Terna — Earnings Release 2018

Nov 9, 2018

9M18 Consolidated Results

November 9th 2018

Agenda

Demand Evolution – Last 12 months Highlights (1/2)

9M18 data:

• National Demand at 242 TWh
• o/w 36% covered by RES vs 34% in 9M17
• Net Total Production at 210 TWh
• Hydro increased by 24%

Increasing contribution from renewable sources

9M 2018 Key Numbers Highlights (2/2)

€mn	9M 2018	9M 2017	Δ 9M17 vs
			+3%
Revenues1	1,625	1,570
EBITDA	1,230	1,207	+2%
Group Net Income2	542	529	+2%
Total Group Capex	561	545	+3%
		9M 2018	FY 2017
	Net Debt	7,592	7,796
2018 Interim Dividend	7.87 €cents/share3

Solid results confirm FY guidance

1. Directly including the margin of the assets in concession implemented abroad 2. Attributable to Terna 3. Ex dividend date: November 19th 2018. Payment date: November 21st 2018

Revenues 9M 2018 results

Insourcing attività di O&M Rete FS Solid growth in all business lines

Revenues Analysis 9M 2018 results

NON REGULATED ACTIVITIES

€mn

Higher contribution from Regulated and Non Regulated Activities

Opex evolution driven by Regulated and Non Regulated growth Insourcing attività di O&M Rete FS

Opex Analysis 9M 2018 results

Insourcing attività di O&M Rete FS Higher volumes of activities and increasing effort on maintenance programs

EBITDA 9M 2018 results

2% growth at EBITDA level Insourcing attività di O&M Rete FS

From EBITDA to Net Income 9M 2018 results

€mn

1,230 830 542 529 400 6 7 218 EBITDA D&A EBIT Net Financial Expenses Taxes Group Net Income Group Net Income 9M17 1 1 +2% YoY

2% growth at Net Income level

Capex 9M 2018 results

Insourcing attività di O&M Rete FS 2018 Capex well on track

Note: figures may not add up due to rounding 1. I-NPR1+O-NPR1 in line with ARERA Resolution n. 579/17 2. Of which about 12 €mn of Capitalized Financial Charges in 9M18

9M 2018 results Cash Flow & Net Debt Evolution

900 €mn of Operating Cash Flow

Note: figures may not add up due to rounding 1. Including Other Fixed Assets Changes 2. Including Cash Flow Hedge reserve and other

9M 2018 results Net Debt Evolution & Financial Structure

GROSS DEBT BREAKDOWN KEY RATIOS ^{1 1}

Maturity 5.4 years

Maintaining a solid balance sheet

Annex

Consolidated Income Statement¹

€ mn	9M18	2 9M17	Δmn	Δ %
Total Revenue	1,625	1,570	55	3.5%
Regulated Activities	1,481	1,458	23	1.6%
Transmission	1,348	1,347	1	0.1%
Dispatching	103	85	18	21.7%
3 Other	17	16	1	8.1%
IFRIC12	12	10	2	21.2%
Non Regulated Activities	138	112	26	23.5%
International Activities	6	0.9	5	n.m.
Total Costs	395	363	31	8.7%
Regulated Activities	288	272	16	5.8%
Labour Costs	156	153	3	2.0%
External Costs	106	96	10	10.1%
3 Other	14	13	1	6.7%
IFRIC12	12	10	2	21.2%
Non Regulated Activities	101	88	13	15.3%
International Activities	6	4	2	66.7%
EBITDA	1,230	1,207	23	1.9%
D&A	400	390	10	2.5%
EBIT	830	817	13	1.6%
Net Financial Charges	67	68	-2	-2.2%
Pre Tax Profit	763	749	15	2.0%
Taxes	218	222	-3	-1.5%
Tax Rate (%)	28.6%	29.6%	-1.0 pp
Total Net Income	545	527	18	3.4%
Minority Interest	4	-2	5	n.m.
Group Net Income	542	529	13	2.4%

