1

2

1 KEY FIGURES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 . 1 S I M P L I F I E D C ON S OL I D A T E D I N C OM E S T A T E M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 . 2 S I M P L I F I E D C ON S OL I D A T E D B A L A N C E S H E E T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 . 3 S I M P L I F I E D C ON S OL I D A T E D S T A T E M E N T OF C A S H F L OW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 . 4 I N F OR M A T I O N O N C ON S O L I D A T E D N E T F I N A N C I A L D E BT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 . 5 I N F OR M A T I O N O N K E Y O P E RA T I ON A L D A T A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1 . 5 . 1 C U S T O M E R BA S E A N D V O L U M E S S O L D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 . 5 . 2 I N V E S T M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2 HIGHLIGHTS OF THE YEAR 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 . 1 M A RK E T C O N D I T I ON S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 . 2 OT H E R H I G H L I G H T S OF T H E Y E A R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3 ANALYSIS OF THE BUSI NESS AND THE CONSOLI DATED INCOME STATEMENT FOR 2015 AND 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3 . 1 OV E RV I E W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 3 . 2 S A L E S ( U N D E R " RE V E N U E F R OM OR D I N A RY A C T I V I T I E S " O N T H E I N C OM E S T A T E M E N T ) . . . . . . . . . . . . . . . . . . . . . . 1 4

3 . 2 . 1 C H A N G E I N G RO U P RE V E N U E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 3 . 2 . 2 C H A N G E I N RE V E N U E BY S E G M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4

3 . 3 G ROS S M A RG I N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 3 . 3 . 1 C H A N G E I N G RO U P G RO S S M A RG I N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 3 . 3 . 2 G RO S S M A RG I N BY S E G M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6

3 . 4 C U RRE N T OP E RA T I N G I N C OM E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 3 . 4 . 1 C H A N G E I N G RO U P C U RR E N T O P E RA T I N G I N C O M E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 3 . 4 . 2 C H A N G E I N C U RRE N T O P E RA T I N G I N C O M E BY S E G M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8

3 . 5 OP E RA T I N G I N C OM E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 3 . 6 N E T I N C O M E A N D N E T I N C O M E P E R S H A RE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0

4 ANALYSIS OF RESULTS OF DIRECT ENERGIE SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4 . 1 RE S U L T S F ROM D I RE C T E N E R G I E S A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 4 . 2 A L L OC A T I O N OF N E T E A RN I N G S A N D D I V I D E N D D I S T R I BU T I ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 4 . 3 D I V I D E N D D I S T R I BU T I O N D U R I N G T H E L A S T T H RE E F I S C A L Y E A RS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 4 . 4 T A BL E OF N E T E A RN I N G S F OR T H E L A S T F I V E F I S C A L Y E A RS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 4 . 5 N O N - T A X D E D U C T I B L E E X P E N S E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 4 . 6 I N F OR M A T I O N O N S U P P L I E R P A Y M E N T T E RM S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4

5 REVIEW OF CASH, CAPI TAL AND FINANCIAL DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 5 . 1 S H A RE H OL D E RS ' E Q U I T Y A N D N E T F I N A N C I A L D E BT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 5 . 2 E X T E RN A L F I N A N C I N G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 5 . 3 G RO U P C A S H F L OW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8

5 . 3 . 1 C A S H F L O W F RO M O P E RA T I N G A C T I V I T I E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 9 5 . 3 . 2 C A S H F L O W S F RO M I N V E S T I N G A C T I V I T I E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 5 . 3 . 3 C A S H F L O W S U S E D I N F I N A N C I N G A C T I V I T I E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1

5 . 4 RE S T RI C T I O N S O N T H E U S E O F C A P I T A L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 5 . 5 F I N A N C I N G S OU RC E S F O R F U T U RE I N V E S T M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2

6 OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 6 . 1 P OS T - C L OS I N G E V E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 6 . 2 F U T U RE P R OS P E C T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

7 DIVIDEND DISTRIBUTION POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 7 . 1 D I V I D E N D P A I D D U RI N G T H E L A S T T H RE E F I S C A L Y E A RS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 7 . 2 D I V I D E N D D I S T R I BU T I O N P O L I C Y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4

3

The notes on the Group's accounts for 2016 and 2015 were prepared on the basis of the financial statements in

accordance with IFRS standards adopted by the European Union and in effect for the applicable fiscal years, in

accordance with regulation 1606/2002 of 19 July 2002 on international standards. The reader is accordingly

invited to read the following information on the Group's financial position and results together with the Group's

audited consolidated financial statements, prepared in accordance with IFRS for the fiscal years ended on 31

December 2016 and 31 December 2015.

1 KEY F IGURES

1.1 SIMPLIFIED CONSOLIDATED INCOME STATEMENT

Fiscal year ended 31 December

€ m 2016

2015

Revenue from ordinary activities 1,692.4 1,016.5

Gross margin 233.8 148.5

Current operating income 86.8 34.0

Operating income 105.0 15.7

Financial income/(loss) (11.2) (3.7)

Net income from continuing operations 123.6 29.0

Net income 123.6 27.2

4

1.2 SIMPLIFIED CONSOLIDATED BALANCE SHEET

Fiscal year ended 31 December

€ m 2016

2015

Intangible assets 50.2 40.9

Property, plant and equipment 76.2 47.7

Deferred tax assets 66.5 40.8

Other non-current assets 30.3 16.1

Non-current assets 223.2 145.5

Inventory 38.5 36.2

Trade receivables 413.3 220.6

Other current assets 185.7 176.0

Cash and cash equivalents 368.9 35.2

Current assets 1,006.3 468.1

TOTAL ASSETS 1,229.5 613.6

TOTAL SHAREHOLDERS' EQUITY 217.5 (29.4)

Other non-current financial liabilities 182.8 114.8

Other non-current liabilities 59.7 88.6

Deferred tax liabilities 13.1 21.1

Non-current liabilities 255.6 224.5

Trade payables 242.6 187.8

Other current financial liabilities 145.7 69.1

Other current liabilities 368.1 161.5

Current liabilities 756.4 418.4 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,229.5 613.6

1.3 SIMPLIFIED CONSOLIDATED STATEMENT OF CASH FLOW

Fiscal year ended 31 December

€ m 2016 2015

Net cash flow from operating activities 219.0 (18.8)

Net cash flows from investing activities 117.7 (89.9)

Net cash flows used in financing activities (3.9) 109.4

Net change in cash and cash equivalents 332.8 0.7

Cash and cash equivalents at beginning of year 32.0 31.3

Cash and cash equivalents at end of year 364.8 32.0

5

1.4 INFORMATION ON CONSOLIDATED NET FINANCIAL DEBT

Fiscal year ended 31 December

€ m 2016

2015

Financial debt 328.5 183.9 Financial assets at fair value through profit or loss - -

Cash and cash equivalents (368.9) (35.2)

Cash and cash equivalents (gross) (368.9) (35.2) Margin calls paid (3.2) (60.6)

Net financial debt (43.6) 88.1

As part of the presentation of its 2016 financial statements, the Group has amended the definition of its net

financial debt, an aggregate not defined by accounting standards, and which is not directly visible in the Group's

financial statements.

This change is intended to reflect a balance between margin calls received and paid in the context of the energy

purchases and sells that the Group concludes with its counterparties and their impact on the Group cash and

cash equivalents

Net financial debt now corresponds to the difference between financial liabilities (including margin calls received)

and gross cash including margin calls paid.

6

1.5 INFORMATION ON KEY OPERATIONAL DATA

1.5.1 CUSTOMER BASE AND VOLUMES SOLD

The key operational data for activities conducted in France is as follows:

Fiscal year ended 31 December

Operational data

2016

2015

Information on number of customers (in thousands)

Number of customers at end of period (in thousands) 2,063 1,591

Average number of customers for the period (in thousands) 1,839 1,424

Information on volumes sold

Volumes of electricity sold (in Twh) 13.9 7.6

Volumes of gas sold (in Twh) 5.4 3.8

In Belgium, the Group had 50,000 clients as of end December 2016, and had sold 112 GWh of electricity and 368

GWh of gas.

1.5.2 INVESTMENTS

The total volume of investments made by the Company in 2016 was €64.5 million, compared with €71.4 million

in 2015.

The main investments (property, plant and equipment, intangible and financial assets) made during the period

are as follows:

Investments (consolidated) IFRS (in millions of €)

Fiscal year 2016 Fiscal year 2015

Intangible assets 32.9 24.7

Property, plant and equipment 31.6 46.7

Financial assets 0 0

TOTAL 64.5 71.4

These investments mainly concern:

Customer acquisition costs of €25.7 million in 2016 and €19.6 million in 2015. The Group capitalizes its

external customer acquisition costs, which are depreciated over a four year period based on the

customer attrition rate experienced by the Company;

Other intangible assets of €7.2 million in 2016 and €5.1 million in 2015 mainly related to IT tools

developed by the Company for its sales and management activities;

7

Property, plant and equipment for respectively, €31.6 million in 2016 and €46.7 million in 2015,

corresponding mainly in 2016 to the acquisition of the power plant in Marcinelle (amounting to €30.6

million in tangible assets) and in 2015 the acquisition of the power plant in Bayet (amounting to €45.5

million in tangible assets).

2 HIGHLIGHTS OF THE YE AR 2016

2.1 MARKET CONDITIONS

Gas and electricity prices have been very volatile during 2016, hitting lows during the first quarter of 2016 due

to an imbalance between supply and demand in Europe, before rising again, notably in the second half.

At the end of 2016, forward electricity prices in France settled at over €42/MWh for delivery in 2017 and nearly

€38.5/MWh for delivery in 2018, significantly higher than prices seen at the end of 2015 (around €33.5/MWh).

