Iren — Investor Presentation 2020

Nov 10, 2020

IREN RESULTS

9M 2020

10th November 2020

9M 2020 Recurrent Ebitda increase in a negative scenario

m€	9M '19	9M '20	Δ	Δ%
Revenues	3,190	2,629	-561	-17.6%
Ebitda	675	653	-22	-3.3%
Ebit	344	290	-54	-15.6%
Group net profit	191	153	-38	-19.7%
Tech. Capex	324	414	90	27.9%

• Revenues -17.6%: decrease mainly in the energy value chain revenues caused by lower volumes and prices and strategic choices in market
• Ebitda -3.3%: Positive recurrent results despite a difficult scenario affected by Covid for 12 m€, negative impact from regulation of 8m€, the persistence of mild temperatures effects for over 10m€ and a drop in energy prices consequently of lower volumes.
• Ebit -15.6%: higher depreciations and provisions to bad debt due to the emergency partially offset by a release of a provision fund for 16m€
• Group net profit -19.7%: reflecting the Ebit negative trend
• Tech. Capex +27.9%: strong capex plan following business plan assumptions. The increase is mainly explained by Turbigo plant repowering

RAB growth and synergies support the Ebitda rise NETWORKS

• +RAB growth combined with synergies led the 3% Ebitda increase
• +Despite the slowdown caused by the lockdown, investments are in line with the BP assumptions
• +Strong acceleration in the activities of districtization, which already reached the 2020 target
• Negative impact from regulation due to lower costs recognized in tariffs, mainly in water and gas sector

WASTE Negative impact of low PUN and volumes

• +Higher margins on collection activities
• +I.Blu positive contribution for 2m€
• +Saturation of WTE plants, through the reorganization of flows
• +Sorted waste increased to 69.1%
• Decrease in waste managed (-1%) compared to 9M 2019 mainly on landfill, led by Covid emergency
• Lower PUN price affected the electricity sold for 7m€

ENERGY Weak generation and lower heat contribution

+Higher hydro volumes

• +Positive results in the ancillary services market (60m€ vs 50m€ in 2019), despite a decline in Q3
• • Increase in thermo volumes
• Lower coge volumes
• Lower heat distributed due to mild temperature
• Drop in PUN, in electricity clean spark spread and in heat spark spread

OUTLOOK

Stripping out non recurrent elements, the result is expected to be lower than 2019 due to lower expectations on 4Q MSD and a turbine failure

EBITDA BRIDGE (m€)

REMARKS EBITDA ENERGY ANNEXES

MARKET Commercial policy led to margins stabilization

• +Positive repricing policy and hedging activities in both sectors
• • Customer base at 1.873m clients (+57k vs FY2019)
• • Iren Plus positive contribution
• Lower electricity volumes mainly in SMEs and Business segment, primarily for Covid impact
• Lower gas volumes to end clients due to the mild climate
• Emerging costs related to digital migration of our CRM systems and marketing activities

	9M '19	9M '20	Δ	Δ%
EBITDA	675.1	652.6	-22.5	-3.3%
D&A and others	-307.4	-311.1			 Release of Hydroelectric provision funds
Provisions to bad debt	-23.7	-51.3			16 m€
EBIT	343.9	290.2	-53.8	-15.6%	 Higher provisions to bad debt related COVID emergency for 25 million euros
Financial charges	-46.9	-51.3
Companies cons with e.m.	4.7	6.5
Other financial	1.2	0.7
EBT	302.9	246.1	-56.7	-18.7%
Taxes	-90.7	-72.6
Minorities	-21.2	-20.2			 Slight reduction of tax-rate at 29.5%
Group net profit	191.0	153.3	-37.7	-19.7%

Cash-flow and NFP 9M 2020

• The increase is due to the strong growth in investments, consolidation activities and the worsening of net working capital, following the delay in the receipts of trade receivables due to Covid-19 (+50 million euros).
• The consolidation activities of I.Blu, Sei and NOS led to higher debt

• On 28th October 2020, the second tranche of SBB program ended

• 97% of gross debt at fixed interest rate and 3% of gross debt at variable interest rate

• Average long-term debt duration of about 5,7 years vs 5.3 years in 9M 2019

• Reduction in the average cost of debt (2.1% vs. 2.5% in 9M 2019)

• 54% of the Iren total debt is composed by green and assimilated instruments (39% Green Bond, 15% EIB loans)

• Iren is the only Italian local multiutility to have issued 3 Green Bonds for a total size of 1.5b€

9M 2020 Closing remarks

MAIN 9M 2020 TAKEAWAYS

• Ebitda decrease lead by the absence of several positive one-offs reported last year and by a 3Q results in line with our expectations
• Negative Covid impact on Ebitda: 12m€
• M&A activism confirmed
• Investment plan confirmed

COVID IMPACTS ON FY 2020 CONFIRMED

The visibility achieved after the 9M leads to confirm the Covid impacts on FY 2020:

• Ebitda impact for 15m€
• Net working capital increase for around 80m€
• Credit losses for around 25m€

In light of the previous elements, we confirm our guidance on FY 2020:

GUIDANCE ON FY 2020

• Ebitda: 910m€ (of which 6m€ from M&A)
• Net profit: ̴210m€
• NFP/Ebitda: ̴3.5x (of which 0.2x from M&A)
• Capex: ̴630m€

10

Annexes

9M 2020 Business units' results

NETWORKS
m€	9M '19	9M '20	Δ	Δ%
Revenues	740	745	5	1%
Ebitda	264	272	8	3%
Electricity	55	56	1	2%
Gas	63	65	2	3%
Water	146	151	5	3%
Ebit	140	132	-8	-6%
Gross Capex	186	180	-6	-3%

m€	9M '19	9M '20	Δ	Δ%
Revenues	1,088	787	-301	-28%
Ebitda	199	154	-45	-23%
Hydro&Renewables	58	48	-10	-17%
Thermo/Coge, DH	134	98	-36	-27%
Energy efficiency	7	8	1	14%
Ebit	101	64	-37	-36%
Gross Capex	43	105	62	n.s.

WASTE
m€	9M '19	9M '20	Δ	Δ%
Revenues	531	533	2	0%
Ebitda	126	120	-6	-4%
Collection	42	45	3	7%
Treatment & disposal	84	75	-9	-11%
Ebit	55	46	-9	-15%
Gross Capex	34	57	23	70%

ENERGY
9M '19	9M '20	Δ	Δ%

NETWORKS WASTE MARKET P&L CASHFLOW & REMARKS EBITDA ENERGY ANNEXES

9M 2020

9M '19	9M '20	Δ%
53.9	49.5	-8.1%
147	80	-45.4%
175	95	-45.6%
241.9	225.1	-6.9%
53.8	35.6	-33.8%
24.9	23.8	-4.3%
92.1	99.1	+7.5%
260	260	-

Scenario

9M 2020 Balance sheet

	FY '19*	9M '20
Net fixed assets	6,101	6,232
Net Working Capital	166	232
Funds	-625	-590
Other assets and liabilities	-284	-287
Net invested capital	5,358	5,587
Group Shareholders' equity	2,652	2,672
Net Financial Position	2,706	2,915
Total Funds	5,358	5,587

9M 2020 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.