreementswere subject to certain terms. Conergy and the bankingsyndicate had agreed in this connection to commissionan auditing firm to prepare an independentbusiness review. This independent business reviewcame to the conclusion that follow-up financing for thecurrent credit facility beyond 31 December 2011 wouldbe rather unlikely unless the Company’s capital basewas strengthened. This conclusion triggered a suspensivecondition, and as a result the maturity date ofall loans was accelerated to 21 December 2010. On17 December 2010, the creditors reached an agreementwith Conergy AG to reduce the Company’s debtsubstantially, with some creditors providing equitycapital. The refinancing concept as a prerequisite forthe granting of a new loan agreement that was signedin December 2010 will reduce Conergy’s debt byEUR 188 million, markedly lowering the Company’s futureinterest burden. It also provided for extending theremaining loans until the refinancing measures havebeen implemented but at most until 31 July 2011.contribute their loan receivables from Conergy as anin-kind contribution up to nominally EUR 188 million inexchange for shares; to this end, the loan receivablesshall be measured at 60.0 percent of their nominalvalue. Conergy’s debt will be reduced in both cases. Inthe meantime these measures were resolved accordinglyby the Extraordinary General Meeting on 25 February2011 and are being implemented. Finalimple mentation of the refinancing concept is still subjectto the condition that the guarantee facility existingas at 31 December 2010 is reduced to roughlyEUR 141 million. Certification by a court-appointed auditorfor the in-kind contribution that the value of theloan liabilities to be contributed in a non-cash capitalincrease corresponds to at least 60.0 percent of theirnominal value is another requirement; All other termsof the new loan agreement have been fulfiled.The existing applicable loan agreement imposes operatinglimitations on both Conergy and its subsidiariesas well as extensive disclosure requirements and theobligation to comply with specific financial indicators.Conergy has undertaken thereunder to ensure that certainbalance sheet and earnings ratios, such as the ratioof consolidated net borrowings to consolidated EBITDA(in each case with and without contingent liabilities), aspecific ratio of consolidated EBITDA to consolidatednet interest expense and a specific equity ratio do notexceed or fall below a specific figure. The agreed uponvalue for the equity-ratio could not be met since 31 December2010. But this corresponds with the restructuringconcept that was agreed upon on 17 December 2010.The parties also agreed on 17 December 2010 thatsome of the members of the existing banking syndicatewill make available a new cash loan of up to approximatelyEUR 135 million to discharge the currentcredit facility as part of the restructuring as well as aguarantee facility of up to approximately EUR 141 millionfor four years at market terms. The new syndicatedloan agreement will provide for financial covenants afterthree years.For the rest, among other things, the refinancing conceptprovides for a reduction of the Company’s capitalstock of roughly EUR 398 million by approximatelyEUR 348 million to approximately EUR 50 million, aswell as a capital increase of up to EUR 188 million.Conergy’s shareholders will have a subscription rightin connection with this capital increase. If these subscriptionrights are exercised, Conergy will use theproceeds to discharge the corresponding amount ofthe loans outstanding. If the subscription rights are notexercised, some of the creditors have undertaken toCertain other requirements do apply during the term ofthe agreement. Among other things, these requirementscrimp the ability of the Conergy Group to provideassets as collateral, sell assets, participate in jointventures, acquire additional companies or businessunits, incur additional debt, make loans, provide guarantees,incur leasing liabilities or undertake specificrestructuring measures. Any noncompliance withthese stipulations – or if the financial figures agreedupon are not reached – may trigger an extraordinaryright of termination on the lenders’ part, which wouldgive them the right to call the loan immediately. Thelenders also have other customary rights to terminate,for example, if a German or other significant subsidiaryfiles for insolvency.Credit risksCredit risks from trade accounts receivable or financialassets arise when one party fails to honour its obligations,in whole or in part, and can result in the loss of

104Conergy AG I Annual Report 2010cash or income. Such risks generally arise up to thecarrying amounts of the financial assets recognised inthe balance sheet (see note 30).As a rule, all customers wanting to do business withthe Conergy Group are subject to credit checks. TheGroup’s central department responsible for the managementof working capital will monitor receivablesbalances on an ongoing basis with the aim of ensuringthat the Group is not exposed to significant creditrisks. These measures notwithstanding, non-paymentrisks can never be fully precluded. Business with majorcustomers is subject to separate credit monitoring inconnection with the Group’s central working capitalmanagement as part of receivables management. However,relative to the Group’s entire risk exposure fromdefault risks, the receivables from these counterpartiesare not so large as to create extraordinary concentrationsof risk. In addition to this customary terms apply.Risks arising from the capital structureIn addition to bringing about a sustained increase inthe enterprise value, managing the finances of theConergy Group is also aimed at maintaining an adequatecapital structure. Gearing thus serves as an additionalfinancial ratio in our management control system.It is defined as the ratio of net liabilities (borrowingsless liquid funds) to equity. Repaying borrowings aswell as boosting the equity base through retainedearnings and/or capital increases serve as controllinginstruments. We aim to achieve a gearing of 100.0 percentin the medium term, i. e. a 1:1 ratio of net financialliabilities to equity. In this context we refer to the remarksregarding the refinancing concept given in theprevious section on liquidity risks.Gearing in the period under review developed as follows:Net liabilities 31.12.2010 31.12.2009Borrowings EUR million 291.6 293.6Liquid funds EUR million 36.7 52.1Net liabilities EUR million 254.9 241.5Equity EUR million 71.4 116.0Gearing in percent 357.0 208.26. Changes in the consolidated groupAcquisitionsNo acquisitions were made in the financial year justended.Discontinued operationsThe Management Board decided in December 2009 tosell the EPURON division, which focused mainly onwind energy and bioenergy projects, and report it underdiscontinued operations.As part of this disposal, in December 2010 Conergysold EPURON’s German and French wind projectbusiness (including the respective operating assets) toan investment fund of Impax Asset Management Ltd.,one of the leading specialists for listed and privateequity funds in the European renewable energies market.The combined asset/share deal between Conergy’ssubsidiary Momentum Renewables GmbH (formerlyEPURON GmbH), and Impax New Energy Investors IIL.P. comprises the former’s German wind energy developmentactivities in Hamburg, all its equity interestsin three operational wind farms in East Germany, theplant management business of CSO Energy GmbH aswell as 100.0 percent of EPURON’s wind energy businessin France.In addition major projects based on concentrated solarpower (CSP) technology were sold in Spain in the firstquarter of 2011. Aside from the remaining wind energyproject business in Australia, as well as the biogasproject business that was sold to RES Projects GmbH(a leading, Munich-based specialist for the developmentand implementation of biomethane plants) in earlyFebruary 2011, all other activities were discontinuedin 2010. The plan is to dispose of the wind energyproject business in Australia by the end of June 2011at the latest. Assets and liabilities resulting chiefly fromthe former project business that will not be or were nottransferred in connection with the disposal were allocatedto continuing operations.As before, it is our foremost economic goal in the 2010financial year to improve the key performance indicatorsEBITDA, EBIT, working capital and gearing.

105Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationThe assets scheduled for disposal and the related liabilitiesof the discontinued operations are categorisedas follows:EUR million 31.12.2010 31.12.2009AssetsGoodwill 0.8 1.1Intangible assets 0.0 0.1Property, plant and equipment 0.7 2.6Inventories 7.8 28.8Other assets 2.1 3.5Cash and cash equivalents 0.3 2.311.7 38.4LiabilitiesBorrowings 0.0 16.7Trade payables 1.0 5.7Other liabilities 0.1 5.11.1 27.5The net income from discontinued operations is asfollows:EUR million 2010 2009Sales 4.0 16.5Other expenses and income – 6.4 – 14.8Result before taxes fromdiscontinued operations – 2.4 1.7Income taxes – 0.5 0.1Result after taxes fromdiscontinued operations – 2.9 1.8Thereofvaluation gains / lossesfrom value adjustments of assetsand liabilities – –Current profits / losses 3.7 –comprised taxes – –Discontinued operations account for the following netcash flows:EUR million 2010 2009Cash flow from operating activities – 9.2 15.4Cash flow from investing activities 0.8 – 0.9Cash flow from financing activities – 0.2 – 0.3Cash flow from discontinuedoperations – 8.6 14.2Available-for-sale assets and liabilitiesIn the 2010 financial year, the assets and liabilities ofGüstrower Wärmepumpen GmbH, which belonged tothe Components segment, were classified as “availablefor sale”. In the first quarter of 2011, Conergy sold thissubsidiary, which is specialised in the production andsale of heat pumps, to SmartHeat Inc. This NASDAQlistedcompany is a leading provider of heat transfer andenergy conservation solutions in the Chinese market.Conergy’s entire equity interest in Güstrower Wärmepumpenwas transferred to SmartHeat under the sale.In addition, Güstrower Wärmepumpen GmbH alsotakes over Conergy’s land, which originally was allocatedto the Holding segment.The assets and liabilities of Conergy’s Swiss subsidiaryin the Europe segment, Conergy (Schweiz) GmbH,were also classified as “held for sale” in the 2010 financialyear. In the first quarter of 2011, Conergy sold its Swisssolar thermal products business to Capital Stage AG,a private equity company specialising in companiesand projects in the clean-tech sector. Conergy’s entireequity interest in its Swiss subsidiary was transferred toCapital Stage. The assets and liabilities of the Company’sCypriot subsidiaries in the European segment were alsoclassified as “available for sale”. This change in presentationis rooted in the Company’s plan to discontinueits activities in Cyprus.Assets and related liabilities slated for disposal arecategorised as follows:EUR million 31.12.2010 31.12.2009AssetsGoodwill 2.9 –Intangible assets 0.7 –Property, plant and equipment 1.3 –Inventories 4.0 –Other assets 0.7 –Cash and cash equivalents 1.0 –10.6 –LiabilitiesBorrowings – –Trade payables 0.2 –Other liabilities 1.6 –1.8 –

