GREENEARTH ENERGY LTD ACN: 120 710 625 AND CONTROLLED ENTITIES FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

This half-year financial report is to be read in conjunction with the financial report for the year ended 30 June 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

TABLE OF CONTENTS Page Directors’ Report

3

Auditor’s Independence Declaration

11

Financial Report for the half year ended 31 December 2012 Condensed Consolidated Statement of Comprehensive Income

12

Condensed Consolidated Statement of Financial Position

13

Condensed Consolidated Statement of Changes in Equity

14

Condensed Consolidated Statement of Cash Flows

15

Notes to the Financial Statements

16

Directors’ Declaration

25

Independent Auditor’s Review Report

26

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

The Directors present their report together with the condensed financial report of the consolidated entity consisting of Greenearth Energy Ltd and the entities it controlled, for the half-year ended 31 December 2012 and independent review report thereon. This financial report has been prepared in accordance with Australian Accounting Standards. Directors names The names of the directors in office at any time during or since the end of the half-year are: Name Samuel R Marks Robert J Annells Mark Miller John T Kopcheff Leslie Erdi Robert L King

Period of directorship Director since 1 July 2012 Director since 13 July 2006 Director since 3 September 2008 Director since 13 July 2006 Director from 1 July 2012 to 26 January 2013 Director from 13 July 2006 to 30 June 2012

The directors have been in office since the start of the financial period to the date of this report unless otherwise stated. Review of operations The consolidated loss of the group for the half-year after providing for income tax amounted to $607,069 (2011: $2,248,430 loss). FINANCIAL OVERVIEW The first half of the 2012/13 financial year has seen Greenearth Energy make substantial progress across all areas of the consolidated group. The key focus has been a concerted effort to reduce costs and re-focus the operating units in-line with the long-term strategy. The results identified below are consistent with this approach. -

The Consolidated Loss of the Group after Tax for the comparative period decreased by 73% to $607,069 (2011: $2,248,430). This was principally due to expenses for the half year been tightly controlled, along with a share of associate's accounting profit for the period in the NewCO2 Fuels Israel joint venture company, as detailed in Note 8 to the half year financial statements.

-

Net cash used in operations during the comparative period reduced by 66% to an outflow of $482,527 (2011:$1,408,564 outflow). This was due to the reduction of expenses across the consolidated group, along with an increase in sales from the Energy Efficiency business and a $247k receipt from the ATO for a R&D rebate in relation to prior periods.

-

Revenues from continuing operations increased by 226% from the previous comparative period to $181,244 (2011: $55,638). This included increased sales revenue in the Energy Efficiency business, along with a gain on the disposal of the PHP entity.

-

Expenses decreased by 31% from the previous comparative period to $1,279,898 (2011: $1,842,331). This was due to a reduction across all major expense categories; specifically Employee benefits and Administrative expenses, reduced by 32% and 49% respectively.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

As detailed in the business unit updates in the following pages, Greenearth Energy is well positioned for growth in the remaining half of 2012/13 and beyond. Senior management continues to focus on building the Energy Efficiency business, with the goal of generating positive cash-flow to sustain the consolidated group. Along with the newly de-risked approach of establishing a proof of resource in the Geothermal business prior to drilling, bodes well for the future of the company. For the period 1 January 2013 to 13 March 2013, the group’s cash inflows were $463k (including $300k collected from Erdi Fuels Pty Ltd and $159k collected from Greenearth Energy Efficiency debtors), and outflows were $450k (being payments to suppliers and employees). This resulted in a net cash inflow for that period of $12k. STRATEGY EXECUTION As outlined at the Annual General Meeting, along with the September and December Quarterly reports, Greenearth Energy's long term strategy remains unchanged. However, there is a refocused approach within the group, with day to day operations concentrating on three key business units as follows:

BUSINESS UNIT UPDATES In-line with the financial reports included behind this summary, the three key business units are identified within the following segment reporting units:

