2017 Carnegie Clean Energy Limited ABN 69 009 237 736 · 2017. 10. 13. · Mauritius, initiating the Garden Island Microgrid project and taking a 35% investment stake in EMC. The

ANNUALREPORT

Registered Offi ce 21 Barker Street Belmont WA 6104 +61 8 6168 8400 [email protected] www.carnegiece.com

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Carnegie Clean Energy Limited A

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TABLE OF CONTENTS

12 MONTHS OF ACHIEVEMENTS

CHAIRMAN & MANAGING DIRECTOR’S REPORT

COMPANY OVERVIEW

PARTNERSHIPS

■Lendlease

■Infratec

■EasternGuruma

SOLARCAPABILITIES

■CommercialSolarPV

■UtilitySolar(BOO)

■SolarWaterPumping

SOLAR-NORTHAMPROJECT

BATTERYCAPABILITIES

■CSIROProject

WAVECAPABILITIES

■WaveHubProject,UK

■GardenIsland,WA

■Albany,WA

MICROGRIDCAPABILITIES

■GIMGProject

INTELLECTUALPROPERTY

CARNEGIE TEAM

HEALTH,SAFETY&ENVIRONMENT

KNOWLEDGESHARING&RESEARCH

CORPORATE GOVERNANCE

DIRECTORS’ REPORT

AUDITOR’SINDEPENDENCEDECLARATION

STATEMENTOFPROFITANDLOSS

STATEMENTOFFINANCIALPOSITION

STATEMENTOFCHANGESINEQUITY

STATEMENTOFCASHFLOWS

NOTESTOTHEFINANCIALSTATEMENTS

DIRECTORS’DECLARATION

INDEPENDENTAUDITOR’SREPORT

ADDITIONALINFORMATION

COMPANY DIRECTORY

S O L A R

B AT T E R Y

M I C R O G R I D

W A V EF

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12 MONTHS OF ACHIEVEMENTS

Carnegieinvested

AU$13m throughsharesandcashtotakeownershipofsolarandmicrogridbusinessEnergy

MadeClean(EMC).ShareholdersvotedoverwhelminglyfortheacquisitioninDecember2016

$18m Capitalraisewas

completed,threetimesoversubscribed,inApril

CarnegieandARENAsigneda

$2.5m fundingagreementfortheGardenIslandMicrogrid

Project

CarnegieWaveEnergyLimited(ASX:CWE)

becameCarnegieCleanEnergyLimited(ASX:CCE)

inDecember2016

$5m Capitalraiseviaconvertiblenoteswascompletedin

January

$3.69m debtfinancingagreementsignedtosupporttheGardenIslandMicrogrid

Project

EnergyMadeCleansignedajointventureagreementwithLeandleseServicestodeliversolar,batteryandmicrogridprojectsacross

Australia

$3.1m R&D

taxcashrefundwasreceived

Carnegieawarded

£9.6m (AUD$15.5m)EuropeanRegionalDevelopmentFundgrantforitsCETOWaveHubProjectinthe

UnitedKingdom

Carnegie’sregisteredofficemovedtoEMC’s

headquartersinBelmont

FactoryacceptancetestinganddeliverytositecompletedforAustralia’slargestbatterysystemforCSIRO’sMurchisonRadio-astronomyObservatory

(MRO)

JohnDavidson,EnergyMadeCleanMD,wasappointedasExecutiveDirectortotheCarnegie

BoardofDirectorsfollowingtheEMC

acquisition

WAStateGovernmentcommitted

$19.5m infundingforanAlbanyWaveEnergyProjectandCentreofExcellence

FederalMinisterfortheEnvironmentandEnergy,theHonJoshFrydenbergofficiallycommenced

constructionoftheGardenIslandMicrogridwithasod

turningceremony

10MWsolarprojectannouncedforNortham,WesternAustralia.TheprojectwillbethefirstprojectconstructedandtheLeadlease/EMCjoint

ventureandCarnegie’sfirstbuildownoperatesolar

project

Highpenetrationrenewableenergy

roadmap,waveresourceassessmentanddesignsdeliveredbyCarnegietotheRepublicofMauritius

MultimilliondollarcontractawardedtoEMCforthedesign,constructionandinstallationofamicrogridsystematDelamereAirWeaponsRangeintheNorthernTerritoryof

Australia

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4 5CHAIRMAN & MANAGING DIRECTOR’S REPORT CARNEGIECLEANENERGYANNUALREPORT2017

CHAIRMAN & MANAGING DIRECTOR’S REPORTCARNEGIECLEANENERGYANNUALREPORT2017

CHAIRMAN & MANAGING DIRECTOR’S REPORT

“ON BEHALF OF THE BOARD OF DIRECTORS, WE ARE PLEASED TO PRESENT TO YOU CARNEGIE CLEAN ENERGY’S 2017 ANNUAL REPORT.”

ThisyearmarkedthetransformationofCarnegieWaveEnergyintoCarnegieCleanEnergyaswe furtheradvancedour renewableenergydiversificationstrategyviathe100%acquisitionofsolar/batteryengineeringandconstructioncompany,EnergyMadeClean(EMC).

During the previous year, Carnegie began this diversification process withthreekeyinitiatives–winningDFAT-fundedmicrogridconsultancyworkonMauritius, initiating theGarden IslandMicrogridproject and takinga35%investmentstakeinEMC.The100%acquisitionofEMCinDecember2017hasnowenabledustoexpandCarnegie’sofferingstoencompasswaveenergy,solarpower,batterystorageandhybridsystemsincludingsolar/battery/dieselmicrogrids.ItalsoallowsustoselltocustomersonbothanEPC(engineering,procurementandconstruction)orBOO(build,ownandoperate)basiswherewecansellpowerandoperationandmaintenance(O&M)services.

This year sawus completedesign, approvals, offtakeandfinancing for theGardenIslandMicrogrid(GIMG). ThisisCarnegie’sfirstBOOprojecthavingsuccessfullysecuredalongtermpowerandwaterofftakewiththeDepartmentofDefence foruseatHMASStirlingonGarden Island.Construction isnowunderwayof the 2MWsolarPV and2MW/0.5MWhbattery storageprojectwhichwillintegrateintoourexistingcontaineriseddesalinationplantontheislandaswellastheDepartmentofDefence’sdieselpowerstationandtheWesternPowergrid.TheProjectwillbeashowcaseforislandsnationsandfringeofgridapplicationsgloballyandwillunlockfutureprojectopportunities.

WearecloselyfollowingtheGIMGwithoursecondBOOproject,theNorthamSolarPowerStation.At the timeofwriting,wehavenowsecuredourgridconnection offer fromWestern Power. Final electricitymarket registrationand financing requirements are being completed ahead of constructioncommencement.ThiswillalsobethefirstprojecttobeconstructedbytheEMC/LendleaseJointVenture.This JVcombines theengineeringcapabilityofEMCwiththedeliverycapabilityofaTier1Australianconstructionpartner.

WealsocontinuetoinvestinanddevelopEMC’scorestrengthintheEPCofmicrogrid systemssuchas thatdelivered to theCSIRO’sSquareKilometreRadioTelescopeinoutbackWesternAustraliaandthenewlywonsolar/battery/dieselmicrogrid for theDepartment of Defence in theNorthern Territory.EMC’scompetitiveadvantageisinthedesignofcomplex,innovativepower

MR JEFFREY HARDINGCHAIRMAN OF DIRECTORS

DR. MICHAEL OTTAVIANOMANAGING DIRECTOR & CEO

systems that integratemultiple power technologies. Suchmicrogrids nowhaveimmediatecostandperformanceadvantageinoff-gridapplicationsinAustraliaandacrosstheglobeandweanticipaterapidgrowthinthismarketoverthecomingyears.

Whilsttherehasbeenademonstrabletransformationinoursolarandbatterybusinessinthelast12months,therehasalsobeensignificantdevelopmentofourwaveenergytechnology.OurCETOteamhasspentthepast12monthstaking the learnings from our record breaking PerthWave Energy ProjectandcollaboratingwithourglobalsupplychaintodisruptourownthinkingtodeveloptheCETO6technology.Weanticipaterevealingthisnewdesignbeforetheendofthecalendaryear.TheteamhasalsoworkedhardtosecurethebestsiteandfundingsupportforthefirstdeploymentofCETO6,weighingupoptionsatWaveHub,GardenIslandandAlbanysites.WecurrentlyawaitfeedbackonGovernmentfundingsupportonallsitesbeforewemakeafinaldecisionwhichwealsoanticipatewewillbeinapositiontoannouncebeforetheendofthecalendaryear.

ThediversificationofourbusinessintotheEPCandBOOofsolar,batteryandmicrogridproductshasallowedus to immediatelybring forward revenuesand, intime,willbringforwardprofits.Wearenowwellpositionedtotakeadvantageoftherapidlydecliningcostsofsolarandbatteryproductswhichprovides a natural hedge to our higher risk/higher reward wave energytechnology.HavingcompletedourfirstsevenmonthsofownershipofEMC,we aremoving to streamline business overheads and ensure our team islean and focused on areas where we can sustain competitive advantage,particularly in thedesignof complex, integratedenergy systems. Thishasinvolvedareductioninoverallstaffingnumbersatalllevelsandareductionindirectorandexecutivesalaries.

While EMC was only 100% owned for the last sevenmonths of the 2017FinancialYear,thestandalonebusinesshadaturnoverforthefull2017financialyearofapproximately$12million.TheCompanylooksforwardtoseeingEMCrevenues grow and the first revenues flow from the EMC/Lendlease JointVentureduringthe2018FinancialYear.

Wewould like to thank our team for their hardwork through aperiod ofcompany transformation. We also acknowledge the support of our loyalshareholders through this process as we reshape Carnegie. We are wellpositionedandwellcapitalisedtodeliverontheopportunitiesahead.

Mr Jeffrey Harding ChairmanofDirectors

Dr. Michael OttavianoManagingDirector&CEO

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6 7COMPANY OVERVIEWCARNEGIECLEANENERGYANNUALREPORT2017

COMPANY OVERVIEWCARNEGIECLEANENERGYANNUALREPORT2017

“DIVERSIFICATION OF ENERGY SOURCE AND SUPPLY IS KEY TO BUILDING RESILIENCE DURING THIS TIME OF DISRUPTION IN THE ENERGY SECTOR.”

COMPANY OVERVIEW

Carnegie Clean Energy Limited (formerly Carnegie Wave Energy) is an Australian, ASX-listed (ASX: CCE) developer of utility scale solar, battery, wave and hybrid energy projects. With its 100% owned CETO Wave Energy Technology and the acquisition last year of Energy Made Clean (EMC), Carnegie is the only company in the world to offer a combination of wave, solar, wind, battery storage and desalination via microgrids.

Carnegie excels in the delivery of complex, integrated utility scale energysolutions suchas the 1.6MWsolarPVplus2.6MWhBatteryEnergyStorageSystem(BESS)fortheCSIRO’sMurchisonRadio-astronomyObservatory(MRO)and the recentlywon solar/battery/dieselmicrogrid for theDepartmentofDefenceattheDelamereAirWeaponsRangeintheNorthernTerritory.

Carnegie’s unique business model encompasses the full value chain ofproject development, engineering, design, finance, construction, operationandmaintenance, underpinned by integrating state-of-the-art technology.Carnegieistechnologyagnosticwithsolarandbatterytechnology,enablingflexibilityandcostcompetitivenessandalsoretainsan in-house innovationteamthatproducesuniquemicrogridsolutionsinadditiontotheproprietyworldleadingCETOwaveenergytechnology.

Carnegiewillbethegeneratorandsupplierofpowerthroughthedevelopmentandownershipofutility scalesolarpowerstations, thefirstofwhich is theGardenIslandsolarandbatterymicrogridwhichwillbefollowedbya10MWsolararraylocatedinNortham,WAwhichisduetostartconstructioninthecomingmonths.

CarnegiealsocontinuestodevelopitsCETOWaveEnergytechnology,whilstprogressingproject siteoptions inAlbany (WA),Cornwall (UK) andGardenIsland(WA).TheseprojectswillutilisetheCETO6technology.

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8 9PARTNERSHIPSCARNEGIECLEANENERGYANNUALREPORT2017

PARTNERSHIPS

“CARNEGIE HAS ESTABLISHED PARTNERSHIPS TO EXPAND ITS NATIONAL AND INTERNATIONAL DELIVERY CAPABILITY AND ENABLE LARGER SCALE PROJECTS.”

LENDLEASE (Australia)

In December 2016, Energy Made Clean signed a 50/50 Joint VentureAgreementwithLendleaseServices.ThisJVAprovidestheopportunityforEMCtoincreaseitscapacitytobidforanddeliverabroaderrangeofsolar,BESSandmicrogridopportunitieswithinAustralia, including increasedaccess to theNationalEnergyMarket (NEM),by leveragingLendlease’snational footprintacrossAustralia.LendleaseServicesbusinesshasapproximately3,000peopleandhas apresence in everyAustralian state and territory. ThefirstprojectdeliveredunderthisjointventurewillbeCarnegie’sNorthamSolarProject.

PARTNERSHIPSCARNEGIECLEANENERGYANNUALREPORT2017

INFRATEC (NZ and South Pacific)

EMC and Infratec have a strategic alliance agreement under which thecompaniesshare resources, skillsand IP tobringawider rangeofproductofferings to New Zealand, Pacific Islands and other internationalmarkets.Infratec is a regional leader in renewable generation, transmission anddistribution supporting a wide range of electrical, technology and assetinitiatives within Alpine Energy and increasing numbers of other networkcustomers in SouthCanterbury,NewZealand. The first project completedunderEMCandInfratec’sstrategicallianceagreementwastheconstructionandinstallationofanewBESSinAlpineEnergy’sTimaruWashdykefacilitiesinNewZealand.

EASTERN GURUMA (Kimberley, WA)

EnergyMadeClean,throughtheir50%ownedsubsidiaryEnergyMadeCleanKimberley(EMCK)openeditsfirstfacilityinBroomethisyear.EnergyMadeCleanKimberlyisownedjointlywithEasternGurumaPtyLtdwhosetraditionalownersarefromTomPriceinthePilbararegionofWesternAustralia.EasternGuruma Pty Ltd,was founded in 2004 and has become one of themostsuccessfulAboriginalbusinesses in theWesternAustralianmining industryprovidingCivil,Mining,FacilitiesManagementandLandscapingservices tosomeofAustralia’s largest ironoreminers in thedeliveryof over$1billionworthofprojects.ThepartnershipallowsCarnegie,throughEMCK,toexpandinto the northernWestern Australianmarket to capitalise on the growingrequirementforreliable,off-gridenergysolutions.

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10 11SOLARCARNEGIECLEANENERGYANNUALREPORT2017

SOLAR

“CARNEGIE WILL BE A GENERATOR AND SUPPLIER OF POWER THROUGH THE DEVELOPMENT AND OWNERSHIP OF UTILITY SCALE SOLAR POWER STATIONS.”

Carnegie has a range of solar offerings with proven project delivery of commercial solar PV, utility scale solar arrays and solar water pumping solutions. Carnegie offers monitoring, operational support and maintenance options for all its solar systems.

COMMERCIAL SOLAR PV

CarnegieisaleaderincommercialscalesolarPVintegrationforcommercialandindustrialclients.

This experience has been developed through the delivery of high profileprojects to the cities ofMandurah, Canning, Cockburn andMelville, alongwiththeWAPolice,Australia’slargestgrainexporterCBH,SIGMAQueenslandand many other Australian businesses. This market continues to grow asAustralianbusinesses looktooffsetspirallinggridenergycostsandutilitiesbegintoopenupnetworkopportunities.

SOLARCARNEGIECLEANENERGYANNUALREPORT2017

SOLAR WATER PUMPING + SPS

Carnegiedeliversremotemonitoring,telemetry,controlandautomationtoensure reliable operation of pumping systemswithminimalmaintenancerequirements.Oursolarwaterpumpscanbe integratedwithdieseland/orbatteriestoprovide24/7pumpingdependingonprojectrequirements.

Carnegie’s solar water pumps provide outstanding water delivery in themost remote areas of Australia. Solar water pumps can be deployed intoestablishedornewagricultural,mining,dewatering,pivotirrigationandutilitywatersupplyprojects.

Considerable savings canbemade from remaininggrid independent andusingstand-alonepowersystems(SPS)todeliveramorereliable,consistentandcleanerenergysupply.

UTILITY SOLAR (BOO)

Carnegie,throughitswhollyownedsubsidiaryEnergyMadeClean,hasprovenexperienceindeliveringcommercialandutilityscalesolarPVintegrationonamegawattscale.

Carnegie’slargestsolarprojecttodateisthe1.6MWpsolarfacilityconstructedforCSIRO in theMurchison,645kmnortheastofPerth,WA topower theirSquareKilometreArrayPathfinder.Thissolararraywascommissionedin2016withEMCnowclosetocommissioningthebatterycomponent.

GoingforwardCarnegiewillalsobeageneratorandsupplierofpowerthroughthedevelopmentandownershipofutilityscalesolarpowerstations,thefirstofwhichisonGardenIsland,WesternAustralia.Thisbuildownoperate(BOO)modelwillbereplicatedbyCarnegiethroughoutAustralia.

CAPABILITIES

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12 13SOLAR-NORTHAMPROJECTCARNEGIECLEANENERGYANNUALREPORT2017

“CARNEGIE IS DEVELOPING ITS NORTHAM SOLAR FARM ON A BUILD, OWN, OPERATE BASIS.”

Carnegie is developing a 10 MW solar power station in Northam, Western Australia. The solar power station will consist of 34,000 solar panels and will be constructed on 25 Hectares of strategically located land 100km east of Perth to deliver approximately 24,000 MWh of electricity per annum or enough to power over 4,000 households for 25 years. The system has been designed to be battery storage ready.

Thiswillbethefirstlargescalesolarprojecttobedeliveredaspartofthejointventure between Carnegie’s wholly owned subsidiary EnergyMade CleanandleadingpropertyandinfrastructurecompanyLendleaseServices,andisexpectedtocommenceconstructionbytheendof2017.

Carnegiehasbeendevelopingthe100%privatelyfundedprojecttodateandwillownandoperatethesolarpowerstationthathasalifeexpectancyofatleast twentyfiveyears.Carnegiewillcontinue topursue theBOObusinessmodel through the investment and operation of the solar farm and willselltheelectricityandLGC’sthroughapowerpurchaseagreementoronamerchantbasisintotheelectricitymarket.

Thisprojectpresentstheopportunityforlocalinvestmentandemployment,particularly for the community of Northam. Carnegie aims to use localcapability where possible. The land has also been secured from a locallandholderandwillprovideanalternativerevenuestreamfromagriculturalland. The energy will effectively power 4,000 households and displace17,000 tonnesper yearofCO2-e,which is theequivalentof taking3,500carsofftheroad.

Theprojectisexpectedtocostapproximately$16million.Carnegieiscurrentlyindiscussionswiththirdpartyprovidersofbothequityanddebtandhasarangeoffundingoptionstotaketheprojectthroughtocompletion,includingsharedownershipmodels. Carnegie has the option to sell energy in theWholesaleElectricityMarket(WEM),andtodeliverLargeScaleGenerationCertificates(LGC)to third party customers through either direct Power Purchase Agreements(PPA)ortheirownenergyretaillicenceorsomecombinationofboth.

SOLAR - NORTHAM PROJECT

SOLAR-NORTHAMPROJECTCARNEGIECLEANENERGYANNUALREPORT2017

“THE FIRST LARGE SCALE SOLAR PROJECT TO BE DELIVERED AS PART OF THE JOINT VENTURE BETWEEN EMC AND LENDLEASE, EXPECTED TO COMMENCE CONSTRUCTION BY THE END OF 2017.”

GENERATING CLEAN ENERGY TO WESTERN AUSTRALIA

SOLAR ARRAY

TOWN OF NORTHAM

CONTROL ROOM

EXISTING POWER LINE

POWER OUTPUT

10MWPOWERING

4000 HOUSESGAS EMISSION REDUCTION

17,000 TONNES CO2-E P.A

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14 15BATTERYCARNEGIECLEANENERGYANNUALREPORT2017

BATTERY

“BESS PROVIDE ENERGY INDEPENDENCE AND SECURITY FOR RESIDENTIAL, COMMERCIAL AND UTILITY CUSTOMERS.”

Carnegie, through its 100% subsidiary Energy Made Clean has deployed the largest number of utility battery storage solutions in Australia. We have more than 25 utility scale systems ranging from off-grid remote communities and fringe of grid applications to on-grid batteries.

Customers range from the WA energy generator and retailer Synergy(providing a grid-connected system as part of a Community Battery Trial),to Horizon Power andWestern Power (providing an off-grid alternative toreplacingpolesandwires)andCSIRO(topowertheremoteSquareKilometre

ArrayPathfinder).

Carnegie’sBESSrangefromTheBambinoonasmallscale(idealforremotestations,farmers,largehomes),tothePoweronDemandPODformiddleoftherangeneeds(ideal forcommercialbusiness,accommodationandroadhouses)throughtothe20ft,40ftandcustomisedBESSonalargescale(idealforlargescalecommercialandutilityprojects).

Carnegie’sBESS integrate the latest lithiumbattery technology toprovidelow-costandreliablepowerforremoteareasandatthefringeofgrid.Carnegiecanofferfullindependencefromthegridorbackuppowerasrequiredforgridconnectedsites.

CAPABILITIES

BATTERYCARNEGIECLEANENERGYANNUALREPORT2017

CSIRO PROJECT

EnergyMadeCleanwasengagedtodesign,constructandinstalla1.6MWpsolar facility in combination with a 2.6 MWh BESS capable of dieselfunctionalitytopowertheCSIRO’sSquareKilometreArrayPathfinder.ThesearethelargestbatterieseverdesignedandassembledinAustraliaandwillbeusedtopoweroneofthemostsophisticatedtelescopesglobally.

TheprojectconsistsofSamsungSDIlithiumbatteriesandPVcentralinvertersdelivered in first of a kind EMI shielded containers custom designed andmanufacturedbyEMCinPerth.

TheBESSandPVinverterpassedfactoryacceptancetestingat its3,500m2 workshop in Belmont and have been successfully delivered to site at theMurchison Radio-astronomy Observatory (MRO), approximately 800kmnortheastofPerth,WesternAustralia.Factoryacceptancetestinginvolvedafullfunctionalitytestofallthekeyequipmentandcontrolsystems,includingasimulatedintegrationwiththeexistingdieselpowerstation.

Thebatteriesunderwentonsiteinstallationandintegrationwiththepreviouslyinstalled1.6MWSolarPVarrayandwillbeintegratedandcommissionedwiththeexistingpowerstationonsiteinthecomingmonths.

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16 17WAVECARNEGIECLEANENERGYANNUALREPORT2017

WAVE

“CARNEGIE IS WORKING TO TRANSFORM THE GLOBAL RENEWABLE ENERGY MARKET THROUGH ITS UNSURPASSED WAVE ENERGY TECHNOLOGY, CETO.”

Globally, Carnegie is an undisputed leader in wave energy technology, being the only company to have operated a grid connected, commercial scale wave energy project over four seasons.

Over $140 million has been invested in the development of the CETOtechnology which has included a combination of rapid prototyping,computationalsimulation,wavetanktestingandin-oceantesting.

Overthepast12months,Carnegiehasmadesignificantprogressinthedesignof its CETO 6 generation to boost output and reduce long term levelisedcostofenergyforecasts.Thesechangesutilisetheproprietarycuttingedgemodellingtoolsdevelopedin-house,billionsofcomputationalrunsonsupercomputersandbuildon intellectualpropertydevelopedover thepast fewyearswiththebenefitofbothin-oceanandtanktestingofCETOunits.

The CETO 6 design builds on the experience gained in all previous CETOgenerationsandincorporatessomeimportantimprovements.

Thediameterofthebuoyantactuatorhasthemostsignificantinfluenceonpoweroutputandhasbeenincreasedtoapproximately20mfromthe7mdiameter80kWunitsuccessfullytestedattheGardenIslandsitein2011andthemostrecent11mdiameter,240kWunitstestedin2015atthesamesite.

Apartfrombeinglarger,CETO6willalsoincorporatethepowergenerationoffshore, inside thebuoy rather thanonshoreaswith thepreviousCETO5design being deployed for the Perth Wave Energy Project. Locating thepower generation within the buoy removes the need to attach pumps,accumulatorsandotherhydrauliccomponentstotheseabed,avoidingtherequirementforoffshoreheavyliftvesselcapacityandreducingtheoffshoreinstallationandmaintenancetimeandcost.TheCETOdesign,incorporatingsubseagenerationandtransmissionofelectricalpowerwillallowCarnegietotakeadvantageofdeeper,moredistanttoshorewaveresourcessignificantlyincreasingthesizeof thecommercialmarket forCETOaswellasallowinggreaterresponsivenessintheCETOcontrolsystem.

CAPABILITIES

WAVECARNEGIECLEANENERGYANNUALREPORT2017

WAVE HUB PROJECT, UK

CarnegiehasbeendevelopingaCETO6projectoptionattheUKGovernment’sWaveHubfacilityinCornwallsince2016. In 2017, Carnegie successfully secured a £9.6m(AUD$17million)ERDFgrantforthefirstphaseofa15MWProject.

Phase one of the 15MW Project consists of the design, construction,installation and operation of a single 1MW grid-connected CETO 6 waveenergy converterdevice, adapted to local conditions and industrialised forlargescalecommercialdeploymentatthepurposebuiltWaveHubtestsiteintheUK.

GARDEN ISLAND, WA

The CETO 6 Project, located offshore of Garden Island, Western Australiais supported by the Australian Federal Government through a $11 millionAustralianRenewableEnergyAgency(ARENA)grantaswellasadebtfacilityfromtheCommonwealthBankofAustralia.

GardenIslandprovedtobetheidealdemonstrationsiteforCarnegie’sCETO5PerthWaveEnergyProject.ItallowsgridconnectionviaCarnegie’sGardenIslandMicrogridProjectandisamediumenergy,openoceanresource.

