Iren — Investor Presentation 2016

Mar 15, 2016

ORGANIC GROWTH	- Organic growth of approximately 45m€, in line with BP estimates led by the performance reported in electricity and gas sales and in DH networks expansion.
SYNERGIES	20m€ of synergies achieved (higher than 2015 targets) thanks to: - Centralization at "Holding level" of the main corporate functions; - Several projects of performance improvement already started; - Standardization of the ICT systems.
	Approximately 25m€ thanks to:
CONSOLIDATION	- AMIAT - Waste collection company in Turin: Deal Closed Dec. 2014 - Consolidation from Jan. 2015.
	- Società Acque Potabili – Deal closed in 1H 2015 – Consolidation from the 2H 2015.

FINANCIAL OPTIMIZATION - Financial profile reshaping - "Investment grade" rating by Fitch (BBB-); Issue of a 500m€ bond under the 1bn€ EMTN programme; operations in liability management.

GREEN CERTIFICATES The residual part of GCs on DH expired at the end of 2014, negatively impacting ²⁰¹⁵ for 20m€

NEGATIVE NON-RECURRENT ELEMENTS BY SBU 2015 margins were negatively impacted by approximately 50 m€ non-recurrent elements (of which approximately 30m€ linked to the absence of positive items occurred in 2014)

POSITIVE CONTINGENCY 20m€ extraordinary positive contribution non-allocated by SBU.

FY 2015: Significant growth in all the operating key indicators.

• Revenues up by 6.6%: due mainly to AMIAT consolidation.
• Ebitda +8.8%: the organic growth together with synergies achievement and the consolidation process more than offset the expiry of GCs and a number of non-recurrent elements. Balanced business portfolio (regulated and quasi regulated activities account for ~76% of the total EBITDA).
• Ebit +6.6%: thanks to gross operating margin's increase which more than offset D&A growth (+20m€) mainly linked to AMIAT and to the absence of the release of provisions reported in FY 2014 (approx. -13m€)
• Net profit +71.4%: The significant growth derived both from the 2015 operating performances and from the absence of negative elements that had impacted 2014 Net profit. Nonetheless, also in this year deferred tax asset negatively affected net profit (-13m€) because of a decrease in IRES percentage (which will have a favorable impact starting from 2017).

GENERATION AND DH – Stable EBITDA results in spite of a number of non-recurring elements.

• The higher contribution coming from the improved utilization of the generation fleet and higher volumes produced offset the 20m€ GCs expiry and the absence of several positive non-recurrent elements reported in 2014 for approximately -21m€
• Generation sector exploited both the trend in commodity prices and the opportunities arisen in the MSD market thanks mainly to the contribution of Turbigo plant.
• Hydroelectric sector reported stable electricity volumes produced (vs. -14.5% at National level).
• DH sector's growth in volumes (+175Gwht), driven also by the continuous expansion in networks which reached 82mcm of volumes heated (+2%)
• EBIT performances were impacted by the absence of the release of significant provisions reported in 2014.

	m€	FY '14	FY '15	Δ	Δ%
Revenues		827	813	-14	-2%
Ebitda		200	199	-1	0%
Ebit		106	74	-32	-30%
Gross Capex		66	36	-30	-45%

MARKET – Client-base exceeding 1.5mln.

• The growth in volumes led by the enhanced market strategies together with the awarding of CONSIP tender (expect. 2016 positive contribution of approx. 1.4 TWh) together with the improved profitability allowed for the maintenance of margins despite of approx. -19m€ non recurrent elements.
• For the first time in IREN's history the energy clients base exceeded 1.5m (free market >50%) in line with the BP objectives. The acceleration in the second half of the year in implementing new marketing strategies towards increasing customer acquisition and improving loyalty allowed IREN to keep its churn rate among the lowest of the sector.

	m€	FY '14	FY '15	Δ	Δ%
Revenues		2,388	2,377	-11	0%
Ebitda		91	87	-4	-4%
	Electricity	25	13	-12	-48%
	Gas&Heat	66	74	8	12%
Ebit		50	41	-9	-17%
Gross Capex		10	14	4	40%

NETWORKS – Positive results partly offset by significant one-offs

• Electricity networks: The positive results of the sector is linked to cost-saving and the equalization for previous years.

• Gas networks: In spite of the significant synergies achieved, the sector reported a reduction in margins because of several one-offs (6m€)

• Water networks: Synergies achievement together with positive tariff trend and the change in perimeter due to SAP deal drove the 4% annual EBITDA growth in the sector.

