Iren — Investor Presentation 2016

Oct 19, 2016

Business Plan @2021

19 October 2016

LEVERAGING ON BOTH A STRONG POSITIONING IN REFERENCE AREAS AND ON A SAFE BUSINESS PORTFOLIO ACHIEVEMENTS

Constant innovation in processes, people and IT solutions has been and will remain the main key to unlock the future of the company.

INNOVATION

A continuous dialogue with the stakeholders to strengthen IREN's role as consolidator in its reference areas.

TERRITORY

IREN @ 2021

Top level service provider within an environmentally, socially and financially sustainable context.

TRUST & COMMITMENT

SCENARIO PILLARS

Improved visibility in regulated activities' regulations and returns

Transfer of waste tariff regulation to AEEGSI/ARERA

Fragmented market in reference areas and upcoming tender season

Steady recovery in energy scenario

Supply market ongoing liberalization

Supportive financial market

EFFICIENCY

Increasing the pace in synergies extraction through deep innovation.

DEVELOPMENT

Strong commitment in exploiting M&A opportunities confirming IREN's leading role in its reference areas.

CLIENTS

Significant Increase in client-base and loyalty thanks also to the "New Downstream" project.

KEEP GROWING STICKING TO OUR STRATEGY

Higher «Performance improvement» pace

DEVELOPMENT

Improved contribution from organic growth and synergies

>50% of the organic growth driven by regulated and quasiregulated activities.

75% of total EBITDA growth will be reached by 2019.

Maximum focus on end Clients gives IREN competitive edge.

+400,000 Clients through consolidation and development

75K clients already acquired.

Growth through both external and internal lines.

Increasing loyalty through innovative services (Vip club card, energy efficiency, V.A.S.).

Strong focus on both retail and business clients through "new downstream" program.

CLIENTS

Environmental sustainability is a guiding factor in Iren's strategy for the future

• Strong growth in EBITDA (4.8% c.a.g.r) keeping its structure based on high visibility on margins and on cash-flows thanks to the significant percentage (~75%) of regulated and quasi-regulated activities.
• Growth in all business units in spite of the expiry of Green Certificates (~40 million euros by 2019) affecting the hydroelectric sector.

One third of the total capex devoted to development projects

~2.2 billion Euro capex in 6 years

The majority of capex are devoted to regulated and quasi-regulated activities.

A significant share of maintenance capex will be used to implement technological improvement.

~70% Capex by 2019. Development investments and part of the maintenance capex are flexible and could be shifted over the years based on financial needs.

Significant increase in RAB (including the completion of Parma and Vercelli ATEM).

BBB- Outlook: Stable

Keeping the investment-grade rating will be one of the key elements driving the financial strategy of the Group.

• 2018 NFP/EBITDA ratio is expected approximately at 3.0x, a safe ratio in light of IREN EBITDA structure (75% from regulated/quasi-regulated activities).
• '20-'21 ratio will significantly decrease thanks to robust cash-generation, leaving to the company enough financial flexibility.

It will be used for further development / M&A investments or, otherwise, to improve the dividend policy.

DIVIDEND POLICY ECONOMIC AND FINANCIAL KPIs

Commitment in respecting DPS yearly target consistent with the cash-generation and the leverage profile

• Only 65% of expiring debt is going to be refinanced mainly because of debt reduction.

• cash generation. The percentage of IREN's debt funded by bonds (36% in 1H 2016) is expected to grow in the next years.

• Significant reduction in cost of debt thanks to liability management and current yield scenario.

• IREN is committed to lengthening its current average L/T debt maturity (~5.0y in 1H 2016).

