Iren — Investor Presentation 2016

Aug 4, 2016

ORGANIC GROWTH Organic growth of approximately 21m€ (12m€ in 1Q 2016), coming mainly from the energy value chain.

SYNERGIES 16m€ of synergies already achieved (7m€ in 1Q 2016) representing more than 50% of 2016 target

CONSOLIDATION After the closing of TRM deal in January, the company continued its territorial consolidation process, obtaining a controlling stake in Atena (May 2016), further strengthening the Group's role as aggregator in the Piedmont region.

FINANCIAL OPTIMIZATION Sound financial management which:

• partially offset the increase in the cost of debt (due to the TRM consolidation)
• managed to reduce NWC by approx. 40m€ compared to 1Q 2016.

1H 2016: All the Business Plan growth drivers confirmed.

Income statement					Ebitda Bridge
m€	1H '15	1H '16	Δ	Δ%					16	30	417
Revenues	1,579	1,555	-24	-1.5%	378	(19)	(9)	21
Ebitda	378	417	39	10.3%
Ebit	217	242	25	11.7%
Net profit	103	119	16	16.1%	EBITDA 1H '15	One-off 2015	Wacc reduction	Organic Growth	Synergies	Consolid.	EBITDA 1H '16

• Revenues -1.5%: weak commodity prices scenario (PUN price at its lowest ever)
• Ebitda +10.3%: thanks both to organic growth and synergies (37m€ almost doubled compared to 1Q 2016). The change in consolidation perimeter is worth 30m€ and its mainly linked to TRM.
• Ebit +11.7%: reflecting good operating results which more than offset D&A growth linked to TRM.
• Net profit +16.1%: benefitting from the growth in EBIT and an adjustment in participations (TRM effect) which offset higher financial charges and taxes

GENERATION AND DH – Higher margins from cogen/thermo production.

• The positive trend in margins, already reported in 1Q 2016, continues thanks to a persistent positive difference between gas and electricity prices.
• Generation sector drove the growth in EBITDA, benefitting from higher spark-spreads and volumes in combination with an increased contribution from MSD market thanks to the improved flexibility of IREN's generation fleet.
• Hydroelectric sector hit by both a fall in electricity price and lower electricity and green cert. production.
• DH sector's margin stable in spite of a slight reduction in volumes (mild winter season effect). 3.6mcm of further volumes heated have been already contracted (positive effects starting from the next winter season).
• EBIT performances (+58%) thanks to the positive operating results plus the release of a number of provisions.

m€	1H '15	1H '16	Δ	Δ%
Revenues	398	403	5	1%
Ebitda	103	119	16	15%
Ebit	38	60	22	58%
Gross Capex	9	15	6	67%

ELECTRICITY PRODUCTION (GWh)

MARKET – Increase in customer-base and profitability confirmed.

The strong growth in EBITDA derived from:

• Scenario - change in regulation both in regulated and free market (PCV)
• Company strategy – higher effectiveness of re-pricing strategy together with a winning shipping and logistics policy (gas sector) and a sound hedging procedure (electricity sector).
• Portfolio review - strong focus on end clients (+25% electricity volumes sold) vs. lower volumes sold on IPEX.
• The positive trend already reported in 1Q 2016 in commercial and marketing activity continued also in 2Q with +21k energy clients compared to FY 2015, to which are added approx. 54K energy clients coming from the consolidation of Atena (multi-utility in Vercelli)

	m€	1H '15	1H '16	Δ	Δ%
Revenues		1,199	1,084	-115	-10%
Ebitda		62	83	21	34%
	Electricity	13	32	19	146%
	Gas&Heat	49	51	2	4%
Ebit		46	59	13	29%
Gross Capex		7	9	2	35%

NETWORKS – Positive results net of 2015 water tariff recovery.