ALBANY, WA

In2017,theWesternAustralianGovernmentcommitted$19.5milliontofundaWaveProjectandCentreofExcellenceinAlbany,WesternAustralia.

CarnegiehasrespondedtothisGovernmentwithaCETO6projectproposalthatwoulddemonstratethepotentialforWAandAustraliatotapintoahighlyconsistentrenewableresource;delivering24/7cleanpowerintotheelectricalgridatatimewhererecognitionoftheimportanceofreliable,cleanenergyinAustraliahasneverbeenhigher.TheProjectisproposedtobedeliveredinstagesandinvolveaninitial1MWunit.

Significant progress has also been made over the past year made inselecting the first site to deploy CETO 6, including discussions with thevariousGovernmentfundingagenciesassociatedwitheachsite.WehavedevelopedthreesiteoptionsforourinitialCETO6deploymentandexpecttomakeafinaldecisionastothelocationofthefirstCETO6projectbeforetheendof2017.

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18 19MICROGRIDCARNEGIECLEANENERGYANNUALREPORT2017

MICROGRID

“RENEWABLE MICROGRIDS CAN DELIVER IMPROVED SECURITY OF SUPPLY WITH CLEAN, RELIABLE POWER AND WATER.”

Carnegie is a developer of utility scale solar, battery, wave and hybrid energy projects. Carnegie is the only company in the world to offer a combination of wave, solar, wind, battery storage and desalination via microgrids.

Carnegie specialises in energy systemsmade up of distributed renewableenergysourcesthatarecapableofoperatingindependentlyfromthemainpowergrid. Itsmicrogrids combinemultiple renewable energygenerationsourcesinordertoreducetherelianceonfossilfuelsandtraditionalformsofenergytosupplyreliablepower,24/7.

CAPABILITIES

MICROGRIDCARNEGIECLEANENERGYANNUALREPORT2017

GIMG PROJECT

Carnegiehascommencedconstructiononits2MWsolarPhotovoltaic(PV)and2MW/0.5MWhBESScomponentsoftheGardenIslandMicrogrid(GIMG)Projectwhichistheworld’sfirstdemonstrationofasolar,battery,waveanddesalinationmicrogrid. TheGIMGProjectwill be the largest embedded,grid-connected solar and battery microgrid in Australia. Carnegie hassignedsupplyagreementswiththeDepartmentofDefenceforthepowerandwaterproducedbytheProjecttobeusedbyHMASStirling,Australia’slargestnavalbase.

TheProjectwillalsointegratewiththeexistingDepartmentofDefencedieselgeneratorsandtheWesternPowergridtodemonstratebothoff-gridandon-gridfunctionalityofamicrogridand‘bumpless’transferbetweenthesetwooperatingmodes.

The Garden IslandMicrogrid is owned and will be operated by Carnegie.Carnegie’s 100% owned subsidiary, Energy Made Clean, is responsiblefor thedesign, construction andongoingmaintenance of theProject. Thedesalinationplantisalreadyoperationalatthesite.Constructionofthesolarandbatteryprojectisdueforcompletionbytheendof2017.

The$7.5millionproject is supportedby theFederalGovernmentwith$2.5millionofARENAfunding.

Hon. Joshua Frydenberg MP, Minister for the Environment and Energy breaking ground on the world first Garden Island Microgrid in August 2017

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20 21INTELLECTUALPROPERTYCARNEGIECLEANENERGYANNUALREPORT2017

INTELLECTUAL PROPERTY

The creation, protection and maintenance of the CETO Intellectual Property (IP) continues to be a core business for Carnegie. Carnegie invests significant resources, overseen by our in-house IP Coordinator, ensuring that all novel aspects of the CETO technology are appropriately protected globally.

Carnegie’s CETO Intellectual Property portfolio consists of nine patentfamilies and more than 140 patents and patents pending along withvarioustrademarks.

An Independent Expert’s Report completed by intellectual propertyspecialists,GlobalIPServices,describedtheinvestmentmadeinprotectingtheCETO intellectualpropertyashaving “…createdsignificant IPbarriers toentry, andprovidesCarnegie…with a strong, global capacity to leverage itsCETOIPandsuccessfullycommercialisethistechnology…”

CarnegieownstheglobalIntellectualProperty&DevelopmentRightsfortheCETOtechnologyandwillcontinuetogenerateandprotectnewIPasCETOcontinues to mature. This IP, along with Carnegie’s unique developmentcapability and CETO knowledge and experience, creates a significantcompetitiveadvantagewhichwillallowCarnegietotap intothevastwaveenergyresourceglobally.

“CARNEGIE IS THE 100% OWNER OF THE GLOBAL INTELLECTUAL PROPERTY & DEVELOPMENT RIGHTS FOR THE CETO TECHNOLOGY.”

2X PATENT FAMILIESEnergy Relief in the

Buoyant Actuator

1X PATENT FAMILYBuoyant Actuator

1X PATENT FAMILY

2X PATENT FAMILIES

Deployment

TRADE MARK

CETOCarnegie Wave Energy

Device Logo

CETO Device

1X PATENT FAMILYPower & Control System

CARNEGIE TEAMCARNEGIECLEANENERGYANNUALREPORT2017

CARNEGIE TEAM

With the acquisition of EMC in December 2016, Carnegie’s team grew significantly. The company now employs approximately 100 people with expertise across solar, battery, microgrid and wave energy design, construction and operation.

Carnegie’sheadofficeisnowco-locatedwiththeEMCfacilityinBelmontwithasinglemanagementteamresponsibleforallworkareas.Themanagementteam continue to work together to build company wide processes andestablishanewculturefortheexpandedCarnegieCleanEnergyteam.

In addition to merging the EMC and Carnegie teams, the company hasfocussedonstreamliningresourcesandgrowingcorecapabilitieswithintheorganisation,includingadditionalelectricalandrenewableenergyengineersas well as CEC certified electricians. Carnegie’s construction workforceconsistsofbothelectricalandmechanicaltradeswiththeteamworkingonmetroandremotejobsaswellasundertakingtestingandassemblywithintheworkshop.

Carnegieseekstorecruitandretainworldclass,specialistemployeeswhoarededicatedtothedevelopmentanddeliveryofrenewableenergysolutions.

“CARNEGIE’S SPECIALIST TEAM HAS EXPERTISE ACROSS SOLAR, BATTERY, MICROGRID AND WAVE ENERGY DESIGN, CONSTRUCTION AND OPERATION.”

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22 23HEALTH,SAFETY&ENVIRONMENTCARNEGIECLEANENERGYANNUALREPORT2017

HEALTH, SAFETY & ENVIRONMENT

“CARNEGIE’S GOAL OF ZERO HARM MEANS THAT WE WILL CARE FOR AND PROTECT OUR PEOPLE, THE COMMUNITIES IN WHICH WE WORK, AND THE ENVIRONMENT IN ALL OUR OPERATIONS.”

Carnegie continues to focus on continuous improvement in relation to Quality, Health, Safety and Environment.

Carnegie’s dedicated QHSE team is establishing a single managementsystemforthecompanywhichencompassesallworkareasandprojects.ThismanagementsystemcapitalisesonthesystemsandprocessesthatpreviouslyexistedinEMCandCarnegiewhilstprovidingauniformandeffectivestandardofHSEmanagementforallCarnegieactivities.

Aspartof the integration, training isbeingcarriedout forallemployeestoensureeveryoneisawareoftheirHSEobligations.

KNOWLEDGESHARING&RESEARCHCARNEGIECLEANENERGYANNUALREPORT2017

KNOWLEDGE SHARING & RESEARCH

“CARNEGIE HAS A PORTFOLIO OF COLLABORATIVE R&D PROJECTS IN EXCESS OF $11 MILLION.”

RESEARCH PROJECTS

■ WaveEnergyScotland(WES)withfundedprojects:

□ C-GenPTO,withUniversityofEdinburgh

□ ReinforcedPolymersforWaveEnergy(RePower)projectwithDNVGLandtheNationalCompositesCentre

□ RotoHybridschemewithUniversityofEdinburgh&Queen’sUniversityBelfast

■ UniversityofWesternAustralia(UWA):focussedoncostandperformanceoptimisationofwaveenergyconvertors

■ UniversityofWesternAustralia(UWA)ARCLinkage:projectonfoundationdesignforextremeconditionsofwaveenergyconvertors

■ University of Adelaide: development of control strategies to increaseefficiencyofCETO

■ SUPEGEN funded “E-Drive” linear generator project with University ofEdinburghappliedtoCETO

■ Atlantis Resources: collaboration agreement focused on electricalarchitecture

■ MemorandumofUnderstanding(MoU)withSumitomoElectricIndustries(SEI) and TNG Limited (ASX: TNG) to jointly develop the AustralianVanadiumRedoxFlow(VRF)Batterymarket

KNOWLEDGE SHARING

Carnegie continues to engage with stakeholders in communities arounditsoperationsaswellaswithindustrypartners.Carnegieisrecognisedasanindustry leader within Australia and globally and regularly participates inenergyaswellasmarineconferences.

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24 25CORPORATE GOVERNANCECARNEGIECLEANENERGYANNUALREPORT2017


Carnegie Clean Energy Limited is a clean energy and clean energy technology development company. The Company has established procedures to encourage and maintain a culture of good corporate governance.

COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS

TheBoardisresponsibleforestablishingtheCompany’scorporategovernanceframework,thekeyfeaturesofwhicharesetoutinthisreport.Inestablishingitscorporategovernanceframework,theBoardhasreferredtothe3rdeditionoftheASXCorporateGovernanceCouncils’CorporateGovernancePrinciplesandRecommendations.

ThecorporategovernancestatementsetoutinthisreportdisclosestheextenttowhichtheCompanyisfollowingtherecommendationsasatthedateofthisreport.TheCompanyfollowseachrecommendationwheretheBoardhasconsideredtherecommendationtobeanappropriatebenchmarkforitscorporategovernancepractices.WheretheCompany’scorporategovernancepracticesfollowarecommendation,theBoardhasmadeappropriatestatementsreportingontheadoptionoftherecommendation.Incompliancewiththe“ifnot,whynot”reportingregime,where,afterdueconsideration,theCompany’scorporategovernancepracticesdonotfollowarecommendation,theBoardhasexplaineditsreasonsfornotfollowingtherecommendationanddisclosedwhat,ifany,alternativepracticestheCompanywilladoptinsteadofthoseintherecommendation.Unlessotherwisestated,thepracticesdetailedinthisstatementhavebeeninplacefortheentirereportingperiodended30June2017.

Governance-relateddocumentscanbefoundontheCompany’swebsiteatwww.carnegiece.com,underthemenu“AboutUs-CorporateInformation”andwithinthesectionmarked“CorporateGovernance”.

Principle 1: Lay solid foundations for management and oversight

Recommendation 1.1

The listing entity should disclose:

(a) the respective roles and responsibilities of its board and management; and

(b) those matters expressly reserved to the board and those delegated to management.

The Company complies with this recommendation. ApolicyonmattersreservedfortheBoardisoutlinedinthe“MattersReservedforBoardApproval”documentandisavailableon theCompany’swebsite. TheCompanyhasestablishedcleardetailsoftherolesandresponsibilitiesofeachofitsboardmanagementmembers.

Recommendation 1.2

A listed entity should:

(a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and

(b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

TheCompanycomplieswiththisrecommendation.TheCompany has a policy for the evaluation of the BoardandSeniorExecutivesinaccordancewiththeBoardandSenior Executives Evaluation Policy. The appointmentof any director is subject to subsequent approval byshareholders at the next Annual General Meeting ofthe Company. Meeting materials for such meetingincorporatesallrelevantdetailstoassistshareholdersindecidingwhetherornottoelectorre-electthatdirector.

Recommendation 1.3

A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.

TheCompanycomplieswiththisrecommendation.Priorto the formal appointment of any director, a writtenagreement is entered into between theCompany andthedirectorsettingoutthetermsandconditionsoftheirappointment.

CORPORATE GOVERNANCE CARNEGIECLEANENERGYANNUALREPORT2017


Recommendation 1.4

The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.

TheCompanycomplieswiththisrecommendation.TheCompanyhastwoCompanySecretaries,neitherofwhicharethechairmanoftheCompany.WhileoneCompanySecretaryalsofills the roleofNon-ExecutiveDirectoroftheCompany,hehassignificantexperience infinancialand corporative governance matters enabling him tosuitablyadvisetheBoardontheseareas.

Recommendation 1.5


(a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them;

(b) disclose that policy or a summary of it; and

(c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them, and either;

(1) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or

(2) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under the Act.

The Company does not comply with thisrecommendation. The Company has not yet setmeasurableobjectivesforachievingdiversity.TheBoardcontinues to monitor diversity across the organisationandissatisfiedwiththecurrentlevelofgenderdiversity

within the Company. Due to the size of the Company,theBoarddoesnotconsideritappropriateatthistimetoformallysetobjectivesforgenderdiversity.TheCompanycurrently employs (including on a consulting basis) 98 staff (17 females and 81 males). The Companyrecognises that a diverse and talented workforce is acompetitiveadvantageandthattheCompany’ssuccessis the resultof thequalityand skillsofourpeople. TheCompany’s policy on diversity is to employ the rightperson for the right job regardlessof theirgender,age,nationality, race, religious beliefs, cultural background,sexualityorphysicalability.

Recommendation 1.6


(a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and

(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

TheCompanydoesnotcomplywiththisrecommendation.TheCompanydidnotundertakeanassessmentof theBoard during the year. The Board did however assessthediversityofskillsheldbyBoardmembersbywayofaskillsmatrixinordertoassessanypossibleinadequaciesinboardskillsandcapabilities.

Recommendation 1.7


(a) have and disclose a process for periodically evaluating the performance of its senior executives; and

(b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

TheCompanycomplieswith this recommendation.Onan annual basis the Company undertakes a review oftheseniorexecutiveswhich isconfirmed in theAnnualReport.

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Principle 2: Structure the board to add value

Recommendation 2.1

The board of a listed entity should:

(a) have a nomination committee which:

(1) has at least three members, a majority of whom are independent directors; and

(2) is chaired by an independent director; and disclose:

(3) the charter of the committee;

(4) the members of the committee; and

(5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.

TheCompanydoesnotcomplywiththisrecommendation.GiventheCompany’ssize,itisnotconsiderednecessarytohaveaseparateNominationCommittee.Inadditiontotheabove,thefollowinginformationisprovided:

(a) the skills, experience and expertise of each of the Company’s directors are set out in this report;

(b) the Board, in consultation with external advisers where required, undertakes this role; and

(c) a separate policy and procedure for Selection and Appointment of New Directors has been adopted by the Board which provides for the proper assessment of prospective directors and include, but are not limited to, their relevant experience and achievements, compatibility with other Board members, credibility within the Company’s scope of activities, and intellectual and physical ability to undertake Board duties and responsibilities.

Recommendation 2.2

A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.

TheCompanycomplieswiththisrecommendation.TheBoardhasundertakenanassessmentofitsmixofskillsusingaskillsmatrixtoassessstrengthsandidentifyweaknesses.Asummaryoftheblendofskillsissetoutbelow:


EXPERTISE INDUSTRY QUALIFICATIONS

■ Renewableenergy ■ Renewableenergy ■ Business&accounting

■ Energy–fossilfuels ■ Power&electricity ■ Engineering

■ Infrastructure ■ Capitalmarkets ■ Management

■ Industrial&manufacturing ■ Mineralexplorationandmining ■ Electrical

■ Engineering ■ TechnologyandR&D ■ Science

■ Minerals&Mining ■ Construction

■ CapitalMarkets ■ Infrastructure

■ Research&Development

Theskills,experienceandexpertiseofeachoftheCompany'sdirectorsaresetoutinthisreport.


Recommendation 2.3

A listed entity should disclose:

(a) the names of the directors considered by the board to be independent directors;

(b) if a director has an interest, position, association or relationship of the type described in Box 2.3 of the 3rd edition of the ASX Corporate Governance Councils’ Corporate Governance Principles and Recommendations but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and

(c) the length of service of each director.

TheCompanycomplieswiththisrecommendation.Non-ExecutiveDirectorsJeffHarding,MikeFitzpatrick,GrantMooneyandJohnLeggateareconsideredIndependentDirectors.ThelengthofserviceofeachDirectorissetoutinthisreport.

Recommendation 2.4

A majority of the board of a listed entity should be independent directors.

TheCompanycomplieswiththisrecommendation.

Recommendation 2.5

The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.

TheCompanycomplieswiththisrecommendation.

Recommendation 2.6

A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors efficiently.

The Company complies with this recommendation. TheCompanyhasestablishedaprocess for inductionofnewdirectorsandwherepossible,provideseachdirectorwithopportunitiesforprofessionaldevelopmentsuchthattheycanimprovetheireffectivenessasdirectorsoftheCompany.

Principle 3: Act ethically and responsibly

Recommendation 3.1


(a) have a code of conduct for its directors, senior executives and employees; and

(b) disclose that code or a summary of it.

The Company complies with this recommendation.The Company has established a code of conduct forall directors, senior executives and employeeswhich isavailableontheCompany’swebsite.

Principle 4: Safeguard integrity in corporate reporting

Recommendation 4.1


(a) have an audit committee which:

(1) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and

(2) is chaired by an independent director, who is not the chair of the board,

and disclose:


(4) the relevant qualifications and experience of the members of the committee; and

(5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

(b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.

TheCompanycomplieswiththisrecommendation.TheCompanyhaspoliciesforAuditCommitteeCharterandtheExternalAuditorSelection.Acopyof thesepolicies

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TheCompanycomplieswiththisrecommendation.TheCompanyhasaContinuousDisclosurepolicywhichissetoutontheCompany’swebsite.

Principle 6: Respect the rights of security holders

Recommendation 6.1

A listed entity should provide information about itself and its governance to investors via its website.

The Company complies with this recommendation.A summary of the Company’s Corporate GovernancepoliciesissetontheCompany’swebsite.

Recommendation 6.2

A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.

TheCompanycomplieswiththisrecommendation.TheCompanyhasestablishedaninvestorrelationsprogramto ensure effective communications between theCompanyandshareholdersandinvestors.TheCompanyhas a Shareholder Communication Policy which is setoutontheCompanywebsite.

Recommendation 6.3

A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.

TheCompanycomplieswiththisrecommendation.TheCompany has a Shareholder Communication PolicywhichissetoutontheCompanywebsite.

Recommendation 6.4

A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically.

TheCompanycomplieswiththisrecommendation.TheCompanyprovidestheoptiontoshareholderstoreceivecommunicationselectronically,notificationofthisoptionisprovidedbytheCompanyregistry.

are provided on the Company’swebsite. Details of theauditcommitteemeetingsareprovidedinthisreport.

Recommendation 4.2

The board of the listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

TheCompanycomplieswiththisrecommendation.TheBoardreceivesassurancefromtheChiefExecutiveOfficerand the Chief Financial Officer that the declarationin relation to section 295A of the Corporations Actis founded on a sound system of risk managementand internal control and that the system is operatingeffectivelyinallmaterialrespectsinrelationtofinancialreportingrisks.TheCompanyalsohasaseparatepolicyinrelationtoRiskManagementwhichisavailableontheCompany’swebsite.

Recommendation 4.3

A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

TheCompanycomplieswiththisrecommendation.TheCompany’sauditorattendstheannualgeneralmeetingoftheCompanyandisavailabletoansweranyquestioninrelationtotheaudit.

Principle 5: Make timely and balanced disclosure

Recommendation 5.1


(a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and

(b) disclose that policy or a summary of it.



Principle 7: Recognise and manage risk

Recommendation 7.1


(a) have a committee or committees to oversee risk, each of which:


(2) is chaired by an independent director;

And disclose:




(b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework.

TheCompanycomplieswiththisrecommendation.TheCompanyhasanAuditCommitteewhich,pursuanttoitscharterhastheresponsibilityfor:

• monitoring corporate risk assessment and theinternalcontrolsinstituted.

• monitoringtheestablishmentofanappropriateinternalcontrolframework,includinginformationsystems,andconsideringenhancements.

• reviewing external audit programs/reports toensure that where deficiencies in controls orprocedures have been identified, appropriateremedialactionistakenbymanagement.

Recommendation 7.2

The board or a committee of the board should:

(a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and

(b) disclose, in relation to each reporting period, whether such a review has taken place.

The Company complies with this recommendation.As stated above, in the forum of board meetings theboard regularly addresses certain risks thatmay affectthe Company’s business interests and confirmation oftheserisksbeingaddressedarenoted intheCorporateGovernancePolicieswithintheAnnualReport.

Recommendation 7.3

A listed entity should disclose:

(a) if it has an internal audit function, how the function is structured and what role it performs; or

(b) if it does not have an internal audit function, that fact and the processes it employs for evaluation and continually improving the effectiveness of its risk management and internal control processes.

TheCompanydoesnotcomplywiththisrecommendation.TheDirectorsareof the view thatgiven the sizeof theCompany, it is not practical to have an internal auditfunctionandthatriskmanagementisundertakenbytheBoardandseniormanagement.

Recommendation 7.4

A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks.

TheCompanydoesnotcomplywiththisrecommendation.TheDirectorsareof theviewthatgiventheCompany’ssize,risksareaddresseddirectlybytheBoardandseniormanagementandarenotdisclosedexternally.F

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CORPORATE GOVERNANCECARNEGIECLEANENERGYANNUALREPORT2017

Principle 8: Remunerate fairly and responsibly

Recommendation 8.1


(a) have a remuneration committee which:


(2) is chaired by an independent director;

and disclose:




(b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.

TheCompanycomplieswiththisrecommendation.TheCompanyhasapoliciesfortheRemunerationCommitteeCharter, theSeniorExecutivesRemunerationandNon-ExecutiveDirectorremuneration.Acopyofthesepoliciesare provided on the Company’swebsite. Details of theremunerationcommitteemeetingsareprovidedinthisreport.

Recommendation 8.2

A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives.

The Company complies with this recommendation.The Company has separate policies relating to theremuneration of non-executive directors as opposedto senior executives. These policies provide a basis fordistinguishingthetypeofremunerationwhichissuitableforthetwoclasses.

Recommendation 8.3

A listed entity which has an equity-based remuneration scheme should:

(a) have a policy on whether participants are permitted to enter into transaction (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and

(b) disclose that policy or a summary of it.

TheCompanycomplieswiththisrecommendation.TheCompanyhasaSecuritiesTradingPolicywhich,amongother things, sets out theCompany’s policy on tradingtheCompany’ssecurities.AcopyofthispolicyisontheCompany’swebsite.

CORPORATE GOVERNANCE DIRECTORS’ REPORT / 30 JUNE 2017

The Directors present their report on Carnegie Clean Energy Limited (“the Company”, or “Carnegie”) and its controlled entities, (“the Consolidated Group”, or “Group”) for the financial year ended 30 June 2017.

DIRECTORS

TheDirectorsoftheCompanyinofficeatanytimeduringorsincetheendofthefinancialyearare:

Jeffrey Harding B.Eng,B.Com,MBA,FAICDChairman (appointed 21 May 2009)

Mr Harding is recognised as one of Australia’s leadingalternativeenergypractitionersandhasbeenakeydriverinexpandingtherenewablesmarketinAustralia,SouthAmerica and Europe since themid-90’s. From 1995 to2005MrHardingwasManagingDirectorofPacificHydroLimited, Australia’s largest renewable energy developerwith wind and hydro energy projects in Australia, Asiaand Chile. During his tenure, Mr Harding oversaw theinternational expansion of thebusinesswith growth inmarketcapitalisationfromAU$5milliontooverAU$750million and an increase in profit after tax each yearfrom1996to2005,whenPacificHydrowassoldtoIFMRenewableEnergy.MrHardingwas alsopreviously theVice President of the Australian Business Council forSustainableDevelopment.

MrHardingwasalsoChairmanofCeramicFuelCellsLtd(AIM:CFU), was formerly General Manager of BramblesIndustrial Services andVice President of theAustralianBusiness Council for Sustainable Development. MrHarding has regularly presented on issues associatedwithclimatechangeandrenewableenergyandwasthe2014HalseyVisitingProfessorattheUniversityofVirginia.

MrHardinghasdegreesinCivilEngineering,Economics,andaMastersDegree inBusinessAdministration.He isalsoadirectoroftheInfrastructureCapitalGroupandisaFellowoftheAustralianInstituteofCompanyDirectors.MrHardingresidesinbothEuropeandAustralia.

Dr Michael Edward Ottaviano B.Eng, MSc, DBA,MAICD,M.I.EngAusChief Executive Officer and Managing Director (appointed 1 September 2006)

Dr Ottaviano joined Carnegie in January 2006 andwas made Managing Director in March 2007. DrOttaviano oversaw the acquisition of the CETO wavepower intellectual property in 2009 and focusing ofthe company’s efforts on its commercialisation. DuringhistimeasManagingDirector,DrOttavianohasledthedevelopmentofCETOWaveEnergytechnologyandhasbeenresponsible for raisingover$140million inequity,grants and debt. More recently he has steered theGroup’sexpandedfocusintothesolar/batterymicrogridmarket including the acquisition of the Energy MadeCleanGroupin2016.

Dr Ottaviano has previously worked in research anddevelopment and consulted in technology andinnovation management. He has advised companiesonnewproductdevelopment,intellectualpropertyandtechnology commercialisation across various industriesand ranging fromstart-ups to largemulti-nationals.HeisaformerBoardMemberoftheCleanEnergyCouncil,Australia’s clean energy peak industry group, and wasa member of the Australian Government’s EnergyWhitePaperConsultativeCommittee.Heisalsoanon-executivedirectorofASX-listedhearingtechnologystartup, Nuheara Limited and Western Australia’s screenfundingdevelopmentorganisationScreenwest.

DrOttavianohasaBachelorofEngineering,aMaster’sofScienceandaDoctorateinBusinessAdministration.

