Naturgy Energy Group S.A.

Investor Presentation • Apr 29, 2020

1Q20 Results

29 April 2020

Agenda

• 1. COVID-19 company initiatives
• 1. 1Q20 consolidated results
• 1. 1Q20 results by business unit
• 1. Conclusions

COVID-19 company initiatives 01

Environment under COVID-19

Limited visibility on macroeconomic outlook

Unprecedented decline of commodity prices

Declining energy demand due to lower economic activity

Potential regulatory developments impacting WC

Lack of visibility on depth and duration of crisis

Macroeconomic environment

2020E GDP growth consensus estimates FX evolution¹

	W12	W13	W14	W15	W16
Spain	-5.0%	-5.9%	-6.6%	-5.9%	-6.3%
Argentina	-2.8%	-3.4%	-4.1%	-4.6%	-4.4%
Chile	-0.7%	-1.2%	-1.6%	-3.0%	-2.1%
Panama	1.5%	1.5%	-1.0%	-2.3%	-2.0%
Mexico	-3.2%	-4.4%	-5.0%	-5.9%	-5.5%
Brazil	-0.5%	-1.7%	-2.3%	-2.0%	-2.9%

(rebased to 100)

Limited visibility on macroeconomic outlook

Source: Bloomberg Notes: 1. Data as of 24 April 2020

Commodity prices

Unprecedented decline of commodity prices

Electricity and gas demand

Evolution of electricity demand

(% Change vs. 2019 comparable week)

	W12	W13	W141	W15	W16
Spain	-9.5%	-19.1%	-25.2%	-11.3%	-13.7%
Argentina2	-1.5%	-18.1%	-18.6%	-10.4%	-5.5%
Chile2	-3.1%	-2.4%	-6.1%	2.6%	-2.4%
Panama	-14.8%	-16.6%	-16.9%	-15.6%	-18.0%
Mexico	3.0%	1.5%	-10.7%	-5.1%	-3.9%

Evolution of gas demand

(% Change vs. 2019 comparable week)

	W12	W13	W141	W15	W16
Spain	-2.5%	-16.7%	-31.4%	-12.2%	-21.5%
Argentina2	-41.2%	-33.4%	-32.9%	-20.2%	-30.9%
Brazil2	-30.9%	-43.4%	-37.3%	-41.0%	-42.7%
Chile2	-9.0%	-8.0%	-20.4%	4.0%	-18.8%
Mexico2	-15.7%	-21.4%	-31.2%	-15.4%	-28.0%

Declining energy demand due to lower economic activity

Notes:

1. Demand impacted by Easter

2. Data for demand operated within the Group only

Key company initiatives

Employees

Activated 25-Feb.

Prompt creation of a Crisis Committee Early ban on domestic and international travel and attendance to external events

100% of non-critical workforce

ready access to company medical services

Employees health, safety and well-being as a key priority

Employees: roadmap for a safe return

Roadmap for a gradual and safe return to work premises

Society

01

Reinforcement of critical infrastructures to guarantee energy supply

"CRUZ ROJA RESPONDE" donation by employees

03

Supply of free gas and electricity to hospitalized hotels, residences and IFEMA

Free gas and electricity appliances'

inspections to Spain's medical workers, members of Spain's Police, Firemen and Armed Forces

32 hotels & residences Up to 1 million beneficiaries

Committed to supporting society

02

04

Customers & Suppliers

03

12-month bill financing to SMEs, selfemployed individuals and municipalities

Up to 250.000 beneficiaries

Continuity of energy supply to all vulnerable clients

Cash payment advances corresponding to invoices in the 2nd quarter of the year

Up to 11.000 suppliers

Committed to mitigate the impact of the current economic environment

01

Liquidity resources (€m)

Cash and equivalents	4,151
Undrawn committed financing	5,439
Total	9,590

Comfortable debt maturity profile ~6 years average maturity 80% of debt at fixed rates 68% denominated in EUR

Gross debt maturities (m€)

Further opportunities to optimize B/S structure and strengthen liquidity (e.g. new credit lines)

Comfortable balance sheet with additional flexibility

Shareholder remuneration

Delivering on dividend commitments

Business & portfolio

1

Gas procurement contract revisions and renegotiations: Price arbitrage decisions expected between 2020 and 2021

Ongoing transformation initiatives Rethinking of operations to increase efficiency and flexibility (remote work, digitization, etc.) Adapting organization: internal and external talent

Portfolio rotation opportunities: Ongoing analysis to maximize value and de-risking

Accelerating transformation

1Q20 consolidated results 02

Key highlights

Limited impact of COVID-19 on first quarter results

Note: 1. The entire amount corresponds to restructuring costs

EBITDA evolution (€m)

-6%

Lower commodities, new regulation in Spain, EMPL and FX

Net Income evolution (€m)

Better financial result not sufficient to offset weaker activity

Cash flow and Net debt evolution (€m)