Average cost of Debt

Approximately 600m€ of net-

Net-cash generation (m€)

*Net of TRM acquisition impact on debt

ECONOMIC INDICATORS

• 2018 EBITDA at 830m€ confirmed.
• EBITDA growth broadly in line with the previous plan expectations.
• 100m€ incremental Net profit in 4 years, almost doubled compared to 2015, thanks mainly to:
• a significant growth in operating results
• lower financial charges
• slightly lower tax rate

POSSIBLE UPSIDE FROM M&A OPERATIONS NOT INCLUDED IN THE BUSINESS PLAN OBJECTIVES

IREN will continue to develop its consolidation process through cherry-picking from a significant basket of opportunities

GENERATION AND DH: HIGHLIGHTS FOCUS ON BUSINESS

• Recovery in scenario partially offsets GCs expiry: ~40 million€ in the Hydroelectric sector in 2019.
• Full utilization of existing heat production sources (Plants/WTEs) thanks to the Increase in volumes heated (+15mcm), which more than half of the BU cumulated capex are devoted to (no new generations plants).
• Maximization of the ancillary services profitability through a further flexibility and active management of IREN's plant assets (possible margins upside from capacity market, not taken into consideration in the Business plan figures).

m€	2015	2019	2021
Revenues	813	915	993
EBITDA	199	226	239
Cagr. '15-'21		3.1%
Cumulated Capex		575

MARKET AND ENERGY EFFICIENCY: HIGHLIGHTS FOCUS ON BUSINESS

• Downstream strategy focused on end Clients: almost doubling the electricity sold to business Clients and increasing by 25% volumes sold to retail Clients.
• Ending of the protected market (2018 exp.) could be a growth trigger for the company (which already moved to the free market approximately 60% of its Client-base).
• High value added services, home automation, innovative offerings, together with the ongoing consolidation process are the main driver of the expected 27% growth in client-base.
• IREN's own production will be higher than uses.

m€	2015	2019	2021
Revenues	2,377	2,231	2,424
EBITDA	87	114	121
Cagr. '15-'21		5.7%
Cumulated Capex		140

NETWORKS: HIGHLIGHTS FOCUS ON BUSINESS

• Optimization of the tariff model and RAB return maximization.
• 500m€ increase in RAB thanks both to organic (+25% in water sector) and external growth (completion of Parma and Vercelli ATEM).
• Prudent assumptions in gas tenders. Possible participation In tenders within ATEMs in which IREN is not incumbent (not included in BP figures).
• The higher level of synergies will be reached in Networks BU offsetting the decrease in WACC.

m€	2015	2019	2021
Revenues	859	898	918
EBITDA	304	341	362
Cagr. '15-'21		3.0%
Cumulated Capex		1,070

WASTE: HIGHLIGHTS FOCUS ON BUSINESS

• Confirming all the concessions currently owned. Possible participation in tenders within areas in which IREN is not incumbent (not included in BP figures).
• Development of sorted waste treatment plants, in particular in plastic/paper sorting and organic waste.
• Significant increase (~50%) in special waste collection and trading.
• Full consolidation of TRM already achieved. Selective exploitation of M&A operations in the sector, not included in the BP figures, to accelerate development capex.

m€	2015	2019	2021
Revenues	463	584	618
EBITDA	65	161	172
Cagr. '15-'21		17.6%
Cumulated Capex		258

18 months achievements

• ~50m€ synergies
• ~75m€ EBITDA from M&A
• ~65m€ from organic growth (~45m€ in 2015; ~20m€ in 1H 2016)

Increased cash-flow generation

IREN has improved its effectiveness and has created room for further objectives

• Speed-up on synergies
• Exploitation of further opportunities form both M&A transactions and organic growth

Improved dividend policy providing for double digit Total Shareholders Return ver 5 years

Strategy confirmed with better performances

ANNEXES

GAS TENDERS			WASTE CONCESSIONS		WATER CONCESSIONS		ELECTR. CONCESSIONS
ATEM	START*	AREA	EXPIRY		AREA	EXPIRY	AREA	EXPIRY
Genova 1	4/2017	Parma	Expired		Piacenza	Expired	Torino	2030
Parma	7/2016	Piacenza	Expired		Reggio Emilia	Expired	Parma	2030
Reggio Emilia	11/2016	Reggio Emilia	Expired		Genova	>2030	Vercelli	2030
Vercelli	10/2016	Torino	>2030		Parma	2025
Piacenza 2 – Est	9/2017	Vercelli	2028		Vercelli	2023

	Gas	Electricity	Water
	distrib.	distrib.	service
Regulatory period	6 years (2014 – 2019)	8 years (2016 – 2023)	4 years (2016 – 2019)
WACC methodology update	6 years (2016 – 2021)	6 years (2016 – 2021)
WACC update	every	every	every
	three	three	two
	years	years	years
	(2019)	(2019)	(2018)

