REN-Redes Energeticas Nacionais

Earnings Release • Nov 13, 2020

Results Presentation Nine Months 2020

13th November 2020

AGENDA

1. Overview of the period

2. Business performance

1. Overview of the period

9M20 RESULTS 3 1. Overview of the period

KEY MESSAGES 9M2020

10
15

Electricity and natural gas consumption decreased by 3.5% and 1.5% respectively, with renewable sources reaching 56% of the total supply (11pp higher than in 9M2019)

Service quality remained high, with 0.03min of electricity interruption time (93% lower than 9M2019) and natural gas combined availability rate at 100%, the same rate as in 9M2019

EBITDA reached €352.5M, a 4.2% decrease (-€15.5M) mainly explained by lower remuneration rates from lower sovereign bond yields coupled with the new parameters in the gas regulatory framework (-€15.6M) and higher results from the international segment (€5.4M), especially from the consolidation of Transemel in Chile

Net Profit decreased to €76.1M (€10.3M lower than in 9M19), despite the positive effects of a lower cost of debt in Financial results (reduction of €2.8M to -€36.7M) and lower income tax (reduction of €10.3M to -€31.7M), but with an increase in the extraordinary energy sector levy of €3.8M to €28.2M, as for the first time this year it also covered Portgás

COVID-19 had a limited impact on REN's financial performance overall, with neutral impact in Net Income, a slight increase in Net Debt and delays in investment execution, which are expected to be recovered in 2021

The credit agency S&P reaffirmed REN's rating at 'BBB' and outlook stable (October 29th)

SECTOR OVERVIEW

The Energy Transition is at the center of the Portuguese Government agenda

PNEC 2030 is approved

• In July the Portuguese Government approved the PNEC 2030 (National Energy and Climate Plan), the prime instrument for the implementation of the Portuguese roadmap for carbon neutrality
• This sets mandatory targets for renewable energy incorporation in electricity (80% up to 2030, from 52% at present) and carbon reductions until 2030

• On June 17, following the public consultation on the National Hydrogen Strategy, the Portuguese Government has issued Despacho n.º 6403-A/2020 regarding the opening of a call for parties to communicate their interest to participate in a future Important Project of Common European Interest (IPCEI) about hydrogen
• REN was one of the respondents together with a group of relevant national companies. There were around 74 Hydrogen Projects Call responses, and 34 passed to the next selection phase of the IPCEI call

1

Gas Law amendment for Renewable Gases namely Hydrogen

• A new Decree-Law that establishes the organization and functioning of the Sistema Nacional de Gás and its legal framework, was published. This is set for the decarbonisation in domestic and industrial gas consumption introducing a horizon to the gas networks role in a low carbon future
• Production of renewable and low carbon gases is defined as a liberalized market activity. The producers of renewable or low carbon gases may use the product for any purpose. Related to REN ownership unbundling certification, the same restrictions apply as for the electricity sector
• The Decree-Law provides for the growing recognition of renewable gases, in particular hydrogen, as a clean and versatile energy carrier, and definitely a solution for the incorporation of these renewable gases in the gas networks. The mixing targets for hydrogen in the gas network becomes mandatory. REN is already preparing the required upgrades

A new solar capacity auction of 670 MW was held on the 15th and 24th of August. Most of the capacity (483 MW) was sold in the storage option, and price references comparable but lower than to the previous auction were

COVID-19

Main financial impacts arising from the COVID-19 pandemic were felt in investment execution and RoR

Main effects of COVID-19

		Description
1	Delay in transfers to RAB	Due to the coronavirus pandemic that led to a temporary suspension of works in March and April, some projects will not be concluded before year-end	To be ✔ recovered in 2021	Impact on REN's
2	Increase in 10Y Portuguese Government bonds	The increase in 10Y PT Government Bonds in 2020 have a slightly positive impact in REN's rate of return. In electricity the base rate for 2020 is 4.6%		financial performance is overall neutral in Net Income with a slight increase in
3	Additional costs	There were additional costs with donations and safety measures, partially offset by savings with remote work		Net Debt and a delay in transfers to RAB
4	Increase in tariff deviations	Higher tariff deviations as a result of the reduction in electricity consumption. By the end of 9M20, the tariff deviations amounted to €168.8M

2. Business performance

BUSINESS HIGHLIGHTS

In Portugal, service quality remained high, in a context of declining consumption and an increased share of renewables supply

FINANCIAL HIGHLIGHTS

Net Profit with negative evolution, driven by lower EBITDA and despite better financial results

EBITDA contribution by

Decrease in EBITDA explained by lower remuneration rates and higher OPEX costs, partially offset by Chile's contribution

EBITDA evolution breakdown €M

1 Includes Apolo SpA costs | 2 Includes amortizations recovery, subsidies amortization, REN Trading incentives, telecommunication sales and services rendered, interest on tariff deviation, consultancy revenues and other services provided, OMIP and Nester results | 3 Excludes the segment "Other", which includes REN SGPS, REN Serviços, REN Telecom, REN Trading, REN PRO and REN Finance B.V. | 4 Refers to Portgás