After approaching the €25/MWh mark in the first quarter of 2016, prices bounced back strongly, particularly

from September 2016 onwards, due to the shutdown of several nuclear reactors in France as part of

investigations by the Nuclear Safety Authority. Prices even briefly hit €50/MWh in November 2016 for 2017

delivery, before falling back during December, driven by an improvement in the prospects for a return to service

of the reactors that had temporarily been shut down.

Source: EEX

25

27

29

31

33

35

37

39

41

43

45

47

49

January-16 February-16 March-16 April-16 May-16 June-16 July-16 August-16 September-16 October-16 November-16 December-16

In €

/Mw

h

Change in electricity prices in France in 2016

Cal 17 Cal 18 Cal 19

8

Gas futures on the PEG North market settled at levels close to €19/MWh at the end of 2016, compared with a

level close to €16/MWh at the end of 2015.

Source: Powernext

This price hike is in particular related to the sharp rebound in the oil price of related to a tightening of the global

supply/demand balance which, accordingly, drove gas prices up.

2.2 OTHER HIGHLIGHTS OF THE YEAR

Continued sales spurred on by growth in France and Belgium

In 2016, the Group continued its strong growth in its customer portfolio.

At 31 December 2016 the customer portfolio in France stood at nearly 1,607,000 customer sites in electricity and

456,000 customers sites in gas, representing increases of nearly 29% and 33% compared to customer portfolio

figures at 31 December 2015, and an average increase of nearly 30%.

This growth drive, after a 2015 year already at very high levels of acquisition, is propelled by competitive and

innovative offers in electricity and gas, the roll-out of several national advertising campaigns, and the sponsoring

since 1 January 2016 of SA Vendée Cyclisme, Jean-René Bernaudeau's cycling team, which competes since then

under the name "Team Direct Energie".

Moreover, the cancellation of the regulated sales tariffs (TRVs) offered to non-residential customers with a

contracted power in excess of 36 kVA in electricity (yellow and green tariffs) and natural gas consumption above

30 MWh/year at 31 December 2015, enabled the Group to significantly strengthen its customer portfolio in the

business and local authority segments through targeted and customized offers along with strong sales

momentum.

At 31 December 2016, the Group supplied more than 359,000 non-residential sites compared to 254,000 at 31

December 2015.

This sales momentum also continued in Belgium where the Group recorded more than 50,000 customer sites at

31 December 2016 compared to around 25,000 at 31 December 2015.

10

12

14

16

18

20

January-16 February-16 March-16 April-16 May-16 June-16 July-16 August-16 September-16 October-16 November-16 December-16

In €

/Mw

h

Change in PEG North gas prices in €/ Mwh

Cal 17 Cal 18

9

Extension of the ERDF service contract

During the second quarter of 2016, the Group and ErDF (now ENEDIS) signed a one-year extension of the service

contract which had ended on 30 September 2015. This extension, which started retroactively on 1 October 2015,

generated a €29.3 million income in 2016.

Decision of the Conseil d’Etat (France's highest administrative court) on Regulated Tariffs for Electricity Sales

On 15 June 2016, the Conseil d’Etat cancelled two tariff decrees. The decree published on 28 July 2014 and which

cancelled the 5% increase in regulated residential blue tariffs to be implemented on August 1st 2014 was itself

cancelled on the grounds that the principle of legal certainty was not met in respect of blue tariffs for the period

between 1 August 2014 and 31 October 2014. Regarding the decree published on 30 October 2014, it was

cancelled on the grounds that it did not take into account retroactive tariff adjustments that were necessary in

the case of residential blue and green tariffs for the period between 1 November 2014 and 31 July 2015.

Since the retroactive tariff decrees were published on 1 October 2016, accrued income was recognized in the

amount of €14.2 million in the Group's financial statements at 31 December 2016 This amount corresponds to

the expected impact following the decision of the Conseil d'Etat on the Group's revenue. The issuance of the

corresponding retroactive invoices will begin during the first half of 2017.

Rider to the distribution contract with GRDF

By a decision of the CoRDiS taken the 19 September 2014 and establishing that the natural gas supplier was not

to assume the unpaid distribution costs, for the past and future, of the distribution operator (GRDF), and followed

by an injunction in January 2016 from the same CoRDiS to execute its decision, a contractual agreement was

formalized between the Parties during the first quarter of 2016. Under this agreement in late May 2016, GRDF

repaid Direct Energie the unpaid share of distribution costs incurred prior to 31 December 2015, amounting to

nearly €10 million. By a decision of 2 June 2016, the Paris Court of Appeal fully upheld the Cordis decision

concerning the unpaid share of distribution costs.

The Court of Appeal also held that the supplier was to be compensated for the services performed on behalf of

GRDF through which the end customer obtained access to the distribution networks. Pursuant to this decision,

and in addition of a financial compensation GRDF had to pay to Direct Energie at an agreed price for the past

(since the signing of the Distribution Network Access Agreement in 2005) but which was never implemented,

GRDF proposed Direct Energie an amendment to the Distribution Network Access Agreement setting a

remuneration which, according to Direct Energie, was not “proportionate and equitable to the costs avoided” by

GRDF.

No agreement was reached between the Parties, and as such, the Group has not yet recognized any related

income in its accounts.

The issue has thus been returned to the CoRDis, which has asked the Energy Regulatory Commission (Commission

de Régulation de l’Energie) for an inquiry in order to determine what compensation would be "proportionate

and equitable to the costs avoided" by GRDF. The CRE hired a consultant to perform this study with the suppliers

and the distribution system operators. The CRE is still investigating and should launch a consultation in the first

half of 2017, which should lead to a CORDIS decision in the course of 2017

Decision of the Conseil d’Etat on the Engie/CRE dispute

On 13 July 2016 the Conseil d’Etat issued a decision following Engie’s request to overturn, on the grounds of

excess power, the ruling handed down on 26 July 2012 by the French Energy Regulatory Commission concerning

10

communication of the services agreement concluded between Direct Energie and ERDF (now ENEDIS) on the

management of customers under a single contract, and the decision of 10 December 2014 rejecting the informal

appeal filed by Engie against this decision.

While finding that the appeal filed by Engie was submitted too late for examination, the Conseil d'Etat recognized

that the decision of 26 July 2012 was unlawful on the grounds that it provided that the agreement between

Direct Energie and ERDF was concluded for a transitory period and provided a remuneration that was limited to

suppliers with less than 1,750,000 customers having subscribed a single contract for electricity or gas. The Conseil

d'Etat thus ultimately upheld the argument that these two limits of the contract between ERDF and Direct Energie

were contrary to the principle requiring that the suppliers should not have to bear the costs generated by the

services they provide on behalf of the DSO’s (Distribution System Operators).

This decision expressly confirms the principle that the distribution system operator pays a supplier consideration

for management costs for customers that have a single contract.

The CRE, called upon to launch a consultation in the first half of 2017 and a debate during the second quarter of

2017, has launched a study to determine the appropriate level of compensation of suppliers by network

managers.

Decision of the Court of Justice of the European Union (CURIA) on the gas regulated tariffs

Following a question raised by the French Conseil d’Etat on 15 December 2014, regarding the compatibility of

the French gas regulated tariffs with the European Community law, the CURIA considered that they represent by

nature a restriction to competition, and that the coexistence of a “free price” market segment with a “fixed price”

market segment outside of competition principles is not compatible with a fully operational and competitive gas

market.

A decision of the Conseil d’Etat based on the legality of the French regulation regarding regulated gas tariffs is

expected in the course of 2017.

Implementation of the French capacity mechanism

Following the decision of the European Commission in early November 2016 which deemed the capacity market

proposed by France to be compatible with European regulations, the French capacity mechanism formally

entered into force.

This means that, as of 1 January 2017, electricity suppliers are required to hold capacity certificates covering the

needs of their customer portfolio at the peak of consumption, and that electricity producers must obtain

certificates, tradable on the market, as they become effectively available.

The first capacity auction, which took place on 15 December 2016, resulted in a price of approximately

€10,000/MW. Further auctions will take place in 2017 for the years 2017 and beyond.

The price of the capacity will be passed on, in accordance with the contractual provisions, to Group customers,

from 2017.

11

Provision for loss-making contracts on gas interconnection capacities

As part of its gas supply strategy, the Group concluded in 2009 several contracts with French (GRTgaz), Belgian

(Fluxys) and Dutch (GTS) gas transmission system operators for the reservation, from 2011, of gas import

capacities through Belgium, for periods extending through 2027. The purpose of these contracts was to ensure

security in the gas supply as part of the Group's activities over the long-term, according to the principles

governing the procurement of a licence to supply natural gas in France.

Beginning in 2013, the market environment brought to light the current system's inability to ensure security of

supply, resulting, in particular, in inadequate storage capacity subscriptions. The government therefore initiated

consultations to clarify the obligations incumbent on suppliers, and the available instruments. The specific aim

of these consultations was to reform the storage subscription obligations.

During these consultations, the Group maintained its consistent position, whereby, when defining supplier

obligations in terms of security of supply, due consideration should be given to all available modulation tools,

including those related to gas import capacities in France. However, pending the finalization of this reform and

without jumping to conclusions on the final outcome, the authorities have asked the Group to subscribe annual

storage capacities independently from its own gas interconnection capacities.

Following these consultations, the public authorities drafted the reform, which was reviewed by the Conseil

d’Etat in the second quarter of 2016, without taking into account the Group's proposals to explicitly consider the

gas import capacities of each supplier among the available instruments in terms of supply security.

