Iren — Investor Presentation 2016

Nov 10, 2016

ORGANIC GROWTH Organic growth of approximately 24m€ driven mainly by the energy sector (Generation and Market).

SYNERGIES 23m€ of synergies already achieved, 75% of the expected synergies for this year in the new business plan.

CONSOLIDATION More than 40m€ from consolidation. The process is still ongoing ("Recos - La Spezia" in Septmber, "Salerno Energia Vendite" in October) and IREN is committed in further strengthening its role of consolidator.

FINANCIAL OPTIMIZATION Net of TRM transaction, the NFP has been decreasing for 3 consecutive quarters this year.

9M 2016: double digit growth from EBITDA to Net profit.

Income statement							Ebitda Bridge
m€	9M '15	9M '16	Δ	Δ%						43	559
Revenues	2,219	2,228	9	0.4%	498	(19)		24	23
Ebitda	498	559	61	12.3%			(10)
Ebit	253	285	32	12.9%
Net profit	99	125	26	26.3%	EBITDA 9M '15	One-off 2015	Wacc reduction	Organic Growth	Synergies	Consolid.	EBITDA 9M '16

• Revenues +0.4%: Revenues substantially stable YoY
• Ebitda +12.3%: positive performance equally driven by organic growth and synergies (overall +47m€) and the change in the perimeter (+43m€) thanks to the consolidation process carried out by the company.
• Ebit +12.9%: reflecting good operating results which more than offset D&A growth linked to TRM and higher provisions.
• Net profit +26.3%: benefitting from the growth in EBIT and an adjustment in participations which offset higher financial charges (TRM effect).

GENERATION AND DH – Positive trend confirmed.

• The excellent performance in thermo/cogen sector, already reported in 1H 2016, more than offset the volume/price drop in hydro sector due to commodity scenario and climate conditions.
• Generation sector keeps driving the growth mainly thanks to the combined trend in gas and electricity price together with the exploitation of ancillary services through flexibility and an active management of IREN's generation fleet.
• Hydroelectric sector's margins (-20%) hit by both a fall in electricity price and lower electricity and green cert. production.
• DH sector's margins are stable but, starting from 2017, they will fully benefit from approximately 3 mcm of further volumes heated already contracted.
• EBIT doubled (+108%) thanks to the positive operating results plus the release of a number of provisions.

	9M '15 m€	9M '16	Δ	Δ%
Revenues	557	547	-10	-2%
Ebitda	120	140	20	16%
Ebit	25	52	27	108%
Gross Capex	21	25	4	18%

ELECTRICITY PRODUCTION (GWh)

MARKET – Improved commercial approach and hedging operations drive the growth.

• The steady increase in profitability and EBITDA compared to the same period in 2015 is due to the ability of the Group in exploiting positive scenario conditions, together with the deployment of the strategy outlined in the BP, which already led to:
• +38% electricity volumes sold to end Clients (vs. lower volumes sold on IPEX).
• +85k additional Clients in the last 9 months (of which 54K from Atena consolidation).
• Strong improvement in shipping and logistics policy (gas), together with a sound hedging procedure.

	m€	9M '15	9M '16	Δ	Δ%
Revenues		1.646	1.467	-179	-11%
Ebitda		66	97	31	47%
	Electricity	13	43	30	231%
	Gas&Heat	53	54	1	2%
Ebit		37	53	16	45%
Gross Capex		10	12	2	21%

NETWORKS – Synergies offsetting wacc reduction.

• Energy networks: the absence of a positive equalization reported in 1H 2015 and wacc reduction was substantially offset by synergies. Higher POD's both in electricity and gas thanks to the consolidation of Atena
• Water networks: The fall in EBITDA is linked to the absence of approximately 15m€ tariff recovery for previous years reported in 2015.

m€	9M '15	9M '16	Δ	Δ%
Revenues	632	591	-41	-6%
Ebitda	234	220	-14	-6%
Electricity	54	51	-3	-6%
Gas	55	56	1	2%
Water	125	113	-12	-10%
Ebit	148	125	-23	-16%
Gross Capex	101	97	-4	-4%

WASTE – Positive results thanks both to external and internal growth.

