Iren — Investor Presentation 2019

Apr 12, 2019

Abstract

4 YEARS GROWTH	 The FY 2018 Results mark a further step along a growth path, started 4 years ago, leading the Company to strong achievements in line with the last Business plan objectives: o Ebitda up by 220 m€ (cagr ~8%); o NFP/Ebitda from 3.6x to 2.8x (calculated on Ebitda recurrent); o Net Profit reported more than tripled; o DPS cagr >12%;
ASSET BASE ENHANCEMENT	• Networks RAB FY 2018: 2,125m€ ( +425m€ vs 2014) • Portfolio clients in energy sector FY 2018: ~1,780k (+340k vs 2014) • Heat distributed FY 2018: 2,946 GWht (+310GWht vs 2014) • Waste collected FY 2018: 2,241 kton (+1,150kton vs 2014) • Waste treatment capacity FY 2018: 1,414 kton (+800kton vs 2014)
FY 2018 RESULTS KEY POINTS	 FY 2018 results confirm the effectiveness of the Group strategy focusing on growth as a combination of organic investments and consolidation activities.  The strong cash flow generation allows for a further leverage improvement while confirming the dividend's growth commitment.  Dividend FY 2018 proposal: 8.4€/c per share (+20% vs DPS 2017).

FY 2018 results: growth trend confirmed

FY 2018: underlying growth led by all the strategic pillars in a extraordinary energy scenario

		KPIs								Ebitda	Bridge
m€	FY '17	FY '18	Δ	Δ%						+3,1%					101	967
Revenues	3,697	4,041	344	9.3%							1 5	32		866
Ebitda	820	967	147	17.8%	820	20	840		20	1 3			(26)
Ebit	420	530	110	26.2%				(28)
Net profit	238	242	4	1.8%
Tech. Capex	357	447	90	25.2%
					EBIT DA FY '17	One off 2017	Ebitda recurrent '17	Scenario	Hydro volumes	Organic growth		Synerg. Consolid.	2017 Netowrks balances and others	Ebitda recurrent '18	One off 2018	Ebitda FY'18

• Ebitda reported +17.8%: It takes into account the extraordinary sale of White Certificates (60m€) and the recognition of a Market BU accrual (41m€) attributable to the revision of previous estimates of invoices to be issued accounted in Q4. Stripping out the last element, the Ebitda would have been 926m€, in line with our guidance.
• Ebitda recurrent +3.1%: growth in all the business units led by consolidation (mainly ACAM), organic growth and synergies. The negative energy scenario has affected mainly the operational results of supply activities.
• Ebit +26.2%: half of D&A costs increase is related to the consolidation process. Slight increase of provisions.
• Net profit +1.8%: the reduction in the cost of debt, has been offset by liability management activities, lower results of companies consolidated with equity method and participated ones.
• Tech. Capex +25.2%: double-digit percentage growth in investments in line with our strategy

NETWORKS – Organic growth, Synergies and Consolidation more than offset the absence of balances recorded in 2017

• Energy and water networks: operating margins have been mainly affected by the absence of positive balances (roughly 25m€) reported in 2017. However, the results have been positive thanks to ACAM consolidation (+19m€), synergies and organic growth.
• Increase in Capex (+29%): the growth trend reported during last years is confirmed as it's one of the main pillars of our strategy.

m€	FY '17	FY '18	Δ	Δ%
Revenues	936	947	11	1%
Ebitda	336	342	6	2%
Electricity	76	74	-2	-3%
Gas	87	80	-7	-8%
Water	173	188	15	8%
Ebit	179	176	-3	-1%
Gross Capex	207	268	61	29%

WASTE – Margin recovery thanks to higher volumes and prices

• Ebitda growth thanks to a positive scenario (higher PUN) and organic growth driven by plants saturation, synergies and ACAM consolidation (+2m€).
• The positive results in waste disposal sector have been partially offset by higher door-to-door collection costs due to extension in Reggio Emilia and Turin.
• Average increase in waste management by 13%, mainly due to higher special waste volumes partly disposed in the Group's plants (stronger contribution of REI landfill for special waste disposal) that have also benefited of rising prices.
• Current percentage of door-to-door collection is 79% and sorted waste collection is 64.2%, both growing if compared to 2017. Waste (Kton)

WASTE
	m€	FY '17	FY '18	Δ	Δ%
Revenues		551	610	59	11%
Ebitda		149	155	6	5%
Ebit		67	75	8	11%
Gross Capex		27	31	4	15%

FY '17 FY' 18

ENERGY – Growth led by exceptional hydro volumes, strong ancillary services offset by lower spark spread