• Increase in investments linked to the "optimal area plans", will contribute to RAB's growth in the sector.

m€	FY '14	FY '15	Δ	Δ%
Revenues	341	373	32	9%
Ebitda	152	148	-4	-3%
Electricity	74	76	2	3%
Gas	78	72	-6	-8%
Ebit	106	102	-4	-4%
Gross Capex	61	63	2	4%
El. distr. (GWh)	3,848	3,995
Gas distr. (mcm)	1,119	1,209
m€	FY '14	FY '15	Δ	Δ%
Revenues	464	486	22	5%
Ebitda	149	156	7	4%
Ebit	76	94	18	25%
Gross Capex	83	98	15	18%

From January 2016, IRETI entered into full operation. The 2015 related "Networks BU" EBITDA exceeded 300m€

WASTE – EBITDA growth driven by AMIAT consolidation

• The strong increase in the BU's margins is linked principally to the contribution of AMIAT (approximately 20m€) partially offset by were the temporary negative effect of the shut down of a landfill, which will be recovered in 2016
• Strong increase in special waste collection, (+40% in volumes) whose benefits will be enhances by the waste treatment development plant in pipeline.
• 2015 marked the full implementation of the punctual tariff system in Parma, one of the most important projects of this kind in the Country: more than 190k inhabitants involved.
• EBIT impacted by higher D&A due to the change in consolidation perimeter (-13m€) and to higher D&A and provisions linked to waste disposal plants (-8m€).

	m€	FY '14	FY '15	Δ	Δ%
Revenues		238	463	225	95%
Ebitda		48	65	17	36%
Ebit		14	10	-4	-25%
Gross Capex		18	21	3	15%

WTEs - Energy and Heat prod. (GWh)

From EBITDA to Net Profit.

	FY '14	FY '15	Δ	Δ%
EBITDA	622,7	677,8	55,1	8,8%	 Higher D&A impacting mainly on Waste BU.
D&A	-247,9	-267,6			 Higher provision due to the absence of the
Provisions	-49,4	-63,3			~13m€ funds release reported in FY 2014.
EBIT	325,4	346,8	21,4	6.6%
Financial charges for loans	-89,0	-81,4
Other financial charges	-15,9	-13,4			• Lower FC due to lower cost of debt.
Companies cons with e.m.and adj.	-6,8	-6,3
EBT	213,7	245,7	32,0	15.0%
Taxes	-128,2	-105,6			• Lower tax-rate linked to the cancellation
Minorities	-16,6	-21,9			of RHT and the change in IRAP regulatory framework.
Group net profit	68,9	118,2	49,3	71,4%

The reduction in IRES tax-rate affected the deferred tax assets, resulting in a -13m€ negative impact on Net Profit. This negative effect will be reverse from 2017 on.

Cash-flow and NFP Bridge.

The last quarter of the year confirmed the positive trend already reported in the first nine months (~130m€ reduction in NFP), thanks to a strong operating cash flow generation of approximately 500m€.

Interest rate and debt structure.

• 17% of gross debt at variable interest rate.
• Average long-term debt duration of about 5.1 years.
• Significant reduction in cost of debt (3.4% compared to 3.8% in FY 2014).
• More than 40% of Iren's total debt is funded through bonds (24% at the end of 2014). The residual part is evenly formed by EIB funds and other loans.
• Assignment of an investment-grade rating by Fitch Agency

The 2015 results are the starting points from which to achieve the key strategic elements outlined in the business plan pushing on with actions already put in place

• Synergies: the start of several performance-improvement projects and the IRETI set-up (which took place on the 29th of December through the merger of the business companies running the energy network and the integrated water cycle) will further speed-up the synergies achievement.
• TRM deal closed at the end of January 2016, a fundamental step taken towards the growth of the Group from provincial to regional level.
• Out of the 80 M€ potential target for M&A operations not included in our business plan figures, 2 deals have already been done (Atena and Ecoprogetto Tortona) and further operations are in the pipeline.

Annexes

	FY '14	FY '15	Δ%
Brent USD/bbl	99,2	52,5	-47%
€/USD	1,3	1,1	-17%
Brent €/bbl	74,7	47,3	-37%
Gas Demand (bcm)	61	67	+9%
PSV €/000 scm	273	255	-6%
Energy Demand (Twh)	309	315	+2%
PUN (€/Mwh)	52,1	52,3	0%
CO2 €/Ton	5,9	7,7	+30%
Green Cert. Hydro (€/Mwh)	98,0	100,1	+2%

• The normalization of climate conditions, along with a recovery in Thermoelectric uses, led to a 9% growth in gas demand
• PUN level substantially stable compared to 2014.

	FY '14	FY '15
Net fixed assets	4.619	4.648
Net Working Capital	238	154
Funds	-550	-526
Other assets and liabilities	-28	-46
Net invested capital	4.279	4.231
Group Sharholders' equity	1.993	2.062
Net Financial Position	2.286	2.169
Total Funds	4.279	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.