Furthermore, in April 2016 the Conseil d’Etat, called to rule in the dispute initiated in 2014 by Eni and Uprigaz,

upheld that the authorities were entitled to impose an obligation on gas suppliers to subscribe storage capacities

to ensure supply security, without considering the interconnection capacities specific to each supplier as an

instrument allowing the latter to avoid the same. The matter was referred to the European Union Court of Justice

to resolve the issue concerning the geographical location of the storage areas included in meeting this obligation.

In those circumstances, and irrespective of the period of implementation of the reform draft, which had not yet

been completed as at the date of publication of the financial statements, contracts can no longer be considered

as able to participate directly in the obligations inherent in the Group's gas activities in terms of security of supply,

and this without any prospect of favorable short-term change in the regulation.

Accordingly, at the reporting date, these contracts on access to gas interconnections were treated as onerous

contracts under IAS 37, since:

- It is clearly no longer possible to regard these as capable of meeting the Group's obligations in terms of

security of supply; and

- The costs associated with these contracts over their remaining life, with no prospect of early

termination, are much higher than their market value.

A provision for contract loss of an amount of €31.6 million was accordingly recorded in the 2016 financial

statements.

Acquisition of a combined cycle gas turbine power plant in Belgium

On 30 December 2016, the Group announced the acquisition from the Italian group Enel of 100% of the share

capital in its subsidiary Marcinelle Energie. The latter, dedicated to power generation, owns and operates a

combined cycle gas turbine power plant located in Charleroi, Belgium with around 40 employees. Commissioned

in 2012 with a Siemens-Ansaldo technology, very similar to that held by the Group in Bayet (Allier), this plant has

an installed capacity of about 400 MW.

12

The transaction, fully paid in cash, amounted to €36.5 million in enterprise value and had no impact on the

Group's EBITDA or current operating income in 2016.

After acquiring the Bayet power plant at the end of 2015, this new transaction brings the Group's installed

capacity to nearly 800 MW. Agreed on competitive terms, this transaction also confirms the implementation of

the planned vertical integration strategy with a stronger presence upstream and downstream, thus enabling a

better coverage of the customer portfolio supply.

Strengthening of the Group's financial structure

During the first quarter of 2016, deposits paid in cash with the Group's counterparties to cover the changes in

fair value of forward energy sales and purchases until physical delivery, experienced strong increase, directly

related to the decline in wholesale electricity prices observed over the period.

The Group has secured new funding to absorb this increase:

- Shareholder loans for a total amount of €55 million ;

- A short-term credit line with the Group’s regulated clearing house, for a total amount of €55 million at

the closing date;

- A €60 million increase in its bank revolving credit facility rising the authorized amount to €120 million.

Because market prices rebounded during the rest of 2016, and in particular during the second half, the Group

repaid the shareholders loans early in the fourth quarter. In addition, at 31 December 2016, neither the short

term credit line nor the revolving credit facility were drawn.

Lastly, as part of the pursuit of its growth strategy, the Group proceeded with a new bond issue, in the form of a

private placement with institutional investors. This €68 million issue maturing in October 2023, has an annual

coupon of 3.25%, and strengthens the Group's financial flexibility.

At 31 December 2016, the Group thus had nearly €206 million in available short-term funding sources, in addition

to its available cash.

Direct Energie's shareholding structure

In fiscal year 2016, Direct Energie received legal declarations of crossing of thresholds under Article L.233 -7 of

the French Commercial Code, as described in Section 6.2.1.2. Changes in the distribution of capital over the past

three years of the Registration Document.

Furthermore, the Company was informed of the sale by Ecofin Ltd of its entire stake in the Company's capital,

totaling 1,684,656 shares representing 4.11% of Direct Energie's share capital, through an accelerated

bookbuilding offering executed on 15 June 2016 by Société Générale Corporate & Investment Banking and

Gilbert Dupont.

As part of this investment transaction, Impala SAS, AMS Industries and Luxempart SA acquired 60,000, 90,000

and 100,000 Company shares respectively; the balance (1,434,656 Company shares) being reclassified on the

market.

Direct Energie has been informed that this investment has not raised any question as to the balances that

preexisted in the original concert.

At the closing date of the fiscal year, the Company's shareholding remains structured around a majority concert

formed by Impala SAS, AMS Industries, Lov Group Invest and EBM Trirhena AG, representing some 70% of Direct

Energie's capital and distributed as follows:

13

(*) Calculated using the definition of the Euronext indexes (i.e. excluding: interests over 5% except mutual funds and

retirement funds and interests held by executives, managers, employees, shareholders bound by an agreement, the

treasury shares).

(**) Number of theoretical voting rights determined according to the status of the shareholders in the CACEIS books

as approved at 31 December 2016.

3 ANALYSIS OF THE BUSI NESS AND THE CONSOLI DATED INCOME STATEMENT FOR 2015 AND 2016

Analysis of the business and the consolidated income statement is performed at two levels for sales, gross margin

and current operating income. It is first conducted at Group level, then for the operating segments and their

various geographic regions. Operating profit and net income are only analyzed at Group level.

3.1 OVERVIEW

2016 saw an increase of 66.5% in revenue from ordinary activities, including the Energy Management Margin,

compared to 2015, reaching €1,692.4 million, due mainly to a spike in electricity and gas volumes sold, and the

full-year contribution of the Bayet electricity power plant acquired in December 2015, recorded in Energy

Management Margin.

Current operating income also increased by more than 155% over the period to stand at €86.8 million in 2016

(+€52.8 million compared to 2015). This growth mainly reflects (i) the continuing strong increase in the customer

portfolio (+30% on average) and volumes sold in France, (ii) optimized Group sourcing costs in the context of a

very volatile market during winter 2015-2016, and (iii) continued control of structural costs.

Net income for 2016 was €123.6 million, an increase of €96.3 million compared to 2015. This growth, outpacing

the growth in current operating income, is notably due to the positive change in the fair values of financial

derivatives operational in nature, a direct result of the rebound observed in market prices in the second half of

IMPALA SAS

AMS INDUSTRIES

LOV GROUP INVEST

EBM TRIRHENA AG

MAIN CONCERT

LUXEMPART

Management and others

Free float*

TOTAL

ShareholdersNumbers of

shares held

% of share

capital

Numbers of

voting rights **

% of voting

rights

14 427 751 34.77% 25 846 185 46.95%

6 105 806 14.71% 6 405 315 11.64%

4 474 544 10.78% 4 474 544 8.13%

4 167 870 10.04% 4 167 870 7.57%

29 175 971 70.31% 40 893 914 74.29%

4 191 741 10.10% 4 191 741 7.62%

2 675 553 6.45% 4 020 253 7.30%

41 498 860 100% 55 045 071 100%

5 455 595 13.15% 5 939 163 10.79%

14

2016 in particular, and the recording of tax income of close to €30 million, associated with the activation of

additional deferred taxes on temporary differences and Group tax loss carryforwards over a three-year period.

3.2 SALES (UNDER "REVENUE FROM ORDINARY ACTIVITIES" ON THE INCOME STATEMENT)

3.2.1 CHANGE IN GROUP REVE NUE

€ m 2016

2015

Change in value Change in %

Revenue from ordinary activities 1,692.4 1,016.5 675.9 66.5%

Group revenue, including the Energy Management Margin, amounted to €1,692.4 million in 2016, up by €675.9

million, i.e. 66.5%.

This growth is directly related to the performance of the Commercial trade segment, impacted in particular by

the very dynamic growth in electricity and gas supply in France to non-residential customers, a direct result of

the cancellation of the electricity and gas regulated sales tariffs for these customers on 31 December 2015.

Nevertheless, all the Group's activities contributed to this growth, including the Production segment with the

first full-year contribution of the Bayet electricity power plant, recorded under Energy Management Margin.

3.2.2 CHANGE IN REVENUE BY SEGMENT

€ m 2016

2015

Change in value Change in %

Commercial Trade 1,680.6 1,016.0 664.6 65.4%

Of which France 1,648.0 1,008.3 639.7 63.4%

Of which Belgium 32.6 7.7 24.9 322.5% Production 11.8 0.5 11.3 n.a.

Revenue from ordinary activities 1,692.4 1,016.5 675.9 66.5%

Commercial trade Segment

The commercial trade segment contributed €1,680.6 million to sales, up €664.6 million compared with 2015.

This increase is attributable for the most part to the gas and electricity supply business in France, in which

revenue rose significantly to €1,648.0 million compared with €1,008.3 million in 2015.

The Group's sales dynamic has allowed it to further expand its customer portfolio via a sustained pace of

acquisitions, amounting to nearly 600,000 electricity sites and 180,000 gas sites, representing an average

15

increase of +32% compared to 2015. Buoyed by these acquisitions, the customer portfolio at 31 December 2016

was slightly over 1,600,000 sites for electricity, an increase of 29% compared to December 31, 2015, and over

450,000 sites for gas, up 33% compared to December 31, 2015. Regarding the electricity customer portfolio, the

Group has taken advantage of the end of "yellow" and "green" regulated tariffs since 31 December 2015 which

resulted in significant entries of non-residential customers (industrial and commercial multi-site customers and

public authorities) at the beginning of the year. The average customer portfolio over the year has thus risen by

over 30%.

This growth in the customer portfolio has directly contributed to the significant increase in the volumes of

electricity and gas sold, being respectively 13.9 TWh, an increase of 85% compared to 2015, and 5.4 TWh, up

42% over the same period. As in 2015, temperatures in 2016 were on average relatively close to normal for the

seasons, with limited impact on unit consumptions. Growth of volumes delivered outstripped that of the

customer portfolio for electricity. This is primarily due to the spike in the number of non-residential customers,

especially "yellow" and "green" clients, whose unit consumptions are much higher than those of residential

customers.