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

Geothermal Energy Business Unit Update Greenearth Energy continued to drive both the Geelong Geothermal Power Project (GGPP) and our Latrobe Valley Consortium (LVC), with a focus on sourcing the large level of investment required to develop the projects. On the GGPP, the team successfully negotiated an extension of the $25m ETIS grant until 30 Sept 2013. This included favourable terms which assist in Greenearth Energy being able to apply for federal funding via the Federal Government’s Emerging Renewables Program('ERP'). The ERP is overseen by the $3.2 billion Australian Renewable Energy Agency (ARENA), a funding arm of the Clean Energy Future package. The LVC was formalised during this reporting period, with agreement that Monash University will lead this project and put forward an additional funding proposal via ARENA and the University for the development of an innovative geoscience program. This program integrates advanced and emerging geological, geophysical and petrophysical technologies to understand the potential native productivity of the region and the potential to enhance this through stimulation. The process to bring these two opportunities to fruition is one which takes time and a dedicated group of supporters at all levels. This company was formed on the back of proving that geothermal energy has the capabilities in Australia to develop clean, base-load power to the Australian people, at a financially viable price. We still believe this is the case. Business Unit Overview Geelong Geothermal Power Project (GEP 10): In November 2011 Greenearth Energy successfully concluded negotiations with the Victorian State Government and executed the $25 million funding agreement for the GGPP. The $25 million Victorian Government grant funding was awarded in December 2009 and has recently been extended until 30 September 2013. The grant was issued under the government’s Energy Technology Innovation Strategy (ETIS). The funding was awarded to assist two stages of the GGPP development, with $5million of the $25million to be utilisted towards establishing Proofof-Resource, and the further $20 million awarded for a grid connected 12MWe hot sedimentary aquifer (HSA) geothermal energy demonstration plant. Subsequent project partners have been developed including Melbourne University, Alcoa of Australia, Leighton Contractors, Holcim Australia and Lakes Oil N.L. Latrobe Valley (GEP 12 & GEP 13): The Latrobe Valley is an exciting geothermal prospect as thick insulating coals overly the hot sediments across this region. Greenearth is working with a consortium of Universities and Industry partners to develop an innovative geoscience program which will integrate advanced and emerging geological, geophysical and petrophysical technologies to understand the potential native productivity and the potential to enhance this through stimulation. Matrix, fracture and fault permeability will be differentiated and an advanced uncertainty analysis will be developed to quantify uncertainties. Success will lead to greater exploration success for the Australian geothermal industry and a decision regarding a deep well in the Latrobe Valley by Greenearth Energy.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

Indonesia: Geothermal resources are an increasingly significant source of renewable energy within Indonesia. It has been documented that the viable geothermal resource may be as high as 28,000 Megawatts(MW), representing 40% of the worlds potential geothermal resources. The Indonesian government is actively pursuing geothermal energy over the next 15 years, with the publicised target of aiming to produce more than 9,000MW by 2025, equating to 5% of the country's energy output. Greenearth Energy maintains a joint venture with an Indonesian company in relation to continuing to explore the possibility of geothermal projects within Indonesia.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

Greenearth Energy Efficiency Business Unit Update Greenearth Energy Efficiency ("GEE") had an exciting start to the 2012/13 financial year. The business focus sharpened with the hiring of a dedicated Chief Operating Officer, Urbain du Plessis. Urbain has brought with him a wealth of knowledge, skills and experience from over 25 years in the high-end lighting sector around the world. His role is predominantly around business development and sales, along with product development and the establishment of key supply chain and operational controls. Operationally, GEE had great success on the first 'new-build' warehouse integration for Linfox / Goodman Group in Western Australia, completed in September 2012. Post the installation, an external review was commissioned and performed by a highly regarded independent Energy Efficiency Consulting firm, which reported the following key results: -

Energy savings of over 60% kWh/per year Greenhouse gas abatement of 259 ton CO2-epa Overall cost savings on electricity usage of 61% A 36% reduction in fittings required in comparison to competing products

Subsequently, Linfox publicised the above results in an article in their Linfox Solutions quarterly magazine - December 2012: http://www.linfox.com/News-and-Media/~/media/Solutions%20Magazines/Solutions%20December%202012%20WEB.ashx

These results are an extremely impressive independent verification of the potential of this technology across the Industrial, Manufacturing and Warehouse market in not only Australia, but also the greater Asia Pacific region. The last reporting period also saw the successful roll-out and completion of a retrofit lighting project for a large General Mills Ltd food processing facility in New South Wales. As a US Fortune 500 company, General Mills is one of the largest food manufacturers in the world, owning brands such as Cheerios, Old El Paso, Latina Fresh Pasta and Betty Crocker. The facility saw impressive energy saving results with extremely positive feedback from management and we are currently compiling a case-study which we shall share with our shareholders upon completion.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