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DIRECTORS’ REPORTCARNEGIECLEANENERGYANNUALREPORT2017

DIRECTORS’ REPORT / 30 JUNE 2017

Kieran O’Brien B.Eng,MBA,MEngSc,FIEI,FIEE Executive Director (appointed 23 September 2010)

MrO’BrienisaformerManagingDirectorofESB(Ireland’sElectricitySupplyBoard)NationalGridand servedasamember of the Executive Management Group of ESBfor more than 15 years. He has been responsible forlong term strategic planning in ESB and for relationswith the IrishGovernment andEuropeanUnion in thefuelandutilitysector. MrO’BrienwasActingSecretaryGeneraloftheWorldEnergyCouncil(WEC)from2008-2009andservedtwothreeyeartermsasamemberoftheOfficer’sCounciloftheWEC.Hisinternationalpowerindustry experience extends to Asia, Africa, theMiddleEast,EasternEuropeandNorthAmerica.

Michael Fitzpatrick B.Eng (Hons),B.A (Hons),M.A(Oxon) Non-Executive Director (appointed 28 November 2012)

MrFitzpatrickhasover38yearsinthefinancialservicessector. He is Chairman of Pacific Current Group(formerlyTreasuryGroupLimited),an incubatorof fundmanagement companies, and past Chairman of theAustralian Football League. He also holds several non-executive directorships, including Infrastructure CapitalGroupandLatamAutosLimited.

In 1994 Mr Fitzpatrick founded Hastings FundsManagement Ltd (‘Hastings’), the pioneeringinfrastructure asset management company wherehewasManagingDirectoruntilhe soldhis interest in2005.Hastingswas thenoneof the largestmanagersof infrastructure and alternative assets in Australia(including infrastructure, high yield debt, privateequity and timberland) managing investments ofapproximately A$3.8 billion. Mr Fitzpatrick was adirector of several Hastings’ managed investments,including Pacific Hydro Limited, Global RenewablesLimited, Utilities of Australia, Australian InfrastructureFund and Australia Development Group Pty Ltd (theholdingcompanyofPerthAirport).

PriortoestablishingHastings,MrFitzpatrickwasadirectorofCSFirstBoston.Healsopreviouslyheldpositionswith

MerrillLynchandFirstBostoninNewYork,theVictorianTreasuryandTelecomAustralia.

Mr Fitzpatrick is a former chairman of Victorian FundsManagement Corporation, and the Australian SportsCommission,aformerdirectorofRioTintoLimitedandRioTintoplc,a formermemberof theMelbourneParkTennis Centre Trust, a former director of the CarltonFootballClubandaformerdirectoroftheWalter&ElizaHallInstituteofMedicalResearch.

Mr Fitzpatrick has a Bachelor of Engineering withHonours fromtheUniversityofWesternAustraliaandaBachelorofArtswithHonoursandaMastersofArtsfromOxfordUniversitywherehewasthe1975RhodesScholarfromWesternAustralia.

John Leggate CBE,FREngNon-executive Director (appointed 27 July 2011)

Mr Leggate is a highly-experienced oil and gas andventurecapitalindustryexecutive.Heworkedforover27years forBP.Hiskey leadership roleswereasPresidentof theAzerbaijan InternationalOilCo,BP’sGroupChiefInformation Officer and Group Vice President of BP’sGlobalSupplyChain.

AtBPMrLeggatewascloselyinvolvedinthedevelopmentofcorporatepolicyontechnologyforesight,andcorporateventuringduringthedot-comera.Hehasspent20yearsin the exploration and production business, running awiderangeofprojects,construction,commissioningandproductionoperationswithafocusontheNorthSeaandtheCaspianRegion.MrLeggate’searlycareerwasspentinmarineconsultancyatYarrowsAdmiraltyResearchinGlasgowandafterwardswasengagedinthedesignandconstructionofcoal,oilandnuclearpowerstationswithSouthofScotlandElectricityBoard(nowScottishPower).

MrLeggatehasservedasaDirectorontheMainBoardandAudit Committee of LondonAIM listed ParkmeadGroupandOgin, a venturebackedBostonbasedwindturbine company and on the board of a cybersecuritycompany inWashingtonDC.HehasalsoservedontheUKDTI Far Eastern TradeAdvisoryBoard for four yearsand was advisor to the US House Science Committeeon the potential threat from cyber security on criticalnationalinfrastructureandglobaltrade.

Mr Leggate was awarded the CBE in recognition ofhis outstanding contribution and leadership to theinternational digital technology agenda. Mr Leggate isagraduateofGlasgowUniversityand isaFellowof theInstituteofElectricalEngineeringandFellowoftheRoyalAcademyofEngineering.

Grant Jonathan Mooney B.Bus,CANon-executive Director and Company Secretary (appointed 19 February 2008)

Mr Mooney is the principal of Perth-based corporateadvisoryfirmMooney&Partners,specialisingincorporatecompliance administration to public companies. MrMooneyhasgainedextensiveexperienceintheareasofcorporateandprojectmanagementsincecommencingMooney & Partners in 1999. His experience extends toadviceoncapitalraisings,mergersandacquisitionsandcorporategovernance.Currently,MrMooneyservesasaDirectortoseveralASXlistedcompaniesacrossavarietyofindustriesincludingtechnologyandresources.HeisaDirectorofPOZMineralsLimited,appointed14October2008,BarraResourcesLimited,appointed29November2002, and Talga Resources Limited, appointed 20February2014.HewasaDirectorofNuhearaLimitedfrom1May2007to4June2016.MrMooneyisalsoamemberoftheInstituteofCharteredAccountantsinAustralia.

John DavidsonExecutive Director and Energy Made Clean’s Managing Director (appointed 15 February 2017)

Mr Davidson brings to the Boardmore than 30 years’experience leading major strategic business initiativesand business transformation in a diverse range ofindustries, particularly the renewable energy andtechnologysectors.TheappointmentofMrDavidsonasExecutiveDirectorfollowstheacquisitionofEnergyMadeClean(“EMC”)byCarnegieinDecember2016.

Fromitsinceptionin2002,MrDavidsonhasspentthelast15yearsbuildingEMCintooneofthecountry’s leadingsolarandbatterystorageinnovators.Growinginstrengththroughanumberofacquisitions,includingSolarSales,andClearEnergy,MrDavidsonhasdevelopedauniquebusiness model that offers an end-to-end renewableenergy solution in-house, dedicated to research and


development, custom design, construction, operation,maintenance and monitoring. As founder of EMC, MrDavidsonwill be instrumental in establishing Carnegieas the leading Australian renewable energy microgridproject delivery company. His international businessexperience and connections will also further enhancethecompany’sglobalopportunitiesinthemicrogridandwaveenergytechnologies.

MrDavidsonalsoservesasNon-ExecutiveDirectorontheboardoflistedminingcompanyTNGLimited.

Duringtheyearandatthedateofthisreport,thedirectandindirectinterestsoftheDirectorsinthesharesandoptionsoftheCompanywere:

ORDINARY SHARES

OPTIONS

Michael Fitzpatrick (i) 125,365,359 5,000,000

Dr Michael Edward Ottaviano

35,000,000 -

John Rix Davidson (ii) 297,366,738 -

Jeffrey Harding (iii) 1,346,099 5,000,000

Grant Jonathan Mooney (iv)

2,628,278 15,000,000

Kieran O’Brien 170,000 10,000,000

John Leggate 100,000 5,000,000

i. MrMFitzpatrickisaDirectorofLogCreekPtyLtdandthereforeisdeemedtohaveaninterestin125,365,359ordinarysharesand5,000,000optionsheldbyLogCreekPtyLtdand88GreenVentures.Inaddition,LogCreekPtyLtdholds100convertiblenoteswithafacevalue of $1,000,000 convertible into shares at 8.0c(refertonote19(ii)).

ii. Mr JDavidsonacquired297,142,857ordinary sharesonaspartconsiderationfortheacquisitionofhis65%interest intheEnergyMadeCleanGrouppreviouslynotheldbyCarnegieCleanEnergyLtd.Anadditional223,881 ordinary shares were acquired on 24 April2017throughaSharePurchasePlan.

iii. Mr J Harding is deemed to have an interest in1,346,099 ordinary shares as trustee for the “TheHardingSuperFundAccount”.

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iv. MrGJMooneyisaDirectorofMooney&PartnersPtyLtdandthereforeisdeemedtohaveaninterestin2,628,278ordinarysharesheldbyMooney&PartnersPtyLtd.

COMPANY SECRETARY

Thefollowingpeopleheldthepositionofjointcompanysecretaryattheendofthefinancialyear:

Mr Grant Jonathan Mooney and Mr Aidan John Flynn

PRINCIPAL ACTIVITIES

TheprincipalactivitiesoftheConsolidatedGroupduringtheyearwerethedevelopmentoftheCETOWaveEnergyTechnology and the development of the EnergyMadeCleansolar,batteryandmicrogridbusiness.

OPERATING RESULTS

The consolidated loss of the Consolidated Group forthe financial year ended 30 June 2017 amounted to$14,382,638(2016:consolidatedloss$6,349,387).

DIVIDENDS

The Directors do not recommend the payment of adividend for thefinancialyearended30June2017.Nodividendswerepaidduringthefinancialyear.

REVIEW OF OPERATIONS

Duringtheyear,theConsolidatedGrouptooksignificantstepstoadvanceitssolarandbatterybusiness,including:

• The acquisition of the remaining 65% of theprojectengineeringbusinessEnergyMadeClean(“EMC”), a growing business active in the solar/battery and microgrid sectors. The acquisitionof EMC delivers diversification to Carnegie andexpandsourproductofferingtoutilityscalesolar,waveandenergystorageprojectsinAustraliaandinternationally;

• Establishment of a 50/50 Joint VentureAgreement (“JVA”) between Carnegie’s 100%ownedsubsidiaryEnergyMadeCleanPtyLtdandASX-listedLendleasetodeploysolarandbattery

projects around Australia. The JVA providesopportunities to increaseEMC’s capacity tobidfor and deliver a broader range of solar, BESS,and microgrid opportunities within Australia,including increased access to the NationalEnergy Market (“NEM”), leveraging LendleaseService’s national footprint and staff of 3,000peopleacrossAustralia;

• SignedastrategicMemorandumofUnderstandingwithSumitomoElectricIndustriesandTNGLimitedto collaborate on the promotion, developmentandgrowthofAustralia’s VanadiumRedox FlowBattery (“VRF”) market. EMC’s main role in thispartnershipwillbetoidentifyspecificcommercialdevelopment project site opportunities, inadditiontodesigningandsupplyingacompatiblebalanceofplant(likelytoincludeasolarPVfarm)to integrate with the VRF containerized systembeing supplied by component manufacturerSumitomo,aspartofacompletesolarandbatterydemonstrationproject.

• Announcedthecommencementofitsfirstutilityscale solar project tobe located atNortham inWesternAustralia.On16June2017,theCompanyannounced that the grid-connected 10MWproject received Development Approval fromthe Mid-West/Wheatbelt Joint DevelopmentAssessmentPanel(JDAP).

Strong progress was also made on the developmentoftheCETO6waveenergytechnologyandprojectsiteoptionsbothinAustraliaandoverseas,including:

• An award of £9.6 million (AU$16 million) fromthe European Regional Development Fund forthefirst1MWstageofaplanned15MWWaveHubProjectintheUK;

• Significant progress on the Garden IslandMicrogrid Project including completion of thedesign, receipt of WA Government planningpermission and all Department of Defence(“DoD’) approvals, power and water offtakecontractswithDoD,andsecuringof$2.5millioningrantsfromtheAustralianRenewableEnergyAgency (“ARENA”) with payment of an initial$0.67millionfromARENA.

• AdvancingplansforathirdCETO6WaveEnergyProject option in Western Australia at the siteCarnegie’soffshorelicenceareaatAlbanywheretheWA State Government has created a $19.5million fund for a wave energy project andresearchcentreofexcellenceatthislocation.

Carnegiealsoundertookadditionalfinancinginitiatives,including:

• Closinga$5.0milliondebtfinancingraiseusedtorefinanceanexisting$500,000workingcapitalbankfacilityheldbyEnergyMadeCleanandtofasttrackmicrogridprojectopportunities;

• Received a $3.1 million Research andDevelopmentTaxcashrefundpayment;and

• Completionofa$18.0millioncapitalraisingusedto fund its equity share of the 10MWNorthamSolar Project as well as other project pipelinedevelopmentanddelivery.

FINANCIAL POSITION

Thenet assetsof theConsolidatedGroup increasedby$17.0millionto$112.9millionasat30June2017.This islargely the resultof a$18.0million shareplacement inApril2017.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The following significant changes in the state of affairsoftheConsolidatedGroupoccurredduringthefinancialyear:

• The acquisition of the remaining 65% of theprojectengineeringbusinessEnergyMadeCleanasmentioned under the Review of Operations;and

• Raising $18.0 million by issuing 269.2 millionordinarysharesunderaSharePurchasePlanandPrivatePlacementatanissuepriceof$0.067pershare.

SIGNIFICANT EVENTS SUBSEQUENT TO YEAR END

Thefollowingeventsoccurredsubsequenttotheendofthefinancialyear:


• On 1 August 2017, Carnegie commencedconstruction of the 2MW solar PV and2MW/0.5MWh battery Garden Island Microgridwhich also incorporates Carnegie’s existingdesalinationplant.Theprojectwillsellallpowerand water produced to the Department ofDefenceforusebyHMASStirling.

• On 7 July 2017, Carnegie announced its 100%subsidiary Energy Made Clean Pty Ltd wasawardedthedesignandconstructionofasolar/battery/dieselmicrogrid forLendleaseBuildingson behalf of the Department of Defence. ThemicrogridwillbeinstalledattheDepartmentofDefence’sDelamereAirWeaponsRange in theNorthernTerritoryofAustralia.

With the exception of the above, no other matters orcircumstances not otherwise dealt with in this reportor the consolidated financial statements, have arisensince the end of the financial year which significantlyaffected,ormaysignificantlyaffect,theoperationsoftheConsolidatedGroup,theresultsofthoseoperationsorthestateofaffairsoftheConsolidatedGroupinsubsequentfinancialyears.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The2017financialyearsawCarnegieexpanditsbusinessfocustocapturetheopportunitiesintherapidlyevolvingclean energymarket. The 100% acquisition of projectengineeringcompanyEnergyMadeClean(“EMC”),bringsrevenues to theCompany anddelivers deep capabilityandexperience inthedesignandconstructionofsolar,battery andmicrogridprojects. The acquisitionof EMCdelivers diversification to Carnegie and expands ourproduct offering to utility scale solar, wave and energystorageprojectsinAustraliaandinternationally.

ENVIRONMENTAL ISSUES

The Consolidated Group is required to carry out itsactivitiesinaccordancewiththelawsandregulationsintheareasinwhichitundertakesitsactivities.Therehavebeennoknown significantbreachesof these lawsandregulations.

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SHARE OPTIONS

Atthedateofthisreport,therewere40,000,000optionsoutstanding in respect of unissued ordinary shares toDirectors and a further 14,000,000 options held byemployees.

INDEMNIFYING OFFICER OR AUDITOR

During or since the year end, the Company has givenanindemnityorenteredanagreementtoindemnify,orpaidoragreedtopayinsurancepremiumsasfollows:

• TheCompanyhaspaidpremiumsto insure theDirectorsagainstcertainriskstheyareexposedtoasDirectorsoftheCompany;and

• The Company has agreed to grant Directors arightofaccesstocertainCompanyRecords.

TheCompanyhaspaidpremiumstoinsureeachDirectoragainstliabilitiesforcostsandexpensesincurredbythemindefending any legal proceedings arising out of theirconductwhileactinginthecapacityofaDirectoroftheCompany,other thanconduct involvingawilfulbreachofduty in relation to theCompany.Theamountof thepremiumswas$19,194.

REMUNERATION REPORT - AUDITED

ThisreportdetailsthenatureandamountofremunerationforeachDirectorofCarnegieCleanEnergyLimitedandforthespecifiedexecutives.

Remuneration PolicyThe remuneration policy of Carnegie Clean EnergyLimitedhasbeendesignedtoalignDirectorandExecutiveobjectiveswith shareholder andbusiness objectives byprovidingafixedremunerationcomponentandofferingspecificlong-termincentivesbasedonkeyperformanceareasaffectingtheConsolidatedGroup’sfinancialresults.TheBoardofCarnegieCleanEnergyLimitedbelievestheremunerationpolicy tobe appropriate and effective inits ability to attract and retain thebest Executives andDirectors to run andmanage the Consolidated Group,as well as create goal congruence between Directors,Executivesandshareholders.

The Board’s policy for determining the nature andamountofremunerationforBoardmembersandseniorexecutivesoftheConsolidatedGroupisasfollows:

Theremunerationpolicy,settingthetermsandconditionsfor theExecutiveDirectors andother senior executives,was developed by the Remuneration Committee afterseekingprofessional advice from independent externalconsultants. TheCompany’sRemunerationCommitteebenchmarks the Company’s salaries payable to seniormanagementbyreferencetoindependentindustrydatatoensurethattheCompanyisconsistentwithprevailingmarketconditions.Allexecutives receiveabaseannualsalary (which is based on factors such as length ofserviceandexperience).TheRemunerationCommittee,inconsultationwiththeBoardofDirectors,haschosento adopt an equity based approach to remuneratingexecutivestaffandemployees.TheCompanyutilisedtheEmployeeShareOptionPlanasadoptedbyshareholdersin November 2010 (most recently re-affirmed byshareholders inNovember 2016) as themechanismbywhichoptionsmaybeissuedtoexecutivemanagementandstafftoadequatelyincentivisetheseindividuals.

The Remuneration Committee reviews executivepackages annually by reference to the ConsolidatedGroup’s performance, executive performance andcomparableinformationfromindustrysectorsandotherlistedcompaniesinsimilarindustriesandthenconsidersthejustificationofanysalaryrevieworparticipationintheEmployeeShareOptionPlan.

The performance of executives is measured againstcriteriaagreedannuallywitheachexecutiveandisbasedpredominantlyonthepastyear’sgrowthinshareholders’value over the financial year and by contrast with itspeersandindustrysector.Allincentivesmustbelinkedto predetermined performance criteria. The policy isdesignedtoattractthehighestcalibreofexecutivesandreward them forperformance that results in long-termgrowthinshareholderwealth.

The Board policy is to remunerate non-executiveDirectors at market rates for time, commitment andresponsibilities. The Executive Directors determinepayments to the non-executive Directors and reviewtheir remunerationannually,basedonmarketpractice,duties andaccountability. Independent external adviceissoughtwhenrequired.Themaximumaggregatefeesthatcanbepaidtonon-executiveDirectorsissubjecttoapprovalbyshareholdersattheAnnualGeneralMeeting.Fees for non-executive Directors are not linked to theperformanceoftheConsolidatedGroup.

Company Performance, Shareholder Wealth and Directors’ and Executives’ RemunerationDuringtheyear,theCompanytooksignificantstepstoadvanceitsmicrogridbusiness,thedevelopmentoftheCETO6waveenergytechnology,andsiteassessmentandplanningforwaveenergyprojectsbothinAustraliaandoverseas.

Overthelast12monthstheCompanycompletedits100%acquisitionoftheEnergyMadeCleanbusinessandcontinueditsspendontheCETO6project.ThisspendwaspartiallyoffsetbytheCompanydrawingdownongovernmentgrantsaswellasreceiving$3.1millioninR&Dtaxincentivecashpayment.TheCompanyhasmaintainedandincreaseditsabilitytocontinuethecommercialisationofCETOandthedevelopmentofitsmicrogridbusiness.

2013 2014 2015 2016 2017

$ $ $ $ $

Revenue 351,917 1,913,452 1,716,516 1,729,797 4,845,575

Net loss after tax (3,303,572) (4,176,921) (4,784,050) (6,349,387) (14,382,638)

Share price at year end 0.030 0.050 0.045 0.030 0.057

Theremunerationforeachkeymanagementpersonneloftheconsolidatedentitypaidduringtheyearwasasfollows:

Details of Remuneration for Year Ended 30 June 2017

ACTUAL REWARDS RECEIVED IN THE PERIODACTUARIAL VALUATION OF POTENTIAL FUTURE

REWARDS

Short-term benefitsPost

Employment Benefits - Super

Other long term benefits

Share based payments

PerformanceCash salary, leave paid &

fees

Non Cash Benefits

$ $ $ $ $ $

Jeffrey Harding 110,000 - 10,450 - - -

Mike Fitzpatrick 57,500 - 5,462 - - -

Michael Ottaviano*

784,052 20,035 19,615 11,712 - -

John Davidson** 203,268 7,383 13,517 13,360 - -

John Leggate 60,454 - - - - -

Grant Mooney*** 153,500 - 5,462 - - -

Kieran O’Brien 125,807 - - - - -

Greg Allen 261,500 - 22,942 5,292 255 -

Total 1,756,081 27,418 77,448 30,363 255 -

* MichaelOttaviano’s short-termbenefits include the cash-out ofhis accrued long service leave entitlementof$112,051.

** JohnDavidson’sremunerationcoverstheperiodfrom2December2016to30June2017,beingwhentheEnergyMadeCleanGroupwas100%ownedbytheCompanyduringthefinancialyear.

*** FeesincludeCompanySecretarialfeespaidtoMooney&PartnersPtyLtd,acompanyassociatedwithGrantMooney.


DIRECTORS’ REPORT CARNEGIECLEANENERGYANNUALREPORT2017


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Details of Remuneration for Year Ended 30 June 2016

ACTUAL REWARDS RECEIVED IN THE PERIODACTUARIAL VALUATION OF POTENTIAL FUTURE

REWARDS

Short-term benefitsPost

Employment Benefits - Super

Other long term benefits

Share based payments

PerformanceCash salary, leave paid &

fees

Non Cash Benefits

$ $ $ $ $ $

Jeffrey Harding 115,155 - 10,935 - - -

Mike Fitzpatrick 57,500 - 2,731 - - -

Michael Ottaviano

672,308 56,112** 19,307 27,726 - -

John Leggate 86,659 - - - - -

Grant Mooney* 153,500 - 5,462 - - -

Kieran O’Brien 137,737 - - - - -

Greg Allen 261,500 - 22,942 8,113 23,830 -

Total 1,484,319 56,112 61,377 35,839 23,830 -

* FeesincludeCompanySecretarialfeespaidtoMooney&PartnersPtyLtd,acompanyassociatedwithGrantMooney.

** Includes some relocation costs for the Managing Directors secondment to the UK from December 2015 toSeptember2016.

Performance Income as a Proportion of Total RemunerationNoperformancebasedincentivebonuswasawardedorpaidduringtheyear.

Options Issued as Part of Remuneration for the Year Ended 30 June 2017NooptionswereissuedtoDirectorsduringthefinancialyear.

Employment Contracts Of DirectorsTheemploymentconditionsofthedirectorsareformalisedin Service Contracts. The Managing Director, MichaelOttaviano,iscontractedunderacontractfor$691,616perannum including superannuation plus a fully servicedcompanyvehicle.Duringtheyear,MrOttavianocashedouthisaccruedlongserviceleaveentitlementof$112,051.ExecutiveDirector,KieranO’Brien,isunderacontractfor€86,400perannum.ExecutiveDirector,JohnDavidson,is under a contract for $350,000 plus superannuationandmotorvehiclemaintenancecostsperannum.Non-

ExecutiveDirector,JohnLeggate,isunderacontractfor€41,250 per annum. Non-Executive Directors, MichaelFitzpatrick andGrantMooney, areunder a contract for$57,500 plus superannuation per annum. The abovecontractsremaineffectivefrom1July2017.

Jeffrey Hardingwas appointed as Chairman on 11May2015. As the Chairman, he receives a base salary of$110,000perannumplussuperannuation.Thisremainseffectivefrom1July2017.

There is a contract for service between the CompanyandMooney&PartnersPtyLtd,anentityassociatedwithGrantMooney, commencing from 9 October 2009 foraninitialperiodof3yearsandsubsequentlyonarollingbasis,wherebyMrMooneyprovidesCompanySecretarialservices and receives a fee of $96,000 per annum(exclusiveofGST).Thisfeehasbeenvoluntarilyreducedto $60,000per annum (exclusive of GST) fromAugust2017.AsaNon-ExecutiveDirector,GrantMooneyreceivesabasesalaryof$57,500plussuperannuationperannum,remainingeffectivefrom1July2017.

The employment contracts for Grant Mooney, John Davidson, and Michael Ottaviano stipulate a three-monthresignationperiod.TheCompanymayterminateanemploymentcontractwithoutcausebyprovidingthreemonthswrittennoticeormakingpaymentinlieuofnotice,basedontheindividual’sannualsalarycomponent.Terminationpaymentsaregenerallynotpayableonresignationordismissal forseriousmisconduct. Inthe instanceofseriousmisconducttheCompanycanterminateemploymentatanytime.Terminationpaymentsare inaccordancewithCorporationAct2001.

DIRECTORS’ MEETINGS

Therewere7Directors’meetingsheldduringthefinancialyearended30June2017.Attendanceswereasfollows:

DIRECTOR NUMBER ATTENDED

DIRECTORS AUDIT COMMITTEEREMUNERATION

COMMITTEE

No. Meetings attended

No. Meetings held during time in office

Jeffrey Harding 7 7 3 N/A

Dr Michael E Ottaviano 7 7 N/A N/A

Grant Mooney 7 7 3 5

Kieran O’Brien 7 7 N/A 5

John Davidson 3 3 N/A N/A

John Leggate 7 7 1 5

Michael Fitzpatrick 7 7 3 N/A

Therewasatotalof6circularresolutionspassedbytheBoardofDirectorsduringthefinancialyear.

END OF REMUNERATION REPORT


NON-AUDIT SERVICES

Theexternalauditorswerenotengagedfornon-auditservicesduringthefinancialyearended30June2017.

AUDITOR’S INDEPENDENCE DECLARATION

Theauditor’s independencedeclarationfortheyearended30June2017hasbeenreceivedandcanbefoundonpage40.

Signedon22September2017inaccordancewitharesolutionoftheBoardofDirectors.