In addition to the very significant increase in volumes sold, revenue from the electricity supply business in 2016

also benefited in the first half from the impact of the increase in regulated sales tariffs applied from 1 August

2015 solely on the segment of residential "blue" customers (revaluation of +2.5%). In the second half, this activity

had to cope with unfavorable changes in regulated sales tariffs applied from 1 August 2016, which led to a fall of

0.5% in the residential "blue" customer segment and of 1.5% in non-residential "blue" customers.

In contrast, regulated gas prices continued to drop during the period, directly linked to movements in the market

prices of gas and oil, the main components in the formula used to establish regulated prices. Between 2015 and

2016, this fall averaged around 15% in the Group's customer portfolio in France.

Moreover, the very high volatility observed in the electricity futures markets, particularly during the fourth

quarter of 2016, allowed the Group to conduct arbitrage operations resulting in a net contribution of €3.9 million,

recorded under Energy Management Margin.

Lastly, following the cancellation in June 2016 of two tariff decrees (decree of 28 July 2014 and 30 October 2014),

and the publication of retroactive tariff decrees on 1 October 2016, accrued income was recognized in the

financial statements in the second half of 2016 in the amount of €14.2 million. It corresponds to the expected

impact of the consequences of the decision of the Conseil d'Etat on the Group's revenue.

Revenue generated from the gas and electricity supply business in Belgium amounted to €32.6 million in 2016,

up €24.9 million compared to 2015, reflecting the very substantial growth of the customer portfolio. This is

directly attributable to the full-year impact of the marketing of gas and electricity supply offers throughout

Belgium, from the start of the second quarter of 2015, whereas sales had only taken place in Wallonia during the

first quarter. The ability to span the entire Belgian market accordingly boosted the number of new customers,

representing more than 40,000 sites in 2016. The customers portfolio thus amounted to more than 50,000 sites,

almost doubling compared to 31 December 2015.

Volumes sold increased correspondingly with 112 GWh of electricity and 368 GWh of gas sold in 2016.

16

Production Segment

Following the acquisition on 30 December 2015 of 3CB SAS, which operates a combined cycle gas turbine power

plant (CCGT) with an installed capacity of 408 MW, the Production segment included its net contribution over a

full year for the first time, recorded under Energy Management Margin. It amounted to €11.8 million over the

year with an annual production totaling close to 1.4 TWh.

As in 2015, the other production asset under development had no material impact on the segment's 2016

revenue.

3.3 GROSS MARGIN

€ m 2016

2015

Change in value Change in %

Revenue from ordinary activities 1,692.4 1,016.5 675.9 66.5% Cost of sales (1,458.7) (868.1) (590.6) 68.0%

Gross margin 233.8 148.5 85.3 57.5%

3.3.1 CHANGE IN GROUP GROSS MARGIN

The Group's gross margin amounted to €233.8 million in 2016, up by nearly €85.3 million, i.e. 57.5%. As with

revenue, this rise was mainly driven by growth in the Commercial trade segment, and in particular, the gas and

electricity supply business in France.

3.3.2 GROSS MARGIN BY SEGMENT

€ m 2016

2015

Change in value Change in %

Commercial Trade 224.6 147.9 76.7 51.8%

Of which France 220.2 147.5 72.7 49.3%

Of which Belgium 4.4 0.4 4.0 899.8% Production 9.2 0.5 8.6 1652.7%

Gross margin 233.8 148.5 85.3 57.5%

Commercial trade Segment

The Commercial Trade segment contributed €224.6 million to gross margin, up €76.7 million compared with

2015.

This increase is attributable in large part to the gas and electricity supply business in France, where the gross

margin rose significantly, from €147.5 million in 2015 to €220.2 million in 2016 (+49.3%), under the combined

effects of growth in the customer portfolio and volumes sold, in particular to non-residential customers, against

a background of temperatures close to seasonal averages.

17

In a context of very high volatility in the market prices of electricity in 2016, the sharp decline observed during

winter 2015-2016 having been followed by a sharp recovery which continued in the second half-year, the Group

has been able to optimize its supply conditions, with its electricity purchases progressing throughout the year at

a slower rate than volumes sold (+73% against +85%).

Besides, electricity supply benefited in 2016 from the net increase in residential regulated sales tariffs between

2015 and 2016 (+2.5% at 1 August 2015 and -0.5% at 1 August 2016 on the residential customer segment), as

well as from the one-year extension of the service contract with Enedis, retroactive to 1 October 2015. Together

with the growth in the customer portfolio, it resulted in an additional contribution of €10 million to the gross

margin in 2016 compared to 2015.

Gross margin in the segment was also directly impacted by the recording of accruals amounting to €14.2 million

in respect of tariff regularization generated by the publication of retroactive tariff decrees on 1 October 2016.

In terms of gas supply activity, the Group has been able to control its supply costs in a context of decreasing

market prices and regulated sales tariffs. However, the contribution of this activity to the gross margin was

negatively impacted by the recognition of a provision for onerous contract amounting to €31.6 million on the gas

interconnection capacity secured by the Group between Belgium, the Netherlands and France, in light of the

current regulatory environment and a bleak outlook for favorable developments in the short-term.

The gas and electricity supply business in Belgium generated a gross margin of €4.4 million in 2016 (compared to

€0.4 million in 2015). The very significant increases in the customer portfolio and volumes sold has enabled the

Group to optimize its electricity and gas sourcing strategy, taking particular advantage of the effect of lower

market prices in the first quarter of 2016, thus ensuring profitable business growth.

Production Segment

The gross margin in the Production segment amounted to €9.2 million, an increase of €8.6 million compared to

2015. This increase was a result of the acquisition of 3CB SAS at year-end 2015 and electricity generation during

the year, in a market that was relatively favorable for gas thermal assets.

3.4 CURRENT OPERATING INCOME

€ m 2016

2015

Change in value Change in %

Gross margin 233.8 148.5 85.3 57.5% Personnel expenses (34.6) (26.4) (8.2) 31.0%

Other operating income and expenses (83.2) (65.6) (17.7) 26.9%

Depreciation and amortisation (29.2) (22.5) (6.7) 29.7%

Current operating income 86.8 34.0 52.8 155.4%

18

3.4.1 CHANGE IN GROUP CURRENT OPERATING INCOME

The Group's current operating income amounted to €86.8 million in 2016, up 155.4% for the period. The

Commercial trade segment remained the main contributor to the Group's current operating income, particularly

sales in electricity and gas in France.

3.4.2 CHANGE IN CURRENT OPERATING INCOME BY SE GMENT

€ m 2016

2015

Change in value Change in %

Commercial Trade 92.5 34.7 57.7 166.2%

Of which France 97.3 39.1 58.2 148.9%

Of which Belgium (4.8) (4.4) (0.5) 10.5% Production (5.7) (0.8) (4.9) 645.2%

Current operating income 86.8 34.0 52.8 155.4%

Commercial trade Segment

The Commercial trade segment's contribution to current operating income was €92.5 million, up €57.7 million

compared to 2015. This reflects the sustained commercial momentum observed in the different segments in

which the Group operates, particularly in France, and especially the increase in the non-residential segment since

the regulated sales tariffs on the "yellow" and "green" electricity segments were cancelled on 31 December 2015,

against a background of sourcing cost optimization and control of operating expenses.

Current operating income of the Commercial trade segment in France amounted to €97.3 million, up by €58.2

million compared with 2015.

Employee expenses in this segment increased by €6.0 million. This increase is primarily due to the expansion of

the sales teams related (i) to the full-year impact of the increase in the sales force in 2015 to effectively address

the scheduled end (31 December 2015) of the regulated tariffs for some corporate customers, and (ii)

strengthening the customer services in order to maintain a consistent quality of service in line with the increase

in the Group's customer portfolio. Taking these changes into account, headcount was 333 employees at 31

December 2016 compared to 317 employees at 31 December 2015. Personnel expenses also included the

impacts associated with stock option plans, stable overall between 2015 and 2016, and profit-sharing which

increased by €1.9 million between 2015 and 2016 in line with the strong improvement in results. Excluding the

impact of these elements, payroll increased by €3.7 million to €(28.3) million at 31 December 2016 compared

with €(24.5) million at 31 December 2015.

Other income and operational expenses totaled €(66.8) million for fiscal year 2016 compared with €(59.9) million

in 2015, an increase of €(6.9) million. After signing in the second quarter of 2016 an amendment to its distribution

contract with GRDF including the implementation of the principle, established by the decision of the CoRDiS of

19 September 2014, that the natural gas supplier should not assume outstanding distribution costs incurred by

the distribution network operator (GRDF), both for the future than the past, GRDF reimbursed the Group almost

€10 million for its unpaid distribution costs prior to 31 December 2015.

Restated for this non-recurring impact, other operating income and expenses amounted to €(76.8) million at 31

December 2016 compared to €(59.9) million at 31 December 2015, an increase of €(16.9) million. It is mainly

explained by:

19

- An increase of €(10.0) million in marketing expenses, associated in particular with the intensification of

advertising campaigns and the ramp-up of the Group's digital presence over the year, as well as the

launch on 1 January 2016 of sponsorship of the SA Vendée Cyclisme team, now called Team Direct

Energie;

- A rise of €(8.7) million in external service provider expenses related both to the increase in customer

acquisitions in 2016 compared to 2015 and to the increase in the active customer portfolio over the

period;

- The impact of bad debt net of changes in provisions of €(13.1) million over the period compared to

€(19.9) million for the same period in 2015. This change reflects the Group's continued efforts in

managing its customer portfolio combined with its billing and collection terms;

- An increase in certain taxes for €(3.6) million, related in particular to the significant improvement in the

Group's main financial aggregates.

