Iren — Investor Presentation 2019

Nov 8, 2019

8 thNovember 2019

9M 2019 Stripping out the extraordinary recognition of TEE and GC expiry, sound growth led by a positive performances in all the business units

m€	9M '18 restated	9M '19	Δ	Δ%
Revenues	2,824	3,190	366	13.0%
Ebitda	706	675	-31	-4.4%
Ebit	410	344	-66	-16.1%
Net profit	234	191	-43	-18.2%
Tech. Capex	287	324	37	12.9%

• Revenues +13.0%: thanks to the higher revenues in the energy chain and the inclusion in the scope of consolidation of San Germano, SET and ACAM (only in the first quarter).
• Ebitda -4.4%: all the strategic pillars, the energy scenario and other elements positively contributed to the recurrent ebitda growth.
• Ebit -16.1%: higher D&A related to larger investments and consolidation process.
• Net profit -18.2%: reflecting the Ebit reduction.
• Tech. Capex +12.9%: capex increase to support the organic growth in line with business plan assumptions.

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& N F P

D E B T S T R U C T U R E

C L O S I N G R E M A R K S

A N N E X E S

2019 9M RESULTS

NETWORKS Organic growth, consolidation and synergies confirmed as the main growth drivers

allowed revenues increase.

occur also in 4Q.

the consolidation of ACAM led the 7% Ebitda increase.

WASTE Higher volumes for both organic growth and consolidation

• The Ebitda growth is affected by different positive elements:
  • Organic growth related to disposal plants saturation (including REI landfill contribution), higher prices and the increase in collection margins. These aspects offset the WTEs maintenance.
  • M&A contribution (5m€) from ACAM and San Germano with 350kton of waste managed in the 9 months.
• Increase in capex is related primarily to enlarge the waste collection fleet.
• Increase in waste volumes (+30%) compared to 9M 2018 (+14% with the same perimeter). Sorted waste collection equal to 66.5%, +3% compared to FY2018.

OUTLOOK: the results are expected slightly better than 2018, despite the unavailability of plants due to further maintenance activities in the last quarter.

	m€	9M '18	9M '19	Δ	Δ%	E B I T D A
Revenues		456	531	75	16%
Ebitda		116	126	10	8%	N E T W O R K S
Ebit		61	55	-6	-10%	W A S T E
Gross Capex		18	34	16	88%	E N E R G Y

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M A R K E T

E B I T

C A S H F L O W & N F P

D E B T S T R U C T U R E

C L O S I N G R E M A R K S

A N N E X E S

The overall positive energy scenario and other positive elements have been partially offset by the negative hydroelectric volumes trend ENERGY

• The 9M '19 Ebitda of about 200m€ led to a 17% growth when compared to the underlying 9M '18 Ebitda of roughly 170m€ (excluding extraordinary energy certificates).
  • Hydro sector: stripping out the GC expiry for 27m€, the reduction is led by lower volumes and PUN.
  • Thermo/Coge sector: excluding extraordinary WC for 60m€, stronger contribution from thermo generation because of higher volumes and spark spread. Lower MSD profitability. 9M '19 positively impacted by the recognition of energy certificates related to previous year (15m€).
  • District heating: higher thermal spark spread

OUTLOOK: supportive scenario led by higher spark spread is expected to occur also in the last quarter.

	m€	9M '18	9M '19	Δ	Δ%	E B I T D A
	Revenues	954	1,088	134	14%	N E T W O R K S
	Ebitda	257	199	-58	-23%
	Hydro&Renewables	100*	58	-42	-42%	W A S T E
	Thermo/Coge, DH	157**	141	-16	-10%
	Ebit	171	101	-70	-41%	E N E R G Y
	Gross Capex	50	43	-7	-14%	M A R K E T
	* Including 27m€ of Green certificates expired ** Including 60m€ of White certificates
	ELECTRICITY PRODUCTION (GWh) +19%					E B I T C A S H F L O W & N F P
HEAT PRODUCTION (GWht) +6%	7,222 Hydro & Ren 6,082 1,015 -16% Thermo
1,822 1,725	1,207 843 +120%	1,856 Coge				C L O S I N G R E M A R K S
	4,032 +8%	4,351				A N N E X E S
9M '18 9M '19	9M '18	9M '19			2019 9M RESULTS	page 5

MARKET Margins recovery despite a negative gas climate trend

E B I T

C A S H F L O W & N F P

D E B T S T R U C T U R E

C L O S I N G R E M A R K S

A N N E X E S

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• Recovery in margins and a positive contribution from NDS projects combined with negative climate effect on gas sales:
  • Electricity sector: clients' growth combined with higher margins;
  • Gas sector: negative elements (mainly climate) overcame the positive ones (mostly repricing policy).
• +27K clients compared to FY2018 (now at 1,81m). Further acceleration mainly thanks to the digital strategy.