• Generation sector: the aggregate volumes of electricity production are in line with last year. The increase in hydro volumes has been offset by the decrease in thermo/coge volumes.
  • o Hydro sector: strong contribution thanks also to a positive PUN scenario. The extraordinary volumes led to 20m€ increase in margins if compared to standard hydro volumes (electricity production ~1.2GWh).
  • o Thermo/Coge sector: the increase in ancillary services (~80m€) has offset the lower thermoelectric/cogeneration spark spread caused by higher gas costs and ETS certificates price.
  • o District heating: slight reduction in heat distributed partially compensated by the increase in heat spark spread.

m€	FY '17	FY '18	Δ	Δ%
Revenues	1,104	1,345	241	22%
Ebitda	255*	325**	70	27%
Ebitda recurrent	241	265	24	10%
Ebit	138	188	50	36%
Gross Capex	56	80	24	43%

*Including 14m€ capital gains from the CCGT turbine sale

**Including 60m€ capital gains from the White Certificates extraordinary sale

Electricity Production (GWh)

FY '17 FY '18

MARKET – The negative commodity scenario persists particularly in the gas sector

• 41m€ extraordinary contribution due to a market accrual related to previous years, accounted in Q4.
• Electricity sale sector: the increase in volumes sold and the hedging policy have reduced the impact of the negative scenario.
• Gas sale sector: the absence of lower procurement costs (linked to favorable gas storage in 1H 2017) and a warmer year vs 2017, led to negative margins.
• Continuous Clients growth trend, now standing at ~1,780k Customers (~+65k), with a churn rate in further reduction compared to last year (-13.5% yoy).
• Uses reached ~80% of internal power production in line with BP target.

	m€	FY '17	FY '18	Δ	Δ%
Revenues		2,418	2,602	184	8%
Ebitda		111	139*	28	25%
Ebitda recurrent		111	98	-13	-12%
	Electricity	20	19	-1	-5%
	Gas&Heat	91	79	-12	-13%
Ebit		69	86**	17	25%
Gross Capex		21	31	10	51%

*Including 41m€ ) attributable Revision of previous estimates of invoices to be issued of which 2m€ referred to electricity and 39m€ referred to gas&heat. **The Ebit adjusted would be equal to 46m€

1,477

*net of Ipex, wholesalers and other

290

333

+15%

From EBITDA to Net Profit

	FY '17	FY '18	Δ	Δ%
EBITDA	820.2	966.6	146.4	17.8%
D&A	-353.2	-383.9			• Increase in D&A related to consolidation process (ACAM and IREN Rinnovabili)
Provisions to bad debt	-46.7	-52.2
EBIT	420.3	530.5	110.2	26.2%	• Lower cost of debt (2.7% compared to
Financial charges	-79.4	-69.5			3.1% last year).
Other financial charges	-3.0	-36.6			• Liability management for 30m€
Companies cons with e.m.	22.5	0.7			• Lower contribution from companies consolidated with equity method (OLT and other participations).
Participations adjustment	8.7	-35.6			• OLT participations adjustment for 28m€
EBT	369.1	389.5	20.4	5.5%
Taxes	-104.4	-116.3
Minorities	-27.0	-31.1			• Tax-rate (30%) thanks to structural stabilization in IRES (ordinary tax rate
Group net profit	237.7	242.1	4.4	1.8%	30%).

Cash-flow and NFP Bridge

• Overall, the NFP worsens by only 3.4% notwithstanding 182m€ due to consolidation and 23m€ due to assets' disposal. Net of these effects, debt would decrease by 78m€, benefitting from strong cash-flow generation, which easily covered higher capex and dividends.
• Consolidation includes ACAM, RECOS, Spezia Energia Trading and MAIRA operations.

Interest rate and debt structure

• Average long-term debt duration of about 5.3 years (5.9 years in FY 2017).
• Reduction in cost of debt (2.7% vs. 3.1% in FY 2017).
• IREN's debt is formed of:
  • 67% bonds
  • 25% EIB loans
  • 8% other loans
• Iren is the only Italian local utility that has issued two Green Bond.

Closing remarks

The Iren's sound asset base combined with the effectiveness of the strategy has been allowing the company to cope with the energy scenario volatility.

Since last year the Group is focusing more on organization's enhancement to deal with:

• o A larger complexity led by the several companies taken over
• o The far intense investment's plan included in the last business plan.