The negative impact of depreciation on current operating income in the segment increased by nearly €(1.6)

million in 2016 compared to 2015, in line with the continued acceleration of the commercial momentum which

automatically led to higher capitalized acquisition costs and Group investment, notably in information systems.

Current operating income for the Commercial trade segment in Belgium totaled €(4.8) million, against €(4.4)

million in 2015. This slight deterioration in current operating income, despite a strong increase in gross margin,

reflects the pursuit of market share gains across the whole of Belgium since 2015, requiring, despite significant

pooling of support functions, substantial direct investment, particularly in the sales and marketing areas, in order

to reach the critical size for this activity.

Production Segment

Current operating income for the Production segment amounted to a loss of €(5.7) million in 2016 compared to

a loss of €(0.8) million in 2015. In addition to recurring expenses related to various development projects carried

out by the Group, current operating income in 2015 was directly impacted by the acquisition of 3CB SAS which

has operated the Bayet power plant since early 2016 at merchant conditions. This contribution notably includes

the impact of the Group's decision to bring forward to mid-2017 a major recurring maintenance operation

initially planned for the second half of 2018, given the production outlook for the plant. This resulted in the

recognition of higher depreciations in 2016, relating to components due to be replaced during this operation.

3.5 OPERATING INCOME

€ m 2016

2015

Change in value Change in %

Current operating income 86.8 34.0 52.8 155.4%

Change in fair value of financial derivatives operational In nature

21.4 (11.6) 33.0 -283.9%

Disposals of non-current assets (2.5) (5.9) 3.5 -58.6%

Impairment of non-current assets (0.1) (0.5) 0.4 -79.7%

Income and expenses related to changes in scope of consolidation

(0.6) (0.1) (0.5) 422.4%

Operating income 105.0 15.7 89.2 567.2%

The change in fair value of Energy derivative financial instruments operational in nature represented income of

€21.4 million in 2016 compared to an expense of €(11.6) million in 2015. This year-on-year change, which has no

20

cash impact, stemmed mainly from the change in energy prices during the year. In 2016, the positive net impact

of these instruments comprised:

- a negative impact related to the decrease in the fair value of gas derivative financial instruments,

associated with the unwinding over the period of oil & gas hedging swaps whose fair value was strongly

positive at 31 December 2015,

- and a strong positive impact from the change in fair value of electricity derivative financial instruments,

directly related to the rise in market prices during 2016, above the closing prices in 2015, after having

hit low points in the first quarter. In 2015, the negative impact was directly attributable to the sharp

electricity price decline seen in the fourth quarter of 2015.

Disposals of non-current assets in 2016 consisted mainly of writing off fixed assets related to a combined cycle

gas turbine project which had become obsolete as a result of delays. Disposals of non-current assets in 2015 also

mainly corresponded to writing off fixed assets related to another historic combined cycle gas turbine Group

project.

Impairment of non-current assets, which amounted to €(0.1) million in 2016 and €(0.5) million in 2015, are strictly

limited to equity investments in unconsolidated companies, recognized as available-for-sale assets, for which

indications of impairment have been observed.

Income and expenses related to changes in the scope of consolidation, which amounted to €(0.6) million in 2016,

corresponded to the acquisition costs of the Marcinelle power plant. In 2015, they corresponded to the negative

goodwill resulting from the acquisition of the Bayet plant, net of acquisition costs.

In light of these non-recurring items, operating income in 2016 totaled €105.0 million compared to €15.7 million

in 2015.

3.6 NET INCOME AND NET INCOME PER SHARE

€ m

2016

2015

Change in

value

Change in %

Operating income 105.0 15.7 89.2 567.2%

Cost of net debt (10.8) (3.7) (7.1) 189.0%

Other financial income and expenses (0.4) 0.1 (0.5) n.a.

Financial income / (loss) (11.2) (3.7) (7.5) 204.7%

Corporate income tax 29.5 17.0 12.4 n.a.

Share of net income from companies accounted for by the equity method 0.4 (0.1) 0.4 n.a.

Net income from continuing operations 123.6 29.0 94.6 326.0% Net income from discontinued operations - (1.8) 1.8 n.a.

Net income 123.6 27.2 96.3 353.5%

of which Net income, Group share 123.6 27.2 96.3 353%

of which Net income, minority interests - - - n.a.

21

The deterioration in net financial income, which fell from a net expense of €(3.7) million in 2015 to a net expense

of €(11.2) million in 2016, is mainly due to a second private placement bond issued in November 2015 for a total

amount of €60 million in two tranches, the first tranche of €15 million maturing in December 2019 with an annual

coupon of 4.40%, and the second tranche of €45 million maturing in December 2022 with an annual coupon of

4.80%, which resulted in a significant increase in interest expense in 2016 compared to 2015. Moreover, in a

context of a significant increase of margin calls related to the fall in the wholesale price of electricity observed in

the first half of 2016, the Group drew down short-term credit lines, including shareholder loans for €55 million

which were repaid during the fourth quarter of 2016, and a credit line with its regulated energy market clearing

house for €55 million, with a resulting significant impact on the interest expense. Lastly, the Group carried out a

third bond issue in a single tranche of €68 million bearing interest at 3.25%, in the fourth quarter of 2016.

The Group recognized a tax expense payable of €(11.5) million, in line with the improvement in the net income

before tax of the tax consolidation group, of which Direct Energie is the parent company, and given the use of

tax loss carryforwards. The impact of deferred tax on the fiscal year is income of €40.9 million, including on the

one hand the activation of additional tax loss carryforwards in line with the improved outlook for future results,

which led the Group to proceed with these activations over a three-year period against two years at the end of

2015, in the amount of €13.3 million, and on the other hand, the net change in deferred tax on temporary

differences, recognized over the same timeframe, for €27.6 million. In 2015, the Group recognized a tax expense

payable of €(0.05) million and deferred tax income of €17.1 million.

At 31 December 2016, the share of net income from companies accounted for by the equity method remained

insignificant at €0.4 million compared to an expense of €(0.1) million at 31 December 2015.

Net income from discontinued operations amounting to a loss of €(1.8) million in 2015 mainly corresponded to

the impact of the disposal of Direct Energie Distribution in the second half of 2015, including the recycling to

profit and loss at the time of the disposal of €(0.5) million in recyclable items historically recorded under other

comprehensive income.

Consolidated net income for the 2016 fiscal year showed a profit of €123.6 million, compared with a profit of

€27.2 million in 2015.

2016 2015 Change in value Change in %

Net income (millions of euros) 123.6 27.2 96.3 353.5%

Average outstanding shares (in millions) 41.1 40.8 0.3 0.7%

Average diluted outstanding shares (in millions) 43.4 42.7 0.7 1.6%

Earnings per share (in euros) 3.01 0.67 2.3 350.1%

Diluted earnings per share (in euros) 2.85 0.64 2.2 346.5%

22

4 ANALYSIS OF RESULTS OF DIRECT ENERGIE SA

4.1 RESULTS FROM DIRECT ENERGIE SA

The accounting methods and principles used to prepare the company financial statements at 31 December 2016

are identical to those used in the company financial statements at 31 December 2015, and comply with the

accounting methods and principles defined by the rule ANC 2014-03 of 5 June 2014.

Turnover totaled €2,749.70 million for 2016 compared with €1,828.90 million in the previous year.

This increase of €920.80 million, i.e. 50.3%, was mainly due to:

- An increase in total revenue related to the electricity and gas supply business, including billing for

distribution and other income related to the business (excluding energy consumption taxes), of €613.8

million. This was mainly due to dynamic growth in the number of gas and electricity customers sites, in

particular on the non-residential segment, whose unit consumptions are higher than the average

consumption of residential customers, and to the rise in the electricity regulated sales tariffs recorded

on 1 August 2015, for which the full-year effect was felt in 2016;

- An increase in the amount of energy consumption taxes of €131.3 million subject to rebilling to the end-

customer, notably related, in a context of significant increase in energy volumes sold, to the

introduction of a domestic tax on the end-consumption of electricity (TICFE) from 1 January 2016, in the

unit amount of €22.5/MWh, replacing the CSPE (whose unit amount was €19.5/MWh in 2015);

- Revenue growth of €175.7 million in wholesale activities, a direct result of the progression of the load

curve which led to increasing volumes resold on the wholesales market in order to balance its physical

positions throughout 2016.

Operating profit for 2016 was positive at €189.6 million, compared with €9.3 million in 2015. This rise was mainly

due to the improvement in gross margin (including taxes on revenue) of €235.3 million, directly related to the

increase in the Company's activity, against a background of favorable market prices, partially offset by an increase

in other purchases and external expenses of €(23.8) million, related to the significant growth in the company's

customer portfolio and in particular, sales and marketing efforts instigated to drive this increase.

In addition come the effects of an increase in personnel expenses of €(3.4) million, an increase in net depreciation

and provisions of €(37.1) million, a direct result of the provision for loss-making contracts on the transit capacities

secured by the Group between Belgium, the Netherlands and France, and a decrease in other expenses of €9.3

million, mainly associated with the repayment by GrDF of the unpaid share of historical gas distribution costs, in

accordance with the decision of the Court of Appeal of Paris.

Net financial income was negative at €(9.8) million in 2016, compared with a negative result of €(12.9) million in

2015. This improvement is mainly explained by lower net financial provisions in the amount of €8.8 million,

justified by the fact that a significant allowance in respect of the shares of one of the Company's subsidiaries and

relating to development opportunities for one of the generating assets construction products had been recorded

in 2015. Net interest expense increased, however, by €(5.6) million, a direct consequence of the issuance of a

new bond in 2015, and the implementation of additional financing during 2016, including shareholder loans.