106Conergy AG I Annual Report 20107. Segment disclosuresThe segment table solely shows the Company’s continuingoperations. Comments on its discontinuedoperations are contained in note 6.Segment reporting is based on the organisationalstructure of the Conergy Group in the 2010 financialyear. The individual organisational units are allocatedto the operating segments solely according to economiccriteria, irrespective of their ownership structureunder German corporate law. In its function asthe Company’s chief operating decision maker, theManagement Board is not given any information onsegment assets and liabilities. Given the absence of internalreporting, there are no disclosures on segmentassets and liabilities in respect of reportable segments.Reportable segmentsSegment classification for the 2010 financial year waschanged compared to the consolidated financial statementsas at 31 December 2009. The previous year’sfigures were adjusted accordingly. The segment tablesolely shows the Company’s continuing operations.Conergy is divided into the segments Germany,Europe without Germany, Americas, Asia-Pacific,Components and Holding.The Components segment develops and manufacturessystem components such as solar cells, solar modules,module frames, and mounting systems, as well aselectronic components. Whilst Conergy produces solarcells and solar modules in its Frankfurt (Oder) solarfactory, the Company develops electronic componentssuch as inverters, connection boxes, monitoringsystems, and tracking systems in Hamburg and BadVilbel, and has these built to order by various companies,most of them European. Mounting systems andmodule frames are developed and manufactured inRangsdorf near Berlin. Electrical components andmounting systems are developed and produced by oursubsidiaries voltwerk electronics GmbH and MountingSystems GmbH and are also sold under their respectivebrand names.The segments Germany, Europe without Germany,Americas and Asia-Pacific sell the products manufacturedby the Components segment and the completesystems and components purchased by Conergy, towholesalers, installers and end customers (primarilyfarmers, private households, and investors). The Company’sdistribution activities also include the planning,construction as well as operations management andmaintenance of photovoltaic systems (known as EPCactivities: engineering, procurement, and construction).Conergy offers several different types of service: thesale of individual components or the sale of completesystems with coordinated components and/or planningand engineering services, as well as turnkey plantconstruction with or without operations managementand maintenance. The services that Conergy offersrange from construction planning to the delivery ofcomponents, all the way to the construction of photovoltaicplants.Conergy also develops, finances, implements and operateslarge-scale PV projects in these segments.Conergy’s range of products and services includes siteinspection and development; contracting for, coordinating,and monitoring plant construction; negotiationof project agreements; the creation of project-basedoperating companies; and commercial and technicalmanagement of plants. Conergy also arranges debtand equity financing for these operating companiesand the marketing of equity interests to investors.The “Reconciliation” and “Holding” columns are shownseparately. During reconciliation, intra-Group businesstransactions are eliminated and income and expensesnot directly attributable to the segments are disclosed.The Holding segment essentially comprises the activitiesof the Conergy holding company’s Shared Services aswell as purchasing and logistics.The accounting standards applied to segment reportingcorrespond to those applied for Conergy as a whole.The number of employees corresponds to the numberof full-time employees. Part-time employees are takeninto account on a pro rata basis in accordance withtheir contractual working hours.

107Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationThe following table contains the reconciliation of thereporting segments’ earnings before interest and taxes(EBIT) to the Group’s earnings before taxes:Reconciliation of the segment resultEUR million 2010 2009Operating result of thereported segments – 10.2 – 36.2Operating result reconciliation – 3.6 – 0.6Operating result (EBIT) – 13.8 – 36.8Non-operating result – 14.7 – 21.8Earnings before taxes (EBT) – 28.5 – 58.6region rose by 43.7 percent (previous year: EUR 76.7million). In Australia, the wholesale business was instrumentalin lifting sales to EUR 86.3 million (previousyear: EUR 52.5 million).As in the previous year, no single customer accountedfor more than 10.0 percent of the Conergy Group’ssales in the 2010 financial year. All disclosures regardingsales are classified by the location of the respectiveConergy company’s office.For more details, please see the section on the Group’sprofit or loss in the management report.Cross-segment disclosuresCross-segment sales in Germany were EUR 416.6 million,compared to EUR 280.8 million the previous year.Germany thus accounted for 45.6 percent of overallsales (previous year: 46.7 percent). Sales abroad roseby 54.4 percent to EUR 496.9 million (previous year:EUR 320.1 million). Conergy recorded strong salesgrowth to EUR 328.2 million in the Germany segment(previous year: EUR 255.4 million). This is especiallydue to the positive development of the wholesale business.Moreover, the announcement of or rather thedebate on the reduction in the feed-in tariff, which wasenacted as part of the amendment of the GermanRenewable Energy Sources Act (EEG), boosted demandin Germany, especially in the first half of 2010.Sales in Europe – excluding Germany – increased toEUR 323.7 million (previous year: EUR 191.0 million).Sales developed positively, especially in the CzechRepublic, Italy, France and Greece. In the Czech Republicsales rose from EUR 1.8 million in financial year2009 to EUR 18.9 million in financial year 2010. TheCompany succeeded in further expanding its positionin the wholesale market in Greece and France. As a result,sales in Greece increased to EUR 17.6 million(previous year: EUR 9.5 million). Sales in France roseto EUR 49.2 million (previous year: EUR 33.1 million).Given the improvement in statutory programmesaimed at end consumers in Italy, sales in that countryrose to EUR 151.0 million (previous year: EUR 74.3 million),especially due to the solid performance of thewholesale business. Conergy also succeeded in liftingsales in Spain to EUR 49.5 million (previous year: EUR43.4 million) in the 2010 financial year. In the Americas,sales rose to EUR 63.0 million (previous year: EUR 52.4million). Whilst sales in the United States were EUR 39.4million (previous year: EUR 45.8 million) and thus belowthe previous year’s level, sales in Canada increasedto EUR 23.6 million (previous year: EUR 6.7million). At EUR 110.2 million, sales in the Asia-PacificA total of EUR 171.6 million (previous year: EUR 192.2 million)of the Group’s non-current assets amounting toEUR 175.6 million (previous year: EUR 211.4 million) areattributable to Germany.Disclosures and comments on theincome statement8. SalesSales are comprised of the following:EUR million 2010 2009Sales from the sale of goods 633.8 374.1Sales from services rendered(incl. projects) 246.0 208.4Services realised under constructioncontracts (PoC) 33.7 18.4913.5 600.99. Personnel costsEUR million 2010 2009Wages and salaries – 67.6 – 65.6Social security costs – 17.7 – 16.5– 85.3 – 82.1The social insurance costs also contain the contributionsto private and public institutions for the period afterretirement. These payments relate exclusively to defined-contributionpension plans such as Germany’sstatutory pension scheme.

108Conergy AG I Annual Report 201010. Other operating income11. Other operating expensesThe other operating income is comprised of the following:EUR million 2010 2009The other operating expenses are comprised of thefollowing:EUR million 2010 2009Currency changes 13.9 3.8Deconsolidation income 5.2 11.8Write-up from receivables 6.8 36.0Other operating income 7.7 13.233.6 64.8The income from changes in foreign exchange rateslargely comprises gains from foreign exchange differencesarising between the dates on which foreign currencyreceivables and payables are generated andpaid, as well as foreign currency gains arising on themeasurement at the reporting date exchange rate. Anyresulting foreign exchange losses are recognised in“Other operating expenses”.The income from the reversal of provisions mainlyconcerns the reversal of unused provisions that hadbeen recognised in connection with restructuringmeasures and guarantee risks related to the projectbusiness.The write-up from receivables in the 2009 financialyear essentially comprises the restatement of a receivablefrom MEMC Electronic Materials, Inc.amounting to EUR 34.2 million.The other operating income also comprises a multitudeof minor individual items related to the Group’s32 consolidated companies shown under continuingoperations.Rental, lease andmaintenance expenses – 27.5 – 26.9Legal and consulting expenses – 21.5 – 18.0Distribution costs – 21.0 – 12.1Third-party services(including temporary staff) – 18.8 – 12.9Warranty costs – 15.7 – 7.4Bad debt allowance – 5.7 – 9.2Currency changes – 0.6 – 1.1Other operating expenses – 24.4 – 23.7– 135.2 – 111.3Consulting expenses were largely incurred for consultingand support services related to the Company’srestructuring, specifically, finance (banks), legal affairs,restructuring and auditing. This also contains externalIT and project development services.The expenses for third-party services essentially concerncontract and temporary workers that the Componentssegment incurred in connection with productionat the Frankfurt (Oder) solar module factory.The allowances on receivables were due to a lack ofcreditworthiness on the part of customers. This wasdue to financing problems in connection with individualprojects, among others.The cost of sales contain transport and advertising costs.In 2010 the other operating expenses also containedEUR 2.5 million in expenses for communications andoffice equipment (previous year: EUR 2.8 million);EUR 2.0 million in insurance, contributions, fees andother charges (previous year: EUR 2.6 million); as wellas EUR 3.9 million in expenses for travel, meals andentertainment (previous year: EUR 3.3 million).The miscellaneous other operating expenses comprisea multitude of minor individual items related to theGroup’s 32 consolidated companies shown undercontinuing operations.

109Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Information12. Amortisation, depreciation andimpairment of intangible assets andproperty, plant and equipmentAmortisation, depreciation and impairment of intangibleassets and property, plant and equipment is comprisedof the following:EUR million 2010 2009Impairment of goodwill – 10.9 – 1.5Impairment of own developmentservices – 0.1 0.0Impairment of other intangible assetsand of property, plant and equipment – 6.1 – 0.8Depreciation and amortisation – 26.8 – 23.8– 43.9 – 26.1The useful lives that apply groupwide to depreciationand amortisation as well as the principles governingimpairment losses are provided in the disclosures onthe Company’s key accounting policies.All goodwill was tested for impairment in the fourthquarter of 2010, as usual, in the light of our financialplanning for 2011 through 2013. The Company had tosubstantially adjust its forecast of the expected futurecash inflows in individual countries such as the UnitedStates due to the decline in selling prices and thesmaller volume in the major project business. This resultedin an impairment loss of EUR 10.9 million ongoodwill. The impairment losses on property, plant andequipment basically concern write-downs of land andbuildings belonging to Conergy Real Estate GmbH &Co. KG (segment Holding), which were measured atthe fair value in connection with an intra-Group disposal.13. Non-operating resultConergy’s non-operating result in the 2010 financialyear was EUR – 14.7 million (previous year:EUR – 21.8 million). It comprises EUR 15.9 million innon-operating expenses (previous year: EUR 22.5 million)and EUR 1.2 million in non-operating income(previous year: EUR 0.7 million). See below for detailson the individual categories of the non-operating result.Interest resultThe interest result is made up as follows:Interest resultEUR million 2010 2009ExpensesInterest and similar expenses* – 14.0 – 16.8Interest expense from derivatives(held for trading) – 0.6 – 4.3IncomeOther interest and similar income* 1.2 0.3Interest income from derivatives(held for trading) – 0.4Total – 13.4 – 20.4*For financial assets and liabilities not recognised at fair value.Other non-operating expenses and incomeThe other non-operating expenses and income arecomprised of the following:Other non-operating expenses and incomeEUR million 2010 2009ExpensesInterest expense added back tointerest-bearing provisions – 1.2 – 1.0Other non-operating expenses – 0.1 – 0.4IncomeOther non-operating income – –Total – 1.3 – 1.4Interest expense from interest added back to non-currentprovisions largely concerns provisions for warranties.14. Income taxesIncome taxes comprise taxes paid and owed on incomeand earnings, as well as the deferred tax assets and liabilitiesrecognised by the Group. The income taxes showninclude:EUR million 2010 2009Current income taxes – 2.5 – 0.7Deferred income taxes – 11.0 – 21.8– 13.5 – 22.5The following table shows the reconciliation of taxexpense expected on the basis of the IFRS earningsbefore taxes (EBT) with actual tax expense:

110Conergy AG I Annual Report 2010EUR million 2010 2009Result before taxes from continuing operations – 28.5 – 58.6Result before taxes from discontinued operations – 2.4 1.7Earnings before taxes (total) – 30.9 – 56.9Theoretical income tax rate for the Company in percent 31.5 31.5Expected tax income (+) / expense (–) 9.7 17.9Effects of tax rate changes in future years – 0.1 0.6Municipal trade tax additions / deductions – 2.2 – 2.2Effects of previous years’ taxes recognised in the financial year – 11.1 20.9Effects due to tax rates deviating from the theoretical income tax rate 2.0 – 0.5Effects of non-taxable income 1.4 – 2.5Permanent effects – 0.9 – 0.8Effects of non-deductible expenses – 2.9 – 2.1Effects of the non-recognition and retrospective application of deferred tax assets on temporary differencesand loss carryforwards – 12.0 – 47.9Other differences 2.1 – 5.8Current income taxes (total) – 14.0 – 22.4Effective income tax rate in percent – 45.2 – 39.3Thereof current income taxes from discontinued operations – 0.5 0.1Effective income tax from continuing operations – 13.5 – 22.5Effective income tax rate in percent – 47.3 – 38.4A corporate income tax rate of 15.0 percent and a solidaritysurcharge of 5.5 percent on the corporate incometax rate, as well as trade tax rates between12.0 percent and 16.5 percent, are applied to domestictax calculations unchanged to the previous year in accordancewith applicable taxation rates. Foreign incometaxes are calculated on the basis of the laws andregulations applicable in the respective countries.Deferredtax assetsDeferredtax liabilitiesEUR million 2010 2009 2010 2009Intangible assets 13.0 14.4 0.2 0.1Property, plant and equipment 0.0 0.0 0.1 0.0Receivables and otherfinancial assets 1.2 5.8 0.8 9.8Inventories 0.3 11.6 0.2 2.5The following income tax rates apply in the variouscountries: 30.0 percent in Spain; 33.3 percent inFrance; between 38.1 and 44.0 percent in the USA;30.0 percent in Australia; 31.4 percent in Italy; and 23.2percent in Switzerland.Deferred taxes recognised in the balance sheet stemfrom the following temporary circumstances:Provisions 1.1 3.3 0.2 8.9Other liabilities 0.5 1.8 0.6 7.3Trade payables 0.1 5.0 0.0 0.0Tax loss carryforwards 20.5 32.4 – –36.7 74.3 2.1 28.7Thereof non-current 34.7 48.7 0.3 5.1Netting 1.6 28.7 1.6 28.7Deferred taxes recognised 35.1 45.6 0.5 0.0No deferred tax assets were recognised on deductibletemporary differences in the amount of EUR 80.2 million(previous year: EUR 74.5 million), most of whichare non-current.Deferred tax assets and liabilities are offset at the levelof individual Group companies and within tax unitsif there is a right to offset actual tax assets against

111Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationcurrent tax liabilities and if the deferred tax assets andliabilities are due from or to the same tax authority.As at the balance sheet date, the Company recogniseddeferred tax assets on corporate income and municipaltrade tax loss carryforwards amounting to EUR 63.7 millionand EUR 66.5 million, respectively (previous year:EUR 100.2 million and EUR 78.3 million, respectively).Deferred tax assets were recognised for these carryforwardsinsofar as it is probable that the Group willhave sufficient taxable temporary differences; in turn,these will give rise to taxable income to which theseloss carryforwards can be applied before they expire.Possible tax measures related to the restructuringand/or refinancing of our business activities that mightallow us to use loss carryforwards in future have beentaken into account.The recognised tax loss carryforwards can be used asfollows:EUR million 2010 2009CIT/SS * MTT * CIT/SS * MTT *Up to 1 year – – – –1 to 5 years 1.8 0.0 12.1 7.2More than5 years 61.9 66.5 88.1 71.163.7 66.5 100.2 78.3*CIT= Corporate income tax, SS = Solidarity surcharge, MTT = Municipal trade taxNo deferred tax assets were recognised for corporateincome tax and municipal trade tax loss carryforwardsof EUR 156.7 million and EUR 78.5 million (previous year:EUR 350.1 million and EUR 241.9 million). The unrecognisedtax loss carryforwards can be used as follows:EUR million 2010 2009CIT/SS * MTT * CIT/SS * MTT *Given the direct change in shareholders arising fromthe 2008 capital increase and the bank’s subsequentrestructuring in both January and May 2009, we expectapplication of Section 8c German Corporate IncomeTax Act – which was enacted as part of the reforms ofthe German corporate tax code – to result in the prorata elimination of the existing tax loss carryforwardsas at 31 December 2007 and 31 December 2008 aswell as of the remaining pro rata losses for 2008 and2009 at the level of Conergy AG and various domesticsubsidiaries. The consolidated financial statementsas at 31 December 2009 still presented the tax losscarryforwards under the item, unrecognised losscarryforwards, because the Company expected therestructuring provision of Section 8c para. 1a GermanCorporate Income Tax Act to apply. By resolution dated26 January 2011 (C7/10) however, the EU Commissiondecided that the restructuring provision constitutes anunlawful government grant. The German governmentdisagrees (press release 4/2011 of the German Ministryof Finance dated 9 March 2011) and has announcedthat it will file suit to vacate the EU Commission’s ruling.The outcome of this procedure is uncertain. As thesetax loss carryforwards will likely no longer be availablefor offsetting the Company’s profits, the tax loss carryforwardsthus eliminated are no longer presented. Inthis context please see the disclosures in the risk andopportunity report.Deferred tax liabilities of EUR 28.6 million (previousyear: EUR 36.7 million) for taxes on subsidiaries’retained earnings, which would trigger actual tax paymentsif they were distributed, were not recognised. Ifdeferred tax assets or liabilities were recognised forthese timing differences, only the withholding tax rateapplicable in the given case would apply, if necessarytaking the German tax rate of five percent for dividendspaid into account. There is no plan to pay out the retainedprofits.Up to 1 year – – – –1 to 5 years 48.0 13.4 51.0 7.8More than5 years 108.7 65.1 299.1 234.1156.7 78.5 350.1 241.9*CIT= Corporate income tax, SS = Solidarity surcharge, MTT = Municipal trade tax

112Conergy AG I Annual Report 201015. Earnings per share2010 2009Result from continuing operations applicable to shareholders of Conergy AG EUR million – 41.8 – 80.5Result applicable to shareholders of Conergy AG in EUR million – 44.7 – 79.9Adjustment of results for finance costs for diluting instruments EUR million – –Adjusted result from continuing operations EUR million – 41.8 – 80.5Adjusted result applicable to shareholders of Conergy AG EUR million – 44.7 – 79.9Weighted average number of shares issued Shares 398,088,928 398,088,928Potential effect of diluting instruments (number) Shares – –Adjusted average number of no-par shares issued Shares 398,088,928 398,088,928Basic earnings per sharefrom continuing operations EUR – 0.11 – 0.20from discontinued operations EUR 0.00 0.00Earnings per share applicable to the shareholders of Conergy AG EUR – 0.11 – 0.20Diluted earnings per sharefrom continuing operations EUR – 0.11 – 0.20from discontinued operations EUR 0.00 0.00Earnings per share applicable to the shareholders of Conergy AG EUR – 0.11 – 0.20Under the German Stock Corporation Act (Aktiengesetz),dividends eligible for distribution are calculatedbased on the unappropriated surplus pursuantto the annual financial statements of Conergy AGthat were prepared in accordance with the GermanCommercial Code.Given Conergy AG’s net loss of EUR 493.5 million as at31 December 2009, the Annual General Meeting resolvedon 5 October 2010 not to distribute any dividendfor the 2009 financial year. The net loss pursuant to theannual financial statements of Conergy AG accordingto the German Commercial Code as at 31 December2010 was EUR 195.7 million.At the Extraordinary General Meeting on 25 February2011, the Company’s shareholders voted to reducethe capital stock of Conergy AG from EUR 398,088,928.00,denominated in 398,088,928 no-par bearer shares(no-par shares) having a pro rata interest in the capitalstock of EUR 1.00 per share, to EUR 49,761,116, denominatedin 49,761,116 no-par bearer shares, andthus for an 8:1 reverse stock split. Several shareholdersplaced their objections to the resolutions of the GeneralMeeting on the Notary Public’s record. Whether or notand to what extent these shareholders will file actionsto set aside shareholder resolutions pursuant to Section246 para. 1 German Stock Corporation Act was not yetknown at the time this report was published.Conergy’s Management Board and Supervisory Boardpropose to the Annual General Meeting not to pay anydividend for the 2010 financial year.Basic and diluted earnings per share were EUR – 0.90(2009: EUR – 1.61), given the consolidated loss ofEUR 44.7 million (previous year: loss of 79.9 million)and a total of 49,761,116 shares in future.

113Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationDisclosures and comments on theconsolidated balance sheet16. Intangible assets and goodwillEUR millionGoodwillIndustrialproperty rightsDevelopmentservicesOther intangibleassets andadvancepayments madeTotalAs at 01.01.2009Cost of acquisition or generation 47.8 10.9 23.6 7.1 89.4Cumulative amortisationand impairment losses – 30.3 – 7.3 – 20.5 – 1.2 – 59.3Net carrying amount 17.5 3.6 3.1 5.9 30.1Development in 2009Net carrying amount as at 01.01.2009 17.5 3.6 3.1 5.9 30.1Currency changes 0.0 0.0 0.0 0.0 0.0Acquisitions – – – – –Investments 0.1 0.1 1.7 2.3 4.2Disposals 0.0 0.0 0.0 – 0.6 – 0.6Reclassification to current assets – 1.0 0.0 0.0 – 0.1 – 1.1Amortisation – 0.2 – 0.7 0.0 – 2.7 – 3.6Impairment losses – 1.5 – – – 0.2 – 1.7Reclassifications 0.0 – 2.2 0.0 2.4 0.2Net carrying amount as at 31.12.2009 14.9 0.8 4.8 7.0 27.5As at 31.12.2009Cost of acquisition or generation 41.4 8.7 25.4 10.8 86.3Cumulative amortisationand impairment losses – 26.5 – 7.9 – 20.6 – 3.8 – 58.8Net carrying amount 14.9 0.8 4.8 7.0 27.5Development in 2010Net carrying amount as at 01.01.2010 14.9 0.8 4.8 7.0 27.5Currency changes 0.0 0.1 0.1 0.1 0.3Acquisitions – – – – 0.0Investments 0.0 0.3 1.5 1.6 3.4Disposals – 0.1 0.0 0.0 – 0.4 – 0.5Reclassification to current assets – 2.9 – 0.7 – 0.0 – 3.6Amortisation – – 0.1 – 1.2 – 2.8 – 4.1Impairment losses – 10.9 – – 0.1 – 0.9 – 11.9Reclassifications – 0.1 – – 0.1Net carrying amount as at 31.12.2010 1.0 0.5 5.1 4.6 11.2As at 31.12.2010Cost of acquisition or generation 30.2 8.5 27.0 11.8 77.5Cumulative amortisationand impairment losses – 29.2 – 8.0 – 21.9 – 7.2 – 66.3Net carrying amount 1.0 0.5 5.1 4.6 11.2The line item “reclassification to current assets”shows the relevant disposals of the assets attributableto discontinued operations and disposal groupspursuant to IFRS 5.Research and development costs of EUR 0.7 million(previous year: EUR 0.7 million) were expensed.