Guidance on FY 2019:

In light of the FY 2018 results and confirming the business plan objectives, we expect for FY 2019:

• o Ebitda: 880/890m€
• o NFP/Ebitda: ~2.9x
• o Capex: ~570m€

Annexes

IREN at a glance

• >64% of sorted waste (vs. national avg. 52.5%)

• 3 Waste To Energy plants (>800Kton/y)

• ~690K tons of special waste collected

Pag. 14

Actual progress vs. business plan targets

* Certificates expiry: ~40m€ expiring in 2019 (GCs) and ~25m€ expiring in 2022 (WCs)

• Organic growth will be the main driver throughout the next years, supported by higher investments in Networks and Waste
• The hedging policy in the energy value chain and investments in generation plants flexibility will lead to tackle the high volatile scenario and to offset the certificates' expiry.

EBITDA progress by SBU

NETWORKS

^{48 65} 120 149 155 185 FY '14 FY '15 FY '16 FY '17 FY '18 FY '23E WASTE

• ~650m€ increase in RAB mainly in water thanks also to ACAM consolidation since April 2018 (140m€)
• Roughly 850m€ invested in water network efficiency and water treatment plants
  • Maintaining all the gas and water concessions in which IREN is incumbent.
  • Possible participation in tenders related to ATEMs in IREN's reference areas (not included in the business plan figures).
  • Continuous improvement in asset/workforce management system, exploiting further synergies.
  • Significant increase in waste treatment capacity, starting from 2021 (plastic, organic fraction and paper) and consequently in profitability, also from special waste.
  • Self-sufficiency in completing the entire waste cycle thanks to investments in new waste treatment plants.
  • Confirming all the concessions currently owned. Possible participation in tenders within reference areas in which IREN is not incumbent (not included in BP figures).

EBITDA progress by SBU

• Growth in margins in spite of the expiry of 40m€ of GCs on hydro and 25m€ of WCs on cogeneration (Ebitda cagr would be 5.4% net of certificates expiry).
• Full utilization of existing heat production sources (Plants/WTEs) thanks to the increase in volumes heated (+8mcm).
• Increase in IREN's generation fleet flexibility, in order to be more competitive in ancillary services (neutral impact of capacity market expected).
• 200m€ invested in energy efficiency projects
• Full deployment of the "New Downstream" project: moving from a commodity provider to an expert in high value added services
• Customer base expansion of +12,5% while keeping the churn rate as one of the lowest in the sector
• Digitalization will be one of the drivers of the reduction in cost-to-serve (50% of operations will be digitally carried out by 2021).
• Further ~10m€ will be invested in e-mobility to extend the range of innovative products and services offered.

ATEM	Expiry
Genova 1	Expired
Parma	Expired
Reggio Emilia	Expired
Vercelli	Expired
Piacenza 2 - Est	Expired

GAS TENDERS		WATER CONCESSIONS		ELECTR.	CONCESSIONS
		AREA	Expiry	AREA	Expiry
		Piacenza	Expired	Torino	2030
		Reggio Emilia	Expired	Parma	2030
		Genova	2032	Vercelli 1	2030
		Parma	2025
		Vercelli 1	2023
		La Spezia	2033

AREA	Expiry
Torino	2030
Parma	2030
Vercelli 1	2030

Pag. 18

HYDROELECTRIC CONCESSIONS					WASTE CONCESSIONS
AREA	Hydroelectric plant	Electric Power (MW)	Expiry		AREA Parma**	Expiry Expired
Piemonte 1	Pont Ventoux-Susa	157	2034		Piacenza**	Expired
Piemonte 2	Valle Orco e S. Mauro	300	Expired 2010		Reggio Emilia	Expired
Piemonte 3	S. Lorenzo, Moncalieri, La Loggia, valle Susa	25	---*		Torino	2033
Campania	Nucleo Tusciano	108	2029		Vercelli 1 Vercelli 2	2028 2019
Liguria	Brugneto, Canate	10	Expired 2014		La Spezia	2028

* The expiring date is not provided for electric power plants <10 MW **Ongoing tenders

AREA	Expiry
Parma**	Expired
Piacenza**	Expired
Reggio Emilia	Expired
Torino	2033
Vercelli 1	2028
Vercelli 2	2019
La Spezia	2028

	GAS DISTRIBUTION	ELECTRICITY DISTRIBUTION	WATER 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 three years (2019)	every three years (2019) every two years (2018)
	2018	2019 - 2023
Gas distribution	6.1%	6.1%
Gas metering	6.6%	6.6%
Electricity distrib. and metering	5.6%	5.6%
	2018-2019	2020 - 2023
Integrated water service	5.32%	5.32%
	Already defined values		Assumptions