OUTLOOK: we expect a further recovery in electricity and gas margins enabling to reach an Ebitda higher than last year, net of extraordinary elements.

					E B I T D A
m€	9M '18	9M '19	Δ	Δ%
Revenues	1,754	2,061	307	18%	N E T W O R K S
Ebitda	83	84	1	2%
Electricity	22	27	5	25%	W A S T E
Gas&Heat	61	57	-4	-7%
Ebit	41	47	6	15%	E N E R G Y
Gross Capex	21	30	9	38%	M A R K E T

9M 2019 From EBITDA to Net Profit

	9M '18	9M '19	Δ	Δ%		E B I T D A
EBITDA	706.1	675.1	-31.0	-4.4%	• Increase in D&A related to capital intensive
D&A and others	-261.7	-307.3			investments, consolidation process (ACAM and San Germano) and IFRS 16 application	N E T W O R K S
Provisions to bad debt	-34.3	-23.7				W A S T E
EBIT	410.1	344.1	-66.0	-16.1%		E N E R G Y
Financial charges	-52.3	-46.9			• Lower financial charges mainly thanks to lower cost of debt despite the increase in
Other financial	6.5	1.1			debt	M A R K E T
Companies cons with e.m.	-0.7	4.7			• Lower other financial mainly related to the absence of derivatives' positive contribution	E B I T
Participations adjustment	-0.3	-			reported in 2018	C A S H F L O W & N F P
EBT	363.3	303.0	-60.3	-16.6%	• Higher contribution from companies consolidated with e.m.	D E B T
Taxes	-110.2	-90.7			• Stable tax-rate at 30%	S T R U C T U R E
Minorities	-19.4	-21.2				C L O S I N G R E M A R K S
Group net profit	233.7	191.1	-42.6	-18.2%		A N N E X E S

9M 2019 Cash-flow and NFP Bridge

• Net of the IFRS 16, the consolidation process (San Germano and Ferrania) and derivatives, the NFP would have decreased by 53m€.
• Investments' growth according to business plan assumptions.
• Derivatives: negative impact on debt caused by rates and commodities derivatives.

2019 9M RESULTS page 8

S T R U C T U R E

C L O S I N G R E M A R K S

A N N E X E S

9M 2019 Interest rate and debt structure

• 88% of gross debt at fixed interest rate and 12% of gross debt at variable interest rate.
• Average long-term debt duration of about 5.1 years vs 5.5 years in 9M 2018 (5.9 years after the Green Bond emission in October).
• Reduction in the average cost of debt (2.5% vs. 2.8% in 9M 2018).
• IREN's debt is formed of:
  • 66% bonds
  • 20% EIB loans
  • 14% other loans
• Iren is the only Italian local multiutility to have issued 3 Green Bonds for a total size of 1.5b€

Organic growth, consolidation and synergies keep on contributing in line with our business plan assumptions, allowing for a further strong profitability growth

We are also carrying out the investments needed for enhancing organization and processes in light of a larger business scale

In light of the 9 months positive results we are confident that FY 2019 Ebitda will overcome 900m€

GUIDANCE ON FY 2019

Ebitda: 900 - 910m€ Group's net profit: ~250m€ NFP/Ebitda: ~2.9x Capex: 530 - 550m€

E B I T D A N E T W O R K S W A S T E E N E R G Y M A R K E T E B I T C A S H F L O W & N F P D E B T S T R U C T U R E C L O S I N G

R E M A R K S

A N N E X E S

Scenario

	9M '18	9M '19	Δ%
Gas Demand (bcm)	51.5	53.9	4.7%
TTF €/000 scm	235	147	-37.4%
PSV €/000 scm	241	175	-27.4%
Energy Demand (Twh)	242.2	241.9	-0.1%
PUN (€/Mwh)	58.9	53.8	-8.7%
CO2 €/Ton	14.4	24.9	72.7%
Green Cert. Hydro (€/Mwh)	99.0	92.1	-7.0%
TEE (€/TEE)	253.1	260.0	2.7%

Balance Sheet

	FY '18	9M '19
Net fixed assets	5,786	5,987
Net Working Capital	132	108
Funds	-621	-621
Other assets and liabilities	-282	-266
Net invested capital	5,015	5,208
Group Shareholders' equity	2,562	2,593
Net Financial Position	2,453	2,615
Total Funds	5,015	5,208

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2019 9M RESULTS

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.

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