Cash flow Net debt

	1Q20	vs. 1Q19
EBITDA	944	-16%
Taxes	(8)
Net interest cost	(138)
Other non-cash items	(139)
Funds from operations	659	-23%
Change in working capital	616
Cash flow from operations	1,275	-22%
Growth capex1	(100)
Maintenance capex1	(90)
Divestments	24
Dividends to minorities	(48)
Other	(252)
Free cash flow after minorities	809	-18%
Dividends and other	(755)
Free cash flow	54

Stable net debt after shareholder remuneration

Notes:

1. Net of cessions and contributions

2. Does not include cost from IFRS 16 debt

1Q20 results by business unit 03

EBITDA evolution (€m) Highlights

• Gas, Power & services sales: higher power margins and business optimization offset by lower sales and gas margins
• International LNG: contract renegotiations cause a transitory increase of shorter term sales in depressed price environment
• Europe Power Generation: higher renewable and hydro production offset by higher taxes, lower CCGTs production and pool prices
• International Power Generation: efficiencies and higher margins in PPA offset by lower sales and margins in merchant production

€49m capex, of which ~70% growth & remunerated

EBITDA evolution (€m) Highlights

• Spain gas networks: business optimization offset by lower sales
• Spain electricity networks: lower regulated revenues due to new regulatory period compensated by business optimization
• EMPL: step-down of EMPL capacity compensated by annual tariff increase and FX

			€53m capex, of which ~90% growth & remunerated

New regulatory period in electricity networks and step-down of EMPL capacity

EBITDA evolution (€m) Highlights

• Chile electricity: FX, tariff freeze in transmission activities, higher losses and perimeter changes
• Chile gas: mainly impacted by lower supply sales
• Brazil gas: tariff indexation and lower losses offset by FX
• Argentina: tariff update in April-19 offset by lower demand and FX

All businesses negatively impacted by FX

Positive evolution supported by better margins in Mexico

Conclusions 04

Summary 1Q20 results

Lower energy demand and commodity prices

New electricity networks regulation in Spain and capacity step down in EMPL

FX depreciation in LatAm

Reinforced liquidity and dividend commitment

Limited impact of COVID-19 on first quarter results

COVID-19 uncertainties & management focus

COVID-19 uncertainties

• Duration and depth of crisis and speed of recovery
• Commodity prices
• Energy demand
• FX in LatAm
• Potential regulatory developments impacting WC

Management focus

• Stakeholder support
  • − Employees, society, customers, suppliers…
• Liquidity maximization
  • − Managing cash outlays: opex and discretionary capex
  • − Balance sheet headroom: new credit lines, WC management
• Delivery of dividend commitment
• Gas procurement contracts revision
• New transformation initiatives
  • − Rethinking of operations to increase efficiency and flexibility (remote work, digitization, etc.)
  • − Adapting organization: internal and external talent
• Portfolio rotation evaluation

Q&A 1Q20 Results

Appendix

Alternative Performance Metrics

Naturgy's financial disclosures contain magnitudes and metrics drafted in accordance with International Financial Reporting Standards (IFRS) and others that are based on the Group's disclosure model, referred to as Alternative Performance Metrics (APM), which are viewed as adjusted figures with respect to those presented in accordance with IFRS.

The chosen APMs are useful for persons consulting the financial information as they allow an analysis of the financial performance, cash flows and financial situation of Naturgy, and a comparison with other companies.

Below is a glossary of terms with the definition of the APMs. Generally, the APM terms are directly traceable to the relevant items of the consolidated balance sheet, consolidated income statement, consolidated statement of cash flows or Notes to the Financial Statements of Naturgy. To enhance the traceability, a reconciliation is presented of the calculated values.

Alternative performance metrics	Definition and terms	Reconciliation of values
		31 March 2020	31 March 2019	Relevance of use
Ebitda	Operating profit	Euros 944 million	Euros 1,119 million	Measure of earnings before interest, taxes, depreciation and amortization and provisions
Ordinary Ebitda	Ebitda - Non-ordinary items	1,102 = Euros 944 million + 158	1,167 = Euros 1,119 million + 48	Ebitda corrected of impacts like restructuring costs and other non-ordinary items considered relevant for a better understanding of the underlying results of the Group.
Ordinary Net income	Attributable net income of the period - Non ordinary items	Euros 305 million = 199 + 106	Euros 377 million = 341+ 36	Attributable Net Income corrected of impacts like assets write-down, discontinued operations, restructuring costs and other non-ordinary items considered relevant for a better understanding of the underlying results of the Group.
Investments (CAPEX)	Investments in intangible assets + Investments in property, plant & equipment	Euros 201 million = 26 + 175	Euros 301 million = 31 + 270	Realized investments in property, plant & equipment and intangible assets.
Net Investments	CAPEX + Financial investments net of the cash received from divestments - Other proceeds/(payments) of investments activities	Euros 166 million = 201 - 24 - 11	Euros 289 million = 301 – 0 - 12	Total investments net of the cash received from divestments and other investing receipts.
Gross financial debt	Non-current financial liabilities + "Current financial liabilities"	Euros 17,859 million = 15,744 + 2,115	Euros 17,987 million (1) = 15,701 + 2,286	Current and non-current financial debt