Strategically, Greenearth Energy Efficiency began to evolve with two focused sales approaches; Original Equipment Manufacturers (OEM's) and Turn-Key solutions. The past financial period saw GEE reinvigorate relationships with some of Australia's largest lighting manufacturers and distributors, as well as developing key relationships with some of the global players in the Industrial / warehouse / mining & sports lighting OEM sectors. The turn-key solutions strategy is in-line with the Linfox and General Mills model where GEE provides an 'end to end solution' of the entire lighting design, fittings and control system for our customers, utilising the full capacity of the Metrolight system. We look forward to reporting continued success within this business unit in the second half of 2012/13. Business Unit Overview Greenearth Energy Efficiency ("GEE") is a business unit focused on the integration of energy efficiency technologies into the Industrial, Warehouse and Manufacturing sector across Asia. The core current product focus is on energy efficient lighting, which includes maintaining the distribution rights to the Metrolight Product for Asia (excluding China and Japan), India and South Africa. The strategy behind this business is to two fold; 1 - Turn-Key solutions business which is a 'one-stop-shop' for industrial companies when building or retrofitting a facility and looking to initiate financially viable, energy efficiency technologies into their structures. Recent examples include Linfox / Goodman Group warehouse in Western Australia. The technology has also seen great results for street-lighting and car-parking projects in Australia and overseas. 2 - Original Equipment Manufacturers ('OEM') focus. The OEM focus revolves around the sale of the Metrolight technology direct to OEMs to install the ballast in the OEM's light fitting, and provide the energy savings and efficiencies to a broader range of customers. GEE markets and supports Metrolight products with sophisticated application engineering support to the OEM lighting industry across Asia-Pacific, India & South Africa.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

NewCO2Fuels Joint Venture Business Unit Update The NewCO2Fuels ("NCF") team in Israel continues to make great progress in the development of the CO2 to fuel conversion technology concept, successfully developed in Israel by Professor Jacob Karni and his group at the Weizmann Institute of Science. As part of this process, Erdi Fuels Pty Ltd paid $1million for the development of a single demonstration unit, which is being built in parallel to the proto-type. This transaction was the main driver for an overall accounting profit of $298,814 for the group's 50% share of the joint venture during this reporting period. The first half of 2012/13 was highlighted with a visit by Professor Jacob Karni and David Banitt (CEO) to Australia in early December, along with the NCF team beginning the first steps of designing and constructing prototypes of the demonstration unit in the Solar Tower within the Weizmann institute. The first prototype is targeted for completion in late 2013. From a technical development focus, the past quarter saw the NCF team in Israel advance various aspects of the R&D phase across the following areas; 1. 2. 3. 4. 5. 6.

Fabrication of the solar receiver; Testing of proto-types in the Reaction cell; Final stages of design of the solar reactor; Establishment of the testing facility within the Solar Tower; Development of the hardware designs and software implementation of the control systems; Ongoing patent protection across the globe.

The visit by the Professor and Mr Banitt focused on future business development and promotion of the technology and included meeting potential 'stage 2' partners for NCF for involvement with the project post proof of demonstration. The next scheduled visit is for April 2013. Business Unit Overview In 2011 Greenearth Energy secured an exclusive worldwide Research and License Agreement for a revolutionary technology that has the ability to convert CO2 emissions to fuel. The group's investment is represented by a 50% ownership in NewCO2Fuels Ltd (Israel). As described in the June 2012 annual report, an option deed has been entered into which grants Erdi Fuels Pty Ltd the right to acquire the group's 50% ownership of NewCO2Fuels Ltd. The group will retain an ongoing royalty stream. The CO2 to fuel conversion technology concept, successfully developed in Israel by Professor Jacob Karni and his group at the Weizmann Institute of Science, and proven in subsequent extensive laboratory trials, involves a new method of using concentrated solar energy for the dissociation of carbon dioxide (CO2) to carbon monoxide (CO) and oxygen (O2). The same system can also dissociate water (H2O) to hydrogen (H2) and oxygen (O2), at the same time it dissociates the CO2. The CO, or the mixture of CO and H2 (called Syngas) can then be used as gaseous fuel (e.g. in power plants), or converted to liquid fuel (e.g. methanol or other transportation fuels), which has the potential to be stored, transported and used in motor vehicles. The oxygen produced can be used in the combustion of the clean fuel, or elsewhere.

09

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIIES

ACN: 120 710 625 DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

Significant changes in the state of affairs Significant management changes occurred during the first 6 months of the 2012/13 financial year. We also welcomed a new Chief Financial Officer early in 2013. These changes were as follows: -

1 July 2012 - Appointment of Managing Director; Samuel Marks. 1 July 2012 - Change of role to Non-Executive Director; Mark Miller. 1 July 2012 - Appointment of Non-Executive Director; Dr Leslie Erdi OAM 1 October 2012 - Appointment of Chief Operating Officer - Energy Efficiency; Urbain du Plessis 31 December 2012 Appointment of - Company Secretary; Leslie Smith 7 January 2013 Appointment of - Chief Financial Officer; Robert Smith 26th January 2013 - Cessation of Dr Leslie Erdi OAM as a director, due to his passing.

