Iren — Investor Presentation 2015

Nov 13, 2015

Process Streamlining

through the centralization at "Holding level" of the main corporate functions and through the standardization of the ICT systems.

Company rationalization

through the merger of approximately 15 subsidiaries, 100% owned by the Group, substantially completed. All the AGMs of the involved companies have already resolved upon the mergers and the project will be effective starting from the 1 st January 2016.

Financial profile optimization

• "Investment grade" rating by Fitch (BBB-)
• Issue of a 500m€ bond under the 1bn€ EMTN programme.

9M 2015: +11% growth in Net Profit.

		Income statement
	9M '141 m €	9M '15	Δ	Δ%
Revenues	2,071	2,219	148	7.1%
Ebitda	484	498	14	2,7%
Ebit	283	253	-30	-10.6%
Net profit	89	99	10	11.4%

• Revenues up by 7.1%: The significant increase is mainly due to the change in the consolidation perimeter (AMIAT).
• Ebitda +2.7%: Regulated activities reported a significant growth (+27m€) driven also by the achievement of significant synergies (2015 target already reached). In the unregulated activities sector, the positive performance in Market BU (+10m€) was offset by the expiry of DH green certificates (approx. 13m€) and the absence of some 2014 positive oneoffs (~19m€) .
• Ebit -10.6%: The decrease is due to higher D&A (+18m€) mainly due to AMIAT full consolidation and to the absence of the release of provisions reported in 9M 2014 (approx. -25m€, the majority of which linked to Generation and DH BU).
• Net profit +11.4%: The lower financial charges, due to the lower cost of debt and lower debt itself, combined with an improvement in the results of Associates and tax-rate led to the significant growth in Net profit.

GENERATION AND DH – SBU hit mainly by exogenous elements.

• The increase in MSD demand led the growth in the volumes of Turbigo plant, which was not mothballed.
• Generation sector benefitted from the growth in volumes sold and better MSD performance whose positive effect was more than offset by the absence of ~14m€ one-offs reported in 9M 2014.

.

• Hydroelectric sector continues to benefit from higher production, +3.5% (bucking the national trend, -13%). Nonetheless, the sector reported a slight decrease mainly because the absence of the 5m€ insurance reimbursement occurred in 2014.
• DH sector hit by the green certificates expiry (worth approx. 13m€ in the first 9 months of the year, 20m€ FY). Continuous network expansion trend (+1.9% in heated volumes)
• EBIT performances were impacted by the absence of the release of provisions (~30m€) reported in 9M 2014.

	m€	9M '14	9M '15	Δ	Δ%
Revenues		572	557	-15	-3%
Ebitda		141	120	-21	-15%
Ebit		81	25	-56	-69%
Gross Capex		52	22	-30	-58%

MARKET – Significant results and prospects.

• Remarkable increase in EBITDA (+18%), supported by commercial activities and also by cost cutting, confirming the trend already reported in the last quarters.
• 1.484 mln Retail Client base (+1.2% vs 2014, of which >50% already in the free market) and a refocusing on 2016 sales to final industrial clients (+100% contracted on power thanks to Consip, +30% already contracted on gas) to reduce gross volume sold and risk of volatility

	m€	9M '14	9M '15	Δ	Δ%
Revenues		1,654	1,646	-8	0%
Ebitda		56	66	10	18%
	Electricity	16	13	-3	-17%
	Gas&Heat	40	53	13	33%
Ebit		28	37	9	34%
Gross Capex		7	10	3	38%

NETWORKS – Synergies extraction is one of the main drivers for the growth.

ENERGY INFRASTRUCTURE

• Electricity networks: The positive results of the sector is linked to synergies achievement and the equalization for previous years.
• Gas networks: margin in line compared to the same period of 2014 in spite of a number of negative one-offs (-1m€) thanks to synergies extraction.

m€	9M '14	9M '15	Δ	Δ%
Revenues	241	261	20	8%
Ebitda	107	109	2	2%
Electricity	52	54	2	4%
Gas	55	55	0	0%
Ebit	75	75	0	0%
Gross Capex	43	42	-1	-3%
El. distr. (GWh)	2,880	2,977
Gas distr. (mcm)	760	816

WATER INFRASTRUCTURES

The increase in margins reflects the positive tariff and synergy extraction trend together with the change in perimeter due to the transfer of the former SAP concessions (Savona province) to IREN, effective from the 1 st of July of this year.

m€	9M '14	9M '15	Δ	Δ%
Revenues	334	371	37	11%
Ebitda	118	125	7	5%
Ebit	66	73	7	11%
Gross Capex	48	60	12	24%
Volume sold (mcm)	108,9	114,1

WASTE – Doubled revenues and approx. +50% EBITDA

• The significant increase in all the SBU KPIs is related both to internal items (the full operation of Parma WTE, the strong increase in special waste collection, >40% in volumes) and to the contribution of AMIAT.
• The punctual tariff system has been fully implemented in Parma area involving more than 190k inhabitants. Iren's efforts in innovating the sector is one of the drivers of the growth in sorted waste collection both in the provincial (67%) and metropolitan areas (42%).

	m€	9M '14	9M '15	Δ	Δ%
Revenues		169	348	179	105%
Ebitda		39	57	18	46%
Ebit		15	24	9	63%
Gross Capex		14	12	-2	-15%

WTEs - Energy and Heat sold. (GWh)

Pag. 7

Waste (Kton)

From EBITDA to Net Profit.