• External Growth: thanks to the territorial consolidation process (~35m€) through the acquisition of a controlling stake in TRM.
• Internal Growth: Synergies exploitation together with the full saturation of PAI (and the reduction in the usage of external disposal plant) thanks to its use for disposal of Reggio Emilia urban waste.
• The growth in EBITDA led to a doubling in EBIT

	m€	9M '15	9M '16	Δ	Δ%
Revenues		348	382	34	10%
Ebitda		57	95	38	68%
Ebit		24	50	26	106%
Gross Capex		12	13	1	5%

Waste (Kton)

From EBITDA to Net Profit.

	9M '15	9M '16	Δ	Δ%
EBITDA	497,6	558,9	61,3	12,3%
D&A	-198,1	-215,9			• Higher D&A linked mainly to TRM consolidation.
Provisions	-46,7	-57,6			• Higher provisions mainly linked to non-recurring provision on industrial plants for 7m€.
EBIT	252,8	285,4	32,6	12.9%
Financial charges for loans	-63,3	-69,7			• Higher Financial charges for loans due to TRM consolidation.
Other financial charges	-4,4	-8,8			• Higher "Other financial charges" due to
Companies cons with e.m.and adj.	0,4	11,9			actualization of expenses.
EBT	185,5	218,9	33,4	18.0%	• Adj. in TRM participation value.
Taxes	-69,8	-78,7			• Higher tax linked to the increase in EBT (9M 2016 tax-rate 35.9%).
Minorities	-16,9	-15,3
Group net profit	98,8	124,9	26,1	26,3%

Cash-flow and NFP Bridge.

• Third consecutive quarter in the year experiencing a decrease in NFP (net of the TRM and Atena consolidation effect)
• NWC broadly in line with 1H 2016.

Interest rate and debt structure*.

• 20% of gross debt at variable interest rate.
• Average long-term debt duration of about 4.7 years (5.0 years expected taking into account the recent bond emission and tender offer).
• Further slight reduction in cost of debt (3.4%) compared to 1H 2016 (3.5%).
• IREN's debt is formed of:
• 36% bonds (47% taking into account the recent bond emission and tender offer).
• 33% EIB loans.
• 31% other loans

Further steps.

ORGANIC GROWTH AND SYNERGIES

• Significant optimization in the integrated energy value chain coupled with an active management of the generation assets and a strong focus on Clients which led to approximately +85k Clients in 9M 2016: 20% of the BP expected growth by 2021 already achieved.
• Completion of the company rationalization process by the end of the year: starting from 2017 6 subsidiaries will generate ~95% of the total Group's EBITDA

FINANCIAL OPTIMIZATION

• Issue of a 500m€, 8-year maturity bond with the aim of exploiting the particularly favourable interest rate scenario and lengthening the average debt life.
• Successful concurrent liability management operation through a tender offer on IREN's seasoned bonds.
• Exploitation of a number of opportunities, in particular in the waste sector, has already strengthened the role of the company as aggregator in its reference areas: - acquisition of 25,5% of Recos La Spezia, the newly created company owning and managing a municipal waste treatment plant (authorized for 105k ton/y) serving La Spezia Province;

CONSOLIDATION

• - exclusive right to negotiate with Unieco for the disposal a number of assets of its "Waste" branch;
• - signing of the term-sheet related to the acquisition of a 59,000 square meters landfill close to Turin (special waste);
• - single participant in AMIU pre-tender.
• Upcoming full consolidation of Salerno Energia Vendite leading to a further 90k Clients increase in the near future.

Annexes

	9M '15	9M '16	Δ%
Gas Demand (bcm)	47,2	48	2%
TTF €/000 scm	219	141	-36%
PSV €/000 scm	244	160	-34%
Energy Demand (Twh)	237,4	230,5	-3%
PUN (€/Mwh)	52,1	38,3	-26%
CO2 €/Ton	7,4	5,3	-28%
Green Cert. Hydro (€/Mwh)	99,9	100,1	=

	9M '16	FY '15
Net fixed assets	5,102	4,648
Net Working Capital	174	154
Funds	-523	-526
Other assets and liabilities	-49	-46
Net invested capital	4,704	4,231
Group Sharholders' equity	2,176	2,062
Net Financial Position	2,528	2,169
Total Funds	4,704	4,231

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.