The company issued a total of 4,923,508 shares and 13,000,000 unlisted incentive options during the period ended 31 December 2012. 719,222 ordinary shares were issued as a result of the uptake of options issued as part of the non-renounceable rights issue in November 2011. During the reporting period Greenearth Energy completed two corporate transactions across the consolidated group; the 100% sale of the Pacific Heat and Power business unit and the acquisition of 15% of the NewCO2Fuels Pty Ltd entity from Advance Publicity Pty Ltd. In the opinion of the directors, there were no other significant changes in the state of affairs of the Group that occurred during the half year under review not otherwise disclosed in this report or the financial statements. Subsequent events On the 4th March 2013, the Victorian Government approved a time extension for the $25 million grant for the Geelong Geothermal Power Project ('GGPP'). The time extension has been granted until 30 September 2013 to activate the ETIS grant of $25 million. The $25 million grant was originally awarded in December 2009 under the Victorian Government’s Energy Technology Innovation Strategy (ETIS) for large scale, pre-commercial, sustainable energy demonstration projects. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the review for the half-year is provided with this report.

Signed in accordance with a resolution of the directors.

Samuel R Marks Managing Director Greenearth Energy Ltd Dated this 14th day of March 2013

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 AUDITOR’S INDEPENDENCE DECLARATION

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2012

Revenue Sales revenue Gain on fair value of investments Other income Less: Expenses Employee benefits expenses Costs incurred in the sale of inventories Depreciation expense Finance costs Accounting and audit expenses Marketing and promotion expenses Rent and occupancy expenses Consulting expenses Lease payments Loss on fair value of investments Impairment loss on investments in associates Foreign exchange losses Administrative expenses Total Expenses Share of profit/(loss) of associate accounted for using the equity method

2012 $

Half-year

141,469 11,777 27,998 181,244 (352,746) (165,528) (8,980) (1,251) (121,840) (12,158) (111,139) (112,261) (1,583) (392,412) (1,279,898) 281,267

2011 $ 46,143 9,495 55,638

(519,536) (108,885) (14,132) (1,780) (35,775) (10,755) (52,725) (196,424) (132,909) (19,628) (50,000) (699,782) (1,842,331) (445,070)

Loss before income tax expense

(817,388)

(2,231,763)

Income tax expense Loss from continuing operations

(817,388)

(2,231,763)

Profit (loss) from discontinued operations Profit (loss) for the half-year

210,318 (607,069)

(16,667) (2,248,430)

Total comprehensive income for the half year

(607,069)

(2,248,430)

(586,954) (20,115) (607,069)

(2,248,430) (2,248,430)

Loss is attributable to: Members of Greenearth Energy Ltd Non-controlling interests

Earnings per share for profit from continuing operations attributable to equity holders of the parent entity: Basic loss per share (cents per share) (0.71) (2.37) Diluted loss per share (cents per share) (0.71) (2.37) Earnings per share for profit attributable to the equity holders of the parent entity: Basic loss per share (cents per share) (0.52) (2.39) Diluted loss per share (cents per share) (0.52) (2.39)

The accompanying notes form part of these financial statements

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2012

CURRENT ASSETS Cash and cash equivalents Receivables Financial assets at fair value through profit or loss Inventory Other financial assets Other current assets TOTAL CURRENT ASSETS

31 December 2012 $

30 June 2012 $

245,428 1,556,425 43,180 633,112 54,124 21,670 2,553,938

406,860 1,478,195 31,404 344,844 54,124 28,660 2,344,087

NON-CURRENT ASSETS Receivables Investments in associates Property, plant and equipment Deferred exploration, evaluation and development TOTAL NON-CURRENT ASSETS

250,000 2,304,642 42,604 2,113,385 4,710,631

850,000 2,008,510 51,584 2,111,965 5,022,059

TOTAL ASSETS

7,264,570

7,366,146

CURRENT LIABILITIES Payables Purchase Option Advance on Purchase Option Provisions TOTAL CURRENT LIABILITIES

1,084,361 1,610,921 2,000,000 7,190 4,702,472

654,671 1,610,921 2,000,000 132,373 4,397,965

16,048 16,048

29,548 29,548

TOTAL LIABILITIES

4,718,520

4,427,513

NET ASSETS

2,546,050

2,938,633

NON-CURRENT LIABILITIES Provisions TOTAL NON-CURRENT LIABILITIES

EQUITY Share capital Other Reserves Accumulated lossses EQUITY ATTRIBUTABLE TO THE OWNERS OF GREENEARTH ENERGY LTD Non-controlling Interests TOTAL EQUITY

15,193,703 (41,939) (12,416,088)

15,010,591 410,400 (12,239,534)

2,735,676 (189,626) 2,546,050

3,181,457 (242,824) 2,938,633

The accompanying notes form part of these financial statements

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

Contributed Equity $

Reserves $

15,010,591

410,400

Accumulated Losses $

Noncontrolling interest $

Total Equity $

Consolidated

Balance at 1 July 2012 Loss for the half year Total comprehensive income for the half year Transactions with owners in their capacity as owners: Contributions Acquisition of shares in subsidiary Costs of raising capital Exercise and expiration of options Equity based payments Transactions with owners in their capacity as owners