Scenario

	FY '17	FY '18	Δ%
Gas Demand (bcm)	74.7	72.1	-3.5%
TTF €/000 smc	18.3	24.1	31.7%
PSV €/000 smc	20.7	25.6	23.7%
Energy Demand (Twh)	320.5	321.9	0.4%
PUN (€/Mwh)	53.9	61.3	13.7%
ETS €/Ton	5.8	15.9	174%
Clean SS/PSV (€/Mwh)	7.6	4.6	-40%
Green Cert. Hydro (€/Mwh)	302.5	250.0	-17.4%

ACTUAL

	2017	2021	2023
PUN (€/Mwh)	54	69	72
PSV (€/000 smc)	19	25	26
ETS (€/Ton)	6	24	26
Clean SS/PSV (€/Mwh)	6.0	5.5	6.5
Green Cert. Hydro (€/Mwh)	107	86	84
Energy Efficiency cert. (€/Mwh)	250	225	225

BP ASSUMPTIONS

Shareholding structure

Public Shareholders >50% Public entities IREN's Shareholders are more than 50%: Municipality of Genoa ~19%, Municipality of Turin ~14%, Emilia Municipalities (Reggio Emilia, Parma, Piacenza and other minor Municipalities) ~17%, La Spezia Municipalities ~2%.

Four Shareholders' agreements:

• One between FSU (Municip. Of Genoa) , FCT (Municip. of Turin), Emilia Shareholders and former ACAM Municipalities (expiring April 2022)
• One between FSU and FCT (expiring July 2021)
• One between Emilia Shareholders (expiring April 2022)
• One between former ACAM Municipalities (expiring May 2022 )

Shareholders Agreements

4

They guarantee that all the most important decisions relating to Corporate Governance are taken by agreement of the public Shareholders. In particular, out of 15 members of IREN's BoDs, 13 are appointed by the members of the shareholders agreements, including the CEO, Chairman and Vice-Chairman which are unanimously appointed.

LSS Loyalty Shares

Scheme

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, have already had the effect of increasing the free float (Public shareholders sold approximately 30 million shares in 2017/2018 plus the conversion of >80 million preferred shares into ordinary shares)

Shareholders	Total Shares	%	Total Voting rights	%
FSU Municipality of Genoa	245,249,617	18.85%	457,749,233	23.69%
FCT Municipality of Turin	179,567,795	13.80%	359,135,582	18.59%
Municipality of Reggio Emilia	84,717,464	6.51%	169,434,928	8.77%
Other Municipalities of Reggio Emilia	70,606,428	5.43%	138,807,151	7.18%
Municipality of Parma	41,158,566	3.16%	82,317,132	4.26%
Municipality of Piacenza	19,759,547	1.52%	39,519,094	2.05%
Other Municipalities	534,070	0.04%	1,056,105	0.05%
Munic. Of La Spezia and other Munic. In its Province	24,705,700	1.90%	24,705,700	1.28%
Shares/voting rights owned by public entities	666,299,187	51.22%	1,272,724,925	65.87%
Free float	634,632,190	48.78%	659,507,326	34.13%
IREN's Share capital	1,300,931,377	100%	1,932,232,251	100%

On the 1 st June 2018, the "loyalty share scheme" came into force. All the Shareholders that have kept IREN shares for at least two years and have been registered in the proper list have now a double voting right for each shares (only in relation to specific matters, such as the appointment of the Board of Directors and of theBoard of StatutoryAuditors).

IREN SHAREHOLDING STRUCTURE TRADE REGIME OF PUBLIC SHAREHOLDERS' SHARES

Shareholders	Total Shares	Non-negotiable shares (until may 2022)	Negotiable shares (under specific policy to avoid overhang risk)	Freely negotiable shares (not included in the shareholders agreement)
FSU Municipality of Genoa	245,249,617	154,281,688	90,967,929	-
FCT Municipality of Turin	179,567,795	154,281,689	25,286,106
Municipality of Reggio Emilia	84,717,464	58,228,078	26,489,386	-
Other Municipalities of Reggio Emilia	70,606,428	44,147,738	23,272,996	3,185,694
Municipality of Parma	41,158,566	14,025,186	5,292,380	21,841,000
Municipality of Piacenza	19,759,547	12,248,901	7,510,646	-
Other Municipalities	534,070	311,318	216,288	6,464
Munic. Of La Spezia and other Munic. In its Province	24,705,700	17,804,838	2,918,139	3,982,723
Shares owned by public entities	666,299,187	455,329,436	181,953,870	29,015,881

210,969,751 negotiable shares equal to 16.2% of IREN's share capital

	FY '18	FY '17
Net fixed assets	5,786	5,412
Net Working Capital	132	182
Funds	-621	-618
Other assets and liabilities	-282	-105
Net invested capital	5,015	4,871
Group Shareholders' equity	2,562	2,499
Net Financial Position	2,453	2,372
Total Funds	5,015	4,871

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.