• Electricity networks: The slight decrease in EBITDA is mainly linked to the absence of a positive equalization reported in 1H 2015 and wacc reduction, partially offset by synergies.
• Gas networks: Higher efficiency more than offset the reduction in wacc.
• Water networks: The fall in EBITDA is linked to the absence of approximately 15m€ tariff recovery for previous years reported in 1H 2015.
• +80m€ RAB deriving from Atena consolidation.

m€	1H '15	1H '16	Δ	Δ%
Revenues	392	400	8	2%
Ebitda	159	148	-11	-7%
Electricity	37	35	-2	-5%
Gas	34	36	2	7%
Water	88	77	-11	-12%
Ebit	104	88	-16	-15%
Gross Capex	64	60	-4	-7%

* Due mainly to change in consolidation Perimeter (ex. SAP concessions)

Pag. 6

WASTE – 76% growth thanks to changes in perimeter and in urban waste flow.

• The strong increase in the BU's margins, in spite of the drop in electricity price, is linked principally to:
• o the territorial consolidation process (~25m€) through the acquisition of a controlling stake in TRM.
• o The reduction in the utilization of external disposal plants.
• The regional plan regulating waste flow in Emilia Romagna has given IREN the possibility of disposing Reggio Emilia urban waste in IREN's WTE in Parma (PAI). This will guarantee the full saturation of the plant in the next years.

Urban waste Special waste

Waste (Kton)

	m€	1H '15	1H '16	Δ	Δ%
Revenues		234	254	20	9%
Ebitda		36	63	27	76%
Ebit		12	32	20	173%
Gross Capex		6	7	1	10%

WTEs - Energy and Heat sold (GWh)

581 603 197 202 1H '15 1H '16 778 805

	1H '15	1H '16	Δ	Δ%
EBITDA	378.1	417.1	39.0	10.3%
D&A	-130.9	-143.0			 Higher D&A linked mainly to TRM
Provisions	-30.5	-32.1			consolidation.
EBIT	216.7	242.0	25.3	11.7%
Financial charges for loans	-41.0	-46.9			• Higher Financial charges for loans due to TRM consolidation.
Other financial charges	2.3	-5.9			• Higher "Other financial charges" due to
Companies cons with e.m.and adj.	4.8	13.2			actualization of expenses.
EBT	182.8	202.4	19.6	10.7%	• Adj. in TRM participation value.
Taxes	-68.0	-71.3			• Higher tax linked to the increase in EBT (1H 2016 tax-rate approximately 35%).
Minorities	-12.3	-12.0
Group net profit	102.6	119.1	16.5	16.1%

Cash-flow and NFP Bridge.

• Net of the TRM and Atena consolidation effect, the NFP would have been 53m€ lower compared to FY 2015 and in line with 1Q 2016 level.
• 40m€ NWC reduction compared to 1Q 2016.

Interest rate and debt structure.

• 20% of gross debt at variable interest rate.
• Average long-term debt duration of about 5.0 years.
• Slight reduction in cost of debt (3.5%) compared to 1Q 2016 (3.6%).
• IREN's debt is formed of:
• 36% bonds
• 33% EIB loans
• 31% other loans

Annexes

Market Scenario.

	1H '15	1H '16	Δ%
Brent USD/bbl	57.9	39.7	-31%
€/USD	1.1	1.1	=
Brent €/bbl	51.9	35.6	-31%
Gas Demand (bcm)	35.2	35.7	1%
PSV €/000 scm	248	182	-36%
Energy Demand (Twh)	153.2	151.5	-1%
PUN (€/Mwh)	49.8	37.0	-26%
CO2 €/Ton	7.2	5.7	-21%
Green Cert. Hydro (€/Mwh)	99.9	100.1	=

• PUN hit in the first 6 months of the year the lowest level ever reported.

	1H '16	FY '15
Net fixed assets	5,114	4,648
Net Working Capital	168	154
Funds	-521	-526
Other assets and liabilities	-48	-46
Net invested capital	4,713	4,231
Group Sharholders' equity	2,169	2,062
Net Financial Position	2,544	2,169
Total Funds	4,713	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.