Alternative Performance Metrics

Alternative performance metrics	Definition and terms	Reconciliation of values
		31 March 2020	31 March 2019	Relevance of use
Net financial debt	Gross financial debt - "Cash and cash equivalents" - "Derivative financial assets"	Euros 15,010 million = 17,859 - 2,813 - 36	Euros 15,268 million (1) = 17,987 – 2,685 – 34	Current and non-current financial debt less cash and cash equivalents and derivative financial assets
Leverage (%)	Net financial debt / (Net financial debt + "Net equity")	53.2% = 15,010 / (15,010 + 13,224)	52.2% (1) = 15,268 / (15,268 + 13,976)	The ratio of external funds over total funds
Cost of net financial debt	Cost of financial debt - "Interest revenue"	Euros 141 million = 147 - 6	Euros 156 million = 161 - 5	Amount of expense relative to the cost of financial debt less interest revenue
Ebitda/Cost of net financial debt	Ebitda / Cost of net financial debt	6.7x = 944 / 141	7.3x (1) = 4,562 / 626	Ratio between Ebitda and net financial debt
Net financial debt/LTM Ebitda	Net financial debt / Last twelve months Ebitda	3.4x = 15,010 / 4,387	3.3x (1) = 15,268/ 4,562	Ratio between net financial debt and Ebitda
Free Cash Flow after minorities	Free Cash Flow + Dividends and other + Acquisitions of treasury shares + Inorganic investments payments	Euros 809 million = 54 + 571 + 184 + 0	Euros 983 million = 280 + 560 + 135 + 8	Cash flow generated by the Company available to pay to the shareholders (dividends or treasury shares), the payment of inorganic investments and debt payments.
Free Cash Flow	Cash flow generated from operating activities + Cash flows from investing activities + Cash flow generated from financing activities - Receipts and payments on financial liability instruments	Euros 54 million = 1,275 - 413 – 690 - 118	Euros 280 million = 1,628 - 625 – 493 - 230	Cash flow generated by the Company available to pay the debt.

ESG metrics

ESG metrics		1Q20	1Q19	Change	Comments
Health and safety
Accidents with lost time (1)	units	1	8	-87.5%	Significant improvement following Plan Naturgy 2019
LT Frequency rate (2)	units	0.04	0.27	-85.2%	Reflects the reduction in accidents, although slightly adjusted by a lower number of working hours
Environment
GHG Emissions	M tCO2 e	3.8	4.3	-12.0%
Emission factor	t CO2/GWh	294	318	-7.6%	Higher renewable and lower CCGT production in the period
Emissions-free installed capacity	%	30.1	28.1	7.1%	New renewable capacity coming into operation in Spain
Emissions-free net production	%	37.8	28.1	34.5%	Higher renewable and hydro production
Interest in people
Number of employees	persons	11,081	12,330	-10.1%	Perimeter changes and efficiencies
Training hours per employee	hours	4.4	5.6	-21.5%	Reduction in ratio explained by need for a training itinerary overhaul, required after business reorganization
Women representation	%	32.0	30.0	6.7%	Commitment for diversity and gender equality policies
Society and integrity
Economic value distributed	M€	4,971	6,137	-19.0%	Affected by lower purchases and external services
Notifications received by the ethics committee	units	25	40	-37.5%	Improved oversight and accountability as well as lower activity following Covid-19 crisis

Disclaimer

This document is the property of Naturgy Energy Group, S.A. (Naturgy) and has been prepared for information purposes only.

This communication contains forward-looking information and statements about Naturgy. Such information can include financial projections and estimates, statements regarding plans, objectives and expectations with respect to future operations, capital expenditures or strategy.

Naturgy cautions that forward-looking information are subject to various risks and uncertainties, difficult to predict and generally beyond the control of Naturgy. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Naturgy and their subsidiaries before the different supervisory authorities of the securities markets in which their secuirities are listed and, in particular, the Spanish National Securities Market Commission.

Except as required by applicable law, Naturgy does not undertake any obligation to publicly update or revise any forward-looking information and statements, whether as a result of new information, future events or otherwise.

This document includes certain alternative performance measures ("APMs"), as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority in October 2015. For further information about this matter please refer to this presentation and to the corporate website (www.naturgy.com).

This document does not constitute an offer or invitation to purchase or subscribe shares, in accordance with the provisions of the restated text of the Securities Market Law approved by Royal Legislative Decree 4/2015, of 23 October and their implementing regulations. In addition, this document does not constitute an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities, in any other jurisdiction.

The information and any opinions or statements made in this document have not been verified by independent third parties; therefore, no warranty is made as to the impartiality, accuracy, completeness or correctness of the information or the opinions or statements expressed herein.

This presentation is property of Naturgy Energy Group, S.A. Both its content and design are for the exclusive use of its personnel.

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