P&L Quarterly Analysis Annex

€ mn	1Q18	1 1Q17	Δ	2Q18	1 2Q17	Δ	3Q18	1 3Q17	Δ
Total Revenue	538	524	14	542	522	20	546	525	21
Regulated Activities	488	490	-2	492	477	14	501	490	11
Transmission	451	451	1	447	444	3	450	453	-3
Dispatching	29	29	0	31	27	5	43	29	14
2 Other	5	8	-4	10	4	7	3	4	-2
IFRIC12	3	2	1	3	3	0	6	4	1
Non Regulated Act.	47	34	13	47	44	3	44	34	10
3 International Activities	3	0	3	2	0	2	1	1	0
Total Costs	129	121	7	137	130	7	129	113	17
Regulated Activities	95	93	2	99	97	2	94	82	12
Labour Costs	54	53	0	55	54	1	48	46	1
External Costs	34	31	3	37	35	2	34	30	4
2 Other	4	7	-3	4	5	-1	6	1	5
IFRIC12	3	2	1	3	3	0	6	4	1
Non Regulated Act.	32	27	5	36	32	4	33	29	4
International Activities	2	1	1	2	1	1	2	2	1
EBITDA	409	403	7	406	392	14	416	412	4
D&A	133	130	2	135	131	4	133	129	3
EBIT	277	273	4	271	261	9	284	283	1
Net Financial Charges	25	21	4	17	19	-2	25	29	-4
Pre Tax Profit	252	252	0	254	242	12	258	254	4
Taxes	69	74	-5	74	70	4	76	78	-2
Tax Rate (%)	27.2%	29.2%	-2.0%	29.3%	29.0%	0.2%	29.2%	30.6%	-1.3%
Total Net Income	184	179	5	179	172	8	183	177	6
Minority Interest	1	-1	2	1	0	1	2	-1	3
Group Net Income	183	179	3	178	172	6	181	178	4

2017 Restated P&L Quarterly Figures¹ Annex

€ mn	1Q17	2Q17	3Q17	4Q17	FY17
Total Revenue	524	522	525	592	2,163
Regulated Activities	490	477	490	510	1,967
Transmission	451	444	453	457	1,804
Dispatching	29	27	29	27	112
2 Other	8	4	4	15	31
IFRIC12	2	3	4	11	21
Non Regulated Act.	34	44	34	77	189
3 International Activities	0	0	1	5	6
Total Costs	121	130	113	196	559
Regulated Activities	93	97	82	154	426
Labour Costs	53	54	46	65	218
External Costs	31	35	30	59	155
2 Other	7	5	1	19	32
IFRIC12	2	3	4	11	21
Non Regulated Act.	27	32	29	39	127
International Activities	1	1	2	3	7
EBITDA	403	392	412	397	1,604
D&A	130	131	129	137	527
EBIT	273	261	283	260	1,077
Net Financial Charges	21	19	29	21	89
Pre Tax Profit	252	242	254	240	988
Taxes	74	70	78	72	294
Tax Rate (%)	29.2%	29.0%	30.6%	30.2%	29.8%
Total Net Income	179	172	177	167	694
Minority Interest	-1	0	-1	8	6
Group Net Income	179	172	178	159	688

Annex

Consolidated Balance Sheet

€ mn	Sep. 30,2018	Dec. 31,2017	Δmn
PP&E	12,910	12,753	157
Intangible Asset	497	506	-8
Financial Inv. and Other	272	208	64
Total Fixed Assets	13,679	13,466	213
Net WC	-1,703	-1,485	-217
Funds	-318	-356	38
Net Capital Invested	11,658	11,625	33
Financed by:
Consolidated Net Debt	7,592	7,796	-205
Total Shareholder's Equity	4,067	3,829	238
Total	11,658	11,625	33
D/E Ratio	1.9	2.0
D/D+E Ratio	0.7	0.7
Number of Shares (mn)	2,010	2,010

