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ERG Investor Presentation 2019

Sep 5, 2019

4235_ip_2019-09-05_6bbeb85e-0596-4dee-9838-58caace334ce.pdf

Investor Presentation

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COMPANY OVERVIEW

5 SEPTEMBER 2019, MILAN ITALIAN INFRASTRUCTURE DAY 2019

DISCLAIMER

This document contains certain forward-looking information that is subject to a number of factors that may influence the accuracy of the statements and the projections upon which the statements are based.

There can be non assurance that the projections or forecasts will ultimately prove to be accurate; accordingly, the Company makes no representation or warranty as to the accuracy of such information or the likelihood that the Company will perform as projected.

AGENDA

  • A successful industrial Transformation
  • 2018-2022 Strategy & Recent Developments
  • 2Q 2019 Results & 2019 Guidance
  • A focus on Sustainability
  • Appendix

Management Profiles

A SUCCESSFUL INDUSTRIAL TRANSFORMATION

A LONG HISTORY…

installed wind capacity is

1,506MW.

ERG INDUSTRIAL TRANSFORMATION

Renewable diversification financed through oil-linked disposals and strong cash generation

(1) Itrefersto M&A and organicgrowthCAPEX

(3) 2018 includes TotalERG Disposal whose closing took place on January 10, 2018 with a partial cash-in of €85mn in 2017, and ForVEI acquisition (EV €345mn) whose closing took place on January 12, 2018 (4) 2019 includesAndromeda acquisition(€221mn, finalisedon February12, 2019) and the recentwind asset acquistionin France (€52mn), whoseclosing tookplace on May6, 2019

(2) Itincludesdividendspaidin May2019 (ca. €112mn with ordinaryDPS at€0.75/sh)

… BUT A RAPIDTRANSFORMATION

EU LEADINGRENEWABLE IPP

(1) It includes Polaris acquisition of 52MW signed in March 2019, whose closing took place on May 6, 2019

(2) It includes Linda project entered into operation in June2019, and Aquila acquisition of 3 wind farms for 34MW (signed on August 19, 2019), whose closing is expected in 3Q 2019

(3) It includes Andromeda acquisition (51.4MW), whose closing took place on February 12, 2019

(4) It refers to Romania, Bulgaria and Poland

SHAREHOLDINGSTRUCTURE

(1) ERG owns 0.965% of own Shares

STEADY AND WELL BALANCEDPORTFOLIO

•Close to 70% of EBITDA from incentives

  • •EBITDA well balanced across different generation assets
  • •Geographical and seasonal diversification, allowing for complementarity of the different energy sources
  • •Earnings stability sustained by priority of dispachtment

  • •A strict financial discipline on investments (organic and M&A) through:
    • -Strategic Committee (EVP, VP, CEO, CFO, 2 Board Members(1) )
    • -Investment Committee (CEO, CFO, Management Team)

  • •Strong risk management policy:

  • -Best practice risk policy to ensure the hedging policy of the generation portfolio

  • •Full Alignment of interests between Top Management and shareholders through:
      • Launch in 2018 of a 3 year LTI compensation scheme fully based on shares

(1) 1 non-executive and 1 independent referring to the Corporate Governance Code set out by the Italian Stock Exchange (2) Committee composed of 3 independent Board Members

(3) Committee composed of 2 independent Board Members and 1 non-executive Board Member

2018-2022 STRATEGY & RECENT DEVELOPMENTS

ERG 2018-2022 STRATEGIC OPTIONS

ERG 2018-2022 CAPACITY EVOLUTION STRONG EXECUTION IN 2018

(3) Closing will take place in 3Q 2019

GREENFIELDDEVELOPMENT WELL ON TRACK

REPOWERING& REBLADINGIN PROGRESS

  • •153MW (ca. 400MW after RPW) included in BP:
    • 92MW (242MW after RPW) received positive opinion from "Commissione VIA"
  • •additional 121MW applied for authorization

•additional ca. 100MW in engineering phase

  • •New capacity under reblading is 75MW
  • •13MW (Avigliano) on stream in 2Q 2019
  • •22MW received VIA Decree
  • •additional 40MW applied for authorization
  • •Reblading of Avigliano wind factory carried out on:

