Italgas — Investor Presentation 2021

Mar 11, 2021

2020 MAIN TAKEAWAYS

Keep creating value for our shareholders We propose a DPS of € 0.277

FY 2020 RESULTS Key highlights

2020 targets met

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( * ) Toscana Energia fully consolidated from 4Q 2019, equity accounted before; for details on adjustments see slide 8

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Capex at new all time highs

capex and supply chain support

(**) Operating leases ex IFRS 16 €76.3mn at the end of 2020 and €74.7mn at the end of 2019

Cashflow generation capacity confirmed

Net Debt increased as a result of higher

FY 2020 SUSTAINABILITY Key highlights

Continuous effort to improve sustainability performance and accountability

ENVIRONMENT GOVERNANCE

• Gas leakage rate* 0.1%
• Energy intensity** -5.4% vs 2019

• 95% of network inspected for leaks detection with Picarro Surveyor

• Digitisation investments to enhance and optimise grid management and maintenance (gas and water)
• Sardinia methanisation ongoing

• More than 20,000 hours training on digitization topics

SOCIAL

• Increased share of woman in the workforce to 15%

• Workforce empowerment and safety focus, considering also Covid-19 implications

• Sustainability KPIs in the remuneration scheme of CEO and top management

• 67% independent directors in the board, including the Chairman***
• Integrated annual report (2020 FY results)
• Integration of ESG and climate risks in the Enterprise Risk Management

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(**) Energy intensity calculated as the ratio between total energy consumption and gas distributed

(***) Based on assessment of 10 March 2021 and Corporate Governance Code applicable from 1 January 2021

CAPEX FY 2020 marks a new record

New record highs achieved in 2020, led by network capex growth and despite Covid19 impact

CAPEX Mix changes, meters replacement plan close to end

905km new networks pipes of which 334km in Sardinia

1.22m new smart meters installed**

FY 2020

€777.5mn* +5,1% yoy

RESULTS FY 2020 Reported vs adjusted

€mn	FY 2020 reported	FY 2020 adjusted		special items
Revenues	1,442.2	1,333.8	108.4	meters replaced with smart ones by 2019
Operating expenses	- 414.3	- 362.4	- 51.9	- 38.5mn smart meters replacement fund provision
EBITDA	1,027.9	971.4	56.5	- 13.0mn severance plan fund provision - 0.4mn co-investment plan
Depreciation & amortisation	- 424.6	- 424.6	-
EBIT	603.3	546.8	56.5
Net interest income (expenses)	- 49.2	- 49.2	-
Net income from associates	1.5	1.5	-
EBT	555.6	499.1	56.5
Income taxes	- 152.0	- 135.1	- 16.9	- 16.9mn fiscal impact of non-recurring items
NET PROFIT before minorities	403.6	364.0	39.6
Minorities	- 20.6	- 18.6	- 2.0
NET PROFIT after minorities	383.0	345.4	37.6

+108.4mn mainly related to depreciation of traditional

- 38.5mn smart meters replacement fund provision

- 16.9mn fiscal impact of non-recurring items

RESULTS FY 2020 Adjusted

€mn	FY 2019 adjusted	FY 2020 adjusted	Change
Revenues Operating expenses	1,257.9 - 350.4	1,333.8 - 362.4	75.9 - 12.0
EBITDA	907.5	971.4	63.9	+ 7.0%
Depreciation & amortisation	- 391.5	- 424.6	- 33.1
EBIT	516.0	546.8	30.8	+ 6.0%
Net interest income (expenses)	- 51.0	- 49.2	1.8
Net income from associates	14.9	1.5	- 13.4
EBT	479.9	499.1	19.2
Income taxes	- 128.3	- 135.1	- 6.8
NET PROFIT before minorities	351.6	364.0	12.4
Minorities	- 6.4	- 18.6	- 12.2
NET PROFIT after minorities	345.2	345.4	0.2	+ 0.1%	9

FY 2020 Adjusted

RESULTS Adjusted Revenues +6.0% vs FY 2019

RESULTS FY 2020 Adjusted

€mn	FY 2019 adjusted	FY 2020 adjusted	Change
Regulated revenues	1,206.9	1,285.9	79.0
Distribution	1,109.1	1,183.7	74.6
Tariff contribution for meters replacement	22.9	30.2	7.3
Other distribution revenues	74.9	72.0	- 2.9
Otherrevenues	51.0	47.9	- 3.1
TOTAL REVENUES	1,257.9	1,333.8	75.9

FY 2020 Adjusted

RESULTS Adjusted Operating expenses +3.4% vs FY 2019

€mn

RESULTS FY 2020 Adjusted

€mn	FY 2019 adjusted	FY 2020 adjusted	Change
Distribution fixed costs	254.7	258.1	3.4
Net labour cost	144.1	145.3	1.2
Net external cost	110.6	112.8	2.2
Other activities	22.9	24.9	2.0
Net labour cost	2.1	3.6	1.5
Net external cost	20.8	21.3	0.5
Other costs	2.2	6.4	4.2
Tee	7.8	5.0	- 2.8
Concessions fees	62.8	68.0	5.2
TOTAL COSTS	350.4	362.4	12.0

