Iren — Investor Presentation 2019

Jul 31, 2019

31st July2019

1H 2019 Double digit growth led by strong operational performances excluding the last year non recurrent contribution from TEE and GC expiry

m€	1H '18 restated	1H '19	Δ	Δ%
Revenues	1,937	2,238	301	15.6%
Ebitda	506	478	-28	-5.5%
Ebit	315	258	-57	-18.2%
Net profit	185	151	-34	-18.4%
Tech. Capex	164	197	33	20.1%

2019 1H RESULTS

& 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

• Revenues +15.6%: thanks to higher revenues in the energy chain and the inclusion in the scope of consolidation of San Germano and SET and ACAM only in the first quarter.
• Ebitda -5.5%: net of 2018 White certificates sale (60m€) and the expiry of Green certificates in 2Q (22m€), the growth is equal to 12.7% thanks to a favorable energy scenario, organic growth (11m€), M&A (9m€), synergies (5m€) and positive effects from energy certificates (15m€) related to previous year.
• Ebit -18.2%: higher D&A related to capital-intensive investments and consolidation process.
• Net profit -18.4%: reflecting the Ebit reduction. Net of energy certificates, the increase would have been around 20%.
• Tech. Capex +20.1%: increase in capex in line with Business Plan assumptions. page 2

NETWORKS Growth driven by investments, synergies and consolidation

• Energy and water networks: growth led by higher revenues (thanks to the RAB increase), synergies and the consolidation of ACAM.
• Increase in Capex (+13%): further increase in water and electricity infrastructures in order to improve the resiliency and reduce the leakage of the system.

OUTLOOK: the positive trend reported in the first six months of 2019 is expected to recur also in the second part of the year, likely balances could occur over the second half.

	m €	1H '18	1H '19	Δ	Δ%	E B I T D A
	Revenues	443	482	39	9%
	Ebitda	160	172	12	8%	N E T W O R K S
	Electricity	35	36	1	2%	W A S T E
	Gas	38	41	3	7%
	Water	87	95	8	10%	E N E R G Y
	Ebit	88	90	2	2%
	Gross Capex	101	114	13	13%	M A R K E T
(M€)	ELECTRICITY CAPEX		RAB (M€) +4%			E B I T C A S H F L O W & N F P
			2,107	2,194	Electricity	D E B T
	18		439	445	Gas	S T R U C T U R E
			670	691	Water	C L O S I N G R E M A R K S
			998	1.058
1H '18	1H '19		FY '18	1H '19		A N N E X E S
					2019 1H RESULTS	page 3

WASTE Growth led by the disposal plants saturation and consolidation

• The contribution of organic growth is mainly related to disposal plants saturation (including REI landfill contribution), higher prices and the increase in collection margins.
• M&A contribution (3m€) from ACAM and San Germano with +190kton of waste managed in the first half.
• Increase in capex is related primarily to enlarge the waste collection fleet.
• Increase in waste volumes (+18%) compared to 1H 2018. Sorted waste collection equal to 66.2%, +2% compared to FY2018 thanks also to the extensions of door-to-door collection system.

OUTLOOK: the results are expected slightly better than 2018, considering the unavailability of plants due to maintenance activities planned in second half.

	m€	1H '18	1H '19	Δ	Δ%	E B I T D A
Revenues		294	352	58	20%
Ebitda		74	84	10	14%	N E T W O R K S
Ebit		36	37	1	2%	W A S T E
Gross Capex		10	22	12	n.a.	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

Growth led by supportive scenario and energy efficiency contribution, net of energy certificates impact ENERGY

• Generation sector is impacted by higher volumes compared to last year and positive spark spread. The result is affected by the absence of white certificates sales (60m€) and the expiry of green certificates (22m€) partially offset by previous year certificates (15m€).
• Hydro sector: reduction mainly led by lower volumes.
• Thermo/Coge sector: volumes growth and increase in spark spread allowed to overcome the MSD reduction.
• District heating: higher thermal spark spread and partial recovery in volumes.

OUTLOOK: as the favorable scenario is expected to persist also in the second half, we expect to report results in line with last year recurrent Ebitda.