(12,239,534)

(242,824)

2,938,633

-

-

(586,954)

(20,115)

(607,069)

-

-

(586,954)

(20,115)

(607,069)

35,962 147,150

(73,313) (410,400) 31,374

410,400 -

73,313 -

35,962 178,524

183,112

(452,339)

410,400

73,313

214,486

Balance at 31 Dec 2012

15,193,703

(41,939)

Balance at 1 July 2011

13,350,876

410,400

Loss for the half year Total comprehensive income for the half year Transactions with owners in their capacity as owners: Contributions Costs of raising capital Equity based payments Transactions with owners in their capacity as owners Balance at 31 Dec 2011

(12,416,088)

(189,626)

2,546,050

(9,646,166)

-

4,115,110

-

-

(2,248,430)

-

(2,248,430)

-

-

(2,248,430)

-

(2,248,430)

983,071 (10,000) 445,649

983,071 (10,000) 445,649 1,418,720 14,769,596

-

-

-

-

-

-

1,418,720

-

3,285,400

410,400

(11,894,596)

The accompanying notes form part of these financial statements

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2012

CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Rebates received/(payments made) for exploration and evaluation costs Interest received Net cash used in operating activities

2012 $

Half-year

2011 $

222,536 (944,981)

385,743 (1,760,032)

235,759 4,158 (482,527)

(41,058) 6,783 (1,408,564)

CASH FLOW FROM INVESTING ACTIVITIES Payment for investments Net cash used in investing activities

(14,866) (14,866)

CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares Proceeds from issue of option Advance from issue of option Capital raising costs Advances to related parties Net cash provided by investing activities

35,962 300,000 335,962

983,071 1,014,921 (10,000) (1,825,863) 162,129

(161,432) 406,860 245,428

(1,246,435) 1,866,378 619,943

Net decrease in cash and cash equivalents

Foreign exchange differences on cash holdings Cash and cash equivalents at beginning of half-year Cash and cash equivalents at end of half-year

-

The accompanying notes form part of these financial statements

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 1: BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT This half-year financial report does not include all the notes of the type usually included in an annual financial report. It is recommended that this half-year financial report be read in conjunction with the annual financial report for the year ended 31 December 2012 and any public announcements made by Greenearth Energy Ltd during the half-year in accordance with any continuous disclosure obligations arising under the Corporations Act 2001 . The half-year financial report was authorised for issue by the directors as at the date of the directors’ report. (a)

Basis of preparation

This financial report is a general purpose half-year financial report that has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 . The half-year financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. The accounting policies applied in this half-year financial report are consistent with those of the annual financial report for the year ended 30 June 2012 and the corresponding half-year. (b)

Going Concern

The Directors have prepared the financial report on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The consolidated entity incurred an operating loss after income tax expense for the period ended 31 December 2012 of $607,069 (2011: $2,248,430) and at the reporting date total assets exceeded total liabilities by $2,546,050 (30 June 2012: $2,938,633), including deferred exploration, evaluation and development assets of $2,113,385 (30 June 2012: $2,111,965). The Directors have determined that there is a cash requirement of $1,800,000 over the forthcoming 12 months to maintain operations, which represents a net cash requirement of $500,000 after allowing for known contracted cash receipts of $1,300,000 during that time. The majority of these known contracted receipts are the remaining amounts receivable in relation to the $2,000,000 option advance from Erdi Fuels as disclosed in the 30 June 2012 annual report. The Directors anticipate that this net cash flow requirement of $500,000 is likely to be funded by the net operating cash flow of Greenearth Energy Efficiency Pty Ltd ("GEE", a company within the consolidated group) as its energy efficient lighting business continues to expand over the next 12 months. This subsidiary is integral to the group's recent and continuing focus on short term expansion of revenue streams and is expected to experience significant revenue growth over the next 12 months, enabling it to fully fund the rest of the consolidated group's net cash flow requirement of $500,000.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

(b)

Going Concern (continued)