These were intended to cover the increase in margin calls, in the first quarter, related to the sharp decline in

prices on the electricity and gas market. They were repayed during the second half of 2016.

An extraordinary loss of €(0.2) million was recorded in 2016 compared with a loss of €(3.2) million in 2015. In

2015, this result was mainly due to the disposal of Direct Energie Distribution.

Profit-sharing resulted in an expense of €(2.0) million in 2016 against an expense of €(0.1) million in 2015. This

increase is directly related to the significant improvement in Direct Energie's results.

23

Income tax amounted to an expense of €(11.4) million in 2016, following strong growth in the Company's

profitability. Tax income recognized in 2015 was made up of a research tax credit granted to the Company of

€0.1 million, and the expected payment of back taxes following the tax audit completed in 2015, in the amount

of €(0.05) million.

Thus, the net gain for 2016 was €166.2 million, compared with a €(6.7) million loss in 2015.

4.2 ALLOCATION OF NET EARNINGS AND DIVIDEND DISTRIBUTION

The Board of Directors will propose to the General Shareholders' Meeting of 30 May 2017 the allocation of net

earnings for the fiscal year ended 31 December 2016 and a dividend distribution as follows:

- Net income for the year amounting to €166,191,455.74;

- Retained earnings in the amount of €14,043,193.44;

- Providing distributable net profit of €180,234,649.18 to be allocated as follows:

o to the legal reserve for the amount of €7,058.95,

o to payment of a dividend in the nominal amount of €0.25 per share,

o the balance of distributable net profit to be allocated to "Retained earnings".

The maximum number of shares entitled to a dividend in respect of the fiscal year ended 31 December 2016

amounts to 42,654,444 corresponding to the sum of the 41,498,860 shares making up the share capital at 31

December 2016, and the 1,155,584 shares liable to be issued between 1 January 2017 and the ex-dividend date

in respect of the exercise of stock options granted by the Board of Directors.

The Board of Directors will propose to the General Shareholders' Meeting the distribution of an amount of €0.25

per share with dividend entitlement. The ex-dividend date will be 2 June 2017 and the dividend will be payable

as of 6 June 2017 on the basis of positions established as of the evening of 4 June 2017.

It is specified that the total amount of dividends distributed is required to take into account all existing shares on

the ex-dividend date and that, in the event that, on that date, (i) the Company held some of its own shares, or

that (ii) all the shares liable to be issued as a result of the exercise of stock options granted by the Board of

Directors have not actually been issued, then the amount corresponding to dividends not paid in respect of the

shares referred to in (i) and (ii) will be allocated to the "Retained earnings" account.

4.3 DIVIDEND DISTRIBUTION DURING THE LAST THREE FISCAL YEARS

In 2016, the Company paid its shareholders a dividend of €0.20 per share for fiscal year 2015, in the total amount

of €(8.2) million.

In 2015, the Company paid its shareholders a dividend of €0.15 per share for fiscal year 2014, in the total amount

of €(6.1) million.

It did not pay any dividend for prior fiscal years.

24

4.4 TABLE OF NET EARNINGS FOR THE LAST FIVE FISCAL YEARS

4.5 NON-TAX DEDUCTIBLE EXPENSES

The amount of expenses described in Article 39-4 of the French General Tax Code added back for purposes of

calculating taxable income amounted to €78,459 for the fiscal year ended 31 December 2016. Theoretical income

tax on these expenses totaled €26,153.

4.6 INFORMATION ON SUPPLIER PAYMENT TERMS

At the close of the fiscal years ended 31 December 2016 and 31 December 2015, the balance of trade payables,

broken down by maturity, is as follows:

At 31 December 2016:

In thousands of euros

Past due

Due at D+30

Due between D+31 and D+60

Due beyond D+60

Other

Total trade payables

Trade payables 9,672 71,409 3,451 - 84,532

Accrued expenses 152,584 152,584

TOTAL 9,672 71,409 3,451 - 152,584 237,117

Nature and indications (€) 2012 2013 2014 2015 2016

Capital at end of year

Share capital 4 657 385 4 008 197 4 079 297 4 079 297 4 149 886

Number of shares outstanding 46 573 850 40 081 965 40 792 965 40 792 965 41 498 860

Number of bonds convertible in shares - - - - -

Operations and results of the years

Revenue excluding VAT 1 187 705 251 1 054 109 509 1 413 217 099 1 828 883 972 2 749 689 826

Income before taxes, D&A and provisions 6 536 446 14 876 401 65 331 179 26 252 431 230 974 637

Income tax (300 062) 1 026 287 (359 932) (59 245) 11 374 164

Income after taxes, D&A and provisions (3 222 613) 14 656 616 24 299 839 (6 705 110) 166 191 456

Distributed income - - 6 117 759 8 242 358 10 374 715

Earnings per share

Income after taxes but before D&A and provisions 0,15 0,35 1,61 0,65 5,29

Income after taxes, D&A and provisions (0,07) 0,37 0,60 (0,16) 4,00

Dividend per share - - 0,15 0,20 0,25

Personnel

Average number of employees 335 280 283 297 325

Payroll charges 20 692 941 15 448 592 14 814 574 16 404 934 18 464 439

Employee benefits (social security, other social contributions,

etc…)9 913 669 6 809 254 6 901 281 8 143 077 9 473 012

25

- At 31 December 2015:

In thousands of euros

Past due

Due at D+30

Due between D+31 and D+60

Due beyond D+60

Other

Total trade payables

Trade payables 12,563 52,457 754 - 65,774

Accrued expenses 117,778 117,778

TOTAL 12,563 52,457 754 - 117,778 183,552

5 REVIEW OF CASH, CAPI TAL AND F INANCIAL DEB T

5.1 SHAREHOLDERS' EQUITY AND NET FINANCIAL DEBT

At 31 December 2016, Group shareholders' equity stood at €217.5 million, an increase of €246.9 million

compared with 31 December 2015, primarily due to the change in fair value of derivative hedging instruments

related to the load curve of the Group's electricity customers (€123.7 million), recorded as other comprehensive

income in accordance with IFRS, and related on the one hand to the sharp recovery in electricity prices observed

during 2016 and on the other, to the unwinding in 2016 of derivatives with a negative fair value at 31 December

2015. These temporary changes in fair value are designed to unwind with the delivery of electricity volumes

associated with these hedging instruments. Restated for this temporary impact, Group shareholders' equity

amounted to €203.9 million at 31 December 2016 compared to €80.6 million at end 2015.

As part of the presentation of its 2016 financial statements, the Group has amended the definition of its net

financial debt, an aggregate not defined by accounting standards, and which is not directly visible in the Group's

financial statements. This change is intended to reflect a balance between margin calls received and paid in the

context of the energy purchases and sells that the Group concludes with its counterparties and their impact on

the Group cash and cash equivalents. Net financial debt now corresponds to the difference between financial

liabilities (including margin calls received) and gross cash, after taking into account margin calls paid.

It amounted to €(43.6) million at the end of 2016 compared with €88.1 million at the end of 2015.

The change in net financial debt is mainly due, in addition to the net generation of cash resulting from the

improvement in the Group's results, to the acquisition of 100% of the capital of Marcinelle Energie and the

acquisition of new customers.

5.2 EXTERNAL FINANCING

The Group had access to several external financing instruments:

1. Bilateral bank loans in the form of authorized overdrafts and confirmed 364-day lines of credit for a total

amount of €9.4 million at 31 December 2016 and €17 million at 31 December 2015. Intended to finance

26

general operating needs, these credit lines are indexed to EURIBOR, which is not subject to an interest rate

hedge, plus a margin. As of 31 December 2016 and 31 December 2015, no drawdowns were reported.

2. A receivables factoring program providing for a maximum of €65 million in financing, including taxes.

The position of the related accounts are as follows:

o At 31 December 2016 :

Guarantee fund: N/A

Current account payable with the factor: €35 thousand

o At 31 December 2015:

Guarantee fund: N/A

Current account payable with the factor: €205 thousand

3. Bond issues.

a. In July 2014, the Company completed a private placement of its first bond issue in the amount of

€40 million in two tranches, the first maturing in December 2019, in the amount of €28.5 million

with an annual coupon of 4.70%, and the second maturing in July 2021, in the amount of €11.5

million with an annual coupon of 5%. A third tranche was added to this issue in November 2014

in the amount of €15 million, maturing in November 2022 with an annual coupon of 5%.

b. A second bond was issued during the fourth quarter of 2015 in the amount of €60 million, in two

tranches. The first was in the amount of €15 million, maturing in December 2019 with an annual

coupon of 4.40%, and the second was in the amount of €45 million, maturing in December 2022

with an annual coupon of 4.80%.

c. A third bond was issued during the fourth quarter of 2016, in a single tranche of €68 million,

maturing in October 2023, and with an annual coupon of 3.25%.

These bond issues are governed by covenants, calculated at 31 December of each year, which have been adjusted

during the second quarter of 2016, when the revolving credit facility was raised to €120 million. These can be broken

down at the closing date as follows:

o A debt ratio, L1, which measures the relationship between:

1. Total Net Debt, less the total amount of any security provided by the Direct Energie

Group by way of cash collateral for the purpose of margin calls in respect of energy

purchases,

2. and consolidated EBITDA,

and must be less than or equal to 2.75;

o A debt ratio, L2, which measures the relationship between:

1. Total Net Debt, excluding all current accounts or shareholder loans granted to the

Company,

2. and consolidated EBITDA,

and must be less than or equal to 3.50;

o An interest coverage ratio, which measures the relationship between Consolidated EBITDA and

Consolidated Net Interest Expense, must be greater than or equal to 5.