+5%

m€	1H '18	1H '19	Δ	Δ%	E B I T D A
Revenues	644	785	141	22%	N E T W O R K S
Ebitda	206	166	-40	-19%
Hydro&Renewables	65	41	-24	-37%	W A S T E
Thermo/Coge, DH	141	125	-16	-11%
Ebit	146	102	-44	-30%	E N E R G Y
Gross Capex	25	22	-3	-14%	M A R K E T
					E B I T
ELECTRICITY PRODUCTION (GWh)					C A S H F L O W & N F P
1H '18	1H '19	+32% 4.443			D E B T S T R U C T U R E
-19%	3.360				C L O S I N G R E M A R K S
793 644					A N N E X E S

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2019 1H RESULTS

MARKET The margins reported in 1Q 2019 have been partially recovered

E B I T D A

• 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

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• The results are affected by a slight improvement in margins and the absence of positive elements reported in 2018 equal to 8m€.

• Gas sale sector partial recovery of the negative thermal effect recorded in 1Q 2019 that now stands at -3m€.
• +17K clients compared to FY2018 (now at 1,8m) in further increase, in line with Business plan assumptions.

OUTLOOK: a recovery in electricity sales margin will bring 2019 results in line with those reported in 2018.

m€ 1H '18 1H '19 Δ Δ%

Revenues 1,241 1,512 271 22%

Ebitda 63 55 -8 -13%

Ebit 43 29 -14 -31%

Gross Capex 15 21 6 44%

Electricity 11 9 -2 -21% Gas&Heat 52 46 -6 -12%

1H 2019 From EBITDA to Net Profit

	1H '18	1H '19	Δ	Δ%		E B I T D A
EBITDA	505.8	478.1	-27.7	-5.5%
D&A and others	-174.4	-203.6			• Increase in D&A related to higher capex, consolidation process (ACAM and San	N E T W O R K S
Provisions to bad debt	-16.4	-16.8			Germano) and IFRS 16 application	W A S T E
EBIT	315.0	257.7	-57.3	-18.2%		E N E R G Y
Financial charges	-34.0	-32.3			Lower cost of debt now at 2.5%. •
Other financial	3.4	4.3			• Increase in the results of companies consolidated with equity method.	M A R K E T
Companies cons with e.m.	0.8	4.7				E B I T
Participations adjustment	-0.3	-				C A S H F L O W & N F P
EBT	284.9	234.4	-50.5	-17.7%		D E B T
Taxes	-88.3	-70.2			Stable tax-rate at 30% •	S T R U C T U R E
Minorities	-12.0	-13.6				C L O S I N G R E M A R K S
Group net profit	184.6	150.6	-34.0	-18.4%		A N N E X E S

1H 2019 Cash-flow and NFP Bridge

• The strong cash flow generation allowed to cover the cash out for dividends, the acceleration in investments planned and the consolidation process (San Germano and Busseto).
• 20% increase in dividend policy and extraordinary dividends to third parties.
• Derivatives: negative impact on debt caused by rates and commodities derivatives.

2019 1H RESULTS page 8

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

A N N E X E S

1H 2019 Interest rate and debt structure

• 89% of gross debt at fixed interest rate and 11% of gross debt at variable interest rate.
• Average long-term debt duration of about 5.3 years (5.5 years in 1H 2018).
• Reduction in the average cost of debt (2.5% vs. 2.9% in 1H 2018).
• IREN's debt is formed of:
• 67% bonds (Green Bonds equal to 1b€)
• 20% EIB loans
• 13% other loans

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 1H positive results we improve our FY 2019 guidance

Ebitda: ~900m€ NFP/Ebitda: ~2.9x Capex: ~570m€

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

2019 1H RESULTS page 10

Scenario

	1H '18	1H '19	Δ%
Gas Demand (bcm)	38.5	40.1	4.2%
TTF €/000 scm	223	166	-25.4%
PSV €/000 scm	237	198	-16.4%
Energy Demand (Twh)	158.6	157.3	-0.8%
PUN (€/Mwh)	53.8	55.1	2.5%
CO2 €/Ton	12.3	23.8	93.9%
Green Cert. Hydro (€/Mwh)	99.0	92.1	-7.0%
TEE (€/TEE)	257.6	260	0.9%

Balance Sheet

	FY '18	1H '19
Net fixed assets	5,786	5,919
Net Working Capital	132	70
Funds	-621	-610
Other assets and liabilities	-282	-271
Net invested capital	5,015	5,108
Group Shareholders' equity	2,562	2,538
Net Financial Position	2,453	2,570
Total Funds	5,015	5,108

s a e n n e x

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2019 1H 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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