The anticipated revenue growth (and consequent cash flow contribution) of GEE over the next 12 months is based on certain assumptions in relation to the short-term development of the business. These assumptions relate to the expected future revenue and profitability of GEE during that time and are based on currently available information including management assessments of forward orders, probable future orders and other information. In the event that GEE is unable to generate sufficient operating cash flow to fund the group's net cash flow requirement of $500,000 over the next 12 months, other funding avenues may be required and accordingly the Directors continue to develop their other renewable technologies and are focussing on expanding their revenue streams in conjunction with seeking to raise additional capital. The Directors also recognise that additional funding is required over the next 2 to 3 years to further develop current geothermal projects, in particular its flagship domestic geothermal project, the Geelong Geothermal Power Project (GGPP). Additional funding is potentially still available through access to Commonwealth and Victorian Government Grants as discussed below. The Directors also continue to seek potential joint venture partners at a project level. This further investment will be required to undertake the project, fulfil the terms of the Government Grants and secure access to the Government funding. On 3 November 2011, Greenearth Energy and the Victorian Government executed the funding agreement in relation to the awarding of $25 million funding grant that is receivable subject to meeting Government pre-conditions including co-contribution requirements. $5 million of the grant relates to the Proof of Resources stage with the remaining $20 million to be contributed towards demonstration stage upon a successful Proof of Concept stage. The Directors are also in the process of applying for funding via the Australian Government's Emerging Renewable program. If successful, this additional funding will assist to meet the cocontribution requirements of the Victorian government funding agreement. To allow the Company time to undertake this process while maintaining the Victorian Government Grant the Company has been granted an extension from the Victorian Government until 30 September 2013, to allow a suitable application to be submitted while maintaining a significant funding contribution towards the Proof of Resource phase. There is no guarantee the Company will be successful in securing this funding. The consolidated entity does not have any material commitments in relation to the GGPP or other permits it holds as at balance date or the date of signing this financial report. For the period 1 January 2013 to 13 March 2013, the group’s cash inflows were $463k (including $300k collected from Erdi Fuels Pty Ltd and $159k collected from Greenearth Energy Efficiency debtors), and its outflows were $450k (being payments to suppliers and employees). This resulted in a net cash inflow for that period of $12k. The financial report does not include any adjustment relating to the recoverability or classification of recorded asset amounts nor to the amounts or classification of liabilities that might be necessary should the consolidated entity be unable to trade as forecast or to raise sufficient funding to continue as a going concern. If the going concern basis of accounting is found to no longer be appropriate, the recoverable amount of the assets shown in the Condensed Consolidated Statement of Financial Position are likely to be significantly less than the amounts disclosed and the extent of liabilities may differ significantly from those reflected.

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GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

(c)

Summary of the significant accounting policies

All accounting policies applied in this half-year financial report are the same as those used in the annual financial report for the year ended 30 June 2012.

18

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 2: DIVIDENDS No dividends have been paid or provided for during the half-year. NOTE 3: SEGMENT INFORMATION (a)

Description of segments

The group has six reportable segments. The Greenearth Energy Group holds, or is interested in geothermal acreage or projects which operate in different geographical settings. These settings can be clearly identified by the country they are situated in, or if they exist within Australia, the geological basin they are contained in. A brief description of each identified segment is detailed below. Corporate head office and administration costs are not allocated to segments. Segment 1: Geothermal - Otway Basin The Otway Basin extends along the Southern Margin across Victoria and South Australia. The Basin covers an area of approximately 150,000km2 of which 35% is onshore. Greenearth Energy’s GEP10 is contained within the Otway Basin. Segment 2: Geothermal - Gippsland Basin The Gippsland Basin covers approximately 56,000 km2 of South Eastern Victoria, of which approximately 16,000km2 lies onshore. Greenearth Energy’s GEP 12 and 13 permits are located within the Basin. Segment 3: Geothermal - Indonesia Greenearth Energy Group is exploring the possibility of geothermal development projects within the country of Indonesia. Indonesia is a widely recognised geothermal province. Segment 4: Energy Efficiency Greenearth Energy Group via its subsidiary, Greenearth Energy Efficiency has entered into a distribution agreement with Metrolight Ltd, to introduce its energy efficient lighting solution to the Australian and Pacific Rim. During the financial period, revenue has been received by this segment and market interest is increasing. Segment 5: Waste Heat Recovery (discontinued) A suite of technologies that are proven world class technologies that provide clients with increased energy productivity, energy reliability, operational savings, and lower greenhouse gas emissions. These technologies are distributed via Greenearth Energy subsidiary Pacific Heat and Power. During the period, the company entered into a sale agreement to divest 100% of its ownership interest in Pacific Heat and Power. Segment : Other Projects This segment includes other non-geothermal investments or projects, which Greenearth Energy has either invested in but have not been fully expanded into a distinct business segment, or technologies or project that are currently being considered.