114Conergy AG I Annual Report 201017. Property, plant and equipmentEUR millionLand andbuildingsTechnicalequipment andmachinesOther plantand equipmentAdvancepayments madeand assets underconstructionTotalAs at 01.01.2009Cost of acquisition or construction 73.4 104.3 21.0 43.0 241.7Cumulative depreciationand impairment losses – 3.5 – 16.3 – 8.6 – 9.3 – 37.7Net carrying amount 69.9 88.0 12.4 33.7 204.0Development in 2009Net carrying amount as at 01.01.2009 69.9 88.0 12.4 33.7 204.0Currency changes 0.0 0.0 0.2 0.0 0.2Investments 2.5 3.7 5.5 1.0 12.7Disposals 0.0 – 7.7 0.0 – 1.7 – 9.4Reclassification to current assets – 1.0 – 0.6 – 1.0 – – 2.6Depreciation – 2.3 – 13.5 – 4.2 – 0.2 – 20.2Impairment losses 0.0 – 0.3 – 0.3 0.0 – 0.6Reclassifications – 20.3 1.0 – 21.5 – 0.2Net carrying amount as at 31.12.2009 69.1 89.9 13.6 11.3 183.9As at 31.12.2009Cost of acquisition or construction 74.7 119.3 24.4 20.8 239.2Cumulative depreciationand impairment losses – 5.6 – 29.4 – 10.8 – 9.5 – 55.3Net carrying amount 69.1 89.9 13.6 11.3 183.9Development in 2010Net carrying amount as at 01.01.2010 69.1 89.9 13.6 11.3 183.9Currency changes 0.0 0.1 0.7 0.0 0.8Investments 0.9 2.5 2.0 5.8 11.2Disposals – 0.8 – 0.2 – 0.9 – 0.4 – 2.3Reclassification to current assets – 0.7 0.0 – 0.5 – – 1.2Depreciation – 2.6 – 17.1 – 3.0 0.0 – 22.7Impairment losses – 4.9 0.0 – 0.3 – – 5.2Reclassifications 0.0 6.3 0.1 – 6.5 – 0.1Net carrying amount as at 31.12.2010 61.0 81.5 11.7 10.2 164.4As at 31.12.2010Cost of acquisition or construction 73.4 130.5 24.3 16.9 245.1Cumulative depreciationand impairment losses – 12.4 – 49.0 – 12.6 – 6.7 – 80.7Net carrying amount 61.0 81.5 11.7 10.2 164.4The line item “reclassification to current assets”shows the relevant disposals of the assets attributableto discontinued operations and disposal groupspursuant to IFRS 5.

115Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Information18. Financial assetsFinancial assets comprise the following items:Financial assetsEUR million 31.12.2010 31.12.2009TotalOf whichcurrentTotalOf whichcurrentLoans andreceivables 6.2 4.6 11.3 3.1Available-for-salefinancial assets – – – –Held-to-maturityfinancial assets – – – –Financialinstrumentsheld-for-trading – – 0.0 0.0Derivatives inhedge accounting – – – –Total 6.2 4.6 11.3 3.120. InventoriesEUR million 31.12.2010 31.12.2009Raw materials and consumables 28.3 27.3Work in progress 33.4 12.8Finished goods 104.5 64.1Advance payments made 3.3 3.3169.5 107.5In 2010, the following inventories were recognised attheir lower fair values net of distribution expenses:EUR million 31.12.2010 31.12.2009Raw materials and consumablesCarrying amount before impairment 28.7 27.3Less impairment – 0.4 0.0Carrying amount 28.3 27.319. Other assetsEUR million 31.12.2010 31.12.2009Other assets 64.8 69.4ThereofReceivables from the tax office 17.6 27.8Prepaid expenses 2.0 1.0Other current assets 45.2 40.6Thereof non-current 0.9 0.9EUR 17.6 million (previous year: EUR 27.8 million) in receivablesfrom the tax authority primarily concern VATreceivables and are due within one year.Work in progressCarrying amount before impairment 34.6 13.0Less impairment – 1.2 – 0.2Carrying amount 33.4 12.8Finished goodsCarrying amount before impairment 110.8 66.4Less impairment – 6.3 – 2.3Carrying amount 104.5 64.1Cost of materials increased in the 2010 financial yeardue to impairment losses on inventories amounting toEUR 7.9 million (previous year: EUR 2.5 million).21. Trade accounts receivableIn the 2010 financial year, the other assets ofEUR 45.1 million (previous year: EUR 40.1 million) includea purchase price receivable related to the disposalof the German and French wind energy projectbusiness (including all related operating assets) to aninvestment fund belonging to Impax Asset ManagementLtd. They also contain receivables of EUR 21.8 million(previous year: EUR 34.2 million) from MEMC ElectronicMaterials, Inc. The other current assets also comprisea multitude of minor individual items related to theGroup’s 32 consolidated companies shown under continuingoperations.EUR million 31.12.2010 31.12.2009Trade receivables beforeimpairment losses 117.8 128.1Less impairment losses – 14.6 – 14.7Trade receivables 103.2 113.4ThereofReceivables fromproduction contracts 18.8 47.5Advance payments received – 6.5 – 22.912.3 24.6Most trade accounts receivable have short residuallives. Hence their carrying amounts correspond to thefair value at the balance sheet date.

116Conergy AG I Annual Report 2010The item, trade accounts receivable, also contains thecontracts recognised pursuant to the percentage ofcompletion method under IAS 11. This item comprisesthe contract costs accrued at the reporting date andthe profits from the relevant order, pro-rated accordingto the stage of completion. Advances received on thecontracts recognised were deducted. Orders resultingin a net loss were considered in connection with aloss-free measurement.Receivables from construction contracts developedas follows year-on-year:EUR million 31.12.2010 31.12.2009The following impairment losses were recognised inthe reporting year:EUR million 2010 2009As at 01.01. 14.7 10.9Currency changes – 0.0Additions 4.6 8.2Use – 1.6 – 1.0Reversals – 3.1 – 1.8Disposal – – 0.4Reclassificationto current assets 0.0 – 1.2As at 31.12. 14.6 14.7Accrued contract costs 17.5 39.3Contract gains realised pro rataincl. carryforward effect 1.3 8.2Less recognised contract losses – –Less advance payments received – 6.5 – 22.912.3 24.6The aging structure of the trade accounts receivablethat are not impaired was recognised is as follows:EUR million 31.12.2010 31.12.2009Trade receivables 103.2 113.4ThereofNeither impaired nor past due asof the balance sheet date 54.1 51.7Not impaired as of the balancesheet date and past due withinthe following periods:Less than 1 month 25.1 27.2Between 1 and 2 months 12.1 11.6Between 2 and 3 months 4.3 3.9Between 3 and 6 months 1.2 6.7Between 6 and 12 months 2.0 1.9More than 12 months 1.6 4.146.3 55.4As at 31 December 2010, trade accounts receivable thatwere due but not impaired amounted to EUR 46.3 million(previous year: EUR 55.4 million). Given specificcredit management processes and separate assessmentsof individual credit risks, receivables that havenot been written down are considered recoverable.Any future non-payment risk related to existing receivableshas been adequately considered in the valuationallowances. Furthermore, receivables of a certainscope have been hedged through bank guaranteesand reservations of title have been agreed.Specific and global valuation allowances are recognisedin the income statement under other operatingexpenses while reversals are recognised under otheroperating income. Reversals in the 2009 financial yeardo not include the write-up of the other receivablefrom MEMC Electronic Materials, Inc. in the amount ofEUR 34.2 million.The fair value of the trade accounts receivable at thebalance sheet date constitutes the maximum exposureto lending risks at such date.22. Grants receivedDuring the 2010 reporting period, Conergy Groupcompanies received a total of EUR 0.9 million in nonreimbursablegovernment grants and supplements(actual inflow of funds). In addition, Conergy alsoobtained binding promises of grants for a total ofEUR 2.0 million (subsidy notifications) in 2010. Governmentgrants are tied to specific projects subject tocertain requirements and conditions. For instance,Conergy is obligated to leave subsidised assets in thesubsidised plant for a period of five years (from theproject’s completion date) and/or to guarantee jobs forspecific plants during the same period. During theperiod presented and until the time the consolidatedfinancial statements were prepared, these requirementshad been met; Conergy expects these requirementsto be met in future as well.

117Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationThe following subsidies were disbursed in the reportingperiod:EUR million 31.12.2010 31.12.2009Investment subsidy – 0.2Investment grants 0.9 –0.9 0.2The subsidies and supplements in the 2009 and 2010financial years were granted in connection with theconstruction of an operation in Zweibrücken and the expansionof the existing production facility in Rangsdorf.23. Cash and cash equivalentsEUR million 31.12.2010 31.12.2009Cash on hand / checks 0.3 1.0Bank balances 36.4 51.136.7 52.1Cash and cash equivalents include checks, cash onhand and bank credit balances. As a rule, this item alsocontains financial instruments with initial maturities ofup to three months. In a deviation from the presentationin the consolidated balance sheet, the cash holdingsshown in the statement of cash flows as at 31 December2010 contain EUR 1.3 million in cash and cashequivalents attributable to discontinued operations.24. EquityThe individual components of equity as well as theirdevelopment in 2009 and 2010 follow from the statementof changes in equity of the Conergy Group.Capital stockThe subscribed capital (capital stock) of Conergy AGin the 2008 financial year was increased by resolutionof the Annual General Meeting on 28 August 2008from EUR 35,088,928.00 by EUR 363,000,000.00 tocurrently EUR 398,088,928.00. It is denominated in398,088,928.00 no-par bearer shares with a pro ratainterest in the capital stock of EUR 1.00 per no-parshare. Each share grants identical rights and one voteat the Annual General Meeting. New shares are issuedas bearer shares unless the Annual General Meetingresolves otherwise.As at 31 December 2010, Conergy AG posted a losscorresponding to one half of its capital stock. This iswhy the Management Board convened an ExtraordinaryGeneral Meeting on 18 January 2011. The Company’sExtraordinary General Meeting on 25 February 2011resolved to reduce the Company’s capital stock bymeans of a simplified capital reduction pursuant toSection 229 German Stock Corporation Act fromEUR 398,088,928.00 to EUR 49,761,116.00 and, toincrease the capital stock thus reduced in a secondstep by up to EUR 237,551,399.00 by means of a capitalincrease subject to shareholders’ subscription rightthat grants certain of the Company’s creditors the rightto subscribe to shares unsubscribed by the Company’sshareholders in return for contributing their loanreceivables as in-kind contributions. Several shareholdersplaced their objections to the resolutions ofthe General Meeting on the Notary Public’s record.Whether or not and to what extent these shareholderswill file actions to set aside shareholder resolutionspursuant to Section 246 para. 1 German Stock CorporationAct was not yet known at the time this reportwas published.Pursuant to Article 5 para. 3 of the Articles of Association,the Management Board is authorised, subject tothe approval of the Supervisory Board, to increase theCompany’s capital stock until 9 June 2014 by a total ofup to EUR 100,000,000 by once or repeatedly issuingup to 100,000,000 new no-par bearer shares in returnfor contributions in cash and/or in kind (“AuthorisedCapital 2009”). In principle, the shareholders are granteda subscription right. The new shares may also be acquiredby one or more banks, subject to the obligationto offer them to the shareholders for subscription.The Management Board is authorised hereby to excludeshareholders’ subscription right with the approvalof the Supervisory Board, once or repeatedly:(a) to the extent necessary in order to exclude fractionalshares, if any, from shareholders’ subscription right;(b) to the extent necessary in order to grant to theholders of options or conversion rights or obligationsarising from bonds with conversion rights and/or optionsor a conversion obligation a subscription right to newshares in the scope to which they would be entitledas shareholders once they exercised the option orconversion right or fulfilled the conversion obligation;(c) to the extent that the new shares are issued in returnfor cash contributions and the pro rata amount of thecapital stock attributable to all of the newly issuedshares does not exceed the total of EUR 39,808,892.00or, if lower, 10.0 percent of the capital stock extant