DR MICHAEL EDWARD OTTAVIANO GRANT JONATHAN MOONEY Managing Director Director

DIRECTORS’ REPORT CARNEGIECLEANENERGYANNUALREPORT2017


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AUDITOR’SINDEPENDENCEDECLARATION CARNEGIECLEANENERGYANNUALREPORT2017

AUDITOR’S INDEPENDENCE DECLARATION

Consolidated statement of profit and loss and other comprehensive income for year ended 30 June 2017

NOTE CONSOLIDATED GROUP2017 2016

$ $RevenueSalesrevenue 2 4,598,030 200,375Royaltyincome 2 452,591 882,798Shareof(losses)/profitsofassociateaccountedforusingtheequitymethod

3,31 (579,081) 371,892

Netgainonfinancialinstrumentsatfairvaluethroughprofitandloss 17 250,343 -Otherincome 2 123,692 274,732

4,845,575 1,729,797Cost Of Goods SoldCostofsales-solar,batteryenergystoragesystems,&microgrids 33 (5,980,924) -Gross Profit (1,135,349) 1,729,797

ExpensesDepreciationandamortisationexpense 4 (1,401,120) (117,072)Occupancyexpense (692,833) (285,290)Consultancyexpenses (19,915) (266,719)Researchexpenses (706,241) (134,386)EmployeeandDirectorsexpenses (5,256,158) (3,002,133)EmployeeSharebasedpayments 29 (131,583) (598,144)Financecosts (678,928) (1,448,381)Companysecretarialexpenses (96,000) (96,000)Administrativeexpenses (2,538,676) (2,113,126)Adjustmenttofairvalueontheacquisitionoftheremaininginterestinaformerassociate

31 (1,636,101) -

Otherexpensesfromordinaryactivities (89,734) (17,933)Lossbeforeincometax 4 (14,382,638) (6,349,387)Incometaxbenefit/(expense) 5 - -Loss for the year (14,382,638) (6,349,387)

Other comprehensive incomeExchangedifferencesontranslatingforeigncontrolledentitiesandforeigncurrencies

5,488 487

Incometaxrelatingtocomponentsofothercomprehensiveincome - -Total comprehensive loss for the year (14,377,150) (6,348,900)

Lossattributableto:Membersoftheparententity (14,382,638) (6,349,387)

Totalcomprehensivelossattributableto:Membersoftheparententity (14,377,150) (6,348,900)

Earnings per shareBasiclosspershare(centspershare) 8 (0.647) (0.337)Dilutedlosspershare(centspershare) 8 (0.647) (0.337)

The accompanying notes form part of these financial statements.

STATEMENT OF PROFIT AND LOSS

Inaccordancewiththerequirementsofsection307CoftheCorporationsAct2001,asleadauditorfortheauditofCarnegieCleanEnergyLtdfortheyearended30June2017,Ideclarethat,tothebestofmyknowledgeandbelief,therehavebeen:

(a) nocontraventionsoftheauditorindependencerequirementsoftheCorporationsAct2001inrelationtotheaudit;and

(b) nocontraventionsofanyapplicablecodeofprofessionalconductinrelationtotheaudit.

CYRUS PATELL Partner

CROWE HORWATH PERTH

SignedatPerth,22September2017

Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.

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STATEMENTOFCHANGESINEQUITYCARNEGIECLEANENERGYANNUALREPORT2017

Consolidated statement of financial position as at 30 June 2017


$ $CURRENT ASSETSCashandcashequivalents 9 16,202,143 8,200,500Tradeandotherreceivables 10 6,735,661 723,737Inventories 33 1,389,218 -Otherassets 16 3,278 34,600TOTAL CURRENT ASSETS 24,330,300 8,958,837

NON-CURRENT ASSETSTradeandotherreceivables 10 575,182 460,000Availableforsalefinancialassets 11 12,414 12,414Otherfinancialassets 19 - 3,690,000Investmentaccountedforusingtheequitymethod 13,31 - 5,047,919Property,plantandequipment 14 6,501,304 494,724Intangibles 15 96,644,810 83,998,065Othernon-currentassets 16 - 67,552TOTAL NON-CURRENT ASSETS 103,733,710 93,770,674

TOTAL ASSETS 128,064,010 102,729,511

CURRENT LIABILITIESTradeandotherpayables 17 6,044,754 2,691,965Short-termprovisions 18 728,878 427,096Short-termborrowings 19 2,785,468 -TOTAL CURRENT LIABILITIES 9,559,100 3,119,061

NON-CURRENT LIABILITIESTradeandotherpayables 17 570,819 33,169Long-termprovision 18 273,399 207,470Long-termborrowings 19 4,733,715 3,423,035TOTAL NON-CURRENT LIABILITIES 5,577,933 3,663,674

TOTAL LIABILITIES 15,137,033 6,782,735

NET ASSETS 112,926,977 95,946,776

EQUITYIssuedcapital 20 185,212,910 154,019,255Reserves 21 2,913,540 3,960,346Accumulatedlosses (75,199,473) (62,032,825)TOTAL EQUITY 112,926,977 95,946,776


STATEMENT OF FINANCIAL POSITION

Consolidated statement of changes in equity for year ended 30 June 2017

CONSOLIDATED GROUP NOTEISSUED

CAPITALACCUMULATED

LOSSES

FOREIGN CURRENCY RESERVE

OPTION RESERVE TOTAL

Balance at 1.7.2015 144,940,603 (60,565,270) 1,680 7,862,134 92,239,147

Comprehensive loss

Lossfortheyear - (6,349,387) - - (6,349,387)

Othercomprehensiveincome - - 487 - 487

Total comprehensive loss for the year - (6,349,387) 487 - (6,348,900)

Transactions with owners

Sharecapitalissuedduringtheyear 9,183,376 - - - 9,183,376

Capitalraisingcosts (104,724) - - - (104,724)

Equityportionofconvertiblenotes - - - 379,733 379,733

Sharebasedpaymentexpense - - - 598,144 598,144

Sharebasedpaymentexpiredunexercisedandexercised

- 4,881,832 - (4,881,832) -

Total transactions with owners 9,078,652 4,881,832 - (3,903,955) 10,056,529

Balance at 30.6.2016 154,019,255 (62,032,825) 2,167 3,958,179 95,946,776

Balance at 1.7.2016 154,019,255 (62,032,825) 2,167 3,958,179 95,946,776

Comprehensive loss

Lossfortheyear - (14,382,638) - - (14,382,638)

Othercomprehensiveincome - - 5,488 - 5,488

Total comprehensive loss for the year - (14,382,638) 5,488 - (14,377,150)

Transactions with owners

Sharecapitalissuedduringtheyear 31,554,230 - - - 31,554,230

Capitalraisingcosts (360,575) - - - (360,575)

Equityportionofconvertiblenotes - - - 32,113 32,113

Transferofequityportionofconvertiblenoteonexercise

- 668,977 - (668,977) -

Sharebasedpaymentexpense - - - 131,583 131,583

Sharebasedpaymentexpiredunexercisedandexercised

- 547,013 - (547,013) -

Total transactions with owners 31,193,655 1,215,990 - (1,052,294) 31,357,351

Balance at 30.6.2017 185,212,910 (75,199,473) 7,655 2,905,885 112,926,977


STATEMENT OF CHANGES IN EQUITYF

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NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2017

44 STATEMENTOFCASHFLOWS CARNEGIECLEANENERGYANNUALREPORT2017

Consolidated statement of cash flows for year ended 30 June 2017

NOTE CONSOLIDATED GROUP

2017 2016

$ $CASH FLOWS FROM OPERATING ACTIVITIESReceiptsfromcustomers 10,542,486 142,218ReceiptsfromRoyalties 677,918 1,034,883Interestreceived 141,994 280,308Interestpaid (265,704) (13,027)Paymentstosuppliersandemployees (25,230,105) (10,091,839)ReceiptsfromR&DTaxRebate 3,142,973 14,049,871ReceiptsfromGovernmentgrantfunding 1,847,436 1,284,982Netcash(usedin)/providedbyoperatingactivities 25 (9,143,002) 6,687,396

CASH FLOWS FROM INVESTING ACTIVITIESPaymentsfordevelopmentofasset (3,296,547) (3,574,778)Purchaseofproperty,plantandequipment (6,280,359) (238,233)Proceedsfromsaleofproperty,plantandequipment 818 -Paymentsforpurchaseoffinancialassets 19 3,690,000 (3,690,000)Netproceedsfromacquisitionofsubsidiaries 31 264,313 -Paymentsforinvestment - (3,176,027)Netcash(usedin)investingactivities (5,621,775) (10,679,038)

CASH FLOWS FROM FINANCING ACTIVITIESNetproceedsfromissueofshares 18,417,940 7,467,306Netproceedsfromissueofconvertiblenotes 4,873,684 -Repaymentofborrowings (527,762) -Netcashprovidedbyfinancingactivities 22,763,861 7,467,306

Net(decrease)/increaseincashheld 7,999,085 3,475,664Cashandcashequivalentsatbeginningoffinancialyear 8,200,500 4,724,794Effectofexchangeratefluctuationsoncashheld 2,558 42Cashandcashequivalentsatendoffinancialyear 9 16,202,143 8,200,500


STATEMENT OF CASH FLOWS

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Carnegie Clean Energy Limited (“the Company”) is a company domiciled in Australia. The consolidated financialstatementsof thecompanyasatandfor thetwelvemonthsended30June2017comprisetheCompanyand itssubsidiaries(“theConsolidatedGroup”).

TheseparatefinancialstatementsoftheCompany,CarnegieCleanEnergyLimited,havenotbeenpresentedwithinthisfinancialreportaspermittedbytheCorporationsAct2001.TheGroupisa‘forprofit’entityforfinancialreportingpurposesunderAustralianAccountingStandards.

TheconsolidatedfinancialstatementswereauthorisedforissuebytheBoardofDirectorson22September2017.

Basis of PreparationThefinancialreportisageneralpurposefinancialreportthat has been prepared in accordancewith AustralianAccountingStandards(AASB),adoptedbytheAustralianAccountingStandardsBoardand theCorporations Act 2001.

Australian Accounting Standards set out accountingpolicies that the AASB has concluded would resultin a financial report containing relevant and reliableinformationabouttransactions,eventsandconditionstowhichtheyapply.CompliancewithAustralianAccountingStandards ensures that the financial statements andnotesalsocomplywithInternationalFinancialReportingStandards.Materialaccountingpoliciesadoptedinthepreparationofthisfinancialreportarepresentedbelow.They have been consistently applied unless otherwisestated.

The financial report has beenprepared on an accrualsbasis and is based on historical costs,modified,whereapplicable,bythemeasurementatfairvalueofselectednon-currentassets,financialassetsandfinancialliabilities.

New and amended accounting standards and interpretations

Theconsolidatedentityhasadoptedallnew, revisedoramending Accounting Standards and Interpretationsissued by the Australian Accounting Standards Board(‘AASB’) that are mandatory for the current reportingperiod.TheadoptionoftheseAccountingStandardsandInterpretations did not have any significant impact onthefinancialperformanceorpositionoftheconsolidatedentity.

Anynew,revisedoramendingAccountingStandardsorInterpretationsthatarenotyetmandatoryhavenotbeenearlyadopted.

Accounting Policies

Principles of Consolidation

The consolidated financial statements incorporatethe assets, liabilities and results of entities controlledby Carnegie Clean Energy Limited at the end of thereporting period. A controlled entity is any entity overwhichCarnegieCleanEnergyLimitedhasthepowertodirecttheactivitiesoftheentityandisexposedto,orhasrights to, variable returns from its involvement. Controlwill generally exist when the parent owns, directly orindirectly through subsidiaries, more than half of thevoting power of an entity. In assessing the power togovern,theexistenceandeffectofholdingsofactualandpotentialvotingrightsarealsoconsidered.

WherecontrolledentitieshaveenteredorlefttheGroupduring the year, the financial performance of thoseentities are included only for the period of the yearthattheywerecontrolled.AlistofcontrolledentitiesiscontainedinNote12tothefinancialstatements.

In preparing the consolidated financial statements, allinter-groupbalancesandtransactionsbetweenentitiesin the consolidated group have been eliminated onconsolidation. Accountingpolicies of subsidiaries havebeen changed where necessary to ensure consistencywiththoseadoptedbytheparententity.

Income Tax

Theincometaxexpense(revenue)fortheyearcomprisescurrent income taxexpense (income) anddeferred taxexpense(income).

Currentincometaxexpensechargedtotheprofitorlossis the tax payable on taxable income calculated usingapplicable income tax rates enacted, or substantially

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46 NOTES TO THE FINANCIAL STATEMENTSCARNEGIE CLEAN ENERGY ANNUAL REPORT 2017 47NOTES TO THE FINANCIAL STATEMENTS

CARNEGIE CLEAN ENERGY ANNUAL REPORT 2017



enacted,asatreportingdate.Currenttaxliabilities(assets)arethereforemeasuredattheamountsexpectedtobepaidto(recoveredfrom)therelevanttaxationauthority.

Deferred income tax expense reflects movements indeferred tax asset and deferred tax liability balancesduringtheyearaswellunusedtaxlosses.

Current and deferred income tax expense (income) ischargedorcrediteddirectlytoequityinsteadoftheprofitorlosswhenthetaxrelatestoitemsthatarecreditedorchargeddirectlytoequity.

Deferredtaxassetsandliabilitiesareascertainedbasedontemporarydifferencesarisingbetweenthetaxbasesof assets and liabilities and their carrying amounts inthefinancial statements.Deferred taxassetsalso resultwhereamountshavebeenfullyexpensedbutfuturetaxdeductions are available. No deferred income taxwillberecognisedfromtheinitialrecognitionofanassetorliability,excludingabusinesscombination,wherethereisnoeffectonaccountingortaxableprofitorloss

Deferred tax assets and liabilities are calculated at thetaxratesthatareexpectedtoapplytotheperiodwhentheassetisrealisedortheliabilityissettled,basedontaxratesenactedorsubstantivelyenactedatreportingdate.Their measurement also reflects themanner in whichmanagement expects to recover or settle the carryingamountoftherelatedassetorliability.

Deferredtaxassetsrelatingtotemporarydifferencesandunusedtaxlossesarerecognisedonlytotheextentthatit isprobablethat futuretaxableprofitwillbeavailableagainstwhichthebenefitsofthedeferredtaxassetcanbeutilised.

Where temporary differences exist in relation toinvestmentsinsubsidiaries,associates,deferredtaxassetsandliabilitiesarenotrecognisedwherethetimingofthereversal of the temporary difference can be controlledanditisnotprobablethatthereversalwilloccurintheforeseeablefuture.

Currenttaxassetsandliabilitiesareoffsetwherealegallyenforceable right of set-off exists and it is intendedthat net settlement or simultaneous realisation andsettlementoftherespectiveassetandliabilitywilloccur.Deferred tax assets and liabilities are offset where alegallyenforceablerightofset-offexists,thedeferredtaxassetsandliabilitiesrelatetoincometaxesleviedbythe

sametaxationauthorityoneitherthesametaxableentityordifferenttaxableentitieswhereitisintendedthatnetsettlement or simultaneous realisation and settlementof the respective asset and liabilitywill occur in futureperiods in which significant amounts of deferred taxassetsorliabilitiesareexpectedtoberecoveredorsettled.

Carnegie Clean Energy Limited has not formed a taxconsolidated group with its Australian wholly ownedsubsidiaries acquired through the acquisition of theEnergy Made Clean business. As such each entity isresponsible for accounting for its own current anddeferredtaxamounts.AnyunusedtaxlossesandunusedtaxcreditsarethereforequarantinedateachentityandareunavailabletotheremainderoftheGroup.

Property, Plant and Equipment

Each class of property, plant and equipment is carriedat cost less, where applicable, any accumulateddepreciationandimpairmentlosses.

Plant and equipment

Plantandequipmentaremeasuredonthecostbasis.

ThecarryingamountofplantandequipmentisreviewedannuallybyDirectorstoensureit isnotinexcessoftherecoverable amount from these assets. The recoverableamountisassessedonthebasisoftheexpectednetcashflowsthatwillbereceivedfromtheasset’semploymentand subsequent disposal. The expected net cashflows have been discounted to their present values indeterminingrecoverableamounts.

The cost of fixed assets constructed within theConsolidatedGroupincludethecostofmaterials,directlabour,borrowingcostsandanappropriateproportionoffixedandvariableoverheads.

Subsequent costs are included in the asset’s carryingamountorrecognisedasaseparateasset,asappropriate,onlywhen it isprobable that futureeconomicbenefitsassociatedwiththeitemwillflowtothegroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancearechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.

Depreciation

The depreciable amount of all fixed assets includingcapitalisedleaseassets isdepreciatedonastraight-linebasis over their useful lives to the Consolidated Groupcommencing from the time theasset isheld ready foruse.

Thedepreciationratesusedforeachclassofdepreciableassetare:

CLASS OF FIXED ASSET DEPRECIATION RATE

Plant and equipment 1.0% – 50.0%

Theassets’residualvaluesandusefullivesarereviewed,and adjusted if appropriate, at each Statement ofFinancial Position date. An asset’s carrying amount iswrittendown immediately to its recoverableamount iftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.

Gains and losses on disposals are determined bycomparing proceeds with the carrying amount. Thesegainsandlossesareincludedintheincomestatement.Whenrevaluedassetsaresold,amountsincludedintherevaluationreserverelatingtothatassetaretransferredtoretainedearnings.

LeasesLeasesoffixedassetswheresubstantiallyalltherisksandbenefits incidental to the ownership of the asset, butnotthe legalownership, is transferredtoentities intheconsolidatedgroupareclassifiedasfinanceleases.

Financeleasesarecapitalisedbyrecordinganassetanda liabilityat the lowerof theamountsequal to the fairvalueoftheleasedpropertyorthepresentvalueoftheminimum lease payments, including any guaranteedresidual values. Leasepayments are allocatedbetweenthereductionoftheleaseliabilityandtheleaseinterestexpensefortheperiod.

Leased assets are depreciated on a straight-line basisovertheshorteroftheirestimatedusefullivesortheleaseterm.

Leasepaymentsforoperatingleases,wheresubstantiallyall the risks and benefits remain with the lessor, arecharged as expenses in the periods in which they areincurred.

Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assetsandfinancial liabilities, are recognisedwhen the entitybecomes a party to the contractual provisions of theinstrument. For financial assets, this is equivalent tothedatethatthecompanycommits itselftoeitherthepurchaseorsaleoftheasset(i.e.tradedateaccountingisadopted).

Financialinstrumentsareinitiallymeasuredatfairvalueplus transactionscosts, exceptwhere the instrument isclassified ‘at fair value through profit or loss’, in whichcase transaction costs are expensed to profit or lossimmediately.

Classification and Subsequent Measurement

Financial instruments are subsequently measured ateither of fair value, amortised cost using the effectiveinterest ratemethod, or cost. Fair value represents theamount for which an asset could be exchanged or aliabilitysettled,betweenknowledgeable,willingparties.Where available, quotedprices in an activemarket areused to determine fair value. In other circumstances,valuationtechniquesareadopted.

Amortisedcostiscalculatedas:

a. The amount at which the financial asset orfinancialliabilityismeasuredatinitialrecognition;

b. Lessprincipalrepayments;

c. Plusorminusthecumulativeamortisationofthedifference, if any, between the amount initiallyrecognisedandthematurityamountcalculatedusingtheeffectiveinterestmethod;and

d. Lessanyreductionforimpairment.

The effective interestmethodisusedtoallocateinterestincome or interest expense over the relevant periodand is equivalent to the rate that exactly discountsestimated future cash payments or receipts (includingfees,transactioncostsandotherpremiumsordiscounts)through the expected life (or when this cannot bereliablypredicted,thecontractualterm)ofthefinancialinstrument to thenet carryingamountof thefinancialassetorfinancialliability.Revisionstoexpectedfuturenet

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cashflowswillnecessitateanadjustmenttothecarryingvaluewithaconsequentialrecognitionofanincomeorexpenseinprofitorloss.

TheGroupdoesnotdesignateanyinterestsinsubsidiariesor associates as being subject to the requirements ofaccountingstandardsspecificallyapplicabletofinancialinstruments.

i. Loans and receivables

Loansandreceivablesarenon-derivativefinancialassets with fixed or determinable paymentsthatarenotquotedinanactivemarketandaresubsequentlymeasuredatamortisedcost.

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either notsuitable to be classified into other categoriesof financial assets due to their nature, or theyare designated as such by management. Theycomprise investments in the equity of otherentities where there is neither a fixedmaturitynordeterminablepayments.

iii. Financial liabilities

Non-derivative financial liabilities (excludingfinancialguarantees)aresubsequentlymeasuredatamortisedcost.

Fair value

Fairvalueisdeterminedbasedoncurrentbidpricesforallquotedinvestments.Valuationtechniquesareappliedto determine the fair value for all unlisted securities,includingrecentarm’s lengthtransactions, referencetosimilarinstrumentsandoptionpricingmodels.

At each reporting date, the Group assesses whetherthere is objective evidence that a financial instrumenthas been impaired. In the case of available-for-salefinancialinstruments,asignificantorprolongeddeclineinthevalueoftheinstrumentisconsideredtodeterminewhether an impairment has arisen. Impairment lossesarerecognisedintheincomestatement.

Impairment

At each reporting date, the Group assesses whetherthere is objective evidence that a financial instrument

has been impaired. In the case of available-for-salefinancialinstruments,asignificantorprolongeddeclineinthevalueoftheinstrumentisconsideredtodeterminewhether an impairment has arisen. Impairment lossesarerecognisedintheincomestatement.

Derecognition

Financialassetsarederecognisedwherethecontractualrights to receipt of cash flows expires or the asset istransferredtoanotherpartywherebytheentitynolongerhas any significant continuing involvement in the risksandbenefitsassociatedwiththeasset.Financialliabilitiesarederecognisedwheretherelatedobligationsareeitherdischarged,cancelledorexpired.Thedifferencebetweenthe carrying valueof the financial liability extinguishedor transferred to another party and the fair value ofconsideration paid, including the transfer of non-cashassetsorliabilitiesassumed,isrecognisedinprofitorloss.

BorrowingsLoansandborrowingsareinitiallyrecognisedatthefairvalue of the consideration received, net of transactioncosts. Where appropriate they are subsequentlymeasuredatamortisedcostusingtheeffective interestmethod.

Wherethereisanunconditionalrighttodefersettlementofthe liability forat least 12monthsafterthereportingdate,theloansorborrowingsareclassifiedasnon-current.

The component of the convertible notes that exhibitscharacteristicsofa liability is recognisedasa liability inthe statement of financial position, net of transactioncosts.

On the issue of convertible notes the fair value of theliability component is determined using amarket rateforanequivalentnon-convertiblebondandthisamountis carried as a financial liability on the amortised costbasis until extinguished on conversion or redemption.The increase in the liability due to the application oftheeffectiveinterestmethodisrecognisedasafinancecost.Theremainderoftheproceedsareallocatedtotheconversion option.Where the conversion optionmeetsthedefinitionofequity,itisrecognisedandincludedinshareholders’equity,netoftransactioncosts.Thecarryingamount of the conversion option is not remeasured inthe subsequent years. The corresponding interest onconvertiblenotesisexpensedtoprofitorloss.

Finance CostsFinance costs attributable to qualifying assets arecapitalised as part of the asset. All other finance costsareexpensed in theperiod inwhich theyare incurred,including:

• interestonbankoverdrafts;

• interestonshort-termandlong-termborrowings;and

• interestonfinanceleases.

Impairment of Assets including GoodwillAttheendofeachreportingperiod,theGroupassesseswhether there is any indication that an asset may beimpaired.Theassessmentwillincludetheconsiderationofexternalandinternalsourcesofinformationincludingdividendsreceivedfromsubsidiariesorassociates.Ifsuchanindicationexists,animpairmenttestiscarriedoutontheassetbycomparing the recoverableamountof theasset,beingthehigheroftheasset’sfairvaluelesscoststosellandvalueinuse,totheasset’scarryingvalue.Anyexcess of the asset’s carrying value over its recoverableamount is expensed immediately in the profit or lossunless the asset is carried at a re-valued amount inaccordancewithanotheraccountingstandard.

Where it is not possible to estimate the recoverableamountofan individualasset,theGroupestimatestherecoverableamountofthecash-generatingunittowhichtheassetbelongs.

Impairmenttestingisperformedannuallyforintangibleassetswithindefinitelives,includingforgoodwill.

Impairmentisdeterminedforgoodwillbyassessingtherecoverableamountofeachcash-generatingunit(“CGU”)orgroupofCGUstowhichthegoodwillrelates.Whentherecoverableamountof theCGU is less than itscarryingamount,an impairment loss is recognised. Impairmentlosses relatingtogoodwillcannotbe reversed in futureperiods.

Intangible Asset – Acquired Intellectual Property and Development Costs An intangible asset arising from externally acquiredintellectual property and development expenditure on

an internal project is recognised onlywhen theGroupcandemonstratethetechnicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale,itsintentiontocompleteanditsabilitytouseorselltheasset,howtheassetwillgenerate futureeconomicbenefits, the availability of resources to complete thedevelopment and the ability to measure reliably theexpenditure attributable to the intangible assetduringits development. Following the initial recognition ofacquired intellectual property and the developmentexpenditure,thecostmodelisappliedrequiringtheassettobecarriedatcostlessanyaccumulatedamortisationandaccumulatedimpairmentlosses.

The carrying value of an intangible asset arising fromacquired intellectual property and developmentexpenditureistestedforimpairmentannuallywhentheassetisnotyetavailableforuseorhasanindefinitelife,ormorefrequentlywhenanindicationofimpairmentarisesduringthereportingperiod.

Acquiredintellectualpropertyanddevelopmentcostinrespectofanassetavailableforusethathasafinitelifeisamortisedovertheasset’susefullife.