27

The various financial aggregates used to calculate the covenants are defined as follows, under the terms of the

bond issue documentation, as amended:

o Total Net Debt means, on the basis of the latest consolidated financial statements, the

aggregate outstanding principal, capital or nominal amount (and any fixed or minimum

premium payable on prepayment or redemption) of the Financial Indebtedness of all the

members of the Group (other than any bank guarantees (cautionnements bancaires)) less cash

and investments convertible into cash with a maximum notice of 32 days and having a maturity

of less than or equal to a year (provided that such investments convertible into cash consist

exclusively of term deposit accounts or other similar instruments with no exposure on the

principal amount), as shown in the latest consolidated financial statements;

o Financial Indebtedness means, on the basis of the consolidated financial statements, (without

double counting) any indebtedness for or in respect of:

1. moneys borrowed,

2. any amount raised by acceptance under any acceptance credit facility or

dematerialised equivalent,

3. any amount raised pursuant to any note purchase facility or the issue of bonds, notes,

debentures, loan stock or any similar instrument,

4. the amount of any liability in respect of any lease or hire purchase contract which

would, in accordance with IFRS, be treated as a finance or capital lease,

5. receivables sold or discounted (other than any receivables to the extent they are sold

on a non-recourse basis and/or any receivables transferred by the Issuer in relation to

moneys borrowed),

6. any amount raised under any other transaction (including any forward sale or

purchase agreement) having the commercial effect of a borrowing,

7. any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby

or documentary letter of credit or any other instrument issued by a bank or financial

institution (other than a performance bond issued in the ordinary course of trading by

one of its Subsidiaries in relation to the obligations of another Subsidiary and ordinary

course counter-guarantees for the purpose of margin calls in respect of energy

purchases), and

8. the amount of any liability in respect of any guarantee or indemnity for any of the

items referred to in paragraphs (1) to (8) above accrued and paid by the Issuer in that

Test Period in respect of Financial Indebtedness;

o Consolidated EBITDA means, in relation to any Test Period, on the basis of the latest

consolidated financial statements of the Issuer, the recurring operating profit (or EBIT)

excluding the mark to market on derivatives before depreciation, amortisation and provisions

of the Issuer on a consolidated basis, based on figures presented in the latest audited

consolidated annual financial statements of the Issuer;

o Consolidated Net Interest Expense means, on a consolidated basis, in relation to any Test

Period, interest expense for that Test Period less interest income of the Issuer and any other

finance income accrued by the Issuer for that Test Period to the extent received by the Issuer.

At 31 December 2016, within the meaning of the covenants, the L1 debt ratio was equal to (0.39), the L2 debt

ratio was equal to (1.54) and the interest coverage ratio was 10.36, within the authorized limits.

28

At 31 December 2015, within the meaning of the covenants, the debt ratio (which measured the relationship

between Total Net Debt and Consolidated EBITDA) was 2.49 and the interest coverage ratio was 16.12, within

the authorized limits. The L1 and L2 debt ratios were not in effect at that date.

4. A confirmed three-year revolving credit facility of up to €120 million (versus €60 million at 31 December

2015) and secured with a pool of eight banks. Set up in May 2015, and having been doubled in size in April

2016, its purpose is to finance the Group's general operating needs. This credit facility, which may be

drawn down for renewable periods, is subject to an annual commitment fee of between 0.35% and 0.90%,

depending on the level of drawdowns, and a non-utilization fee calculated pro rata temporis at an annual

rate of 35% of the applicable margin. The cost of drawdowns is based on EURIBOR, and calculated

according to the duration of the drawdown plus a margin ranging between 1% and 2%, depending on the

level of the L1 debt ratio. It is governed by covenants identical to those applicable to the bond issues. At

31 December 2016, no drawdowns were in place.

5. A short-term credit line with the Group’s regulated energy market clearing house, for a total amount of

€55 million at the closing date. This credit line, which can be drawn down to finance the margin calls

relating to energy sales and purchases , bears a 2.17% annual interest rate , and was unused at year-

end.

5.3 GROUP CASH FLOW

Changes in the Group's cash and cash equivalent during 2015 and 2016 were as follows:

€ m 2016 2015

Income before taxes and financial expenses 105.3 13.9

Non-cash items 39.5 47.0

Change in working capital requirement 74.2 (79.8)

Net cash flow from operating activities 219.0 (18.8)

Property plant and equipment (33.8) (25.7)

Fixed financial assets 187.0 (23.9)

Changes in scope (35.5) (40.3)

Net cash flows from investing activities 117.7 (89.9)

Change in borrowings 8.4 120.0

Net financial expenses (10.3) (4.6)

Treasury shares (0.1) 0.0

Other flows (1.9) (6.1)

Net cash flow from financing activities (3.9) 109.4

Net change in cash and cash equivalents 332.8 0.7

Cash and cash equivalents at beginning of year 32.0 31.3

Cash and cash equivalents at end of year 364.8 32.0

29

5.3.1 CASH FLOW FROM OPERATING ACTIVITIES

Between fiscal years 2015 and 2016, cash flow from operational activities increased by €237.8 million to €219.0

million at December 31, 2016.

This is due to the combination of:

- An increase in income before taxes and interest, amounting to €105.3 million in 2016 compared to €13.9

million 2015 (+€91.4 million), reflecting a very substantial rise in activity, notably on the gas and

electricity supply segment in France for residential and non-residential customers (industrial and

commercial multi-site customers, public authorities); and

- The positive change in working capital requirements.

Non-cash items in 2016 mainly included, in addition to depreciation, the charge to a provision for loss-making

contracts in the amount of €31.6 million relating to the transport capacities secured by the Group between

Belgium, the Netherlands and France and the impact of the positive change in fair value of financial derivative

instruments totaling €25.3 million. This is attributable to the increase in fair value of financial electricity

derivatives related to the market price hike in 2016, and the decrease in fair value of financial gas derivatives

related, in particular, to the unwinding during the period of the gas & oil hedging swaps, whose fair value was

strongly positive at 31 December 2015. In 2015, non-cash items mainly included, in addition to depreciation, the

negative impact associated with the change in fair value of financial derivatives for €(8.7) million.

The positive change in working capital requirements is directly related to:

- The year-end unwinding of calendar forward purchases products and their substitution by quarterly and

monthly products. This market mechanism ("cascading"), with no effect on net income for the fiscal

year in the Group's consolidated financial statements, had a positive impact on cash of €93.3 million in

2016, directly related to the rise in market prices observed at the end of 2016, whereas the impact was

negative at €(38.2) million in 2015, following the slump in market prices in late 2015;

€ m 2016 2015

Consolidated net income 123.6 27.2

Tax expenses/income (29.5) (17.0)

Financial income/(loss) 11.2 3.7

Income before taxes and financial expenses 105.3 13.9

Depreciation and amortisation 29.2 22.5

Impairment 0.1 0.6

Provisions 31.9 6.2

Effect of changes in consolidation scope and other gains and losses on disposals0.0 0.2

Expenses related to share-based payments 1.7 1.4

Change in fair value of financial instruments (25.3) 8.7

Other financial items with no cash impact 2.1 7.5

Share of income from associates (0.4) 0.1

Items with no cash impact 39.5 47.0

Income tax paid (10.6) -

Change in working capital requirement 84.9 (79.8)

Net cash flow from operating activities 219.0 (18.8)

30

- A regulatory change that saw the domestic tax on the end consumption of electricity (TICFE), paid by

the Group on a quarterly basis each 25th of the month following the end of each quarter, replace the

Contribution to the Public Electricity Service (Contribution au Service Public de l’Electricité (CSPE)) which,

prior to that date, was paid on a monthly basis;

- Significant growth in the gas and electricity supply business, in particular with non-residential customers

since the beginning of the year, which contributed to the significant increase in trade receivables, net

of trade payables related to these receivables, during 2016.

In 2015, in addition to the impact from cascading for €(38.2) million, the negative change in working capital

requirements (€(79.8) million) stemmed from:

- The repayment of €(10.0) million of the balance of an operating debt following the merger of Poweo

and Direct Energie, repayment which was staggered over several years in agreement with the

counterparty;

- The increase in quantities of gas storage in 2015, of €9.3 million, consequence of storage obligations

imposed by the public authorities given its customer portfolio;

- The growth of the non-residential customer segment, in particular in the second half of 2015, which

contributed to the increase in trade receivables, net of trade payables related to these receivables.

5.3.2 CASH FLOWS FROM INVESTING ACTIVITIES

Net cash flow from investing activities evolved significantly between fiscal years 2015 and 2016, primarily as a

result of the reversal of the Group's position in cash deposits ("margin calls”) made in particular with external

Group counterparties as part of transactions relating to the purchase and sale of energy, a direct consequence

of the rise in market prices observed over the period.

€ m 2016 2015

Acquisition of fixed assets (33.8) (25.7)

Disposals of fixed assets - 0.0

Property plant and equipment (33.8) (25.7)

Change in deposits and guarantees 184.8 (55.5)

Acquisition of available-for-sale securities 0.0 (0.0)

Change in financial assets - 27.9

Net change in loans originated by the Company 2.2 3.8

Fixed financial assets 187.0 (23.9)

Acquisition of shares in companies not fully consolidated (0.0) -

Acquisition of subsidiary, net of cash acquired (35.5) (43.9)

Loss of control of subsidiaries net of cash and cash equivalents sold - 3.7

Changes in scope (35.5) (40.3)

Net cash flows from investing activities 117.7 (89.9)

31

During 2016, these cash flows amounted to €117.7 million, mainly due to:

- Acquisitions of fixed assets for €(33.8) million, mainly comprising increased customer acquisition costs

reflecting the growing pace of commercial acquisitions;

- The €184.8 million increase in deposits and guaranties paid for the most part to clearing house ABN as

part of stock market transactions, and to other counterparties with which the Group concluded energy

purchase and sale transactions, to source the load curve associated with its customer portfolio. This

variation is directly related to the steep rise in the market price of electricity observed at the end of

2016, and to the delivery during the year of energy volumes covered by deposits made in late 2015. At

31 December 2016, the Group was a net recipient of cash deposits and margin calls for a total amount

of €129.1 million;

- The acquisition for a net amount of €(35.5) million of Marcinelle Energie, operator of a combined cycle

gas turbine power plant located in Charleroi in Belgium.