118Conergy AG I Annual Report 2010both at the time this authorisation takes effect and atthe time it is exercised for the first time (“maximumamount”) and the issue price of the shares to be newlyissued is not substantially lower than the market priceof the Company’s listed shares of the same class atthe time the issue price is finally fixed; [and] (d) tothe extent that the new shares are issued in return forin-kind contributions (especially in the form of companies,business units, equity stakes in companies orreceivables).The pro rata amount of the capital stock attributable tonew or previously acquired treasury shares that areissued or sold in accordance with or under Section186 para. 3 sentence 4 German Stock CorporationAct while this authorisation is in effect, subject to theexclusion of shareholders’ subscription right, shall beoffset against the maximum amount set forth in item(c) of the forgoing paragraph, as well as the pro rataamount of the capital stock attributable to shares thatare or must be issued to satisfy bonds with conversionrights and/or options or a conversion obligation, tothe extent that these bonds are issued while this authorisationis in effect subject to the exclusion ofshareholders’ subscription right in analogous applicationof Section 186 para. 3 sentence 4 GermanStock Corporation Act.The Management Board is further authorised, subjectto the approval of the Supervisory Board, to determineadditional details of the capital increase and the conditionsof the share issuance.The Management Board is also authorised pursuant toArticle 5 para. 9 of the Company’s Articles of Association,as amended by the resolutions of the AnnualGeneral Meeting on 5 October 2010, which were recordedin the Commercial Registry on 23 February 2011,to increase the Company’s capital stock until 4 October2015, with the approval of the Supervisory Board,by a total of EUR 99,044,464.00 by issuing a total ofup to 99,044,464 new no-par bearer shares (no-parshares), once or repeatedly, in return for contributionsin cash and/or in kind (Authorised Capital 2010). Inprinciple, the shareholders are granted a subscriptionright. The new shares may also be acquired by one ormore banks, subject to the obligation to offer them tothe shareholders for subscription.The Management Board is authorised in this connectionto exclude shareholders’ subscription right with theapproval of the Supervisory Board, once or repeatedly:(a) to the extent necessary in order to exclude fractionalshares, if any, from shareholders’ subscription right;(b) to the extent necessary in order to grant to theholders of options or conversion rights or obligationsarising from bonds with conversion rights and/or optionsor a conversion obligation a subscription right tonew shares in the scope to which they would be entitledas shareholders once they exercised the option orconversion right or fulfilled the conversion obligation;(c) to the extent that the new shares are issued in returnfor in-kind contributions (especially in the form of companies,business units, equity stakes in companies, receivablesor for the purpose of satisfying conversion oroption rights or obligations). The Management Boardis authorised, subject to the approval of the SupervisoryBoard, to determine additional details of the capitalincrease and the conditions of the share issuance.Pursuant to Article 5 para. 8 of the Company’s Articlesof Association, as amended by the resolutions of theAnnual General Meeting on 5 October 2010, whichwere recorded in the Commercial Registry on 23 February2011, the Company’s capital stock was increasedby up to EUR 199,044,464.00 by issuing199,044,464 new no-par bearer shares (no-par shares)with a pro rata interest in the capital stock of EUR 1.00per share (contingent capital). This contingent capitalincrease serves to grant no-par bearer shares to theholders or creditors of convertible bonds and/orbonds with warrants, profit participation rights and/orincome bonds (or combinations of these instruments)that are issued by the Company or its direct or indirectassociates under the authorisation granted by theAnnual General Meeting on 5 October 2010 pursuantto Agenda item 7 in return for cash contributions andestablish a conversion right or option to the Company’snew no-par bearer shares or a conversion obligation.This contingent capital increase shall be executed onlyinsofar as the options or conversion rights are exercisedor insofar as the holders or creditors obligated toconvert actually fulfil their conversion obligation andprovided that no treasury shares or new shares issuedunder authorised capital are used to satisfy same.The new no-par bearer shares shall participate in theCompany’s profit from the start of the financial year inwhich they are created through the exercise of optionsand/or conversion rights or through the fulfilment ofconversion obligations. The Management Board is authorizedto determine other details relating to the executionof the Contingent Capital Increase.The Management Board has the right under Section71 para. 1 German Stock Corporation Act to purchasethe Company’s treasury shares in the following cases:(a) if such purchase is necessary in order to avert se­

119Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationvere, imminent harm to the Company; (b) if the sharesare to be offered for purchase to persons who were orare employed with the Company or one of its associates;(c) if the purchase is made in order to compensateshareholders using shares in specific situations prescribedby law; (d) if the purchase does not entail anyconsideration; (e) by virtue of universal succession;and (f) pursuant to a resolution of the Company’sAnnual General Meeting to retire stock in accordancewith the requirements regarding a reduction in thecapital stock. The shares bought back under items (a)through (c) above, along with the Company’s othertreasury shares, which it already purchased or stillretains, may not account for more than 10.0 percent ofthe capital stock.At this time, Conergy AG is not authorised to purchasetreasury shares under any resolution of its AnnualGeneral Meeting pursuant to Section 71 para. 1 no. 8German Stock Corporation Act.Capital reservesThe capital reserves comprise the excess of the issueprice over the par value of the Conergy shares issued.They are not normally available to the shareholders fordistribution. In addition, the excess of the amountspaid or received in connection with the buyback or saleof treasury shares over their par value is also recognisedin this item.The Company’s capital reserves rose by EUR 2.1 millionto EUR 323.9 million in the 2010 financial yearon account of Commerzbank AG’s reimbursementof excess fees related to the 2008 capital increase lessthe respective deferred taxes.Other reservesAside from appropriations from cumulative prior-periodnet income/losses, the expense and income items to berecognised directly in equity from the fair value measurementof the available-for-sale financial instruments,the effective portion of changes in the value of hedginginstruments in a cash flow hedge and the reconcilingitems from currency translation are also recognised inother reserves. The cumulative prior-period net income/losses contain the undistributed net income generatedby both Conergy and the consolidated companies.Non-controlling interestsConergy holds non-controlling interests in ConergyCeská Republika s.r.o. (Czech Republic) and Sun­Technics Energy Systems Private Limited (India).25. ProvisionsThe provisions developed as follows in the financial year:EUR million Warranties Restructuring Legal disputes Other TotalAs at 01.01.2010 22.1 2.5 1.6 22.7 48.9Thereof non-current 20.1 – – 15.6 35.7Change in the basis of consolidation – – – – –Addition 12.6 0.6 0.6 5.9 19.7Use – 3.6 – 0.9 – 0.3 – 3.6 – 8.4Reversal – 2.9 – 0.7 – 0.6 – 4.8 – 9.0Interest cost 0.6 – – 0.4 1.0Reclassification to current liabilities – 0.3 – – 0.0 – 0.3Currency changes 0.3 – 0.0 0.1 0.4As at 31.12.2010 28.8 1.5 1.3 20.7 52.3Thereof non-current 27.4 – – 14.1 41.5

120Conergy AG I Annual Report 2010Provisions for warranties were recognised for expectedfollow-up work in connection with major projectspreviously concluded and warranties under productand performance guarantees for the Company’s ownproducts and for merchandise. The other provisions basicallycontain expected losses from service contracts.The restructuring provisions only contain the expensesthat are directly allocable to and necessary for therestructuring and that are unrelated to the Company’soperating business in future. For instance, this includestermination benefits to employees as well as paymentsfor rented property no longer being used.The line item, reclassification to current liabilities, showsthe relevant disposals of the liabilities attributable todiscontinued operations and disposal groups pursuantto IFRS 5.Members of the Management Board participate in ashare-based payment programme based on stock appreciationrights that is integral to each ManagementBoard member’s variable compensation. An individualpercentage of the annual variable compensation (targetamount) provides the basis for measuring the stockappreciation rights. The number of phantom stockoptions is determined based on the weighted averageprice of the Company’s share on the last 30 days ofthe financial year for which the compensation isowed. Depending on the performance of Conergy’sshare price relative to a three- or four-year performanceperiod that starts on the issue date, an amount correspondingto no more than 200.0 percent but no lessthan 50.0 percent of the target amount is paid to theparticipants upon the programme’s expiry; the measurementis based on the weighted average share priceduring the 30 trading days preceding the payment date.Obligations to personnel, such as, for example, chargesfor variable and individual one-off payments, vacationclaims as well as other personnel expenses are recognisedunder other liabilities.26. Stock options programmeIndividual commitments under share-based paymentsenable the Company to link certain components ofcompensation to its share price or the latter’s changeover time. Conergy therefore maintains a share-basedpayment system for members of its ManagementBoard and selected employees based on stock appreciationrights (SARs) on shares of Conergy AG. Theshare-based payment programme based on stock appreciationrights constitutes a cash-settled sharebasedpayment transaction as defined in IFRS 2.Certain employees were given the right in the 2010financial year to participate in the long-term incentiveprogramme (LTIP 2010). Stock appreciation rights areoptions that entitle the owner to a claim for payment incash of an amount corresponding to the difference betweenConergy AG’s share price and the exerciseprice. These options have a maturity of four years and aholding period of one and one half years from the datethe SARs are issued. The stock appreciation rights maybe exercised at any time during this exercise period,at the earliest however after at least one performancetarget has been met at least once. This performance targetis tied to a specific price of Conergy AG’s share on30 consecutive trading days. The stock appreciationrights lapse in toto at the end of the holding period if theperformance target is not met within the first 18 months.The stock option programmes that had been put inplace for individual members of the ManagementBoard in 2007 and 2008 lapsed because the exerciseconditions were not fulfilled at the time the respectivedirector’s contracts expired.Expenses of TEUR 27 (previous year: income ofTEUR 32) were recognised under personnel expensesin connection with this stock option programme for thefinancial year just ended. For the share-based compensationa total of TEUR 100 in liabilities (previous year:TEUR 73) were recognized as of 31 December 2010.27. BorrowingsBorrowing are comprised as follows:EUR millionTotalupto 1year1 to 5yearsmorethan 5yearsAs at 31.12.2010Liabilities to banks 277.7 277.7 – –Derivative financialinstruments 1.0 1.0 – –Other borrowings 12.9 1.8 – 11.1Total 291.6 280.5 – 11.1As at 31.12.2009Liabilities to banks 275.7 200.7 75.0 –Derivative financialinstruments 6.2 3.3 2.9 –Other borrowings 11.7 0.8 0.0 10.9Total 293.6 204.8 77.9 10.9

121Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationTo ensure sufficient operating liquidity, on 31 July 2007Conergy AG, the Momentum Renewables GmbH(formerly EPURON GmbH), Conergy SolarModuleGmbH & Co. KG and Conergy Deutschland GmbHclosed a syndicated loan for a total of EUR 600 millionfrom originally 23 banks under the leadership ofCommerzbank AG, Dresdner Bank AG and WestLBAG (EUR 400 million cash loan and EUR 200 millionguarantee and documentary credit facility). The cashloan is divided into two tranches and is intended forfinancing the construction of the production facility inFrankfurt (Oder) (Tranche A) and for financing ConergyGroup’s working capital requirements (Tranche B witha revolving facility of EUR 250 million). In addition, thesyndicated loan provides a guarantee and documentarycredit facility of EUR 200 million. Originally,Tranche A for EUR 150 million had to be paid back inhalf-yearly instalments until 31 December 2011,starting in 30 June 2008. A total of 37.5 million wererepaid in 2008 and a total of EUR 18.8 million wererepaid in 2009 as agreed with the banks. An additionalloan payment of EUR 18.8 million was madeonce the out-of-court settlement with MEMC ElectronicMaterials, Inc. regarding the delivery of solarwafers for the Frankfurt (Oder) plant was executed inmid-February 2010. Furthermore, a special loan paymentof EUR 1.9 million was made in August 2010.Tranche B in the amount of EUR 250 million was originallyscheduled for repayment by 31 July 2010. On29 July 2010, Conergy originally had reached anagreement with its financing banks to extend all loansuntil the end of 2011. The parties had also agreed thatthe three instalments outstanding on the term loan(Tranche A) would also be suspended until the end of2011. These agreements were subject to certain terms.Conergy and the banking syndicate had agreed in thisconnection to commission an auditing firm to preparean independent business review. This independentbusiness review came to the conclusion that follow-upfinancing for the current credit facility beyond 31 December2011 would be rather unlikely unless the Company’scapital base was strengthened. This conclusiontriggered a suspensive condition, and as a result thematurity date of all loans was accelerated to 21 December2010. On 17 December 2010, the creditors reachedan agreement with Conergy AG to reduce the Company’sdebt substantially, with some creditors providingequity capital. The refinancing concept as a prerequisitefor the granting of a new loan agreement that wassigned in December 2010 will reduce Conergy’s debtby EUR 188 million, markedly lowering the Company’sfuture interest burden. It also provided for extendingthe remaining loans until the refinancing measureshave been implemented but at most until 31 July 2011.The parties also agreed on 17 December 2010 thatsome of the members of the existing banking syndicatewill make available a new cash loan of up to approximatelyEUR 135 million to discharge the current creditfacility as part of the restructuring as well as a guaranteefacility of up to approximately EUR 141 million for fouryears at market terms. The new syndicated loan agreementwill provide for financial covenants after three years.For the rest, among other things, the refinancing conceptprovides for a reduction of the Company’s capitalstock of roughly EUR 398 million by approximatelyEUR 348 million to approximately EUR 50 million, aswell as a capital increase of up to EUR 188 million.Conergy’s shareholders will have a subscription rightin connection with this capital increase. If these subscriptionrights are exercised, Conergy will use theproceeds to discharge the corresponding amount ofthe loans outstanding. If the subscription rights are notexercised, some of the creditors have undertaken tocontribute their loan receivables from Conergy as anin-kind contribution up to nominally EUR 188 million inexchange for shares; to this end, the loan receivablesshall be measured at 60.0 percent of their nominal value.Conergy’s debt will be reduced in both cases. Inthe meantime these measures were resolved accordinglyby the Extraordinary General Meeting on 25 February2011 and are being implemented. Finalimplementation of the refinancing concept is still subjectto the condition that the guarantee facility existingas at 31 December 2010 is reduced to roughlyEUR 141 million. Certification by a court-appointedauditor for the in-kind contribution that the value of theloan liabilities to be contributed in a non-cash capitalincrease corresponds to at least 60.0 percent of theirnominal value is another requirement; all other terms ofthe new loan agreement have been fulfiled.The existing applicable loan agreement imposes operatinglimitations on both Conergy and its subsidiariesas well as extensive disclosure requirements and theobligation to comply with specific financial indicators.Conergy has undertaken thereunder to ensure thatcertain balance sheet and earnings ratios, such as theratio of consolidated net borrowings to consolidatedEBITDA (in each case with and without contingent liabilities),a specific ratio of consolidated EBITDA toconsolidated net interest expense and a specific equityratio do not exceed or fall below a specific figure. Theagreed upon value for the equity-ratio could not bemet since 31 December 2010. But this correspondswith the restructuring concept that was agreed uponon 17 December 2010.

122Conergy AG I Annual Report 2010Certain other requirements do apply during the term ofthe agreement. Among other things, these requirementscrimp the ability of the Conergy Group to provideassets as collateral, sell assets, participate in jointventures, acquire additional companies or businessunits, incur additional debt, make loans, provide guarantees,incur leasing liabilities or undertake specificrestructuring measures. Any noncompliance with thesestipulations – or if the financial figures agreed uponare not reached – may trigger an extraordinary right oftermination on the lenders’ part, which would givethem the right to call the loan immediately The lendersalso have other customary rights to terminate, for example,if a German or other significant subsidiary filesfor insolvency.28. Trade accounts payableTrade accounts payable generally have short residuallives. The carrying amounts essentially correspond tothe fair values of these liabilities.EUR million 31.12.2010 31.12.2009Liabilities arising from salary or wage settlement foremployees include, among others, obligations to personnel,such as, for example, charges for variable andindividual one-off payments, vacation claims as wellas other personnel costs.An amount of EUR 9.2 million (previous year:EUR 22.7 million) in liabilities to the tax authority primarilyconcerns import VAT liabilities due within one year.The miscellaneous other liabilities in the amount ofEUR 2.0 million (previous year: EUR 1.9 million) cover amultitude of elements in subsidiaries, each of which byitself is immaterial.30. Reporting on financial instrumentsThe Conergy Group’s risk management system forcredit risks, liquidity risks and individual market risks(i.e. interest rate risks, currency risks and other pricerisks) is described in note 5 as well as in the risk reportof the management report.Trade payables 161.7 116.5ThereofAdvance payments received 12.2 6.712.2 6.729. Other liabilitiesEUR million 31.12.2010 31.12.2009Other liabilities 30.1 46.0ThereofLiabilities arising from salaryfor employees 12.3 8.9Liabilities to the tax office 9.2 22.7Accrued expense 3.3 9.1Deferred income 2.8 2.6Liabilities related to socialsecurity 0.6 0.5Purchase price liabilities inconnection with the acquisitionof companies – 0.3Miscellaneous other liabilities 1.9 1.9Non-current 2.0 2.5

123Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther InformationDisclosures on financial instruments by categoryThe following table shows both the carrying amountsand the fair values of the individual financial assetsand liabilities for each individual category of financialinstruments and reconciles them with the correspondingbalance sheet item. In contrast to the previous year,this additionally entails allocating financial assets andliabilities to two classes to improve the representations,specifically, “measured at amortised cost” and“measured at fair value”. As the balance sheet item“other assets” contains both financial instruments andnon-financial assets (e.g. receivables from the tax officeor prepaid expenses and accrued income), the columnentitled “non-financial assets” serves to provide thenecessary reconciliation.Carrying amounts and fair values of financial instruments31.12.2010Measuredat amortised costMeasuredat fair valueNon-financialassetsEUR million Carrying amount Fair value Carrying amount Carrying amountCarrying amountshown in thebalance sheetTrade accounts receivable 103.2 – – – 103.2Loans and receivables 103.2 103.2 – – 103.2Financial assets 6.2 – – – 6.2Loans and receivables 6.2 6.2 – – 6.2Available-for-sale financialassets – – – – –Held-to-maturity investments – – – – –Derivatives with a hedgingrelationship – – – – –Financial instruments heldfor trading – – – – –Other assets 37.5 – – 27.3 64.8Loans and receivables 37.5 37.5 – – 37.5Non-financial assets – – – 27.3 27.3Cash and cash equivalents 36.7 – – – 36.7Loans and receivables 36.7 36.7 – – 36.7Financial assets, total 183.6 – – – 183.6Thereof: Loans and receivables 183.6 – – – 183.6Borrowings 290.6 – 1.0 – 291.6Measured at amortised cost 290.6 290.6 – – 290.6Derivatives with a hedgingrelationship – – – – –Liabilities held for trading – – 1.0 – 1.0Trade accounts payable 161.7 – – – 161.7Measured at amortised cost 161.7 161.7 – – 161.7Financial liabilities, total 452.3 – 1.0 – 453.3

124Conergy AG I Annual Report 2010Carrying amounts and fair values of financial instruments31.12.2009Measuredat amortised costMeasuredat fair valueNon-financialassetsEUR million Carrying amount Fair value Carrying amount Carrying amountCarrying amountshown in thebalance sheetTrade accounts receivable 113.4 – – – 113.4Loans and receivables 113.4 113.4 – – 113.4Financial assets 11.3 – 0.0 – 11.3Loans and receivables 11.3 12.7 – – 11.3Available-for-sale financialassets – – – – –Held-to-maturity investments – – – – –Derivatives with a hedgingrelationship – – – – –Financial instruments heldfor trading – – 0.0 – 0.0Other assets 40.1 – – 29.3 69.4Loans and receivables 40.1 40.1 – – 40.1Non-financial assets – – – 29.3 29.3Cash and cash equivalents 52.1 – – – 52.1Loans and receivables 52.1 52.1 – – 52.1Financial assets. total 216.9 – 0.0 – 216.9Thereof: Loans and receivables 216.9 – – – 216.9Borrowings 293.6 – – – 293.6Measured at amortised cost 287.4 287.4 – – 287.4Derivatives with a hedgingrelationship – – – – –Liabilities held for trading – – 6.2 – 6.2Trade accounts payable 116.5 – – – 116.5Measured at amortised cost 116.5 116.5 – – 116.5Financial liabilities. total 403.9 – 6.2 – 410.1Cash and cash equivalents, trade accounts receivable,other assets and current financial assets largely haveshort residual lives. Hence the carrying amounts correspondto the fair values at the balance sheet date.The fair value of non-current financial assets with residuallives of more than one year corresponds to thepresent value of the payments related to these assets,taking current interest rate parameters into account.Trade accounts payable as well as borrowings generallyhave short residual lives or respectively variableinterest rates. Their carrying amounts thus correspondto their fair values.