Theamortisationratesusedforeachclassof intangibleassetare:

CLASS OF INTANGIBLE ASSET USEFUL LIFE

Microgrid/battery technology development asset

7 years

Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of eachof theGroup’s entitiesis measured using the currency of the primaryeconomic environment in which that entity operates.Theconsolidatedfinancial statementsarepresented inAustraliandollarswhichistheparententity’sfunctionalandpresentationcurrency.

Transaction and balances

Foreign currency transactions are translated intofunctionalcurrencyusingtheexchangeratesprevailingatthedateofthetransaction.Foreigncurrencymonetary

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itemsaretranslatedattheyear-endexchangerate.Non-monetary items measured at historical cost continueto be carried at the exchange rate at the date of thetransaction.Non-monetaryitemsmeasuredatfairvaluearereportedattheexchangerateatthedatewhenfairvaluesweredetermined.

Exchange differences arising on the translation ofmonetaryitemsarerecognisedintheincomestatement,exceptwheredeferredtoequityasaqualifyingcashflowornetinvestmenthedge.

Exchange differences arising on the translation of anygain or loss on non-monetary items are recogniseddirectly in equity to the extent that the gain or loss isdirectly recognised in equity, otherwise the exchangedifferenceisrecognisedintheincomestatement.

Exchange differences arising on monetary itemsthat form part of the Groups investment in a foreignoperationarerecognisedintheincomestatementintheseparate financial statements of the parent entity. Onconsolidation,suchexchangedifferencesarerecognisedinitiallyinothercomprehensiveincomeandreclassifiedfrom equity to profit or loss on disposal of the netinvestment.

Employee Benefits Provision ismade for theGroup’s liability for employeebenefitsarisingfromservicesrenderedbyemployeestobalance date. Employee benefits that are expected tobe settledwithinoneyearhavebeenmeasuredat theamountsexpectedtobepaidwhentheliabilityissettled,plus related on-costs. Employee benefits payable laterthanoneyearhavebeenmeasuredatthepresentvalueof the estimated future cash outflows to bemade forthosebenefits.

Equity-settled compensationTheGroupoperatesequity-settledshare-basedpaymentemployee share and option schemes. The fair valueof the equity to which employees become entitled ismeasuredatgrantdateand recognisedasanexpenseoverthevestingperiod,withacorrespondingincreasetotheOptionReserve.Thefairvalueofsharesisascertainedas the market bid price. The fair value of options is

ascertainedusingaBlack-Scholespricingmodelwhichincorporatesallmarketvestingconditions.Thenumberofsharesandoptionsexpectedtovest is reviewedandadjustedat each reportingdate such that theamountrecognised for services received as consideration forthe equity instruments granted shall be based on thenumberofequityinstrumentsthateventuallyvest.

The cumulative cost recognised until settlement is aliabilityandtheperiodicdeterminationofthisliabilityisasfollows:

At each reportingdatebetweengrant and settlement,thefairvalueofthebenefitisdetermined

(a) Duringthevestingperiod,theliabilityrecognisedat each reporting date is the fair value of thebenefit at that date multiplied by the expiredportionofthevestingperiod;

(b) From the end of the vesting period untilsettlement,theliabilityrecognisedisthefullfairvalueoftheliabilityatthereportingdate;and

(c) Allchangesintheliabilityarerecognisedinprofitorlossfortheperiod.

The fair valueof the liability isdetermined, initiallyandateachreportingdateuntilitissettled,byapplyingtheBlack-Scholes option pricing model, considering thetermsandconditionsonwhichthebenefitwasgranted,and to the extent to which employees have renderedservicetodate.

For shares acquired under limited recourse loans, theGroup is required to recognise within the incomestatementaremunerationexpensemeasuredatthefairvalueof the shares inherent in the issue to theeligibleperson,withacorrespondingincreasetoashare-basedpayments reserve in equity. The fair value ismeasuredatgrantdateand recognisedwhen theeligiblepersonbecomes unconditionally entitled to the shares,effectivelyongrant.Aloanreceivableisnotrecognised.

ProvisionsProvisions are recognised when the Group has a legalorconstructiveobligation,asa resultofpastevents, forwhichitisprobablethatanoutflowofeconomicbenefitswillresultandthatoutflowcanbereliablymeasured.

Cash and Cash EquivalentsCash and cash equivalents include cash on hand anddepositsheldatcallwithbanks.

Revenue and Other IncomeRevenue is recognised to theextent that it isprobablethat theeconomicbenefitswill flow to theGroupandtherevenuecanbereliablymeasured,regardlessofwhenthepaymentisreceived.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable,takingintoaccountcontractuallydefinedtermsofpaymentandexcludingtaxesorduty.TheGrouphasconcludedthatitistheprincipalinallofitsrevenuearrangementssinceitis theprimaryobligor inall revenuearrangements,haspricing latitude, and is also exposed to inventory andcredit risks. All revenue is stated net of the amount ofgoodsandservicestax(GST).

Revenue from the solar and battery microgridengineeringandconstructionoperationismeasuredbyphysicalcompletionascertifiedbytheprojectmanagerless progress billings and less provision for foreseeablelosses,allocatedbetweenamountsduefromcustomersandamountsdue tocustomers.Revenue for variationsis recognisedwhen it is probable the variationwill beapprovedby thecustomerand theamountof revenuecanbereliabilitymeasured.

Cost includes variable and fixed costs directly related tospecificcontracts,costsrelatedtocontractactivityingeneralwhichcanbeallocatedtospecificcontractsonareasonablebasis and other costs specifically chargeable under thecontract. Costs expected to be incurred under penaltyclausesandrectificationprovisionsarealsoincluded.Costsincurredinsecuringcontractsareincludedwhentheycanbeseparatelyidentifiedandmeasuredreliably,andwhereitisprobablethatthecontractwillbeobtained.Amountsreceived from customers not recognised as revenueare allocated to Trade and Other Payables. Amountsrecognisedasrevenuebutnotyetbillablearerecognisedasaccruedrevenue,withamountsbilledbutnotpayableuntilthesatisfactionofconditionsspecified inthecontract forthepaymentofsuchamountsoruntildefectshavebeenrectifiedareclassifiedasamountonretention.

Interest revenue is recognised on a proportional basistaking intoaccount the interest ratesapplicable to thefinancialasset.

Royaltyincomeisrecognisedonanaccrualbasis.Royaltyincome,whenapplicable,isreceivedonaquarterlybasisand any under or over accrual applicable to previouslyrecognised royalty income isadjusted forbasedon thereceiptoftheroyaltyincomeentitlement.

Trade and Other ReceivablesTradeandotherreceivables includeamountsduefromcustomersforgoodssoldandservicesperformedintheordinarycourseofbusiness.Receivablesexpectedtobecollectedwithin 12monthsof theendof the reportingperiodareclassifiedascurrentassets.Allotherreceivablesareclassifiedasnon-currentassets.

Trade and other receivables are initially recognised atfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessanyprovisionforimpairment.

InventoriesInventories are valued at the lower of cost and netrealisablevalue.Costsincurredinbringingeachproductto itspresent locationandconditionareaccountedfor,asfollows:

• Raw materials: purchase cost on a weightedaveragebasis

• Finished goods and work in progress: cost ofdirectmaterialsand labourandaproportionofmanufacturingoverheadsbasedon thenormaloperating capacity, but excluding borrowingcosts

Net realisable value is the estimated selling price intheordinarycourseofbusiness, lessestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.

AssociatesAssociatesareentitiesoverwhichtheconsolidatedentityhassignificantinfluencebutnotcontrolorjointcontrol.Investments in associates are accounted for using theequity method. Under the equity method, the shareof the profits or losses of the associate is recognisedin profit or loss and the share of the movements inequity is recognised in other comprehensive income.Investmentsinassociatesarecarriedinthestatementof

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financial position at cost pluspost-acquisition changesin the consolidated entity’s share of net assets of theassociate.Goodwill relatingtotheassociate is includedinthecarryingamountoftheinvestmentandisneitheramortised nor individually tested for impairment.Dividendsreceivedorreceivablefromassociatesreducethecarryingamountoftheinvestment.

When the consolidated entity’s share of losses in anassociateequalsorexceeds its interest intheassociate,including any unsecured long-term receivables, theconsolidated entity does not recognise further losses,unlessithasincurredobligationsormadepaymentsonbehalfoftheassociate.

The consolidated entity discontinues the use of equityaccounting upon the loss of significant influence andrecognisesanyretainedinvestmentat its fairvalue.Anydifference between the associate’s carrying amount,fairvalueoftheinterestininvestmentandproceedsondisposalisrecognisedinprofitorloss.

Business combinations and goodwillBusiness combinations are accounted for using theacquisitionmethod.Thecostofanacquisitionismeasuredastheaggregateoftheconsiderationtransferred,whichis measured at acquisition date fair value, and theamountofanynon-controllinginterestsintheacquiree.Acquisition relatedcosts are expensedas incurredandincludedinadministrativeexpenses.

When the consolidated group acquires a business, itassesses the financial assets and liabilities assumed forappropriateclassificationanddesignationinaccordancewiththecontractualterms,economiccircumstancesandpertinentconditionsasattheacquisitiondate.

Any contingent consideration to be transferred by theacquirerwillberecognizedatfairvalueattheacquisitiondate. Contingent consideration classified as an assetor liability that isafinancial instrumentandwithin thescope of AASB 139 Financial Instruments: RecognitionandMeasurement, is measured at fair value with the changes in fair value recognised in the statement of profit or loss.

Goodwillisinitiallymeasuredatcost(beingtheexcessoftheaggregateofthefairvalueoftheconsiderationtransferredandtheamountrecognizedfornon-controllinginterests

and any previous interest held over the net identifiableassetsacquiredandliabilitiesassumed).

Business combinations are initially accounted for on aprovisional basis. The acquirer retrospectively adjuststheprovisionalamountsrecognisedandrecognisestheadditional assets or liabilities during themeasurementperiod, based on new information obtained about thefactsandcircumstancesthatexistedatacquisitiondate.Themeasurement period ends on either the earlier of(i) 12months from the date of acquisition or (ii) whenthe acquirer received all the information possible todeterminefairvalue.

Trade and Other PayablesTrade and other payables represent the liabilities forgoods and services received by the entity that remainunpaidattheendofthereportingperiod.Thebalanceis recognised as a current liability with the amountsnormallypaidwithin30daysofrecognitionoftheliability.

Goods and Services Tax (GST) and Value Added Tax (VAT)Revenues,expensesandassetsarerecognisednetoftheamountofGSTandVAT,exceptwheretheamountofGSTandVATincurredarenotrecoverablefromtheTaxOffice.InthesecircumstancestheGSTandVATarerecognisedaspartof thecostofacquisitionof theassetoraspartofan itemof theexpense.Receivablesandpayables intheStatementofFinancialPositionareshowninclusiveofGSTandVAT.

Cashflowsarepresentedinthecashflowstatementonagrossbasis,exceptfortheGSTandVATcomponentofinvestingandfinancingactivities,whicharedisclosedasoperatingcashflows.

Government Grants and Research and Development Tax IncentivesGovernmentgrantsand researchanddevelopment taxincentives are recognised at fair value where there isreasonableassurancethatthegrantortaxincentivewillbereceivedandallgrantortaxincentiveconditionswillbemet.Wheregrantor tax incentiveconditionsarenotyet fullymet,grantsor tax incentiveswillbe treatedasunearned funding in the balance sheet. Grants or tax

incentivesrelatingtoexpenseitemsarerecognisedasanoffsetagainsttheseexpensestomatchthecoststheyarecompensating.Grantsortaxincentivesrelatingtoitemscapitalisedasassetsarerecognisedasanoffsetagainsttheassettomatchthecoststheyarecompensating.

Earnings/(loss) per shareBasicearnings/(loss)pershareiscalculatedasnetprofit/(loss) attributable to members of the ConsolidatedGroup,adjustedtoexcludeanycostsofservicingequity(otherthandividends),dividedbytheweightedaveragenumber of ordinary shares on issue throughout thereportingperiod.

Diluted earnings/(loss) per share is calculated as netprofit/(loss)attributabletomembersoftheConsolidatedGroup,adjustedfor,thedilutiveeffectsofanyoutstandingunlistedoptionsoverordinarysharesintheparent.

Fair Value MeasurementWhen an asset or liability, financial or non-financial,is measured at fair value for recognition or disclosurepurposes,thefairvalueisbasedonthepricethatwouldbereceivedtosellanassetorpaidtotransfera liabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate;andassumesthatthetransactionwill takeplaceeither: in theprincipalmarket;or in theabsenceofaprincipalmarket,inthemostadvantageousmarket.

Fairvalueismeasuredusingtheassumptionsthatmarketparticipantswouldusewhenpricingtheassetorliability,assuming theyact in theireconomicbest interests.Fornon-financialassets,thefairvaluemeasurementisbasedon its highest and best use. Valuation techniques thatare appropriate in the circumstances and for whichsufficient data are available to measure fair value, areused,maximisingtheuseof relevantobservable inputsandminimisingtheuseofunobservableinputs.

Assetsandliabilitiesmeasuredatfairvalueareclassified,into three levels, using a fair value hierarchy thatreflects the significance of the inputs used in makingthe measurements. Classifications are reviewed ateach reporting date and transfers between levels aredeterminedbasedonareassessmentofthelowestlevelofinputthatissignificanttothefairvaluemeasurement.

Forrecurringandnon-recurringfairvaluemeasurements,external valuers may be used when internal expertiseiseithernotavailableorwhenthevaluationisdeemedto be significant. External valuers are selected basedonmarketknowledgeandreputation.Wherethereisasignificantchangeinfairvalueofanassetorliabilityfromoneperiodtoanother,ananalysis isundertaken,whichincludesaverificationofthemajorinputsappliedinthelatest valuation and a comparison, where applicable,withexternalsourcesofdata.

Contributed EquityOrdinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.

Comparative FiguresWhen required by Accounting Standards, comparativefigures have been adjusted to conform to changes inpresentationforthecurrentfinancialyear.

When the Group applies an accounting policyretrospectively, makes a retrospective restatement orreclassifiesitemsinitsfinancialstatements,astatementof financial position as at thebeginningof the earliestcomparativeperiodwillbedisclosed.

New Accounting Standards for Application in Future PeriodsAustralian Accounting Standards and Interpretationsthat have recently been issued or amended but arenotyetmandatory,havenotbeenearlyadoptedbytheconsolidatedentityfortheannualreportingperiodended30June2017.Theconsolidatedentity’sassessmentoftheimpactoftheseneworamendedAccountingStandardsand Interpretations, most relevant to the consolidatedentity,aresetoutbelow.

AASB 9 Financial Instruments

This standard is applicable to annual reportingperiodsbeginning on or after 1 January 2018. The standardreplacesallpreviousversionsofAASB9andcompletesthe project to replace IAS 39 ‘Financial Instruments:RecognitionandMeasurement’.AASB9introducesnewclassification and measurement models for financial

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assets.Afinancialassetshallbemeasuredatamortisedcost,ifitisheldwithinabusinessmodelwhoseobjectiveistoholdassetsinordertocollectcontractualcashflows,whichariseonspecifieddatesandsolelyprincipalandinterest. All other financial instrument assets are to beclassified andmeasured at fair value through profit orlossunless theentitymakes an irrevocable electiononinitialrecognitiontopresentgainsandlossesonequityinstruments (that are not held-for-trading) in othercomprehensiveincome(‘OCI’).Forfinancialliabilities,thestandardrequirestheportionofthechangeinfairvaluethatrelatestotheentity’sowncreditrisktobepresentedinOCI(unlessitwouldcreateanaccountingmismatch).New simpler hedge accounting requirements areintendedtomorecloselyaligntheaccountingtreatmentwith the riskmanagement activities of the entity.Newimpairment requirements will use an ‘expected creditloss’(‘ECL’)modeltorecogniseanallowance.Impairmentwillbemeasuredundera12-monthECLmethodunlessthe credit risk on a financial instrument has increasedsignificantly since initial recognition in which casethe lifetime ECL method is adopted. The standardintroduces additional new disclosures. The Group hasyettocommenceanassessmentoftheimpactofAASB9.Managementintendtocommencethedevelopmentof an implementation plan prior to 30 June 2018. It isexpected the planwill likely involve the establishmentofanimplementationteamwhoseresponsibilitywillbetofirstlygainaclearunderstandingoftherequirementsofthenewStandard,andthereafterassessthepotentialimpact on the Group (in the form of accounting anddisclosure, taxation, systems, processes, and internalcontrols) of the new Standard. This assessment willthen establish the areas that require change for thepurposes of full implementation. As part of finalisingthe plan,Managementwill determine the appropriateadoptiondateandtransitionmethod,aswellasensuringappropriatecommunicationwithrelevantstakeholders.

AASB 15 Revenue from Contracts with Customers

This standard is applicable to annual reportingperiodsbeginning on or after 1 January 2018. The standardprovides a single standard for revenue recognition.Thecoreprincipleof the standard is thatanentitywillrecognise revenue to depict the transfer of promisedgoods or services to customers in an amount thatreflects the consideration to which the entity expects

to be entitled in exchange for those goods or services.Thestandardwillrequire:contracts(eitherwritten,verbalor implied) tobe identified, togetherwith theseparateperformanceobligationswithinthecontract;determinethe transaction price, adjusted for the time value ofmoneyexcludingcreditrisk;allocationofthetransactionpricetotheseparateperformanceobligationsonabasisof relative stand-alone selling price of each distinctgood or service, or estimation approach if no distinctobservable prices exist; and recognition of revenuewhen each performance obligation is satisfied. Creditrisk will be presented separately as an expense ratherthan adjusted to revenue. For goods, the performanceobligationwouldbesatisfiedwhenthecustomerobtainscontrol of the goods. For services, the performanceobligationissatisfiedwhentheservicehasbeenprovided,typically for promises to transfer services to customers.Forperformanceobligationssatisfiedovertime,anentitywould select an appropriate measure of progress todeterminehowmuchrevenueshouldberecognisedasthe performance obligation is satisfied. Contracts withcustomerswillbepresentedinanentity’sstatementoffinancialpositionasacontractliability,acontractasset,orareceivable,dependingontherelationshipbetweenthe entity’s performance and the customer’s payment.Sufficient quantitative and qualitative disclosure isrequired to enable users to understand the contractswith customers; the significant judgments made inapplyingtheguidancetothosecontracts;andanyassetsrecognised from the costs to obtain or fulfil a contractwithacustomer.

TheGrouphasyet tocommenceanassessmentof theimpactofAASB15.Management intendtocommencethe development of an implementation plan prior to30 June2018. It is expected theplanwill likely involvethe establishment of an implementation team whoseresponsibilitywillbetofirstlygainaclearunderstandingoftherequirementsofthenewStandard,andthereafterassess the potential impact on the Group (in theform of accounting and disclosure, taxation, systems,processes, and internal controls) of the new Standard.Thisassessmentwillthenestablishtheareasthatrequirechangeforthepurposesoffullimplementation.Aspartof finalising the plan,Managementwill determine theappropriateadoptiondateandtransitionmethod,aswellas ensuring appropriate communication with relevantstakeholders.

AASB 16 Leases

This standard is applicable to annual reportingperiodsbeginning on or after 1 January 2019. The standardreplacesAASB117 ‘Leases’andfor lesseeswilleliminatethe classifications of operating leases and financeleases. Subject to exceptions, a ‘right-of-use’ asset willbe capitalised in the statement of financial position,measured as the present value of the unavoidablefuture lease payments to be made over the leaseterm. The exceptions relate to short-term leases of 12months or less and leases of low-value assets (such aspersonalcomputersandsmallofficefurniture)whereanaccountingpolicychoiceexistswherebyeithera‘right-of-use’assetisrecognisedorleasepaymentsareexpensedtoprofitor lossas incurred.A liabilitycorrespondingtothecapitalisedleasewillalsoberecognised,adjustedforleaseprepayments,leaseincentivesreceived,initialdirectcostsincurredandanestimateofanyfuturerestoration,removalordismantlingcosts.Straight-lineoperatingleaseexpenserecognitionwillbereplacedwithadepreciationchargefortheleasedasset(includedinoperatingcosts)andaninterestexpenseontherecognisedleaseliability(included infinancecosts). In theearlierperiodsof thelease,theexpensesassociatedwiththeleaseunderAASB16willbehigherwhencomparedtoleaseexpensesunderAASB117.However,EBITDA(EarningsBeforeInterest,Tax,DepreciationandAmortisation)resultswillbeimprovedastheoperatingexpenseisreplacedbyinterestexpenseand depreciation in profit or loss under AASB 16. Forclassification within the statement of cash flows, theleasepaymentswillbe separated intobothaprincipal(financing activities) and interest (either operating orfinancingactivities)component.

Forlessoraccounting,thestandarddoesnotsubstantiallychangehowalessoraccountsforleases.TheGrouphasyettocommenceanassessmentoftheimpactofAASB16.Managementintendtocommencethedevelopmentof an implementation plan prior to 30 June 2018. It isexpected the planwill likely involve the establishmentofanimplementationteamwhoseresponsibilitywillbetofirstlygainaclearunderstandingoftherequirementsofthenewStandard,andthereafterassessthepotentialimpact on the Group (in the form of accounting anddisclosure, taxation, systems, processes, and internalcontrols) of the new Standard. This assessment will

then establish the areas that require change for thepurposes of full implementation. As part of finalisingthe plan,Managementwill determine the appropriateadoptiondateandtransitionmethod,aswellasensuringappropriatecommunicationwithrelevantstakeholders.

Significant accounting judgements, estimates and assumptionsIntheprocessofapplyingtheGroup’saccountingpolicies,managementhasmadethefollowingjudgements,apartfrom those involvingestimations,whichhave themostsignificant effect on the amounts recognised in thefinancialstatements:

Impairment of development asset

The Group assesses impairment of all assets at eachreporting date by evaluating conditions specific tothe Group and to the particular asset that may leadto impairment. If an impairment trigger exists, therecoverableamountoftheassetisdetermined.

Annualimpairmenttestingisalsocarriedoutforallintangibleassetswithindefiniteusefullives(refertoNote15).

Useful lives of available for use intangible assets

Acquiredintellectualpropertyanddevelopmentcostinrespectofanassetavailableforusethathasafinitelifeisamortisedovertheasset’susefullife.TheGroupassessestheusefullifebasedonconditionsspecifictotheGroupand to the particular asset, including the expectedusageof theassetbytheGroup,public informationonestimatesofuseful livesof similarassets, and technicalandtechnologicalobsolescence.

Business combinations and goodwill

When the consolidated group acquires a business, itassesses the financial assets and liabilities assumed forappropriateclassificationanddesignationinaccordancewith the contractual terms, economic circumstancesand pertinent conditions as at the acquisition date.Any contingent consideration to be transferred by theacquirerwillberecognisedatfairvalueattheacquisitiondate. Contingent consideration classified as an assetor liability that isafinancial instrumentandwithin thescopeofAASB 139 Financial Instruments: Recognition

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NOTE 2: REVENUE AND OTHER INCOME


2017 2016

$ $

Sales revenueSolar,batteryandmicrogrid 4,598,030 200,375

Royalty income (i) 452,591 882,798

Other income Interestincome 157,942 294,538Gainonproperty,plantandequipmentsale 869 690Realisedgainonforeignexchange (35,119) (20,496)

123,692 274,732

i. TheGroupholdsaminingroyaltywithrespecttoagolddepositinWesternAustralia.Undertheroyaltyagreement,theGroupreceivesapaymentperounceofgoldextractedbythirdparties.ThepastandanyfutureroyaltyincomestreamrequiresnoexpenditureorresourcesbytheCompany.Miningoperationsrelatedtotheroyaltyceasedasof1January2017.

NOTE 3: SHARE OF (LOSS)/PROFITS OF ASSOCIATE ACCOUNTED FOR USING THE EQUITY METHOD

NOTE CONSOLIDATED GROUPSHARE OF (LOSS)/PROFIT 2017 2016

$ $

EnergyMadeCleanGroup 31(a) (578,981) 371,892

EMCKimberleyPtyLtd 31(b) (100) -

(579,081) 371,892

and Measurement,ismeasuredatfairvaluewiththechangesinfairvaluerecognizedinthestatementofprofitorloss(refertoNote15(c)).Goodwillismeasuredastheexcessofthefairvalueofconsiderationtransferredandtheamountofnon-controllinginterestintheacquireoverthenetassetsacquired.

Share based payment transactions

TheGroupmeasuresthecostofequitysettledtransactionswithemployeesbyreferencetothefairvalueoftheequityinstrumentatthedateatwhichtheyaregranted.ThefairvalueisdeterminedbyusingtheBlackScholesformulatakingintoconsiderationthetermsandconditionsuponwhichtheinstrumentsaregranted(refertoNote29).

NOTE 4: LOSS FOR THE YEAR


2017 2016

$ $Thefollowingexpenseitemsarerelevantinexplainingthefinancialperformanceforthereportingyear:Amortisation–intellectualproperty 15(b) 1,111,773 -Depreciation–property,plantandequipment 14(a) 289,347 117,072

1,401,120 117,072

Doubtfuldebtsexpense 20,000 -

NOTE 5: INCOME TAX EXPENSE


2017 2016

$ $

a. The components of tax expense comprise: Currenttax - (981,216) Deferredtax - 981,216

- -b. The prima facie tax benefit on loss from ordinary activities before income tax is reconciled to the income tax as follows:Primafacietaxbenefitonlossfromordinaryactivitiesbeforeincometaxat30%(2016:30%)— ConsolidatedGroup (4,314,791) (1,904,816)Add:Taxeffectof:

— Taxratedifferential 1,589 43,341— FairvaluelossonconsolidationofEMC 490,830 -— Othernon-allowableitems 35,748 5,391— Non-deductibleR&Dcosts 211,872 194,110— Assessablegovernmentgrants 521,776 385,495— Shareofloss/(profit)fromequityaccounted

investment173,724 (95,540)

— Recognitionofpreviouslyunrecognisedtaxlosses - (3,304,153)— Shareoptionsexpensedduringyear 39,475 179,443— Movementindeferredtaxbalancesnotrecognised 2,839,777 83,762— Under/(over)providedinpriorperiods - 4,412,967

Incometaxattributabletoentity - -

Currenttaxbenefit - -

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TheGrouphas tax losses carried forward of $48,685,443 (2016: $37,620,946). The tax losses do not expire undercurrenttaxlegislation.Deferredtaxassethasnotbeenrecognisedinrespectoftaxlossescarriedforwardasaformalassessmentoftherecoverabilityofthetaxlossesunderthecurrenttaxlegislationhasnotbeenperformed.