	2016– 2018	2019 – 2021
Gas distribution	6.1%	6.1%
Gas metering	6.6%	6.6%
Electricity distrib. and metering	5.6%	5.6%
	2016– 2017	2018 – 2019 2020 - 2021
Integrated water service	5.39%*	5.39% 5.39%
	Already defined values	Assumptions

	2015	2019	2021
PUN (€/MWh)	52.3	51.8	54.7
PSV (€/MWh)	24.1	20.1	21.1
ETS (€/Ton)	7.7	7.7	9.6
Clean spark spread – PSV (€/MWh)	1.8	4.5	4.8
Hydro Green Certificates (€/MWh)	100.1	100.6	96.1

FSU (50% Turin Municipality and 50% Genoa Municipality) ~33%, Emilia Municipalities (Reggio Emilia, Parma, Piacenza and other minor Municipalities) ~20%.

Two Shareholders' agreements (one between Emilia Shareholders and one between the latters and FSU) guarantee that all the most important decisions relating to Corporate Governance (appointment of CEO, Chairman and Vice-Chairman in particular) are by agreement of all the public Shareholders.

The introduction of LSS in IREN's bylaws (May 2016) and the elimination of the obligation for Public shareholders to hold at least 51% of IREN's share capital, could have the effect of increasing the free-float of the Group.

In May 2016 the Shareholders' meeting authorized the Board of Director to proceed with a 3% possible capital increase devoted to M&A operations.

*Shares without voting rights; Finanziaria Città di Torino launched an exchangeable bond on 80,498,014 IREN's preferred stocks in November 2015. Bond's maturity is 5 years and it can be converted into IREN's ordinary share anytime until 45 days prior the date fixed for the redemption of the bond. The conversion price is the reference price (1,4334€/Sh) plus 30% premium. **1H 2016

CORPORATE GOVERNANCE – A FOCUS

Shareholders' Agreement			Loyalty shares scheme
Top management	CEO, Chairman and Vice-Chairman have to be unanimously appointed by the Shareholders' Agreement members		Key elements	Public Shareholders no longer have the obligation to hold at least 51% of IREN's share capital, it is sufficient for them to hold at least 50%+1 of voting rights. In any case, according to the Shareholders' agreement 40% of IREN's outstanding shares owned by public Shareholders cannot be sold. Double voting right will be guaranteed to those shares held at least for two years by the same shareholders.
Board of Directors	Board of Directors acts in autonomy in relation to management and operating choices linked to the business.		Qualified topics	Double voting right has been introduced only for qualified topics which could affect the company long term perspective.
Sale of shares	The Municipalities have to follow a particular process to sell a number of shares (part of the Shareholders' agreement) exceeding a certain limit, hence avoiding any overhang risk.		Stock holding limit	The 5% stock holding limit already exists and it has been maintained, so the minority Shareholders will not suffer any change for the worse in this sense
Penalty fee	Once a decision is taken by the Shareholders' Agreement Committee, the Municipality voting differently in the Shareholders' meeting is subjected to a minimum 10m€ penalty fee.		Free-float	The introduction of the double voting right scheme together with the suppression of the obligation for public entities to hold at least 51% of share capital could increase the free-float, with a positive effect on stock liquidity.

• The OLT Terminal has been recognised by the Italian Government as a national strategic asset; as a result, part of its revenues are granted (64% guarantee factor).
• Thanks to a number of recent rulings by the Administrative court the regulatory framework is now clear in terms of recognized operating costs and RAB remuneration. It will allow the terminal to reach and keep the break-even during the BP time-frame
• RAB approximately 900m€. Remuneration on RAB equal to 6.6% plus an additional 3.0% (as a new LNG terminal).
• Merchant activity is assumed to start in 2017 with a significant growth from 2019 onwards.
• Terminal has already started operating thanks the awarding through a competitive bidding (in summer 2016) of 5 lots related to storage and regasification service for approximately 450mcm.

OLT SHAREHOLDING STRUCTURE

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.