MW for RBL

13

22

75

40

of 25/06/2019

as

    • April/May 2019
    • Capex €3.1mn

  • Production increased 19%

DRIVINGINTO2023

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Keep growing leveraging on assets rejuvenation, larger capacity abroad and high quality financial stucture

FINANCIALS – UPDATEDPROJECTIONS

Acceleration of targets in the first years of BP

GROUP DEBT STRUCTURE

  • •Debt structure mainly composed of medium term loans with 92% fixed rate portion

  • •ERG's operating assets grant a steady flow of cash upstream to ERG S.p.A.:

  • -Hydro & Natural Gas assets fully unlevered without any external financing constraints

    • Wind & Solar SPVs financed by long term loans with maturities consistent with incentive life and able to upstream a relevant amount of cash

Evolving new financial strategy: move from Project Financing fund raising to corporate/DCM Financing

(1) ERG S.p.A. owns all the operating assets through ERG Power Generation S.p.A., a 100% owned operating subsidiary, free of debt and in cash pooling with ERG S.p.A.

2Q 2019 RESULTS & 2019 GUIDANCE

HIGHLIGHTS: KEY FIGURES

Resilient business performance despite of weak hydro conditions

ADJUSTED P&L

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Note: figures based on NO GAAP measures

1H 2019 CASH FLOW STATEMENT

(1) Out of which €43mn is a non-cash item linked to the write-off of a positive FV associated to Erg Wind Project Financing, while the remainder is mainly linked to the IRS unwinding of the same Project Financing

2019 GUIDANCE

(1) 2019 Guidance does not include IFRS 16 effects. It does not include also the effects of the recent acquisitionin Germany for 34MW.

A FOCUS ON SUSTAINABILITY

2018-2022 CSR DRIVERS

The 2018–2022 Business Plan is focused on a continuous development of plants producing energy from renewable sources and sets targets on three main priority areas:

(1) Carbon index (gCO2/kWh) reveals the quantity of CO2included in every kWh produced

ERG SUSTAINABLE EVOLUTION

Decarbonising ERG's electricity production

  • • ERG's business transformation: increasing production of electricity from renewable sources
  • • In this way, by the end of 2018 ERG had reduced the carbon intensity of its production by 90% since it entered the renewable energies sector and by 42% in the last 4 years

ERG's Sustainability numbers

2.5GW Installed capacity from renewable sources

100%

ISO 14001 and/or OHSAS 18001 certified Italian companies consistent with their activities

Source: non financial information statements

(1) The Carbon index drop in 2010 was due to the entrance into operation of the ERG Power plant which replaced the existing oil fed power plants.

(2) The Carbon index drop in 2014 was due to the sale of the ISAB Energy plant.

ESGACHIEVEMENTS AND RATINGS

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APPENDIX

2018-2022 EBITDA EVOLUTION

EBITDA growth based on industrial efficiency and strong rise in renewable asset base

(1) It includes wind incentives phasing out and white certificates termination as of 2020

CAPEX EVOLUTION

A massive and flexible investment plan for growth

(1) It includes CAPEX for Mini Hydro for €13mn

STRONG BALANCE SHEET

Liquidity Evolution (€ mn) (1)

Net Debt/EBITDA Ratio and Capex Evolution

Conservative financial policy focused on:

•consolidated Net debt / EBITDA to be less than 3.0x

  • • limited maintenance capex offering the flexibility to deleverage quickly when necessary (e.g. 2017)
  • • maintaining a solid liquidity profile with an average of €664m in the last three years

Prudent financial policy coupled with sizeable bulk of liquidity

(1) Liquidity is equal to the following components of the Net Financial Position: (i) short-term banking liabilities (ii) cash and cash equivalent

ERG 2018-2022: FINANCIAL STRATEGY

From an Asset based financing to a Corporate/Debt Capital Market based financing

STRONG CASH GENERATION

Average annual FCF Yield(4) at 16% in the plan period

(1) CAPEX includes Greenfield & co Development and Repowering

(2) Disposals include: 2018 proceeds related to TotalErg Disposal (€180mn) and Brockaghboy wind farm disposal (ca. €108mn)