NOTE 6: INTERESTS OF KEY MANAGEMENT PERSONNEL (KMP)

RefertotheRemunerationReportcontainedintheReportoftheDirectorsfordetailsoftheremunerationpaidorpayabletoeachmemberoftheGroup’skeymanagementpersonnelfortheyearended30June2017.

a. Names and positions held in economic and parent entity by key management personnel in office at any time during the financial year are:

KEY MANAGEMENT PERSON POSITION

JeffreyHarding Non-ExecutiveChairman

MichaelOttaviano ManagingDirector

JohnDavidson ExecutiveDirectorandManagingDirectorofEnergyMadeCleanPtyLtd(KMPfrom2December2016)

JohnLeggate Non-ExecutiveDirector

KieranO’Brien ExecutiveDirector

MichaelFitzpatrick Non-ExecutiveDirector

GrantJMooney Non-ExecutiveDirectorandCompanySecretary

GregAllen ChiefOperatingOfficer

ThetotalsofremunerationpaidtoKMPoftheGroupduringtheyearareasfollows:

2017 2016

$ $

Shorttermemployeebenefits 1,783,499 1,540,431

Sharebasedpayments 255 23,830

Otherlongtermbenefits 30,364 35,839

Post-employmentbenefits 77,448 61,377

1,891,566 1,661,477

b. Options and Rights Holdings

Movementinequitysettledoptionsheldbykeymanagementpersonnelisdetailedbelow:

BALANCE 1.7.2016

GRANTED AS COMPENSATION

OPTIONS EXERCISED

NET CHANGE OTHER

BALANCE 30.6.2017

MichaelFitzpatrick 5,000,000 - - - 5,000,000

JeffreyHarding 5,000,000 - - - 5,000,000

GrantMooney 15,000,000 - - - 15,000,000

KieranO’Brien 10,000,000 - - - 10,000,000

JohnLeggate 5,000,000 - - - 5,000,000

GregAllen 5,000,000 - - - 5,000,000

Total 45,000,000 - - - 45,000,000

Detailsofequitysettledoptions forkeymanagementpersonneloutstandingatbalancesheetdateareasfollows:

TERMS & CONDITIONS FOR EACH GRANT

KEY MANAGEMENT

PERSONNEL

VESTED NO.

GRANTED NO.

GRANT DATE

VALUE PER

OPTION AT

GRANT DATE

EXERCISE PRICE

FIRST EXERCISE

DATE

LAST EXERCISE

DATE

MichaelFitzpatrick

5,000,000 5,000,000 25Nov2013

2.11cents 6.5cents 25Nov2013

24Nov2018

JeffreyHarding 5,000,000 5,000,000 25Nov2013


24Nov2018

GrantMooney 15,000,000 15,000,000 25Nov2013


24Nov2018

KieranO’Brien 10,000,000 10,000,000 25Nov2013


24Nov2018

JohnLeggate 5,000,000 5,000,000 25Nov2013


24Nov2018

GregAllen 5,000,000 5,000,000 4Jul2014

1.86cents

7.3cents 4Jul2015 3Jul2017

45,000,000 45,000,000

Alloptionsweregrantedfornilconsideration.

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c. Shareholdings Number of Shares held by Key Management Personnel

BALANCE 1.7.2016

RECEIVED AS COMPENSATION

OPTIONS EXERCISED

NET CHANGE OTHER

BALANCE 30.6.2017

MichaelFitzpatrick 125,365,359 - - - 125,365,359

MichaelOttaviano 39,790,000 - - (4,790,000) 35,000,000

JohnDavidson - - - 297,366,738* 297,366,738

JeffreyHarding 1,196,845 - - 149,254 1,346,099

GrantJMooney 2,553,651 - - 74,627 2,628,278

KieranO’Brien 170,000 - - - 170,000

JohnLeggate 100,000 - - - 100,000

GregAllen 3,000 - - - 3,000

Total 169,178,855 - - 292,800,619 461,979,474

*On2December2016,297,142,857ordinaryshareswereissuedtoMrDavidsonaspartconsiderationfortheCompany’sacquisitionoftheremaining65%interestintheEnergyMadeCleanGroup(refertoNote32).223,881ordinarysharesweresubsequentlyissuedaspartofaSharePurchasePlanon24April2017(refertoNote20).

NOTE 7: AUDITORS’ REMUNERATION


$ $

Remunerationoftheauditoroftheparententityfor:

• Auditingorreviewingthefinancialreport 105,500 82,500

NOTE 8: EARNINGS PER SHARE

CONSOLIDATED GROUP2017 2016

$ $

Basiclosspershare(centspershare) (0.647) (0.337)Dilutedlosspershare(centspershare) (0.647) (0.337)

(a) Reconciliation of earning to Net Loss LossusedinthecalculationofbasicEPS (14,382,638) (6,349,387) LossusedinthecalculationofdilutedEPS (14,382,638) (6,349,387)

(b) Weighted average number of ordinary shares used in calculation of weighted average earnings per share

2,223,789,062 1,886,387,319

Asat30June2016and30June2017,theoutstandingoptionswerenotdilutiveastheweightedaverageexercisepriceoftheoptionswerehigherthantheweightedaveragesharepricefortheyear.

Therehavebeennoothertransactionsinvolvingordinarysharesorpotentialordinarysharessincethereportingdateandbeforethecompletionofthesefinancialstatements.

NOTE 9: CASH AND CASH EQUIVALENTS

CONSOLIDATED GROUP2017 2016

$ $

Cashonhand 3,226 606

Cashatbank 16,198,917 8,199,894

16,202,143 8,200,500

NOTE 10: TRADE AND OTHER RECEIVABLES

CONSOLIDATED GROUP GROSS AMOUNT

PAST DUE BUT NOT IMPAIRED (DAYS OVERDUE)

WITHIN TRADE TERMS

2017 $1-30

$31-60

$61+

$ $

CURRENT

Tradereceivables 1,647,427 16,974 - 788,278 842,175

Provisionfordoubtfuldebts (100,000) - - (100,000) -

Nettradereceivables 1,547,427 16,974 - 688,278 842,175

Prepayments 800,372 - - - 800,372

Accruedrevenue 1,331,736 - - - 1,331,736

Amountonretention 212,488 - - - 212,488

Otherreceivables 2,736,503* - - - 2,736,503

Securitydeposits 107,135 - - - 107,135

6,735,661 16,974 - 688,278 6,30,409

NON-CURRENT


575,182 - - - 575,182

*Includes$2,260,595inresearchanddevelopmenttaxincentivesreceivable.

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CONSOLIDATED GROUP GROSS AMOUNT

PAST DUE BUT NOT IMPAIRED (DAYS OVERDUE)

WITHIN TRADE TERMS

2016 $1-30

$31-60

$61+

$ $

CURRENT

Tradereceivables 3,337 - - 3,337 -

Prepayments 90,521 - - - 90,521

Accruedrevenue 295,462 - - - 295,462

Otherreceivables 74,417 - - - 74,417


723,737 - - 3,337 720,400

NON-CURRENT


460,000 - - - 460,000

NOTE 11: AVAILABLE FOR SALE FINANCIAL ASSETS


2017 2016

$ $

Availableforsalefinancialassets a 12,414 12,414

a. Available for sale Financial Assets Comprise

Unlistedinvestment,atcost:

— sharesinothercorporations 12,414 12,414

Availableforsalefinancialassetscompriseinvestmentsintheordinaryissuedcapitalofvariousentities.Therearenofixedreturnsorfixedmaturitydateattachedtotheseinvestments.

Thefairvalueofunlistedavailableforsalefinancialassetscannotbereliablymeasured.Asaresult,allunlistedinvestmentsarereflectedatcost.

NOTE 12: INTERESTS IN SUBSIDIARIES

Theconsolidatedfinancial statements incorporate theassets, liabilitiesand resultsof the following subsidiaries inaccordancewiththeaccountingpolicydescribedinNote1:

COUNTRY OF INCORPORATION

PERCENTAGE OWNED (%)(i)

2017 2016

CarnegieRecreationalWatercraftPtyLtd Australia 100 100

CETOIP(Australia)PtyLtd Australia 100 100

CETOWaveEnergyChile Chile 100 100

CETOWaveEnergyIreland Ireland 100 100

CETOWaveEnergyUK UnitedKingdom 100 100

ClearEnergyPtyLtd Australia 100 35

CMANomineesPtyLtd(iii) Australia 100 100

EMCEngineeringAustraliaPtyLtd(iii) Australia 100 35

EnergyMadeCleanPtyLtd(ii) Australia 100 35

NewMillenniumEngineeringPtyLtd Australia 100 100

PacificCoastalWaveEnergyCorp. Canada 95 95

SolarFarmCunderdinPtyLtd(iii) Australia 100 35

SolarFarmJurienBayPtyLtd(iii) Australia 100 35

SolarFarmKellerberrinPtyLtd(iii) Australia 100 35

SolarFarmMooraPtyLtd(iii) Australia 100 35

SolarFarmSouthernCrossPtyLtd(iii) Australia 100 35

i. Percentageofvotingpowerisinproportiontoownership.

ii. Fortheyearended30June2016wasrecognisedasaninterestinassociateandnotasubsidiary(refertonote31).

iii. 100%subsidiariesofEnergyMadeCleanPtyLtd.Theinterestsheldasat30June2016wereheldindirectlythroughtheCompany’s35%interestinEnergyMadeCleanPtyLtd.

NOTE 13: INVESTMENT ACCOUNTED FOR USING EQUITY METHOD


2017 2016

$ $

Investmentinassociate(refertoNote31) 31 - 5,047,919

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NOTE 14: PROPERTY, PLANT AND EQUIPMENT


2017 2016

$ $

Plant and equipment:

Atcost 7,459,208 1,354,935

Accumulateddepreciation (957,904) (860,211)

Totalplantandequipment 6,501,304 494,724

a. Movements in Carrying Amounts

Movementinthecarryingamountsforeachclassofproperty,plantandequipmentbetweenthebeginningandtheendofthecurrentfinancialyear

PLANT AND EQUIPMENT

2017 $

Consolidated Group:

Balanceatthebeginningofyear 494,724

Additions 5,448,136

Assetsacquiredaspartofbusinessacquisition(refertoNote32) 893,514

Disposals (43,491)

Depreciationexpense (289,347)

Depreciationcapitalisedtointangibleassetdevelopment (2,232)

Carryingamountattheendofyear 6,501,304

2016

Consolidated Group:

Balanceatthebeginningofyear 402,488

Additions 209,308

Disposals -

Depreciationexpense (117,072)

Carryingamountattheendofyear 494,724

NOTE 15: INTANGIBLE ASSETS

Intangibleassetscanbebrokendownasfollows:

a) Intangibles – CETO technology development asset

CONSOLIDATED GROUP

2017 2016

$ $

InitialacquisitioncostofCETOTechnology–2009 55,989,877 55,989,877

Subsequentdevelopmentexpenditure–CETOTechnology 72,301,647 64,794,474

GrantsandR&Dtaxincentivesreceived (44,293,459) (30,682,103)

Balanceasat1July 83,998,065 90,102,248

Movements for year ended 30 June 2017

Subsequentdevelopmentexpenditure–CETOTechnology 6,294,186 7,507,173

Othergrantsreceived (1,847,436) (1,284,982)

R&Dtaxincentive (5,403,568) (12,326,374)

Balanceasat30June 83,041,247 83,998,065

TheCETOtechnologyhasyettobecommercialisedandis inthedevelopmentphase,thereforethefairvalue lesscostofdisposalhasbeendeterminedtobe themostappropriatebasis fordetermining recoverableamount.TherecoverableamountoftheCETOtechnologyrepresentsthepresentvalueofthefuturecashflowsexpectedtobederivedfromthefurtherdevelopmentandcommercialisationoftheCETOtechnologylesscostofdisposal.

Thedeterminationoffairvalueisbasedon‘fairvalue’asdefinedunderAASB13:FairValueMeasurement.At30June2017,thefairvaluehasbeenestimatedtobegreaterthanthecarryingvalueoftheCETOtechnologyof$83million,accordinglynonetimpairmentlosshasbeenrecognised.

FairvaluewasdeterminedbytheCompanyengagingasuitablyqualifiedindependentconsultantaftertheconclusionofthefinancialyeartoprepareanindependentvaluationreport.Cashflowsareanalysedbytheindependentconsultantovera25-yearperiodapprovedbymanagementfortheyearsfrom2017to2042.Theperiodisconsistentwiththelong-termvalueofanewinfrastructuretechnologyandisconsistentwithcomparableenergyindustryprojectlives.

Keyassumptionsarethosetowhichtherecoverableamountofanassetorcash-generatingunitsismostsensitive.

Thecalculationofthefairvaluelesscostofdisposalisbasedonthefollowingkeyassumptions:

• Thetimingofthedevelopmentofaproductthatcanbelaunchedcommercially;

• TheCompanywillearnaprofitmarginbasedasapercentageofthemanufacturingcostofCETOunitssold;

• Forecastsalesarebasedonaminoritymarketshareoftheworld’sinstalledwaveenergycapacityannuallyto2050;

• Othersignificantcostassumptions,includingongoingSG&Acostsandcorporatecosts;

• Inflationisassumedtobe2.5%inallforecastperiods;

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• TheConsolidatedGroupwillhaveaccesstosufficientfundingtocompletetheCETOdevelopmentthroughtocommercialisation(SeeNote23);and

• A post-tax discount rate of 20.0% to incorporate risks associated with commercialising a wave energytechnologybasedontherangeof17.5%to22.5%.Inderivingthesediscountrates,aspecificriskpremiumrangeof8.5% to 14.0%hasbeen includedgiven thenature, sizeand relativelyearly stageof commercialdevelopment.

Asdiscussedabove,CarnegiehasadoptedthefairvaluelesscostofdisposaltodeterminetherecoverableamountoftheCETOtechnology.ThisfairvaluehasbeendeterminedonthebasisofthefairvaluemeasurementhierarchyoutlinedinAASB13.ThefairvaluehasbeendeterminedusingunobservableinputsandisthereforeconsideredtobeaLevel3asset.TheLevel3assetsunobservableinputsareasfollows:

KEY ASSUMPTIONS RANGE

Timingofcommercialisation Nodelaytofive-yeardelay

Carnegie’smarketshare 2023to2030:15-30% 2031to2040:10-25% 2041to2050:5-20%

ProfitMargin 10%to20%

SG&Acosts 0.5%to5.0%

b) Intangibles – Microgrid/battery technology development asset

CONSOLIDATED GROUP

2017 2016

$ $

AcquisitionofEnergyMadeClean(refertoNote32) 5,847,244 -

Amortisation (1,111,773)

4,735,471 -

c) Intangibles – Goodwill

ThecarryingamountofgoodwillacquiredontheacquisitionofEnergyMadeClean(refertoNote32)isallocatedtothefollowingcash-generatingunits:

CONSOLIDATED GROUP

2017 2016

$ $

CETOwaveenergytechnology 4,434,046 -

Solar&batteryengineering,procurement,andconstruction 4,434,046 -

8,868,092 -

Impairment Testing

GoodwillallocatedtotheCETOwaveenergytechnologycash-generatingunithasbeenassessedforimpairmentaspartoftheimpairmenttestingoftheCETOtechnologydevelopmentasset(refertoNote15(a)).

Therecoverableamountofthegoodwillallocatedtothesolarandbatteryengineering,procurementandconstructioncash-generatingunithasbeendeterminedbyavalue-in-usecalculationusingadiscountedcashflowmodel,basedonthecurrent listofknownprojectsandtheexpectations inrelationtothelikelihoodofsuccess,togetherwithaterminalvalue.

Thefollowingkeyassumptionswereusedinthediscountedcashflowmodel:

• Posttaxnominaldiscountratebasedonaweightedaveragecostofcapitalof17.5%to22.5%;

• Inflationof2%perannumincludingfortheterminalvaluecalculation;and

• Likelihoodofsuccessinturningthecurrentlistofknowprojectsatproposalandtenderstagesintoprojectswonbasedonmanagements’pastexperiences.

Thediscountrateof17.5%to22.5%includesaspecificriskpremiumrangeof8.0%to12.0%duetothenature,sizeandrelativeearlystageoftheEnergyMadeCleanLendLeaseServicesjointventure,fromwhichthemajorityofrevenueforthecash-generatingunitisassumedwillbederivedfrom.

NOTE 16: OTHER ASSETS

CONSOLIDATED GROUP

2017 2016

$ $

CURRENT

Deferredexpenses 3,278 34,600

3,278 34,600

NON-CURRENT

Deferredexpenses - 67,552

- 67,552

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NOTE 17: TRADE AND OTHER PAYABLES

CONSOLIDATED GROUP

2017 2016

$ $

CURRENT

Tradecreditors 3,002,736 579,611

Accruals 2,381,704 2,055,177

Other 660,314 57,177

6,044,754 2,691,965

NON-CURRENT

Tradecreditors* 570,819 33,169

570,819 33,169

*Includedwithinnon-currenttradeandotherpayablesisanamountofcontingentcashconsiderationof$428,670related to the acquisition of EnergyMade Clean (“EMC”). The contingent cash consideration is payable to EMC’sManagingDirectorand founderJohnDavidsonand isdependentupon theachievementof reaching,orpartiallyreaching,atargetof$50millionrevenuefortheEMCbusinessforthetwo-yearperiodending30June2018.

Themaximumcontingent cash consideration payable under the EMCShare Sale Agreement is $1,000,000. TheDirectorshavedeterminedthefairvalueofthecontingentcashconsiderationtobe$428,670at30June2017.Thiswasdeterminedusinga50%probabilityweightingforachievingtherevenuetargetandafterdiscountingthefuturevalueofthecashpayments.The50%probabilitywasdeterminedbymanagementthroughforwardsalesanalysisofbudgetedversusactualsalesandthehistoricalrevenueachievedovertheperiodto30June2017.AtthetimeofEMC’sacquisitionthefairvalueofthecontingentcashconsiderationwasdeterminedtobe$679,012(refertoNote32)basedona75%probabilityweighting.

ThefairvalueofthiscontingentcashconsiderationhasbeendeterminedinaccordancewithAASB3,asoutlinedinNote32.

NOTE 18: PROVISIONS

CONSOLIDATED GROUP

2017 2016

$ $

Analysis of Total Provisions

Current 728,878 427,096

Non-current 273,399 207,470

1,002,277 634,566

ANNUAL, LONG SERVICE LEAVE AND OTHER EMPLOYEE PROVISIONS

$

Openingbalanceat1July2016 634,566

Additionalprovisions 85,240

Provisionsassumedaspartofbusinessacquisition(refertoNote32) 282,471

Balanceat30June2017 1,002,277

Provision for Long-Term Employee Benefits

Aprovisionhasbeen recognised foremployeeentitlements relating to long service leave (LSL). Incalculating thepresentvalueoffuturecashflowsinrespectofLSL,theprobabilityofLSLbeingtakenisbasedonhistoricaldata.ThemeasurementandrecognitioncriteriarelatingtoemployeebenefitshavebeenincludedinNote1ofthisreport.

NOTE 19: BORROWINGS

a. Convertible notes

CONSOLIDATED GROUP

2017 2016

$ $

CURRENT

CCEconvertiblenotes(i) 2,785,468 -

Current 2,785,468 -

NON-CURRENT

CCEconvertiblenotes(i) - 3,423,035

EMCconvertiblenotes(ii) 4,733,715 -

Non-current 4,733,715 3,423,035

Total 7,519,183 3,423,035

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CONSOLIDATED GROUP

2017 2016

$ $

Balanceatthebeginningoftheperiod 3,423,034 3,561,081

Placementofnewconvertiblenotes(ii) 5,000,000 -

Equitycomponentofconvertiblenotes (32,113) (379,733)

Conversiontoequityduringtheperiod(i) (890,000) -

Unwindingoffinancecosts 144,578 241,687

Issuecosts(ii) (126,316) -

7,519,183 3,423,035

i. On 18 November 2013, the Company completed a capital raising of $4.0 million by issuing 4,000 unlistedConvertibleNotes at an issuepriceof $1,000each (“SeniorNotes”).Other financial assets as at 30 June 2016consisted of amounts held under guarantee for the repayment of 3,690 outstanding Senior Notes (Totalling$3,690,000).TheseSeniorNoteswerecancelledand reissuedon 17November2016such that theyno longerrequireamountsheldunderguarantee.Thereissuednoteshavean8.0%couponrate(originalnotes:0%)anda3.8centsconversionpriceconvertibletoequityatanytimeatthediscretionoftheSeniorNoteholder.Duringtheyear890noteswereconvertedinto23,451,055ordinarysharesinCarnegieCleanEnergyLtd(refertoNote20).Asatthereportingdatethereare2,800SeniorNotesonissuewhichmatureon17November2017.

ii. On11January2017,theCompanycompletedacapitalraisingof$5.0millionbyissuing500unlistedConvertibleNotesatanissuepriceof$10,000each.Thesenoteshavean8.0%couponrateandan8.0centsconversionpriceconvertibletoequityatanytimeatthediscretionofthenoteholder.Asatthereportingdatethereare500notesonissuewhichmatureon11January2020.

b. Senior loan facility

Restrictedaccesswasavailableatthereportingdatetothefollowinglinesofcredit:

CONSOLIDATED GROUP

2017 2016

$ $

Total facilities

Bankloans - 21,000,000

- 21,000,000

Used at the reporting date

Bankloans - -

- -

Unused at the reporting date

Bankloans - 21,000,000

- 21,000,000

On19November2015, theCompanysignedafive-year loan facility for$21millionwith theCommonwealthBankofAustralia(“Facility”).ThiswassignedtoprovidefundingforthenextstageofCETOtechnologydevelopmentandcommercialisationandpartfinancingfortheGardenIslandMicrogridproject.Aspartoftheconvertiblenotesreissue(refertoNote19(a))theFacilitywasplacedonstandbyandnonewdebtabletobedrawn.TheFacilitywassubsequentlyclosedon17November2016.

NOTE 20: ISSUED CAPITAL

CONSOLIDATED GROUP

2017 2016

$ $

2,599,475,784(2016:1,997,849,888)fullypaidordinaryshares 185,212,910 154,019,255

185,212,910 154,019,255

Ordinaryshareshavenoparvalue.ThereisnolimittotheauthorisedsharecapitaloftheCompany.

2017 NO.

2016 NO.

a. Ordinary shares

Atthebeginningofreportingperiod 1,997,849,888 1,766,571,657

Sharesissuedduringtheyear

—1September2015 - 1,123,470

—20November2015 - 4,545,455

—27November2015 - 181,491,659

—19April2016 - 44,117,647

—2December2016 297,142,857 -

—12January2017 3,000,000 -

—23January2017 1,250,000 -

—24January2017 2,250,000 -

—1February2017 1,836,986 -

—16February2017(refertoNote19(a)(i)) 1,052,632 -

—14March2017 3,500,000 -

—24April2017 285,646,052 -

—23June2017(refertoNote19(a)(i)) 5,947,369 -

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(1) On 2 December 2016, 297,142,857 ordinary shares were issued as part consideration for the Company’sacquisitionof the remaining65% interest in theEnergyMadeCleanGroup.The issueof theseshareswasconsideredtobeanon-cashinvestingactivityforthepurposesofAASB107(refertoNote32).

(2) Between12January2017and14March2017,11,836,986shareswereissuedtoemployeesontheexerciseofoptionsissuedpursuanttoanEmployeeShareOptionPlan.6,500,000shareswereissuedat$0.054pershareand5,336,986sharesat$0.073pershare.

(3) On16February,1,052,632shareswereissuedontheconversionofconvertiblenotes.Theshareshadaneffectiveissuepriceof$0.038pershare.

(4) On24April2017,theCompanyraised$4,672,500byissuing220,336,567ordinarysharespursuanttoaSharePurchasePlantoexistingshareholdersatanissuepriceof$0.067pershare.$3,275,525wasadditionallyraisedbytheissuingof48,888,428ordinarysharesinaprivateplacementtosophisticatedinvestorsalsoatanissuepriceof$0.067pershare.Inadditiontothis,16,421,055ordinaryshareswereissuedupontheconversionof624convertiblenotes(refertoNote19(a)(i)).

b. Capital Management

ManagementcontrolsthecapitalofthegroupinordertoprovideshareholderswithadequatereturnsandensurethattheGroupcanfunditsoperationsandcontinueasagoingconcern.

TheGroup’scapitalismadeupofordinarysharecapital.

Therearenoexternallyimposedcapitalrequirements.

ManagementeffectivelymanagestheGroup’scapitalbyassessingtheGroup’sfinancialrisksandadjustingitscapitalstructureinresponsetochangesintheserisksandinthemarket.Thisincludesthemanagementofshareissues.

TherehavebeennochangesinthestrategyadoptedbymanagementtocontrolthecapitaloftheGroupsincetheprioryear.

NOTE 21: RESERVES

CONSOLIDATED GROUP

2017 2016

$ $

a. Foreign Currency Translation Reserve

Theforeigncurrencytranslationreserverecordsexchangedifferencesarisingontranslationofforeigncontrolledsubsidiariesandforeigncurrencies

7,655 2,167

b. Option Reserve

Theoptionreserverecordsitemsrecognisedasexpensesonvaluationofshareoptionsandsharebasedpaymentsincludingloanfundedshares

2,905,885 3,958,179

Total 2,913,540 3,960,346

NOTE 22: CAPITAL AND LEASING COMMITMENTS

CONSOLIDATED GROUP

2017 2016

$ $

a. Operating and Finance Lease Commitments

Notlaterthan1year 712,371 283,798

Laterthan1yearbutnotlaterthan5years 593,939 482,796

Laterthan5years - -

1,306,310 766,594

OperatingleasingcommitmentsconsistofpropertyleasesforthreepropertiesincludingtheCompany’sheadoffice.Theyareallnon-cancellableleaseswiththelongestleasehavinganexpiringtermof3years,expiringon30April2019.