Consolidated Cash Flow Annex

€ mn	9M18
Total Net Income	545
1 D&A	397
Net Change in Funds	-38
Operating Cash Flow	904
2 Δ Working Capital & Other	169
Cash Flow from Operating Activities	1,073
Capital Expenditures	-561
Free Cash Flow to Equity	512
3 Dividends & Equity	-307
Change in Net Cash (Debt)	205

Disclaimer

THIS DOCUMENT HAS BEEN PREPARED BY TERNA S.P.A. (THE "COMPANY") FOR THE SOLE PURPOSE DESCRIBED HEREIN. IN NO CASE MAY IT BE INTERPRETED AS AN OFFER OR INVITATION TO SELL OR PURCHASE ANY SECURITY ISSUED BY THE COMPANY OR ITS SUBSIDIARIES.

THE CONTENT OF THIS DOCUMENT HAS A MERELY INFORMATIVE AND PROVISIONAL NATURE AND THE STATEMENTS CONTAINED HEREIN HAVE NOT BEEN INDEPENDENTLY VERIFIED. NEITHER THE COMPANY NOR ANY OF ITS REPRESENTATIVES SHALL ACCEPT ANY LIABILITY WHATSOEVER (WHETHER IN NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY FROM THE USE OF THIS DOCUMENT OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION WITH THIS DOCUMENT OR ANY MATERIAL DISCUSSED DURING THE PRESENTATION.

THIS DOCUMENT MAY NOT BE REPRODUCED OR REDISTRIBUTED, IN WHOLE OR IN PART, TO ANY OTHER PERSON. THE INFORMATION CONTAINED HEREIN AND OTHER MATERIAL DISCUSSED AT THE CONFERENCE CALL MAY INCLUDE FORWARD-LOOKING STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT THE COMPANY'S BELIEFS AND EXPECTATIONS. THESE STATEMENTS ARE BASED ON CURRENT PLANS, ESTIMATES, PROJECTIONS AND PROJECTS, AND CANNOT BE INTERPRETED AS A PROMISE OR GUARANTEE OF WHATSOEVER NATURE.

HOWEVER, FORWARD-LOOKING STATEMENTS INVOLVE INHERENT RISKS AND UNCERTAINTIES AND ARE CURRENT ONLY AT THE DATE THEY ARE MADE. WE CAUTION YOU THAT A NUMBER OF FACTORS COULD CAUSE THE COMPANY'S ACTUAL RESULTS AND PROVISIONS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO: TRENDS IN COMPANY'S BUSINESS, ITS ABILITY TO IMPLEMENT COST-CUTTING PLANS, CHANGES IN THE REGULATORY ENVIRONMENT, DIFFERENT INTERPRETATION OF THE LAW AND REGULATION, ITS ABILITY TO SUCCESSFULLY DIVERSIFY AND THE EXPECTED LEVEL OF FUTURE CAPITAL EXPENDITURES. THEREFORE, YOU SHOULD NOT PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. TERNA DOES NOT UNDERTAKE ANY OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT ANY CHANGES IN TERNA'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGES IN EVENTS.

EXECUTIVE IN CHARGE OF THE PREPARATION OF ACCOUNTING DOCUMENTS "AGOSTINO SCORNAJENCHI" DECLARES, PURSUANT TO PARAGRAPH 2 OF ARTICLE 154- BIS OF THE CONSOLIDATED LAW ON FINANCE, THAT THE ACCOUNTING INFORMATION CONTAINED IN THIS PRESENTATION, FOR WHAT CONCERNS THE ACTUAL FIGURES, CORRESPONDS TO THE DOCUMENT RESULTS, BOOKS AND ACCOUNTING RECORDS.

Notes

---------------------------------------
---------------------------------------
---------------------------------------
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
---------------------------------------
---------------------------------------	---------------------------------------
---------------------------------------

Notes

---------------------------------------
---------------------------------------
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,