FY 2020 Adjusted

RESULTS Adjusted Ebit +6.0% vs FY 2019

€mn

FY 2020 Adjusted

RESULTS Adjusted Net Profit after minorities in line with FY 2019

FINANCIAL STRATEGY A key source of value creation

Limited refinancing and liquidity needs

Low exposure to interest rates volatility

Long debt tenor

Best in class cost of debt below 1% in 2020

New €1bn dual-tranche bond issue completed in February 2021

Debt Maturities post refinancing exercise of February 2021

FY 2020 Gross Debt Structure*

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EIB

RESULTS FY 2020

	FY 2019	FY 2020	Change
€mn
Net invested capital	6,280.2	6,717.5	437.3
Fixed capital	6,335.0	6,712.3	377.3
Tangible fixed assets	350.0	369.9	19.9
Net intangible fixed assets	6,176.1	6,516.6	340.5
Net payables investments	- 225.0	- 208.6	16.4
Equity-accounted and other investments	33.9	34.4	0.5
Net working capital	56.3	109.7	53.4
Provisions for employee benefits	- 113.2	- 104.6	8.6
Assets held forsale and directly related liabilities	2.1	0.1	- 2.0
Net financial debt	4,485.3	4,736.5	251.2
Financial debt for operating leases (IFRS 16)	74.7	76.3	1.6
Net financial debt ex operating leases	4,410.6	4,660.2	249.6
Shareholders' equity	1,794.9	1,981.0	186.1

SHAREHOLDERS' REMUNERATION

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Allows investors to keep benefitting from underlying growth & efficiencies delivering additional value

Dividend proposal 65% payout

implies 8.2% growth vs 2019 and 18.4% growth vs 2018

DPS (€)

APPENDIX

RESULTS FY 2020

€mn	FY 2019 reported	FY 2020 reported	FY 2019 adjusted	FY 2020 adjusted	Change*
Revenues	1,257.9	1,442.2	1,257.9	1,333.8	75.9
Operating expenses	- 350.4	- 414.3	- 350.4	- 362.4	- 12.0
EBITDA	907.5	1,027.9	907.5	971.4	63.9
Depreciation & amortisation	- 391.5	- 424.6	- 391.5	- 424.6	- 33.1
EBIT	516.0	603.3	516.0	546.8	30.8
Net interest income (expenses)	- 69.3	- 49.2	- 51.0	- 49.2	1.8
Net income from associates	100.8	1.5	14.9	1.5	- 13.4
EBT	547.5	555.6	479.9	499.1	19.2
Income taxes	- 123.9	- 152.0	- 128.3	- 135.1	- 6.8
NET PROFIT before minorities	423.6	403.6	351.6	364.0	12.4
Minorities	- 6.4	- 20.6	- 6.4	- 18.6	- 12.2
NET PROFIT after minorities	417.2	383.0	345.2	345.4	0.2	2 1

( * ) adjusted numbers

RESULTS FY 2020 Reported

€mn	FY 2019 reported	FY 2020 reported	Change	Of which special items
Revenues	1,257.9	1,442.2	184.3	2020 +108.4mn mainly related to depreciation of traditional meters replaced with smart ones by 2019
Operating expenses	- 350.4	- 414.3	- 63.9	2020 -51.9mn mainly severance plan fund provisions and
EBITDA	907.5	1,027.9	120.4	smart meters replacement fund provision
Depreciation & amortisation	- 391.5	- 424.6	- 33.1
EBIT	516.0	603.3	87.3
Net interest income (expenses)	- 69.3	- 49.2	20.1	2019 -18.3mn liability management costs pre-tax
Net income from associates	100.8	1.5	- 99.3	2019 +85.9mn positive capital gain on Toscana Energia
EBT	547.5	555.6	8.1
Income taxes	- 123.9	- 152.0	- 28.1	2020 -16.9mn fiscal impact of non recurring items 2019 -4.4mn fiscal impact of non recurring items
NET PROFIT before minorities	423.6	403.6	- 20.0
Minorities	- 6.4	- 20.6	- 14.2
NET PROFIT after minorities	417.2	383.0	- 34.2

RESULTS P&L quarterly adjusted numbers

€mn

RESULTS 4Q 2020 adjusted numbers

€mn

	4Q 2019	4Q 2020	Change
Revenues	341.0	355.8	14.8
Operating expenses	- 94.2	- 100.1	- 5.9
EBITDA	246.8	255.7	8.9
Depreciation & amortisation	- 107.7	- 108.6	- 0.9
EBIT	139.1	147.1	8.0
Net interest income (expenses)	- 13.8	- 9.0	4.8
Net income from associates	- 2.3	0.3	2.6
EBT	123.0	138.4	15.4
Income taxes	- 34.0	- 34.9	- 0.9
NET PROFIT before minorities	89.0	103.5	14.5
NET PROFIT after minorities	82.6	98.9	16.3

THE LEADING GAS DISTRIBUTOR in ITALY

	OPERATING HIGHLIGHTS (TOTAL)	OF WHICH AFFILIATES
Network length	73,058 km	1,873 km
Municipalities	1,887	61
Redelivery Points	7.749 mn	0.154 mn
Market Share(1)	35%	0.1%
Employees	4,029	44

Disclaimer

Italgas's Manager, Giovanni Mercante, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the company's evidence and accounting books and entries. This presentation contains forward-looking statements regarding future events and the future results of Italgas that are based on current expectations, estimates, forecasts, and projections about the industries in which Italgas operates and the beliefs and assumptions of the management of Italgas. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management are forward-looking in nature. Words such as 'expects', 'anticipates', 'targets', 'goals', 'projects', 'intends', 'plans', 'believes', 'seeks', 'estimates', variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Italgas's actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, political, economic and regulatory developments in Italy and internationally. Any forward-looking statements made by or on behalf of Italgas speak only as of the date they are made. Italgas does not undertake to update forwardlooking statements to reflect any changes in Italgas's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Italgas may make in documents it files with the Italian Securities and Exchange Commission and with the Italian Stock Exchange.

IR contacts

Anna Maria Scaglia Armando Iobbi

Investor.relations@Italgas.it