Financeleasecommitmentsconsistofamountsforplantandequipment.

NOTE 23: BUSINESS RISK

Inthefinancialyearended30June2017,theGroupincurredanoperatinglossof$14.4million(2016:$6.3million).Asat30June2017,theGrouphadanaccumulateddeficitof$75.3million.ThemajorityoftheaccumulateddeficithasresultedfromcostsincurredintheCETOtechnologydevelopmentprogram,andfromassociatedgeneralandadministrativecosts.

As theGroupcontinuestodevelop itsproprietary technologies,and furtherdevelopmicrogridopportunitiesonaprofitablebasiswithinEnergyMadeClean,itexpectstohaveanetdecreaseincashfromoperatingactivitiesuntilitachievespositivecashflow.

TheGroupcannotsaywithcertaintywhenitwillbecomeprofitablebecauseofthesignificantuncertaintiesassociatedwithsuccessfullycommercializingawaveenergytechnologyandcontinuingtodevelopandexpandtheEnergyMadeCleanmicrogridbusiness.Ifexistingresourcesareinsufficienttosatisfytheliquidityrequirements,theGroupmayseektoselladditionalequityordebtsecuritiesorobtaincreditfacilities.IftheGroupisunabletoobtainrequiredfinancing,itmayberequiredtoreducethescopeofitsplannedproductdevelopmentandcommercializationefforts,whichcouldadverselyaffectitsfinancialpositionandoperatingresults.

NOTE 24: OPERATING SEGMENTS

TheGroupidentifiesitsoperatingsegmentsbasedontheinternalreportsthatarereviewedandusedbytheBoardofDirectors(chiefoperatingdecisionmakers)inassessingperformanceanddeterminingtheallocationofresources.

TheGroupisorganisedintotwooperatingsegments:

1) TheCETOwaveenergytechnology/microgridbuild,own,operator,which:

- Isdevelopingandcommercialisingtechnologyforzero-emissionelectricitygenerationfromoceanswell,and

- Theproductionandsellingofenergythroughtheownershipofmicrogrids;and

2) Solar and battery engineering, procurement, and construction, which designs and installs solar, battery, andmicrogridinfrastructureforsale.

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Nooperatingsegmentshavebeenaggregatedtoformtheabovereportableoperatingsegments.

Thefinancialinformationpresentedinthestatementofcomprehensiveincomeandstatementoffinancialpositionisthesameasthatpresentedtothechiefoperatingdecisionmaker.Segmentperformanceisevaluatedbasedonprofitorlossandismeasuredconsistentlywithprofitorlossintheconsolidatedfinancialstatements.However,financing(including finance costs and finance income), gains and losses on fair valuemovements through profit and loss,royalties,shareofprofitandlossesofassociates,lossesonconsolidationanddisposalofassociates,andincometaxesaremanagedonagroupbasisandarenotallocatedtooperatingsegments.

Intersegment transactionsareonarm’s lengthbasisandareeliminatedonconsolidation. Intersegment loansareinitiallyrecognisedattheconsiderationreceivedandearnorincurinterestatprevailingmarketrates.Intersegmentloansareeliminatedonconsolidation.

AllamountsreportedtotheBoardofDirectorsasthechiefdecisionmakerareinaccordancewithaccountingpoliciesthatareconsistenttothoseadoptedintheannualfinancialstatementsoftheGroup.

2017 CETO WAVE ENERGY

TECHNOLOGY/ MICROGRID BOO

SOLAR & BATTERY ENGINEERING,

PROCUREMENT, AND

CONSTRUCTION*

TOTAL SEGMENTS

ADJUSTMENTS AND

ELIMINATIONS

CONSOLIDATED

Revenue

Externalcustomers

- 4,598,030 4,598,030 - 4,598,030

Inter-segment - 643,322 643,322 (643,322) -

- 5,241,352 5,241,352 (643,322) 4,598,030

Segment loss (6,199,598) (6,887,128)* (13,086,726) (1,295,912) (14,382,638)

Total assets 123,064,849 16,751,968 139,816,817 (11,752,807) 128,064,010

Total liabilities 413,727 8,475,917 8,889,644 6,247,389 15,137,033

*The solar and battery engineering, procurement and construction segment covers the period from 2 December 2016 to 30 June 2017. This represents the portion of the reporting period post the acquisition of the remaining 65% interest in the Energy Made Clean Group.

Nocomparativeinformationhasbeendisclosedas30June2017isthefirstreportingperiodinwhichtheGroup’soperationsconsistedofmorethanoneoperatingsegment.PriortotheacquisitionoftheEMCoperations,thefinancialinformationpresentedinthestatementofcomprehensiveincomeandstatementoffinancialpositionwasthesameasthatpresentedtothechiefoperatingdecisionmakers.

NOTE 25: CASH FLOW INFORMATION

CONSOLIDATED GROUP

2017 2016

$ $

Reconciliation of Cash Flow from Operations with Loss after Income Tax

Lossafterincometax (14,382,638) (6,349,387)

Non-cashflowsinprofit

Depreciationandamortisation 1,401,120 117,072

Netlossondisposalofassets 10,319 -

Net(gain)/lossonforeignexchange (9,237) 20,497

Adjustmenttofairvalueontheacquisitionofremaininginterestinformerassociate

1,636,101 -

Netgainonfinancialinstrumentsatfairvalue (250,343) -

Shareoptions&loanfundedsharesexpensed 131,583 598,144

Financecosts 144,577 1,350,001

DoubtfulDebts 20,000 492

Professionalfeesrelatedtoinvestmentinassociate (19,197) -

Shareofloss/(profit)–associate 579,081 (371,892)

Changesinassetsandliabilities,netoftheeffectsofpurchaseanddisposalofsubsidiaries

Increaseintradeandtermreceivables 3,855,851 322,677

Increaseininventory (491,953) -

Decrease/(increase)innon-currentassets 57,330 (208,618)

(Increase)/decreaseindevelopmentasset (1,293,312) 11,215,606

(Increase)/decreaseinintellectualpropertyassets (1,111,773) -

Increase/(decrease)intradepayablesandaccruals 405,246 (27,926)

Increaseinprovisions 174,243 20,730

Cashflowprovidedby/(usedin)operations (9,143,002) 6,687,396

NOTE 26: EVENTS AFTER THE REPORTING PERIOD

a) On1stAugust2017,Carnegiecommencedconstructionofthe2MWsolarPVand2MW/0.5MWhbatteryGardenIslandMicrogridwhichalsoincorporatesCarnegie’sexistingdesalinationplant.TheprojectwillsellallpowerandwaterproducedtotheDepartmentofDefenceforusebyHMASStirling.

b) On 7th July 2017, Carnegie announced its 100% subsidiary EnergyMadeCleanwas awarded thedesign andconstructionofasolar/battery/dieselmicrogridforLendleaseBuildingsonbehalfoftheDepartmentofDefence.Themicrogridwillbe installedattheDepartmentofDefence’sDelamereAirWeaponsRangeintheNorthernTerritoryofAustralia.

Withtheexceptionoftheabove,noothermattersorcircumstancesnototherwisedealtwith inthisreportorthe

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consolidatedfinancialstatements,havearisensincetheendofthefinancialyearwhichsignificantlyaffected,ormaysignificantlyaffect,theoperationsoftheConsolidatedGroup,theresultsofthoseoperationsorthestateofaffairsoftheConsolidatedGroupinsubsequentfinancialyears.

NOTE 27: RELATED PARTY TRANSACTIONS

Sales to andpurchases from related parties aremade on terms equivalent to those that prevail in arm’s lengthtransactions.Outstandingbalancesattheyear-endareunsecuredandinterestfreeandsettlementoccursincash.TheGrouphasnotrecordedanyimpairmentonreceivablesrelatingtoamountsowedbyrelatedparties.

Transactions and balances with Director related entities

a) CompanysecretarialserviceshavebeenprovidedbyMooney&PartnersPtyLtd,acompanyassociatedwithGrantMooneyduringthefinancialyear.TheseamountshavebeenincludedinthedisclosuresatNote6.Thesetransactionswereundertakenundernormalcommercialterms.

b) On11January2017,theCompanycompletedacapitalraisingof$5.0millionbyissuing500unlistedconvertiblenotes(refertoNote19(a)(ii)).100oftheconvertiblenoteswithafacevalueof$1,000,000wereissuedtoLogCreekPtyLtdofwhichMichaelFitzpatrickisadirector.Thecarryingvalueofthe100convertiblenoteswas$946,743asof30June2017.

c) BalancesoutstandingwithDirectorrelatedentities

2017 2016

JOHN DAVIDSON $ $

AmountowingtoCleanEnergyInvestmentHoldingsLimited (1,667) -

AmountowingfromSolarFarmCarnarvonPtyLtd 32,636 -

Contingentamountowing(refertoNote17) (428,670) -

JohnDavidsonisadirectorofCleanEnergyInvestmentHoldingsLimitedandSolarFarmCarnarvonPtyLtd.Thebalancesoutstandingtotheseentitieswereincurredpriortotheacquisitionoftheremaining65%interestinEnergyMadeCleaninDecember2016.

MICHAEL FITZPATRICK

AmountowingtoLogCreekPtyLtd (946,743)

Transactions and balances with Associates

a) TransactionswithAssociates

2017 2016

$ $

SalestoEMCKimberleyPtyLtd 222,282 -

PurchasespaidonbehalfofEMCKimberleyPtyLtd 20,236 -

b) BalancesoutstandingwithAssociates

2017 2016

$ $

AmountowingfromEMCKimberleyPtyLtd 243,180 -

RefertoNote31forfurtherinformationonEMCKimberleyPtyLtd.

NOTE 28: FINANCIAL RISK MANAGEMENT

(a) Financial Risk Management PoliciesTheBoardofDirectorshasresponsibilityfor,amongstotherissues,monitoringandmanagingfinancialriskexposuresoftheConsolidatedGroup.TheBoardmonitorstheGroup’sfinancialriskmanagementpoliciesandexposuresandapprovesfinancialtransactionswithinthescopeofitsauthority.Italsoreviewstheeffectivenessofinternalcontrolsrelatingtocommoditypricerisk,counterpartycreditrisk,currencyrisk,financingriskandinterestraterisk.

Interest rate risk

TheConsolidatedGroup’sexposuretointerestraterisk,whichistheriskthatafinancialinstrument’svaluewillfluctuateasaresultofchangesinmarketinterestrates.Theeffectiveweightedaverageinterestratesinclassesoffinancialassetsandliabilitiesisasfollows:

CONSOLIDATED GROUP

WEIGHTED AVERAGE

EFFECTIVE INTEREST

RATE

FLOATING INTEREST

RATEFIXED INTEREST RATE

MATURING

NON-INTEREST BEARING TOTAL

% $

WITHIN YEAR

$1 TO 5 YEARS

$ $ $

30 June 2017:

Financialassets:

Cashandcashequivalents 1.78 4,014,198 12,000,000 - 187,945 16,202,143

Receivables 2.28 - 607,317 - 6,703,526 7,310,843

Otherfinancialassets - - - - 12,414 12,414

4,014,198 12,607,317 - 6,903,885 23,525,400

Financialliabilities:

Accountspayable - - - 6,615,573 6,615,573

Borrowings 8.0 - 2,785,468 4,733,715 - 7,519,183

- 2,785,468 4,733,715 6,615,573 14,134,756

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CONSOLIDATED GROUP

WEIGHTED AVERAGE

EFFECTIVE INTEREST

RATE

FLOATING INTEREST

RATEFIXED INTEREST RATE

MATURING

NON-INTEREST BEARING TOTAL

30 June 2016:

Financialassets:

Cashandcashequivalents 1.92 2,198,110 6,000,000 - 2,390 8,200,500

Receivables 2.45 - 260,000 460,000 463,737 1,183,737

Otherfinancialassets 2.49 - - 3,690,000 12,414 3,702,414

2,198,110 6,260,000 4,150,000 478,541 13,086,651

Financialliabilities:

Accountspayable - - - 2,725,134 2,725,134

Borrowings - - - 3,423,035 3,423,035

- - - 6,148,169 6,148,169

(b) Credit RiskThemaximumexposuretocreditrisk,excludingthevalueofanycollateralorothersecurity,atbalancedatetorecognisedfinancialassetsisthecarryingamount,netofanyprovisionsfordoubtfuldebts,asdisclosedintheStatementofFinancialPositionandnotestotheStatementofFinancialPosition.

TheConsolidatedGroupdoesnothaveanymaterialcredit riskexposuretoanysingledebtororgroupofdebtorsunderfinancialinstrumentsenteredintobytheConsolidatedGroup.DetailswithrespecttocreditriskoftradeandotherreceivablesareprovidedinNote10.Thecreditriskonliquidfundsislimitedbecausethecounterpartiesarebankswithhighcreditratings.

(c) Net fair valueThenetfairvalueandcarryingamountsoffinancialassetsandfinancialliabilitiesaredisclosedintheStatementofFinancialPositionandinthenotestotheStatementofFinancialPosition.

Forunlistedinvestmentswherethereisnoorganisedfinancialmarketthenetfairvaluehasbeenbasedonareasonableestimationoftheunderlyingnetassetsordiscountedcashflowsoftheinvestment,wherethiscouldnotbedone,theyhavebeencarriedatcost.Nofinancialassetsorfinancialliabilitiesarereadilytradedonorganisedmarketsinstandardisedformotherthaninvestments.

Financial Instruments Measured at Fair Value

Thefinancial instruments recognisedat fair value in theStatementof FinancialPositionhavebeenanalysedandclassifiedusingafairvaluehierarchyreflectingthesignificanceoftheinputsusedinmakingthemeasurements.Thefairvaluehierarchyconsistsofthefollowinglevels:

— quotedpricesinactivemarketsforidenticalassetsorliabilities(Level1);

— inputsotherthanquotedprices includedwithinLevel 1 thatareobservable for theassetor liability,eitherdirectly(asprices)orindirectly(derivedfromprices)(Level2);and

— inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs)(Level3).

CONSOLIDATED GROUP LEVEL 1 LEVEL 2 LEVEL 3 TOTAL

2017 $ $ $ $

Financial assets:

Available for sale financial assets:

—unlistedinvestments - - 12,414 12,414

- - 12,414 12,414

2016

Financial assets:

Available for sale financial assets:

—unlistedinvestments - - 12,414 12,414

- - 12,414 12,414

(d) Sensitivity Analysis

Interest Rate Risk

Thegrouphasperformedsensitivityanalysisrelatingtoitsexposuretointerestraterisk,atbalancedate.Thissensitivityanalysisdemonstratestheeffectonthecurrentyearresultsandequitywhichcouldresultfromachangeintheserisks.

Interest Rate Sensitivity Analysis

At30June2017, theeffectonprofitandequityasa resultofchanges inthe interest rate,withallothervariablesremainingconstantwouldbeasfollows:

CONSOLIDATED GROUP

2017 2016

$ $

Change in profit

Increaseininterestrateby1% 117,735 113,284

Decreaseininterestrateby1% (117,735) (113,284)

Change in Equity

Increaseininterestrateby1% 117,735 113,284

Decreaseininterestrateby1% (117,735) (113,284)

(e) Liquidity RiskLiquidityriskarisesfromthepossibilitythattheGroupmightencounterdifficulty insettlingitsdebtsorotherwisemeetingitsobligationsrelatedtofinancialliabilities.TheGroupmanagesthisriskthroughthefollowingmechanisms:•preparingforwardlookingcashflowanalysisinrelationtoitsoperational,investingandfinancingactivities

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• preparingforwardlookingcashflowanalysisinrelationtoitsoperational,investingandfinancingactivities;

• monitoringundrawncreditfacilities;

• obtainingfundingfromavarietyofsources;

• maintainingareputablecreditprofile;

• managingcreditriskrelatedtofinancialassets;

• investingonlyinsurpluscashwithmajorfinancialinstitutions;and

• comparingthematurityprofileoffinancialliabilitieswiththerealisationprofileoffinancialassets.

Trade and sundry payables are expected to be paid as followed:

CONSOLIDATED GROUP

CONTRACTUAL CASH FLOWS 2017 2016

$ $

Lessthan3months 6,044,754 2,691,965

3monthsto12months 2,785,468 3,423,035

1to5years 5,304,534 33,169

14,134,756 6,148,169

NOTE 29: SHARE BASED PAYMENTS

(a) Types of share based payment plans

Employee share option plan

ShareoptionsaregrantedtoexecutivesandstaffatthediscretionoftheBoardofDirectors.ShareoptionsareonlygrantedtoDirector’safterapprovalbyshareholders.Theplanisdesignedtoalignparticipants’interestswiththoseofshareholdersbyincreasingvalueoftheCompany’sshares.Undertheplan,theexercisepriceoftheoptionsissetbytheBoardofDirectorsatthetimeofissue.

Management Incentive Equity Plan

Followingshareholderapproval,shareswereissuedatmarketvaluetotheManagingDirectorandwerefundedbyalimitedrecourseloan.Theshareissueisnotrecognizedasissuedcapitalandistreatedasashareoptionissueinaccordancewithaccountingstandards.Theplanisdesignedtoalignparticipants’interestswiththoseofshareholdersbyincreasingvalueoftheCompany’sshares.

Consultant share options

Share options are granted to consultants at the discretion of theBoard ofDirectors for services provided to theConsolidatedGroup.TheexercisepriceoftheoptionsissetbytheBoardofDirectorsatthetimeofissue.

Consultant & financier shares

SharesaregrantedtoconsultantsandfinanciersatthediscretionoftheBoardofDirectorsforservicesprovidedtotheConsolidatedGroup.

Nosharesoroptionswereissuedduringthefinancialyearended30June2017inrelationtotheabovesharebasedpaymentplans.

Totaloptionsoutstandingandexercisableareasfollows:

CONSOLIDATED GROUP

NUMBER OF OPTIONS WEIGHTED AVERAGE EXERCISE PRICE

$

Outstandingoptionsat1July2016 120,950,000 0.0658

Exercised (11,836,986) 0.0626

Expired (5,350,000) 0.0623

Outstandingat30June2017 103,763,014 0.0663

Exercisableat30June2017 90,463,014 0.0681

Nooptionsweregrantedduringtheyearended30June2017.

Theoptionsoutstandingat30June2017hadaweightedaverageexercisepriceof$0.0663andaweightedaverageremainingcontractuallifeof0.74years.Exercisepricesrangefrom$0.054to$0.073inrespecttooptionsoutstandingat30June2017.

NOTE 30: PARENT INFORMATION

ThefollowinginformationhasbeenextractedfromthebooksandrecordsoftheparentandhasbeenpreparedinaccordancewithAustralianAccountingStandards.

CONSOLIDATED GROUP

2017 2016

$ $

STATEMENT OF FINANCIAL POSITION

ASSETS

Currentassets 18,928,666 8,948,373

Non-currentassets 112,635,483 94,968,363

TOTAL ASSETS 131,564,149 103,916,736

LIABILITIES

Currentliabilities 12,999,638 10,709,615

Non-currentliabilities 5,519,694 3,663,674

TOTAL LIABILITIES 18,519,332 14,373,289

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CONSOLIDATED GROUP

2017 2016

$ $

EQUITY

Issuedcapital 185,212,910 154,019,255

Reserves 2,905,885 3,958,178

Accumulatedlosses (75,073,978) (68,433,986)

TOTAL EQUITY 113,044,817 89,543,447

STATEMENT OF COMPREHENSIVE INCOME

Totalloss (7,909,406) (5,979,627)

Totalcomprehensiveexpense (7,909,406) (5,979,627)

Guarantees

TheCompanyhasnotenteredintoanyguarantees,inthecurrentorpreviousfinancialyear,inrelationtothedebtsofitssubsidiaries.

Contractual commitments

At30June2017,theCompanyhadnotenteredintoanycontractualcommitmentsfortheacquisitionofproperty,plantandequipment(2016:Nil).

NOTE 31. INTERESTS IN ASSOCIATE

Interestsinassociatesareaccountedforusingtheequitymethodofaccounting.Informationrelatingtoassociatesthatarematerialtotheconsolidatedentityaresetoutbelow:

PRINCIPAL PLACE OF BUSINESS / COUNTRY OF INCORPORATION

CONSOLIDATED GROUP

NAME 2017 2016

% %

EnergyMadeCleanGroup* Australia 100.00% 35.00%

EMCKimberleyPtyLtd** Australia 50.00% 17.50%

*On19April2016, theCompanyacquireda35%stake intheEnergyMadeCleanGroup,aWestAustralianbasedsolar, battery andmicrogriddeveloper for apaymentof $4,676,027of shares andcash. Thepurchasewasmade,underaccountingstandards in theaccounts for theyearended30June2016,with the investment treatedasanassociateandaccountedforusingtheequityaccountingmethodunderwhichnogoodwillorintellectualpropertywasrecognised.Duringthereportingyear,theinvestmentcontinuedtobeaccountedforundertheequityaccountingmethoduntil 1December2016.On2December2016, theCompanyacquired the remaining65% interest in theEnergyMadeCleanGroup(refertonote32)andthereafterwasconsolidated(refertonote12).

**At30June2016theCompanyhelda35%interestintheEnergyMadeCleanGroup,whoonhelda50%interestinEMCKimberleyPtyLtd.TheCompanythereforeindirectlyhelda17.5%inEMCKimberleyPtyLtd.OntheCompanyacquiringtheremaining65%oftheEnergyMadeCleanGroupon2December2016itsinterestinEMCKimberleyPtyLtdincreasedto50%.AsEMCKimberleyPtyLtdisajointventurearrangementwithitsother50%shareholder,theGroup’sinterestinEMCKimberleyPtyLtdisrecognisedasaninterestinanassociateutilisingtheequitymethod.

a) Energy Made Clean Group

ENERGY MADE CLEAN (EMC) GROUP

01.12.2016 30.06.2016

$ $

Summarised statement of financial position

Currentassets 7,977,402 7,969,874

Non-currentassets 1,097,362 1,061,098

Totalassets 9,074,764 9,030,972

Currentliabilities 6,628,817 4,901,016

Non-currentliabilities 144,523 174,301

Totalliabilities 6,773,340 5,075,317

Netassets 2,301,424 3,955,655

1 JULY 2016 TO 1 DECEMBER 2017

30.06.2016

$ $

Summarised statement of profit or loss and other comprehensive income

Revenue 7,070,350 16,588,016

Expenses (8,724,581) (16,921,078)

Lossbeforeincometax (1,654,231) (333,062)

Incometaxexpense - 988,606

(Loss)/Profitafterincometax (1,654,231) 655,544

Totalcomprehensive(loss)/income (1,654,231) 655,544

30.06.2017 30.06.2016

$ $

Reconciliation of the consolidated entity's carrying amount

Openingcarryingamount 5,047,919 4,676,027

ProfessionalfeesrelatedtoinvestmentinEnergyMadeClean 19,196 -

Shareof(loss)/profitafterincometax (578,981) 371,892

ReversalofcarryingamountofinterestinEnergyMadeCleanuponcessationofequityaccounting

(4,488,134) -

Closingcarryingamount - 5,047,919For

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30.06.2017 30.06.2016

$ $

Adjustment to fair value of interest in the Energy Made Clean on acquisition of the remaining 65% interest in Energy Made Clean

35%shareofidentifiablenetassetsatfairvalue(refertoNote32) 2,852,033 -

CarryingamountofequityaccountedinvestmentinEnergyMadeCleanpriorto100%acquisition

(4,488,134) -

Lossrecognisedonfairvaluere-measurementofthe35%interestinEnergyMadeClean

(1,636,101) -

b) EMC Kimberley

EMC KIMBERLEY

30.06.2017

$

Summarised statement of financial position

Currentassets 720,869

Totalassets 720,869

Currentliabilities 20,897

Totalliabilities 20,897

Netassets 699,972

Summarised statement of profit or loss and other comprehensive income

Revenue -

Expenses (49,458)

Lossbeforeincometax (49,458)

Incometaxbenefit 14,837

Lossafterincometax (34,621)

Totalcomprehensiveloss (34,621)

Reconciliation of the consolidated entity’s carrying amount

Openingcarryingamount -

InterestacquiredonpurchaseofEnergyMadeClean 100

Shareoflossafterincometax-limitedtovalueofinvestment (100)

Closingcarryingamount -

NOTE 32: BUSINESS ACQUISITION

On2December2016,theCompanyacquiredtheremaining65%oftheEnergyMadeCleanGroup(refertoNote31)forconsiderationof$14,164,727consistingofshares,cashandcontingentcash.Accordingly,underaccountingstandardsat2December2016,theequityaccountingmethodwasdiscontinuedandtheEnergyMadeCleanGroup(“EMC”)wasfullyconsolidatedintotheCompanyaccounts.At31December2016,theGrouphadnotcompletedtheinitialaccountingforthebusinesscombinationandthereforedisclosedprovisionalamountsinits31December2016interimfinancialreport.At30June2017,theacquisitionaccountingofEMChadbeenfinalised.