In 2015, these cash flows amounted to €(89.9) million, primarily due to:

- Acquisitions of fixed assets for €(25.7) million), mainly comprising increased customer acquisition costs

reflecting a growing pace of commercial acquisitions;

- A €(55.5) million increase in cash deposits and guaranties paid to the clearer ABN as part of energy

market transactions, and to other counterparties with which the Group engaged in energy purchase and

sale transactions, to source the load curve associated with its customer portfolio. This increase is directly

related to the sharp decline in the market price of gas and electricity at the end of 2015, resulting in a

rise in margin calls from counterparties, as the Group is a significant net purchaser of energy;

- The acquisition of 3CB, operator of the Bayet power plant, for (€43.9 million);

- The expiry and repayment in full in 2015 of the €27.9 million term deposit taken out by the Group in

2014 to optimize its cash position.

5.3.3 CASH FLOWS USED IN FINANCING ACTIVITIES

Net cash flows generated by financing activities amounted to €(3.9) million for 2016 against €109.4 million in

2015.

€ m 2016 2015

Proceeds from borrowings 185.5 120.9

Repayment of borrowings (177.1) (0.8)

Change in borrowings 8.4 120.0

Interest paid (11.2) (5.2)

Interest received 0.9 0.6

Net financial expenses (10.3) (4.6)

Treasury shares (0.1) 0,0

Sums received from shareholders during capital increases 6.3 -

Dividends paid (8.2) (6.1)

Other flows (1.9) (6.1)

Net cash flow from financing activities (3.9) 109.4

32

In 2016, these negative cash flows mainly related to:

- A net change in borrowings recorded over the period for €8.4 million. This corresponds mainly to the

proceeds from the issuance of a new bond for €68 million, and the impact of the repayment of the

drawdown that had been made on the Group's credit facility in late 2015 in the amount of €60 million

to finance margin calls associated with the fall in market prices of gas and electricity at the end of 2015.

This repayment was made in light of the recovery in market prices from the second quarter of 2016

onwards. Moreover, shareholder loans, which had been set up during the first half of 2016 in the

amount of €55 million, and the drawdown of €60 million on the short-term credit line provided by ABN,

clearing house for the Group's market transactions, were fully repaid during the second half of 2016;

- Payment of net financial expenses for €(10.3) million. The strong growth observed in comparison with

2016 is the direct result of the full-year impact of the bond issuance that took place in the fourth quarter

of 2015 for €60 million, and the various drawdowns on the Group's short-term facilities (revolving credit

facility, shareholder loans, ABN credit line), mainly during the first three quarters of 2016.

In addition, the Group again paid a dividend in 2016, up €2.1 million over 2015, and received €6.3 million

following the exercise of stock options during 2016.

In 2015, positive cash flow of €109.4 million was mainly related to the issuance of a second bond in the second

half for €60 million, and the drawdown at the end of 2015 in the amount of €60 million from the revolving credit

facility set up during the first half of 2015 to finance margin calls related to the fall in the market price of gas and

electricity.

5.4 RESTRICTIONS ON THE USE OF CAPITAL

Excluding:

- Cash deposits paid, recognized as financial assets, which mainly concern cash deposits with certain

Group counterparties to cover changes in fair value of forward energy instruments, associated with

changes in commodities market prices, especially electricity, gas and oil, which amounted, respectively,

to €12.4 million at 31 December 2016 and €65.6 million at 31 December 2015, and are likely to rise and

fall based on underlying changes in commodities prices; and

- Covenants related to its bond issues and credit facilities, presented in Section 5.2 (External financing),

The Group has no restrictions on the availability of its capital.

5.5 FINANCING SOURCES FOR FUTURE INVESTMENTS

The Company plans to finance the acquisition of additional customer sites through cash flow generated by

operations and the bond issued in 2014, 2015 and 2016. IT investments, needed to support the growing customer

portfolio, will be financed from cash flow or covered by leases or leasing contracts.

With regard to the development of the combined-cycle natural gas plant in Landivisiau, which has a capacity

premium granted by the public authorities, the Group and its partner, Siemens Project Ventures, intend to set

up project financing as soon as 2017's second semester provided that all necessary authorizations are free of any

claim, and that the in-depth investigation launched by the European Union to evaluate tender compliance with

European Union rules on State aid does not impact the project schedule. The proposed debt would fall within a

target of 60% to 80% of total estimated investment costs equal to approximately €450 million, with the equity

contribution supplementing the financing plan. To finance its share of the equity contribution to the joint

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venture, the Group will increase its capital or raise additional financing at the time the power plant construction

begins.

Finally, in the event of additional acquisition opportunities, the Group may raise additional capital and seek new

sources of financing in addition to those already secured.

6 OUTLOOK

6.1 POST-CLOSING EVENTS

There were no material post-closing events to disclose at the date on which the 2016 financial statements were

published.

6.2 FUTURE PROSPECTS

The Group believes that the markets in which it operates offer significant opportunities for growth and aims,

through the implementation of the strategy presented in Section 1.1.3 (Context and strategy) of its Registration

Document, to consolidate its position as the third-largest French operator on the gas and electricity supply

market, to become fully integrated and continue its international development. The Group intends to expand its

market share in France and in Belgium.

Given the size of the customer portfolio achieved in France and Belgium in 2016, and the respective dynamics

observed in these two markets, the Group has decided to review its target of customer sites by countries by

2018, and to now focus on a global customer site target, across all of its markets. The Group's overall portfolio

objective has accordingly now been set at 4 million customer sites across all market segments, both in gas and

electricity, by 2020.

Moreover, the Group aims to increase its global portfolio to 2.5 million customer sites in 2017.

The Group also aims to generate €2 bn revenue, subject to temperatures in line with seasonal averages.

Concerning its current operating income, the Group seeks to generate €100 million in 2017, at seasonal average

temperatures, and is committed to controlling development expenses, taking into account the regulatory

framework and changing market. The Group's current operating income was €86.8 million for 2016.

The Group also intends to pursue its vertical integration strategy through investments in production capacities

with a two-fold objective:

- (i) strengthen its position as a flexible electricity generator to offer a diversified energy mix with efficient

technologies and production means (notably NGCC and hydraulic) in order to promote industrial

competitiveness and protect the consumer purchasing power. The Group is positioning itself as a

candidate to take over major hydraulic concessions;

- (ii) to be fully involved in securing the supply of electricity, as demonstrated by the development of the

NGCC project at Landivisiau in Brittany, which is part of the Breton Electric Agreement.

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Lastly, it strives to operate at the cutting edge of innovation in energy services, to support and achieve

transformation in usage, by anticipating the future needs of its customers.

The Group aims to produce a debt ratio and interest coverage ratio below the limits associated with its various

financing instruments.

The Group’s priority uses of the cash flow generated from operating activities will be to expand its customer

portfolio across all segments (residential, non-residential), both in France and abroad. Each year, however, it will

review the opportunity to pay a dividend, as it did in June 2016 and June 2015, based on 2015 and 2014 results.

The Group will submit to the next General Shareholders' Meeting in 2017 a dividend on the basis of its 2016

results, taking into account in particular the general economic framework, the specific conditions in its business

area, the Group's results, its financial position, the interests of its shareholders, insofar as this distribution is

consistent with its business development targets and compliant with the financial ratios set forth above.

These outlooks and targets do not constitute forecasts or estimates of profits resulting from a budgeting process,

but are simply outlooks and targets based on data, assumptions and estimates considered reasonable by the

management, and presuming the successful implementation of the Group's strategy presented in Section 1.1.3

of its Registration Document (Context and strategy).

These data, assumptions and estimates are likely to change or be modified due to uncertainties related to

regulations, competition, economics, finance, accounting, tax or other factors of which the Company is unaware.

In particular, the occurrence of one or more risks (described in its Registration Document) could have an impact

on the Group's activity, results, financial position or outlook, and may impact its ability to achieve its targets.

Accordingly, the Company makes no commitment nor guarantees that they will be achieved.

7 DIVIDEND DISTRIBUTIO N POLICY

7.1 DIVIDEND PAID DURING THE LAST THREE FISCAL YEARS

The Company decided, at its Board of Directors meeting held to approve the 2016 financial statements, to

propose to the General Shareholders' Meeting on 30 May 2017 the payment of a dividend in the nominal amount

of €0.25 per share.

At its Board of Directors meeting held to approve the 2015 financial statements, the Company decided to pay a

dividend in the nominal amount of €0.20 per share, paid on 15 June 2016 based on the number of shares making

up the share capital at the close on 12 June 2016. The share of distributable profit corresponding to treasury

shares was allocated to retained earnings, such that the net distribution amount was equal to €8,242,358.

7.2 DIVIDEND DISTRIBUTION POLICY

In the past three fiscal years, the Company only distributed dividends at the close of the 2014 and 2015 financial

statements.

Given the growth strategy planned by the Group, it does not intend to establish a dividend payment policy within

the next 12 months.

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However, the Company's Board of Directors will annually review the opportunity of paying a dividend, given the

general economic climate, specific conditions within its business area, the Group's results, its financial position,

the interests of its shareholders and any other factors it deems relevant.