9M20 RESULTS 10

Return on RAB negatively influenced by the downward trend in Portuguese bond yields

Transfers to RAB and CAPEX below 9M19, with delays caused by the COVID-19 pandemic

Transfers to RAB €M Key highlights

Capex €M

Electricity

• Main investment projects concluded:
  • Chafariz substation: new 220 kV bay to connect Sincelo wind farm
  • Sacavém and Falagueira substations: refurbishment of the command and protection systems

Gas Transmission

• Main investment projects concluded:
  • Pipeline network: replacement of flow computers
  • Sines terminal: replacement and upgrade of the electrochlorination station

Gas Distribution

• Investments for network expansion and densification, mostly for B2C, with new prospects for B2B investments continuing to be monitored, alongside with firm contracts
• Network decarbonization process on the move

RAB relatively stable despite small declines in almost all asset classes

Average RAB evolution €M

Overall, the decrease in RAB remuneration is largely explained by lower rates

Return on RAB evolution breakdown €M

Decrease in Return on RAB explained by a lower rate of return on assets with and without premium¹ , a smaller asset base (by €10.6M to €2,015.8M) and a decrease in weight of assets with premium²

Return on RAB with negative evolution due to a lower RoR (from 5.40% to 4.59%), and a smaller asset base (by €42.0M to a total of €948.0M)

Gas Transmission Gas Distribution

Increase in OPEX mostly related to pass-through costs, with core OPEX increasing only ~3%

Core OPEX¹ evolution €M Key highlights

Core external costs

• related to forest clearing (+€4.2M), as a result of more demanding legislation
• COVID-19 related costs²(+€1.0M)
• Lower electricity costs in the LNG Terminal (-€1.1M)
• Other (e.g., travel & transport, IT, 3 rd party services) (-€1.4M)

Personnel costs

• Reflects essentially the decrease in overtime costs and travel allowances (-€0.3M) and the net effect of entries and exits (-€0.4M)

Non-core costs

• Pass-through costs (costs accepted in the tariff) increased by €3.8M, of which €2.4M correspond to costs with crossborder and system services costs and €0.5M to costs with NG transportation

1 Calculated as OPEX minus pass-through costs (e.g., ITC mechanism, NG transportation costs, ERSE costs and subsoil occupation levies) 2 Includes donations of masks to the health authorities and to a ventilators' scientific project, individual protection equipment for employees

INTERNATIONAL BUSINESS Businesses in Chile contributed positively

(1.3%)

(41.0%)

Below EBITDA, financial results improving due to lower cost of debt, and taxes with overall positive evolution despite the increase in CESE

Net profit evolution breakdown €M Key highlights

• A Prudent financial policy led to the strengthening of Financial Results and a positive effect on Net Profit (€2.8M), on the back of lower costs
• The extraordinary levy CESE continued to penalize Net Profit (€-3.8M), now also applicable to the gas distribution business
• A recovery of tax from previous years in €5.6M contributed to the decrease of income tax

1,159

2024

354

Net Debt nearly flat, with operating cash flow covering payments related to investing and financing activities

1 Calculated as Net Debt plus Cash, bank deposits and derivative financial instruments (€47M), excluding effects of hedging on yen denominated debt, accrued interest and bank overdrafts | 2 Includes loans (6.9%), Transemel's debt (0.3%) and leasing (0.1%)

Commercial paper

13.6%

Other²

EIB

SHARE PRICE & SHAREHOLDER RETURN

Shareholder return penalized by share price drop following the PSI-20 trend, with no "sell" recommendations from analysts

Hold recommendations 40.0% 35.0pp 9M2019: 75.0% Buy recommendations 60.0% 43.0pp 9M2019: 17.0% Upside/Downside (+/-) 19.7% 14.7pp 9M2019: 5.0% Average Price target 9M2019: €2.73 €2.80 €0.07 (2.6%) Annualized closing prices % Analyst recommendations¹

3. Closing remarks

CLOSING REMARKS

REN with limited COVID-19 impact but penalized by the new gas regulatory framework

The COVID-19 impact on REN's financial performance was overall neutral in Net Income, with a slight increase in Net Debt, however some projects were temporarily suspended

EBITDA benefited from the inclusion of Transemel and the good performance of Electrogas. However, it suffered from lower remuneration rates resulting from the new regulatory framework in gas, the decrease in bond yields, and the decrease in RAB

Net Profit continued to be penalized by the extraordinary levy that raised the effective tax rate to 38.9%. However, it benefited from the strengthening of Financial Results, due to lower costs

This presentation and all materials, documents and information used therein or distributed to investors in the context of this presentation do not constitute, or form part of, a public offer, private placement or solicitation of any kind by REN, or by any of REN's shareholders, to sell or purchase any securities issued by REN and its purpose is merely of informative nature and this presentation and all materials, documents and information used therein or distributed to investors in the context of this presentation may not be used in the future in connection with any offer in relation to securities issued by REN without REN's prior consent.

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