Assets acquired and liabilities assumed

ThefairvaluesoftheidentifiableassetsandliabilitiesofEnergyMadeCleanasatthedateofacquisitionwereasfollows:

FAIR VALUE

$

Cashandcashequivalents 1,751,678

Currenttradeandotherreceivables 3,779,271

Inventories 2,165,464

Othercurrentassets 280,989

Property,plantandequipment(refertoNote14(a)) 893,514

Intangible–microgrid/batterytechnologydevelopmentassets(refertoNote15(b)) 5,847,244

Othernon-currentassets 203,848

Interestbearingliabilities (507,477)

Tradeandotherpayables (5,838,869)

Short-termprovisions(refertoNote18) (282,471)

Non-currenttradeandotherpayables (144,523)

Totalidentifiablenetassetsatfairvalue 8,148,668

Fairvaluere-measurementofinterestinEnergyMadeCleanpriorto100%acquisition(refertoNote31)

(2,852,033)

Goodwill(refertoNote15(c)) 8,868,092

Purchase consideration 14,164,727

Representing:

Cashpaidtovendor 1,600,000

Fairvalueofsharesissued(refertoNote20) 11,885,714

Fairvalueofcontingentcash(refertoNote17) 679,012

14,164,726

Cashusedtoacquirebusiness,netofcashacquired:

Cashpaidtovendor 1,600,000

Less:cashandcashequivalentsacquired (1,751,678)

Less:othernon-currentassets(deposits)acquired (112,635)

Netcashinflow (264,313)

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8786 NOTES TO THE FINANCIAL STATEMENTSCARNEGIE CLEAN ENERGY ANNUAL REPORT 2017


TheamountofrevenueandprofitorlossofEMC(theacquiree),excludinginter-companytransactions,sinceacquisitiondateupto30June2017includedintheConsolidatedStatementofComprehensiveIncomewas:

• Revenue$4,136,056

• Loss$5,937,105

Hadtheacquisitionoccurredon1July2016thefullyearcontributiontorevenuesandtheconsolidatedlossaftertaxwouldhavebeen:

• Consolidatedrevenue$8,515,059

• Consolidatedloss$18,028,457

NOTE 33: INVENTORY

2017

$

Balanceasof1July2016 -

Add:Inventoryacquiredaspartofbusinessacquisition(refertoNote32) 2,165,464

Add:Purchasesduringperiod 5,204,678

Less:Costofgoodssold (5,980,924)

Balanceasof30June2017 1,389,218

Inventory may be broken down as follows:

Rawmaterials 464,660

Goodsintransit 111,365

Workinprogress 813,193

Totalinventoryatthelowerofcostandnetrealisablevalue 1,389,218

NOTE 33: COMPANY DETAILS

TheregisteredofficeandPrincipalplaceofbusinessoftheCompanyis:

Carnegie Clean Energy Limited 21 Barker StreetBelmont WA 6104

DIRECTORS’DECLARATIONCARNEGIECLEANENERGYANNUALREPORT2017

DIRECTORS’ DECLARATION

TheDirectorsoftheCompanydeclarethat:

1. thefinancialstatementsandnotes,assetoutonpages41to86,areinaccordancewiththeCorporationsAct2001and:

a. complywithAccountingStandardsandthe Corporations Regulations 2001;

b. giveatrueandfairviewofthefinancialpositionasat30June2017andoftheperformancefortheyearendedonthatdateoftheConsolidatedGroup;

2. thefinancialstatementscomplywithInternationalFinancialReportingStandardsassetoutinNote1;

3. theremunerationdisclosuresthatarecontainedintheRemunerationReportintheDirectorsReportcomplywiththeCorporations Act 2001 andtheCorporations Regulations 2001;and

4. theManagingDirectorandChiefFinanceOfficerhaveeachdeclaredthat:

a. thefinancialrecordsofthecompanyforthefinancialyearhavebeenproperlymaintainedinaccordancewithsection286oftheCorporations Act 2001;

b. thefinancialstatementsandnotesforthefinancialyearcomplywiththeAccountingStandards;and

c. thefinancialstatementsandnotesforthefinancialyeargiveatrueandfairview;

5. IntheDirector’sopinion,therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.

ThisdeclarationismadeinaccordancewitharesolutionoftheBoardofDirectors.

DR MICHAEL EDWARD OTTAVIANO GRANT JONATHAN MOONEY Managing Director Director

Datedthis22dayofSeptember2017

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CARNEGIE CLEAN ENERGY LTD

REPORT ON THE AUDIT OF THE FINANCIAL REPORT

Opinion WehaveauditedthefinancialreportofCarnegieCleanEnergyLtd(theCompany)anditssubsidiaries(theGroup),whichcomprisestheconsolidatedstatementoffinancialpositionasat30June2017,theconsolidatedstatementofprofitorlossandothercomprehensiveincome,theconsolidatedstatementofchangesinequityandtheconsolidatedstatementofcashflowsfortheyearthenended,notescomprisingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformationandtheDirector’sDeclaration.

Inouropinion, theaccompanyingfinancial reportof theGroup is inaccordancewiththeCorporations Act 2001; including:

(a) givingatrueandfairvalueoftheGroup’sfinancialpositionasat30June2017andofitsfinancialperformancefortheyearendedonthatdate;and

(b)complyingwithAustralianAccountingStandardsandtheCorporations Regulations 2001.

Basis for Opinion WeconductedourauditinaccordancewithAustralianAuditingStandards.Ourresponsibilitiesunderthosestandardsarefurtherdescribedinthe Auditor’s Responsibilities for the Audit of the Financial Reportsectionofthisreport.Weare independentoftheGroupinaccordancewiththe independencerequirementsoftheCorporations Act 2001 andtheethicalrequirementsoftheAccountingProfessionalandEthicalStandardsBoard’sAPES 110 Code of Ethics for Professional Accountants(theCode)thatarerelevanttoourauditofthefinancialreportinAustralia;andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeCode.

Weconfirmthattheindependencedeclarationrequiredbythe Corporations Act 2001,whichhasbeengiventothedirectorsoftheCompany,wouldbeinthesametermsifgiventothedirectorsasatthetimeofthisauditor’sreport.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforouropinion.

Key Audit MattersKeyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditofthefinancialreportofthecurrentyear.Thesematterswereaddressedinthecontextofourauditofthefinancialreportasawhole,andinformingouropinionthereon,butwedonotprovideaseparateopiniononthesematters.Foreachmatterbelow,ourdescriptionofhowourauditaddressedthematterisprovidedinthatcontext.

INDEPENDENTAUDITOR’SREPORT CARNEGIECLEANENERGYANNUALREPORT2017

EMC ACQUISITION ACCOUNTING

KEY AUDIT MATTER AND WHY HOW OUR AUDIT ADDRESSED THE MATTER

Duringtheyear,theGroupincreaseditsownershipinterestintheprojectengineeringbusinessEnergyMadeClean(EMC)from35%to100%,resultinginachangeinaccountingmethod,fromequityaccountingtoconsolidation.

Theacquisitionoftheremaining65%interestoccurredon2December2016.Theinitialaccountingfortheacquisitionwasincompleteat31December2016,resultingintheCompanyrecognisinganddisclosingtheassetsacquired,liabilitiesassumedandresultinggoodwillonaprovisionalbasis,aspermittedbyAASB3–BusinessCombinations.

TheGroupsubsequentlyengagedavaluationexperttoindependentlyvaluethepurchaseconsiderationandtheidentifiableassetsandliabilitiesofEMC,forthepurposesoffinalisingtheacquisitionaccounting.

Wefocusedonthisareadueto:

■ Thecomplexity involved todetermine thegainorloss to be recognised on the discontinuation ofequityaccountingoftheownershipinterestinEMC,anditssubsequentconsolidationfrom2December2016;

■ Theacquisitionaccountinginvolvingtheestimationof the fair value of the purchase consideration(including the contingent considerationcomponents), assets and liabilities and theidentification and valuation of certain identifiableintangibleassetsandgoodwill;and

■ Significant judgement involved in relation to theassumptions used in the valuation and purchasepriceallocationprocess.

Ourproceduresincluded:

■ Ensuringthechangeinaccountingbasis,fromtheequity method to consolidation accounting, wascorrectlymeasuredandrecognised inaccordancewithAustralianAccountingStandards;

■ Inspecting the key terms in the Share PurchaseAgreement;

■ Reading the independent valuation reportpreparedbyManagement’sExpert;

■ Challenging the critical assumptions usedby Management’s Expert in relation to theidentification and recognition of assets andliabilitiesandtheassociatedfairvalues,byinvolvingour technicalaccountingandvaluationspecialiststo question Management’s Expert and concludeonthereasonablenessofthekeyassumptionsusedindetermining the fair valuesandpurchasepriceallocation,adoptedbytheGroup;

■ Assessingtheaccountingentriesusedtorecordtheacquisition,theassetsandliabilitiesofEMCattheacquisitiondate;

■ Assessing the fair valueadjustmentsmade to theprovisional amounts, to reflect the completion oftheacquisitionaccountingprocess;and

■ Assessingtheskills,competenceandobjectivityofManagement’sExpert.

WealsoconsideredtheappropriatenessoftheinformationcommunicatedinthedisclosuresincludedinNotes1,15,17,31and32.


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VALUATION OF GOODWILL AND OTHER INTANGIBLE ASSETS


Theimpairmentofgoodwillandotherintangibleassetsisakeyauditmatteras:

■ goodwill and other intangible assets represented76%oftheGroup’stotalassetsat30June2017;

■ the100%acquisitionofEMCduringDecember2016required theGroup to reassess thedeterminationofcashgeneratingunits(CGU’s);

■ a significant level of judgement is applied whenconsidering Management’s assessment ofimpairmentofgoodwillandotherintangibleassets(with both finite lives and indefinite useful lives),especiallyinrelationtoforecastcashflows,discountrates applied, assumptions underlying forecastgrowthandterminalgrowthrateassumptions;

■ thesectorsinwhichtheGroupoperatesexperiencescompetitivemarketforceswhichcanincreasetheuncertaintyofforecastcashflowsusedinvaluationmodels;and

■ a significant level of judgement is required inassessing the extent to which other intangibleassets with finite useful lives (computer software,technologyandintellectualproperty)willgeneratesufficienteconomicbenefitstosupportthecarryingvalue of these capitalised costs, as estimated byManagement.


■ assessing Management’s determination of theGroup’sCGU’sbasedonourunderstandingofthenatureoftheGroup’sbusinessandthechangestothatbusinessasaresultoftheacquisitionofEMC.WealsoanalysedtheinternalreportingoftheGrouptoassesshowoperatingperformanceismonitoredby, and reported to, the Group’s chief operatingdecisionmakers;

■ using the assistance of our technical accountingandvaluationspecialiststochallengethevaluationmethodologies employed by Management’sExperts, includingkeyassumptionsandestimatesusedtodeterminetherecoverablevalue,includingthoserelatingtodiscountrates,growthassumptionsandterminalgrowthrates.ThisincludedcomparingtheGroup’sinputstoexternallysourceddata,aswellasinformationobtainedbyusduringthecourseofourauditprocedures;

■ interrogating the sensitivity analysis prepared byManagement’s Expert in relation to the discountrates, growth rates and terminal growth rates, asa means of further challenging Management’sassumptions;

■ assessing and challenging Management’sevaluationoftheestimatedusefullivesofcomputersoftware, technology and intellectual property, aswellastheirevaluationofindicatorsthatsuchassetsmaybe impaired. In assessing this, we comparedthe assumptions underlying the estimated futurebenefitstoourunderstandingofthebusinessandrelevanteconomicandindustryfactors;

■ evaluating the recognition criteria applied to thecostsincurredandcapitalisedduringthefinancialyear against the requirements of the accountingstandards;and


INDEPENDENTAUDITOR’SREPORTCARNEGIECLEANENERGYANNUALREPORT2017

RECOGNITION OF REVENUE


FollowingtheacquisitionofEMC,themajorityoftheGroup’srevenuenowrelatestorevenuegeneratedfromcontractingactivities.Revenueismeasuredbasedoneitherthestageofcompletionofcontractsoronthesatisfactionofcontractmilestones.Incaseswhenrevenueisbasedonthestageofcompletion,thisiscalculatedontheproportionoftotalcostsincurredatthereportingdatecomparedtoManagement’sestimationoftotalcostsofthecontract.Wefocusedonthesetypesofcontractsduetothehighlevelofmanagementestimationinvolved,inparticularrelatingto:

■ forecasting total cost to complete at initiation ofthecontract;and

■ the recognition of variations and claims, basedon assessment by the Group as to whether it isprobablethattheamountwillbeapprovedbythecustomerandthereforerecovered.


■ documentingourunderstandingofManagement’sprocesses and controls regarding accounting fortheGroup’scontractrevenues;

■ testingthedesign,implementationandoperatingeffectivenessof theGroup’scontrolsovercontractrevenuesincluding:

• contractauthorization;

• management’s review and assessmentof significant changes in work in progressbalances;

• incaseswhererevenueisbasedonthestageof completion of contracts, ensuring thatinvoices are raised only after the appropriateManagement review and approval andcustomerconfirmation;and

• in cases where revenue is based on thesatisfaction of contract milestones, ensuringthat invoices are raised upon reaching thecontract milestones or upon receipt ofconfirmation from the customer that thecontractmilestoneshavebeenachieved.



VALUATION OF GOODWILL AND OTHER INTANGIBLE ASSETS


■ comparing the recoverable amount of eachimpairmentassessmenttothetotalcarryingvalueoftheassetsincludedineachoftheCGU’s,includingquestioningwhetheritwasappropriatetoincludeor exclude assets in the CGU and evaluating theresultant headroom for reasonableness based onour understanding of theGroup’s operations andthemarketforcesthatimpactit.

WealsoconsideredtheappropriatenessoftheinformationcommunicatedinthedisclosuresincludedinNotes1and15.

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Other InformationThedirectorsare responsible for theother information.Theother informationcomprises thedirectors’ reportandsecurities information included in the annual report for the year ended 30 June 2017, but does not include thefinancialreportandourauditor’sreportthereon.

Ouropiniononthefinancialreportdoesnotcovertheotherinformationandwedonotexpressanyformofassuranceconclusionthereon.


Inconnectionwithourauditofthefinancialreport,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialreportorourknowledgeobtainedintheauditorotherwiseappearstobemateriallymisstated.

If,basedupontheworkwehaveperformed,weconcludethatthereismaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

Directors’ Responsibilities ThedirectorsoftheCompanyareresponsibleforthepreparationofthefinancialreportthatgivesatrueandfairviewinaccordancewithAustralianAccountingStandardsandtheCorporationsAct2001andforsuchinternalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationofthefinancialreportthatgivesatrueandfairviewandisfreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingthefinancialreport,thedirectorsareresponsibleforassessingtheGroup’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccounting,unlesstheDirectorseitherintendtoliquidatetheGrouporceaseoperations,orhavenorealisticalternativebuttodoso.

Auditor’s Responsibility for the Audit of the Financial ReportOurobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialreportasawholeisfreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithAustralianAuditingStandardswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthefinancialreport.

As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement andmaintainprofessionalscepticismthroughouttheaudit.Wealso:

• Identifyandassesstherisksofmaterialmisstatementofthefinancialreport,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

• Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheGroup’sinternalcontrol.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebythedirectors.

• Concludeontheappropriatenessofthedirectors’useofthegoingconcernbasisofaccountingand,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsandconditionsthatmaycastsignificantdoubtontheGroup’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentionintheauditor’sreporttotherelateddisclosuresinthefinancialreportor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor’sreport.However,futureeventsorconditionsmaycausetheGrouptoceasetocontinueasagoingconcern.



RECOGNITION OF REVENUE


■ WeobtainedManagement’slistingofprojectsstartedandcompletedduringtheyearaswellasthosethatwere incomplete at30 June 2017 and used dataanalytic routines to select a sampleof contracts fortesting.Ourproceduresincluded:

- Checking the mathematical accuracy of thereconciliationandrecalculating;

• Cumulativerevenuerecognisedtodate;

• Estimatedattributableprofitmarginforthecontract;

• Cumulativeprogressbillingstodate;

• Amountsdueto/fromCustomers;and

• Cumulativeattributableprofits.

- Agreeingthestageofcompletionortheattainmentofcontractmilestones, tocorrespondencefromcustomersandcertificationsfromtherespectiveprojectmanagers;

- Ensuringthetotalprojectrevenuefortheyearforallcontractsagreedtotheamountsrecognisedanddisclosedinthefinancialstatements;

- Ensuring that the Amounts Due to/fromCustomersatyearend,havebeenappropriatelyrecognised and disclosed in the financialstatements;and

- For contracts where it is probable that totalcontractcostswillexceedtotalcontractrevenue,ensure that the expected loss is recognisedimmediately, in accordance with AASB 111 – Construction Contracts.

WealsoconsideredtheappropriatenessoftheinformationcommunicatedinthedisclosuresincludedinNotes1,2,10and17.

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• Evaluatetheoverallpresentation,structureandcontentofthefinancialreport,includingthedisclosuresandwhetherthefinancialreportrepresentstheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

• Obtainsufficientappropriateauditevidenceregardingthefinancial informationoftheentitiesorbusinessactivitieswithintheGrouptoexpressanopinionontheGroupfinancialreport.Weareresponsibleforthedirection,supervisionandperformanceoftheGroupauditandremainsolelyresponsiblefortheauditopinion.

Wecommunicatewiththedirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

Wearealsorequiredtoprovidethedirectorswithastatementthatwehavecompliedwithrelevantethicalrequirementsregardingindependence,andtocommunicatewiththemallrelationshipsandothermattersthatmaybereasonablybethoughttobearonourindependence,andwhereapplicable,relatedsafeguards.

From the matters communicated to the directors, we determine those matters that were of most significanceintheauditofthefinancial reportofthecurrentyearandarethereforethekeyauditmatters.Wedescribethesematters inourauditor’s reportunless lawor regulationprecludespublicdisclosureabout thematterorwhen, inextremelyrarecircumstances,wedeterminethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.

REPORT ON THE REMUNERATION REPORT

Opinion on the Remuneration ReportWehaveauditedtheRemunerationReportincludedinpages36to39ofthedirectors’reportfortheyearended30June2017.

Inouropinion,theRemunerationReportofCarnegieCleanEnergyLtdfortheyearended30June2017complieswithsection300AoftheCorporations Act 2001.

ResponsibilitiesThedirectors of theCompany are responsible for thepreparation andpresentation of theRemunerationReportinaccordancewith section300Aof theCorporationsAct2001.Our responsibility is toexpressanopinionon theRemunerationReport,basedonourauditconductedinaccordancewithAustralianAuditingStandards.

CYRUS PATELL Partner

CROWE HORWATH PERTH

SignedatPerth,22September2017



ADDITIONAL INFORMATION

AdditionalinformationrequiredbytheAustralianStockExchangeLimitedListingRulesandnotdisclosedelsewhereinthisreport.Theinformationwaspreparedbasedonshareregistryinformationprocessedupto31August2017.

SPREAD OF HOLDINGS NUMBER OF HOLDERS OF ORDINARY SHARES

1 - 1,000 257

1,001 - 5,000 622

5,001 - 10,000 1,162

10,001 - 100,000 5,246

100,001 - andover 3,568

Number of Holders 10,855

Number of shareholders holding less than a marketable parcel 3,000

SUBSTANTIAL SHAREHOLDERS

Shareholder Name Number of Shares

JohnRixDavidson 297,366,738

Voting RightsAllordinarysharescarryonevotepersharewithoutrestriction.Optionsforordinarysharesdonotcarryanyvotingrights.

Statement Of Quoted SecuritiesListedontheAustralianStockExchangeare2,599,475,784fullypaidshares.Allordinarysharescarryonevotepersharewithoutrestriction.

Optionsforordinarysharesdonotcarryanyvotingrights.

Company SecretaryThenamesofthejointCompanySecretariesareGrantJonathanMooneyandAidanJohnFlynn.

MrMooneyistheprincipalofPerth-basedcorporateadvisoryfirmMooney&PartnersPtyLtd,specialisingincorporatecomplianceadministrationtopubliccompanies.

Currently,MrMooneyactsasCompanySecretarytoseveralASXlistedcompaniesacrossavarietyofindustriesincludingtechnology,resourcesandenergyandhasobtainedadepthofexperiencethroughhisinvolvementinadiversityofcorporatetransactions.HeisamemberoftheInstituteofCharteredAccountantsinAustralia.

MrFlynn,isthecompany’sChiefFinancialOfficerandhasover17yearsofexperienceinaccountingandfinanceandtheenergyindustry.

MrFlynnisaCPAandholdsaBachelorofScienceandaBachelorofCommerceaswellaspostgraduatequalificationsinenergystudies.

ADDITIONALINFORMATION CARNEGIECLEANENERGYANNUALREPORT2017

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96 97ADDITIONALINFORMATION CARNEGIECLEANENERGYANNUALREPORT2017

ADDITIONALINFORMATION CARNEGIECLEANENERGYANNUALREPORT2017


TWENTY LARGEST HOLDERS OF EACH CLASS OF QUOTED EQUITY SECURITIES

ORDINARY FULLY PAID SHARES

SHAREHOLDER NAME NUMBER OF SHARES PERCENTAGE OF CAPITAL

JOHNRIXDAVIDSON 297,366,738 11.44%

LOGCREEKPL 116,819,904 4.49%

UILLTD 101,330,192 3.90%

CLEANENERGYINVHLDGSLT 35,294,117 1.36%

OTTAVIANOMICHAEL 35,000,000 1.35%

CATHBENPL 30,321,026 1.17%

CITICORPNOMPL 28,578,703 1.10%

BNPPARIBASNOMPL 21,419,694 0.82%

FRASER MATTHEW PETER 19,265,032 0.74%

HSBCCUSTODYNOMAUSTLTD 16,495,170 0.63%

JPMORGANNOMAUSTLTD 15,222,616 0.59%

ALCOCKSUPERFUNDPL 12,728,220 0.49%

RICHCABPL 12,727,752 0.49%

MENDAYMALCOLMJOHN 8,822,226 0.34%

LOGCREEKPL 8,545,455 0.33%

KATTAGANNAPL 8,513,045 0.33%

RHODES DAMIEN TERENCE M 8,000,000 0.31%

RICHCABPL 7,753,000 0.30%

MASTERSLYNSAY+JANET 7,742,541 0.30%

BROWN-NEAVESSUPERPL 7,210,528 0.28%

TOTAL 501,789,221 19.30%

Registered OfficeTheregisteredofficeisat21BarkerStreet,Belmont,WA6104

Thetelephonenumberis(08)61688400

Thefacsimilenumberis(08)62304925


HOLDERS OF SECURITIES IN AN UNLISTED CLASS

OPTIONS

OPTIONHOLDER NAME NO. OPTIONS EXERCISE PRICE VESTING DATE EXERCISE DATE

MrJeffreyHarding 5,000,000 6.5cents 25November2013 24November2018

MrMichaelFitzpatrick 5,000,000 6.5cents 25November2013 24November2018

MrKieranO'Brien 10,000,000 6.5cents 25November2013 24November2018

MrJohnLeggate 5,000,000 6.5cents 25November2013 24November2018

GrantMooney 15,000,000 6.5cents 25November2013 24November2018

In addition to the options detailed above there are 20,100,000 unlisted options on issue under the Company’sEmployeeShareOptionPlan.

HOLDERS OF RESTRICTED SECURITIES

SHARES

SHAREHOLDER NAME NUMBER OF SHARES PERCENTAGE OF CAPITAL

JOHNRIXDAVIDSON 297,142,857 11.43%

148,571,428oftherestrictedsecuritiesareescroweduntil6December2017and148,571,429oftherestrictedsecuritiesareescroweduntil6December2018.

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98 COMPANY DIRECTORYCARNEGIECLEANENERGYANNUALREPORT2017

DIRECTORSJeffrey HardingB.Eng,B.Com,MBA,FAICD(Chairman)

Dr Michael E Ottaviano B.Eng,MSc,DBA,MAICD,M.I.EngAus(CEOandManagingDirector)

Kieran O’BrienB.Eng,MBA,MEngSc,FIEI,FIEE(ExecutiveDirector)

John Davidson(ExecutiveDirector)

Michael Fitzpatrick B.Eng(Hons),B.A(Hons), (Non-ExecutiveDirector)

John LeggateCBE,FREng(Non-ExecutiveDirector)

Grant MooneyB.Bus,CA(Non-ExecutiveDirectorandCompanySecretary)

COMPANY SECRETARIESGrant .MooneyB.Bus,CA(Non-ExecutiveDirector)

Aidan FlynnB.Comm.BSc,CPA,PostGraduateDip.Re(ChiefFinancialOfficer)

REGISTERED OFFICE21BarkerStreet Belmont,WA6104

T: +61(8)61688400 F: +61(8)62304925 E: [email protected] www.carnegiece.com

AUDITORSCrowe Horwath256StGeorgesTerrace, PerthWA6000

SOLICITORSHerbert Smith FreehillsQV1Building 250StGeorgesTerrace Perth,WA6000

SHARE REGISTRYSecurity Transfer Australia Pty Ltd770CanningHighway, Applecross6153WA T: +61(8)96282200 F: +61(8)93152233

STOCKEXCHANGETheCompany’ssecuritiesarequotedontheofficiallistoftheAustralianStockExchangeLimitedThehomeexchangebeingPerth 2TheEsplanade,Perth6000 WesternAustralia

ASXCODE:CCE

COMPANY DIRECTORY

Paper and printing credentials.ecoStarisanenvironmentallyresponsiblepapermadeCarbonNeutral. The greenhouse gas emissions of themanufacturingprocess including transportationof thefinishedproduct toBJBallPapersWarehouseshasbeenmeasuredbytheEdinburghCentre for CarbonNeutral Company and the fibre sourcehasbeenindependentlycertifiedbytheForestStewardshipCouncil(FSC). ecoStar is manufactured from 100% Post ConsumerRecycledpaper inaProcessChlorineFreeenvironmentundertheISO14001environmentalmanagementsystem.

Carbon Neutral.Pangolin Associates has assessed the Carbon Emissionsassociatedwith theproductionof theCarnegie Clean Energy Annual Report for 2017.Fromthesefindings,verifiedemissionreductionsunits(akaCarbonCredits)havebeenpurchasedandsurrendered to offset all emissions generated by the report’sproduction.

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ANNUALREPORT

Registered Offi ce 21 Barker Street Belmont WA 6104 +61 8 6168 8400 [email protected] www.carnegiece.com

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2017Carnegie Clean Energy LimitedABN 69 009 237 736

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Documents

2017 Carnegie Clean Energy Limited ABN 69 009 237 736 · 2017. 10. 13. · Mauritius, initiating the Garden Island Microgrid project and taking a 35% investment stake in EMC. The