126Conergy AG I Annual Report 2010Disclosures on derivativesThe following transactions with derivative financialinstruments existed at year’s end:EUR million 31.12.2010 31.12.2009NominalvaluePositivemarket valueNegativemarket valueNominalvaluePositivemarket valueNegativemarket valueInterest rate swapsCashflow hedges 37.5 – 0.9 175.0 – 6.1Forward exchange and currencyoption transactionsFair value hedges 31.7 – 0.1 25.8 0.0 0.169.2 0.0 1.0 200.8 0.0 6.2The negative market value of the interest rate swapshas been recognised as a liability.The fair value of the derivative financial instruments atthe balance sheet date constitutes the Company’smaximum exposure to lending risks at such date.IFRS 7 requires a sensitivity analysis, which examinesthe effects of hypothetical changes in foreign exchangerates at the balance sheet date on the Group’s assets,liabilities, cash flows and profit or loss. The effects ofhypothetical changes in foreign exchange rates on thetranslation risk are not subject to IFRS 7. A hypotheticalnegative five percent change in foreign exchange rateswas used to determine the sensitivities, positing a simultaneousgain in all currencies against the euro based oneach currency’s year-end exchange rate. The hypotheticalloss from derivative and primary financial instrumentsas at 31 December 2010 would have been EUR 9.6 million;it would have been attributable to the currencyrisk arising from liabilities in US dollars.An increase of one percentage point of all relevantinterest rates as at 31 December 2010 would haveresulted in a financial result that would have beenEUR 3 million less. A decrease of all relevant interestrates would have improved the financial result byEUR 3 million.Other disclosures31. In- and outflow of cash and cashequivalentsThe consolidated statement of cash flows shows thechanges in the Group’s cash and cash equivalentsresulting from the in- and outflow of funds during thefinancial year. The consolidated statement of cashflows was prepared in accordance with the requirementsof IAS 7. Cash flows are allocated to three areas:operating activities, investing activities and financingactivities.The indirect method is used to show cash flows relatedto operating activities such that the surplus cash flowsfrom operating activities are determined by adding all noncashexpenses and subtracting all non-cash incomefrom operating income related to continuing operations(EBIT). The cash flow related to investing and financingactivities is determined directly on the basis of in- andoutflows.Under IFRS 5, cash flows from operating, investingand financing activities must be disclosed separatelyaccording to continuing and discontinued operations.Cash flows related to investing and financing activitiesin connection with discontinued operations are separatelydisclosed in note 6.Operating activitiesBased on operating income (EBIT) of EUR – 13.8 millionin the 2010 financial year (previous year:EUR – 36.8 million), adjusted for non-cash items suchas depreciation, amortisation and impairment losses,changes in non-current provisions as well as othernon-cash income and expenses such as, for instance,portions of the net gain/loss from currency translation,and writedowns of inventories and receivables, thecash flow from operating activities before changes innet working capital (gross cash flow) increased considerablyto EUR 34.5 million year-on-year (previousyear: EUR – 37.5 million).At EUR 17.1 million, the cash flow generated in the2010 financial year from operating activities related tocontinuing operations was EUR 36.0 million lower yearonyear (previous year: EUR 53.1 million), especiallydue to the outflow of EUR 22.8 million in funds from

128Conergy AG I Annual Report 2010Purchase commitment and obligations to acceptgoodsConergy has undertaken to purchase solar wafers andsolar modules from suppliers. These contracts haveoriginal terms of between one and ten years. TheCompany’s obligations to accept goods essentiallyarise from a delivery contract between MEMC ElectronicMaterial, Inc. and Conergy AG. In this connection,Conergy entered into a ten-year delivery contractwith MEMC in October 2007 for the purpose of securingthe quantities of silicon it needs in the long term.The amount to be purchased from MEMC in future is inline with the needs of the Conergy solar factory inFrankfurt (Oder); it includes a total sales volume of approximatelyUSD 840 million. The wafer prices arebased on the prevailing market price. The amountpayable will be determined annually based on definedcriteria. The prepayments in the amount of USD 26.6million required thereunder from 2010 have alreadybeen made. MEMC is supposed to repay to Conergythe payments into the Refundable Capacity ReservationDeposit, which are to be fixed annually, over the termof the agreement. But the amount may be offsetagainst MEMC’s receivables if Conergy defaults orfails to perform.The Company had liabilities (commitments for capitalexpenditures) of EUR 5.1 million related to orders forinvestment projects in our solar module factory thathad already started or were planned.Conergy has the following obligations under existentlong-term purchasing agreements:EUR million 31.12.2010 31.12.2009Up to 1 year 145.7 170.61 to 5 years 455.3 565.7More than 5 years 348.9 397.4949.9 1,133.7Repurchase obligationsConergy Services GmbH has undertaken vis-à-visoperators to repurchase installations under the relevantsale and assignment agreements. This will give rise tototal financial obligations of EUR 5.9 million (previousyear: EUR 5.9 million). However, these repurchase obligationsmust be fulfilled from 2023 at the earliest.Frankfurt (Oder). These properties carry hereditarybuilding rights.Insurance policies with a term of one year give rise tofinancial obligations in the amount of EUR 1.4 million.Conergy has the following obligations under existentlease, insurance and hereditary building right contracts:EUR million 31.12.2010 31.12.2009Up to 1 year 2.8 4.61 to 5 years 6.5 5.5More than 5 years 127.3 126.2136.6 136.333. Related partiesThe related parties of the Conergy Group include themembers of its Management Board and SupervisoryBoard as well as members of subsidiaries’ bodies tothe extent that they occupy key positions, in each caseincluding their close relatives. Related parties also includethose companies upon which members of theCompany’s Management Board or Supervisory Boardor their close relatives can exercise a significant influenceor in which they hold a significant voting share.Furthermore, related parties include non-consolidatedcompanies with which the Company forms a Group or inwhich it holds a share that enables it to significantlyinfluence the business policies of the investee, aswell as major shareholders of the Company and itsGroup companies.The Conergy Group maintains several business relationshipswith related parties, which, in the Company’sopinion, were handled at normal market terms.On 5 September 2008, Conergy AG as lessor enteredinto a sublease with AMMER!PARTNERS GmbH, Hamburg,a company controlled by its managing partner,Mr Dieter Ammer, as lessee for various offices with atotal area of 205.95 m 2 as well as for two parking spacesin the Berliner Bogen office building at Anckelmannsplatz1, 20537 Hamburg. The total cost to be borne byAMMER!PARTNERS GmbH until 30 September 2010was EUR 4,740.08 gross per month. The monthly renthas been EUR 4,992.52 since 1 October 2010.OtherThere are also annual financial obligations ofEUR 1.4 million for a term of 99 years in connectionwith the land at the production sites in Rangsdorf andCommerzbank AG had taken over shares in Conergy AGin connection with its takeover of Dresdner Bank AG.In its capacity as one of the syndicate’s lead managingbanks, Dresdner Bank, which at the time was legally

129Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationindependent, subscribed and took over the new sharesfrom the cash capital increase in December 2008 withthe proviso that it would offer them to the Company’sshareholders in accordance with Section 186 para. 5German Stock Corporation Act for purchase by meansof an indirect subscription right and offer any unsubscribednew shares under the subscription offer to institutionalinvestors in a private placement subject tospecified conditions. Commerzbank AG now holds theshares in Conergy AG directly since Dresdner Bank AGwas merged into Commerzbank AG on 11 May 2010.Commerzbank AG most recently notified Conergy AGon 4 August 2010 that its interest in the voting sharesof Conergy AG on 3 August 2010 had fallen below the30.0 percent voting share threshold and was 29.08 percenton that date.On 31 July 2007 Conergy AG, the Momentum RenewablesGmbH (formerly EPURON GmbH), Conergy Solar­Module GmbH & Co. KG and what is today ConergyDeutschland GmbH closed a syndicated loan for a totalof EUR 600.0 million from 23 banks under the leadershipof Commerzbank AG, Dresdner Bank AG, whichat the time was legally independent, and WestLB AG.Commerzbank Bank AG provides banking services toConergy and its German subsidiaries in connectionwith their ordinary activities.In addition, the Company and its French subsidiaries,Conergy S.A.S. and Epuron S.A.R.L., have entered intoa general Automated Common Concentration InternationalService agreement with Commerzbank AG (previously:Dresdner Bank AG) and BNP Paribas Bank SA.Under this agreement, all balances in the respectivesubaccounts are transferred to the main account ofConergy AG in order to even out its cash flow.Furthermore, Conergy AG and its Spanish subsidiaries –Conergy España S.L.U. and Sun Technics Instalacionesy Mantenimiento S.L. – entered into a general DresdnerCash Concentrating agreement with Commerzbank AG(previously: Dresdner Bank AG). Under this cash concentratingprocedure, all balances in the respectivesubaccounts are transferred to the main account ofConergy AG in order to even out its cash flow.These transactions are executed in connection with thecompanies’ ordinary activities at prevailing market terms.The compensation report in the Group managementreport summarises the standards applicable to the determinationof the compensation paid to Conergy’sManagement Board. It also describes the standardsapplicable to the compensation paid to its SupervisoryBoard pursuant to the disclosures under Section 314para. 1 no. 6a sentence 5 through 8 and no. 6b GermanCommercial Code.The total compensation paid to the members of theManagement Board was TEUR 3,974 (previous year:TEUR 2,833).The compensation of the Management Board underIFRS does not include the fair value of the newly grantedshare-based payments; it only includes the sharebasedpayments earned in the current year plus thechanges in the value of claims under share-based paymentsnot yet made. Share-based payments weremade to one member of the Management Board in the2010 financial year.TEUR 2010 2009Fixed annual compensation 2,050 1,709Compensation in kind / other benefits * 399 381Non-performance-basedcompensation 2,449 2,090Short-term variable compensation ** 1,498 711Directly paid compensation 3,947 2,801Fair value of newly granted sharebasedpayment (SAR) 152 –Total compensation according to HGB 4,099 2,801Long-term variable compensation(benefits vested in the current year) 100 –Change in value of existing benefits – 73 32Share-based payment 27 32Total directly paid compensation 3,947 2,801Long-term variable compensation(benefits vested in the current year) 100 –Change in value of existing benefits – 73 32Total compensation according to IFRS 3,974 2,833*The other compensation components comprise non-cash compensation (e. g.company car, insurance) and allowances for pension insurance (relief fund); they alsoinclude noncompete compensations for former members of the Management Board.**These figures are principally based on provisions, assuming full target achievement.Please see the compensation report contained in theGroup management report for more details.The Supervisory Board members received compensationtotalling TEUR 373 (previous year: TEUR 208).No loans were outstanding to members of the ManagementBoard or Supervisory Board as at 31 December2010.