19

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 3: SEGMENT INFORMATION (continued) (b)

Segment information

2012

Geothermal -

Geothermal -

Otway

Gippsland

Geothermal -

Energy

Waste Heat Recovery

Other

Basin

Basin

Indonesia

Efficiency

(discontinued)

Projects

Total

$

$

$

$

$

$

$

Segment revenue Total segment revenue

-

-

-

Inter-segment revenue

-

-

-

-

-

-

Total segment result

-

-

(17,847)

Inter-segment eliminations

-

-

-

Segment result from external source

-

-

(17,847)

(432,916)

-

(154,611)

(605,375)

9,668

786,856

-

3,929,114

6,839,024

Segment revenue from external source

141,469

-

-

-

-

141,469

-

-

(432,916)

-

-

141,469 141,469

Segment result

Total segment assets

2011

612,771

1,500,613

-

(154,611)

-

(605,375)

-

-

Geothermal -

Geothermal -

Otway

Gippsland

Geothermal -

Energy

Waste Heat Recovery

Other

Basin

Basin

Indonesia

Efficiency

(discontinued)

Projects

Total

$

$

$

$

$

$

$

Segment revenue Total segment revenue

-

-

-

46,143

58,327

-

Inter-segment revenue

-

-

-

-

-

-

104,470

Segment revenue from external source

-

-

-

46,143

58,327

-

Total segment result

-

-

-

(155,950)

(19,314)

Inter-segment eliminations

-

-

-

Segment result from external source

-

-

-

(155,950)

(19,314)

(446,865)

(622,129)

11,163

461,727

88,027

1,329,049

4,104,157

104,470

Segment result

Total segment assets

712,577

1,501,614

-

-

20

(446,865) -

(622,129) -

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 3:

SEGMENT INFORMATION (continued)

(b)

Segment information (continued)

(i)

Reconciliation of segment result from the external source to the consolidated statement of comprehensive income 2012 $

Segment result from external source Interest revenue Interest expense Depreciation and amortisation Share of profit/(loss) of associates and joint ventures accounted for by the equity method Unallocated revenue and gains Unallocated expenses Total loss before income tax

NOTE 4:

Half-year

2011 $

(605,375) (1,251) (8,980)

(622,129) 5,131 (1,780) (14,132)

281,267 250,092 (522,822) (607,069)

(445,070) (1,170,450) (2,248,430)

PURCHASE OPTION

Purchase Option (deferred revenue)

1,610,921

1,610,921

An Option deed has been entered into by Greenearth Energy Ltd, its joint venture partner and Erdi Fuels Pty Ltd in connection with the funding and development of technology for making fuel from CO2. The underlying asset is presented as an investment in associate, NewCo2fuels Ltd within the financial reports of Greenearth Energy Ltd. In consideration of the payment by Erdi Fuels Pty Ltd of US$4.5 million over the period required to develop the technology, Erdi Fuels Pty Ltd has been granted the option to acquire all the equity in the Israeli based Joint Venture Company NewCo2fuels Limited. The option is exercisable 2 years from the commencement of the technology development should the research and development activities have progressed sufficiently to Alpha Proof, the commercialisation stage. The receipt for granting of the option is presented as a current liability within the financial reports of Greenearth Energy however represents deferred revenue for which there is no recourse if the purchase option is not exercised. The option exercise price is $100. For clarification it is noted that the $4.5 million development payments identified above flow directly to the joint venture company and are not retained by Greenearth Energy. In addition to the option payments, an ongoing royalty stream will be paid on sales to be shared by the group (via NewCo2fuels Pty Ltd) and the Joint Venture partners.

21

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 5:

ADVANCE ON PURCHASE OPTION

Advance on Purchase Option (deferred revenue)

2,000,000

2,000,000

In June 2012 Greenearth Energy and Erdi Fuels Pty Ltd agreed to an advance on the fee owing to Greenearth Energy upon exercise of the purchase option in relation to the acquiring of all the equity in the Israeli based Joint Venture Company, NewCo2fuels Limited. The option fee payable to Greenearth Energy has been discounted from a possible $US8.5 million if the purchase option is exercised to an advance amount of $2 million, payable in instalment over a 21 month period commencing with an amount of $150,000 received in June 2012 and a debtor recognised for the outstanding balance within the Financial Statements. During the half-year, a further $300,000 was received and the oustanding balance at 31 December 2012 is $1,550,000. The advance has no impact on the ongoing royalty payable on sale of products as specified in the Option Agreement and there is no recourse if the purchase option is not exercised within the specified timeframe when the technology development has progressed sufficiently to through the Alpha stage. NOTE 6:

CONTRIBUTED CAPITAL

The company issued a total of 4,923,508 ordinary shares and 13,000,000 unlisted options during the period ended 31 December 2012. The company issued 719,222 ordinary shares during the period ended 31 December 2012 for 5 cents per share as a result of exercise of unlisted options. The funds received net of transaction costs were $35,962. A further 4,204,286 ordinary shares were issued during the period in lieu of Directors' fees and associated superannuation applicable to the financial year ended 30 June 2012. During the period, the company issued 13,000,000 unlisted options over ordinary shares to Directors and staff for nil consideration as part of executive remuneration arrangements. A total of 22,581,679 unlisted options over ordinary shares expired during the period ended 31 December 2012, being 6,000,000 unlisted options previously issued to directors and staff, 2,000,000 unlisted options previously issued to Tollhurst Ltd, and 14,581,679 unlisted incentive options previously issued to shareholders who participated in the rights issue conducted by the company during the previous financial year. NOTE 7:

DISCONTINUED OPERATION

(a)

Following the completion of a diagnostic review of all aspects of the company, it was concluded that even though there is a growing demand for waste heat recovery technology, due to long project establishment leadtimes and low margins the business unit, Pacific Heat and Power held no strategic value for the company. The company entered into a sale agreement on 11 July 2012 with sale proceeds then valued at $78,405. As at balance date the value of the consideration was $54,883 and it is still receivable at the date of this report.