(3) It includes net working capital, taxes and net financial costs

(4) FCF Yield: EBITDA after working capital, taxes and net financial costs, deducted maintenance CAPEX, on market cap (share price at €16.4)

KPI IN THE PLAN PERIOD

MANAGEMENT PROFILES

LUCA BETTONTE - CEO

Born in Rovigo on 30th September 1963. Graduated in economics and business at the University of Bologna. Chartered Accountant and Auditor.

Chief Executive Officer of ERG S.p.A.

From June 2012 to January 2018 Director of TotalErg S.p.A. From July 2016 to December 2016 Chief Executive Officer of ERG Renew S.p.A. From April 2012 to July 2016 Director of ERG Renew S.p.A. From July 2011 to April 2012 Chairman of the Board of Directors of ERG Renew S.p.A. From December 2009 to April 2012 General Manager Corporate and Director of ERG S.p.A. From November 2007 to December 2009 CFO of ERG S.p.A.

As from 2003 up to 2007 he has been CFO of Atlantia S.p.A., Finance Director of Autostrade per l'Italia S.p.A., Chairman of Autostrade International US Holdings, Director of Impregilo S.p.A., Autostrade Sud America Srl and of Emittenti Titoli S.pA.

As from 1998 up to 2003 he worked at Indesit Company S.p.A. both as Group Financial Controller at first and lately, starting from year 2000, as CFO, respectively.

As from 1990 up to 1998 he worked for Pricewaterhouse Coopers S.p.A. in Italy and Great Britain.

Professor at the Faculty of Economics and Commerce of the "Università Cattolica Sacro Cuore" in Milan from 2008 to 2010 and of the University of Bologna as from 2004 up to 2008, respectively.

PAOLO MERLI - CFO

Born in Milan on 24th June 1971, he graduated in Electrical Engineering from the University of Pavia in March 1996. After doing his national service at the Italian Red Cross, in June 1998 he was awarded an MBA in Finance from the Eni "Scuola Superiore Enrico Mattei".

He joined the ERG Group in September 2006, where he is currently Corporate General Manager and Chief Financial Officer, in charge of activities pertaining to Investor Relations, Mergers & Acquisitions, Group Administration, Finance, Planning, Control & Reporting, Group Risk Management & Corporate Finance, Procurement and Human Capital & ICT.

He is member of the Strategic Committee, Board Director of ERG Power Generation S.p.A., beside being member of other internal committees such as Management Committee, Investment Committee, Risk Committee and Human Capital Committee. As from 2014 he is the Manager Responsible for preparing the Company's financial reports.

Other positions held in the past:

From October 2015 to January 2018 he was a member of the Board of Directors of TotalErg S.p.A. He previously worked for around 7 years as a financial analyst covering the European Energy and Motorways sectors at Intermonte, a leading brokerage firm owned by the Monte dei Paschi Banking Group. At Intermonte he was also a "specialist" in ERG stock when ERG joined the STAR segment.

From 1998 to 2000 he worked in the sales department at Snam S.p.A. (current Gas & Power division of Eni Group).

Outside of work, his biggest passion is sport, particularly cycling (racing and mountain biking) and skiing (alpine and cross-country).

He is married, with two children.

EMANUELA DELUCCHI – HEAD OF IR

Born in Genoa on 18th December 1975, she graduated in Economics from the University of Genoa in March 1999. She joined the ERG Group in February 2008 where she is currently Head of IR, reporting directly to the CFO.

Other positions held in the past:

From February 2008 to January 2011 she was Head of IR and Planning & Control at ERG Renew.

She previously worked for 3 years as a financial analyst covering the Italian Utilities & Motorways sectors at Intermonte, a leading brokerage firm owned by the Monte dei Paschi Banking Group.

Prior to that she was a financial analyst covering European Utilities & Motorways sector at Lehman Brothers.

She is married, with three children.

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