130Conergy AG I Annual Report 2010Business transactions with non-consolidated subsidiarieswere conducted at arm’s length.The following table shows the scope of deliveries andservices to related companies that were recognisedin Conergy’s consolidated financial statements atamortised cost.EUR million 2010 2009Income 0.3 0.2Expenses 0.0 0.2Receivables 1.0 1.6Liabilities 0.7 1.134. Number of employeesThe Group had 1,600 employees (expressed in fulltime equivalents), including managing directors andManagement Board members, as of 31 December2010 (previous year: 1,553). Of these, 1,569 (previousyear: 1,429) were employed in the Company’s continuedoperations as of 31 December 2010.The average number of employees (expressed in fulltime equivalents) of the companies included in theconsolidated financial statements was:2010 2009Germany 1,071 1,040Europe 250 318Rest of world 231 3111,552 1,669ThereofProduction 459 372Administrative / technical area 1,093 1,2971,552 1,669Adjusted for the average number of employees in thediscontinued operations, in the 2010 financial year1,496 employees were employed with the Group onaverage (previous year: 1,561 employees).35. Auditing feesThe total fees for the auditor of the consolidated financialstatements in the financial year just ended amounted to:EUR million 2010 2009Audits of financial statements 0.2 0.4Other confirmation services 0.2 0.2Tax consultancy services 0.2 0.2Other services 0.0 0.10.6 0.9These fees primarily include the fees for the audit ofthe consolidated financial statements as well as forthe audit of the annual financial statements of Conergyand its significant domestic subsidiaries. Other expensesfor confirmations are related to the review ofConergy AG’s interim financial statements. The expensesenumerated above do not contain TEUR 82 inexpenses related to the audit of the 2009 annual financialstatements that were invoiced in 2010.36. Declaration of complianceThe Management Board and the Supervisory Boardissued the Declaration of Compliance in accordancewith Section 161 of the German Stock Corporation Actand made this declaration publicly available on theCompany’s website.37. Events after the reporting dateOn 23 February 2011 Conergy AG sold its Swiss solarthermal products business to Capital Stage AG, aprivate equity company specialising in companiesand projects in the clean-tech sector. Conergy’s entireequity interest in its subsidiary, Conergy (Schweiz)GmbH, was transferred to Capital Stage in connectionwith the disposal. Conergy (Schweiz) GmbH is a localmarket leader in the solar thermal systems sector; itis also engaged locally in other areas of regenerativeenergies. The company will be renamed Helvetic SolarGmbH in future.On 2 March 2011 Conergy sold its subsidiary, GüstrowerWärmepumpen GmbH, which is specialised in the productionand sale of heat pumps, to SmartHeat Inc.This NASDAQ-listed company is a leading provider ofheat transfer and energy conservation solutions in theChinese market. Conergy’s entire equity interest inGüstrower Wärmepumpen was transferred to Smart­

131Management Board and Supervisory BoardConergy at a glanceGroup Management ReportIndependent Auditor’s Report |Consolidated Financial StatementsFurther InformationHeat under the sale. In addition, Güstrower WärmepumpenGmbH will also take over Conergy’s land.At the General Meeting on 25 February 2011, theCompany’s shareholders voted to reduce the capitalstock of Conergy AG by about EUR 400 million toabout EUR 50 million and thus for an 8:1 reverse stocksplit. The General Meeting also resolved simultaneouslyto increase the capital stock by means of acapital increase by up to EUR 188 million. Both agendaitems were adopted by majorities of 99.5 percent ineach case.Responsibility statementTo the best of our knowledge, and in accordance withthe applicable reporting principles, the consolidatedfinancial statements give a true and fair view of theassets, liabilities, financial position and profit or loss ofthe Group, and the Group management report includesa fair review of the development and performance ofthe business and the position of the Group, togetherwith a description of the material opportunities andrisks associated with the expected development ofthe Group.Effective 7 March 2011, Klaus-Joachim Krauth, amember of the Supervisory Board, resigned from all ofhis offices at his own request: that of Deputy Chairmanof the Supervisory Board, his position as both amember and the Chairman of the Audit Committee aswell as his appointment to the Chairman’s Committee.On 10 March 2011, the Supervisory Board electedAndreas de Maizière its new Deputy Chairman. OswaldMetzger was appointed to the Audit Committee to fillthe vacancy. Bernhard Milow was appointed to theChairman’s Committee, taking the place of Klaus-Joachim Krauth. The Audit Committee also electedAndreas de Maizière its new Chairman.Hamburg, Germany, 22 March 2011Conergy AktiengesellschaftThe Management BoardDr. Sebastian Biedenkopf Andreas WilsdorfHamburg, Germany, 22 March 2011Conergy AktiengesellschaftThe Management Board

132Conergy AG I Annual Report 2010Independent Auditors’ ReportWe have audited the consolidated financial statementsprepared by the Conergy AG, Hamburg, – comprisingthe income statement, statement of comprehensive income,the balance sheet, the cash flow statement, thestatement of changes in equity and the notes to theconsolidated financial statements – and the groupmanagement report for the business year from 1 Januaryto 31 December 2010. The preparation of theconsolidated financial statements and the group managementreport in accordance with IFRS, as adoptedby the European Union (EU), and the additional requirementsof German commercial law pursuant to§ 315a Abs. 1 HGB („Ger man Commercial Code“) arethe responsibility of the parent Company’s management.Our responsibility is to express an opinion on theconsolidated financial statements and on the groupmanagement report based on our audit.We conducted our audit of the consolidated financialstatements in accordance with § 317 HGB and Germangenerally accepted standards for the audit of financialstatements promulgated by the Institut der Wirtschaftsprüfer.Those standards require that we plan and performthe audit such that misstatements materially affectingthe presentation of the net assets, financial positionand results of operations in the consolidated financialstatements in accordance with the appli cable financialreporting framework and in the group management reportare detected with reasonable assurance. Knowledgeof the business activities and the economic andlegal environment of the group and expectations as topossible misstatements are taken into account in thedetermination of audit procedures. The effectivenessof the accounting-related internal control system andthe evidence supporting the disclosures in the consolidatedfinancial statements and the group managementreport are examined primarily on a test basiswithin the framework of the audit. The audit includesassessing the annual financial statements of thoseentities included in consolidation, the determination ofentities to be included in consolidation, the accountingand consolidation principles used and significant estimatesmade by management, as well as evaluating theoverall presentation of the consolidated financialstatements and the group management report. Webelieve that our audit provides a reasonable basis forour opinion.Our audit has not led to any reservations.In our opinion, based on the findings of our audit, thecon solidated financial statements of the Conergy AG,Hamburg, comply with IFRS, as adopted by the EU, theadditional requirements of German commercial lawpursuant to § 315a Abs. 1 HGB and give a true andfair view of the net assets, financial position and resultsof operations of the group in accordance with theserequirements. The group management report is consistentwith the consolidated financial statements andas a whole provides a suit able view of the group’sposition and suitably presents the opportunities andrisks of future development.Without qualifying this opinion, we draw attention tothe fact that the existence of Conergy AG and theGroup as a going concern might be jeopardised byrisks as stated in the section “Financial risks” of theGroup management report.In this section it is stated that the Company is obligedto implement a refinancing concept as a preconditionfor granting a new cash loan and therefore to ensurethe liquidity. The final implementation of the refinancingconcept is still subject to the condition that the guaranteesexisting as at 31 December 2010 are reduced toroughly EUR 141 million. If the preconditions cannot befulfiled until end of July 2011 the existence of Conergy AGand the Group as a going concern would be endangered.Additionally, the existence of Conergy AG and the Groupas a going concern might be jeopardised if sales, incomeand cash flows from operating activities fall significantlybelow the projected figures as far as the consequencescannot be offset by other measures.Hamburg, 23 March 2011Deloitte & Touche GmbHWirtschaftsprüfungsgesellschaft(signed Dinter)(signed ppa. Arlitt)Wirtschaftsprüfer Wirtschaftsprüferin[German Public Auditor] [German Public Auditor]

133Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportConsolidated Financial StatementsFurther Information

134Conergy AG I Annual Report 2010DisclaimerContactThis Annual Report contains forward-looking statementsand information – that is, statements related tofuture, not past, events. These statements may beidentified by words such as “expects”, “anticipates”,“intends”, “plans”, “believes”, “seeks”, “estimates”,“will” or words of similar meaning. Such statements arebased on our current expectations and certain assumptions,and are, therefore, subject to certain risks anduncertainties.A variety of factors, many of which are beyond Conergy’scontrol, affect its operations, performance, businessstrategy and results and could cause the actual results,performance or achievements of Conergy to be materiallydifferent from any future results, performance orachievements that may be expressed or implied bysuch forward-looking statements. For us, particularuncertainties arise, among others, from changes ingeneral economic and business conditions, changesin currency exchange rates and interest rates, introductionof competing products or technologies by othercompanies, lack of acceptance of new products orservices by customers targeted by Conergy, changesin business strategy and various other factors.Should one or more of these risks or uncertaintiesmaterialize, or should underlying assumptions proveincorrect, actual results may vary materially from thosedescribed in the relevant forward-looking statement asexpected, anticipated, intended, planned, believed,sought, estimated or projected. Conergy does notintend or assume any obligation to update or revisethese forward-looking statements in light of developmentswhich differ from those anticipated.Investor RelationsChristoph MarxTel.: +49 / 40 / 271-42-1634Fax: +49 / 40 / 271-42-1639Email: investor@conergy.deCorporate CommunicationsAlexander LeinhosTel.: +49 / 40 / 271-42-1631Fax: +49 / 40 / 271-42-1639Email: presse@conergy.deImprintPublished byConergy AGAnckelmannsplatz 120537 HamburgEditorChristoph Marx and Bettina von FranquéConcept, layout and productionAgentur Punktlandung, HamburgAnnual Reports, Interim Reports and further informationon Conergy AG are available on the internet. Weare pleased to send you printed versions of the AnnualReport as well as additional information upon request.

2011 Financial calendarTuesday, 29 March 2011Publication of the 2010 financial statementsThursday, 12 May 2011Publication of the interim report first quarter 2011Thursday, 30 June 2011General Shareholders’ Meeting, CCH in HamburgThursday, 11 August 2011Publication of the interim report first half-year 2011Thursday, 10 November 2011Publication of the interim report third quarter 2011

Conergy AGAnckelmannsplatz 120537 HamburgGermanywww.conergy-group.com