22

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 7:

DISCONTINUED OPERATION (continued)

(b)

The results of the discontinued operation for the period until disposal are presented below: Half-year

2012 $ (i) Financial performance information Revenue Expenses Loss before income tax Income tax expense Loss after income tax of discontinued operations Profit on sale of the division before income tax Income tax expense Profit on sale of the division after income tax Profit from discontinued operations (ii) Net Net Net Net

Cash flow information cash used in operating activities cash provided by investing activities cash provided by financing activities cash flow

(iii) Carrying amount of assets and liabilities Assets Cash Receivables Assets clasified as held for sale Liabilities Payables Liabilities directly associated with assets classified as held for sale Net assets attributable to discontinued operation (iv) Details of discontinued operation disposed Consideration received or receivable Cash Fair value of contingent consideration Total disposal consideration Less: Net (assets)/deficiency disposed of Gain on disposal of discontinued operation before tax Income tax expense Profit from disposal of discontinued operation

210,318 210,318 210,318

2011 $ 58,327 (74,994) (16,667) (16,667) (16,667)

-

(23,974) 23,974 -

-

88,027 88,027

-

53,720

-

53,720 34,307

54,883 54,883 155,435 210,318 210,318

23

-

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS 31 DECEMBER 2012

NOTE 8:

INVESTMENTS IN ASSOCIATES

Included within investments in associates is the group's investment in NewCO2Fuels Ltd (incorporated in Israel) of $2,303,207. Included within this carrying amount, and the income statement for the period, is $298,814 being the group's share of the net accounting profit of that associate for the period. The associate's net profit for the period includes an amount of USD $1m revenue for amounts received from Erdi Fuels Pty Ltd in relation to a grant for the development of a field demonstration unit. This transaction was the main driver for an overall accounting profit of $298,814 for the group's 50% share of the joint venture during this reporting period. NOTE 9:

RELATED PARTY TRANSACTIONS

In December 2012, Greenearth Energy Ltd acquired a further 15% of the issued shares in NewCO2Fuels Pty Ltd from Advance Publicity Pty Ltd (a shareholder of Greenearth Energy Ltd) for $1. Ths transaction took the percentage of equity interest held by the consolidated entity to 100% (30 June 2012: 85%). The resulting impact on non-controlling interest is shown in the statement of changes in equity. Where applicable, other significant related party transactions are disclosed in the relevant notes to the half-year financial statements. NOTE 10: CONTINGENT LIABILITIES There have been no changes in contingent liabilities since 30 June 2012. NOTE 11: SUBSEQUENT EVENTS On the 4th March 2013, the Victorian Government approved a time extension for the $25 million grant for the Geelong Geothermal Power Project ('GGPP'). The time extension has been granted until 30 September 2013 to activate the ETIS grant of $25 million. The $25 million grant was originally awarded in December 2009 under the Victorian Government’s Energy Technology Innovation Strategy (ETIS) for large scale, pre-commercial, sustainable energy demonstration projects.

24

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES ACN: 120 710 625 DIRECTORS’ DECLARATION

The directors declare that the financial statements and notes set out on pages 12 to 24 in accordance with the Corporations Act 2001 : (a)

Comply with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001, and other mandatory professional reporting requirements; and

(b)

Give a true and fair view of the financial position of the consolidated entity as at 31 December 2012 and of its performance for the half-year ended on that date.

In the directors’ opinion there are reasonable grounds to believe that Greenearth Energy Ltd will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Samuel R Marks Managing Director Greenearth Energy Ltd Dated this 14th day of March 2013

25

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 INDEPENDENT AUDITOR’S REVIEW REPORT

26

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 INDEPENDENT AUDITOR’S REVIEW REPORT

27

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 INDEPENDENT AUDITOR’S REVIEW REPORT

28

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012

Greenearth Energy Limited & CONTROLLED ENTITIES

ACN: 120 710 625 INDEPENDENT AUDITOR’S REVIEW REPORT

29

GREENEARTH ENERGY HALF YEARLY REPORT ENDED 31 DECEMBER 2012