	9M '14	9M '15	Δ	Δ%
EBITDA	484.3	497.6	13.3	2,7%	 Higher D&A related mainly to Generation&DH and
D&A	-179.7	-198.1			Waste sectors.
Provisions	-21.9	-46.7			 Higher provision due to the absence of the ~25m€
EBIT	282.7	252.8	-29.9	-10,6%	funds release reported in 9M 2014.
Financial charges for loans	-69.1	-63.3			• Lower FC due to lower cost
Other financial charges	-7.6	-4.4		of debt and lower actualization costs
Companies consolidated with e.m.	-12.2	0.3
EBT	193.8	185.5	-8.3	-4.3%
Taxes	-91.7	-69.8
Minorities	-13.4	-16.9			• Lower tax-rate linked to the cancellation of RHT
Group net profit	88.7	98.8	10.1	11.4%	and the change in IRAP regulatory framework.

Pag. 8 of 14

Cash-flow and NFP Bridge.

The positive trend reported in the first half of the year is maintained (~130m€ reduction in NFP), thanks to a strong operating cash flow generation of approximately 400m€.

Interest rate and debt structure*.

• 25% of gross debt at variable interest rate.
• Average long-term debt duration of about 4.5 years.
• Significant reduction in cost of debt (3.4% compared to 3.8% in FY 2014).
• Approximately one-third of Iren's total debt is funded through bonds.
• Assignment of an investment-grade rating by Fitch Agency

(*) Excluding the 500m€ Bond emission occurred after the end of the third quarter. Pag. 10

Annexes

	9M '14	9M '15	Δ%
Brent USD/bbl	106.5	55.4	-48.0%
€/USD	1.4	1,1	-17.8%
Brent €/bbl	78.6	49.7	-36.8%
Gas Demand (bcm)	44	47	+8.5%
PSV €/000 scm	237	244	+3.0%
Energy Demand (Twh)	233	237	1.9%
PUN (€/Mwh)	49.8	52.1	+4.7%
CO2 €/Ton	5.7	7.4	+29.5%
Green Cert. Hydro (€/Mwh)	98.2	99.9	+1.7%

• The normalization of climate conditions, along with a recovery in Thermoelectric uses, led to a 8.5% growth in gas demand
• PUN level marks a 4.7% growth thanks mainly to the exceptional hot weather during the summer season.

	FY '14	9M '15
Net fixed assets	4,619	4,597
Net Working Capital	238	170
Funds	-550	-547
Other assets and liabilities	-28	-29
Net invested capital	4,279	4,191
Group Sharholders' equity	1,993	2,035
Net Financial Position	2,286	2,156
Total Funds	4,279	4,191

DISCLAIMER

The Manager in charge of drawing up the corporate accounting documents and the Chief Financial Officer of IREN S.p.A., Mr. Massimo Levrino, hereby declares, pursuant to paragraph 2 of article 154 bis of the Consolidated Finance Act (Legislative Decree No 58/1998), that the accounting information contained in this presentation is consistent with the accounting documents, records and books.

This document was prepared by IREN mainly for use during meetings with investors and financial analysts. This document does not constitute an offer to sell or a solicitation to buy or subscribe shares and neither this entire document or any portion of it may constitute a basis or provide a reference for any contract or commitment.

Some of the information contained in this document may contain projected data or estimates that are based on current expectations and on opinions developed by IREN and are based on current plans, estimates, projections and projects. Consequently, it is recommended that they be viewed as indicative only.

Projected data and estimates entail risks and uncertainties. There are a number of factors that could produce significant differences between projected results and actual results. In addition, results may be affected by trends that are often difficult to anticipate, are generally beyond IREN's control and could produce results and developments that are substantially different from those explicitly or implicitly described or computed in the abovementioned projected data and estimates. The non-exhaustive list that follows being provided merely by way of example, these risks include: significant changes in the global business scenario, fluctuations in the prices of certain commodities, changes in the market's competitive conditions and changes in the general regulatory framework.

Notice is also given that projected data are valid only on the date they are produced. Except for those cases in which the applicable statutes require otherwise, IREN assumes no obligation to provide updates of the abovementioned estimates and projected data.