Terna — Investor Presentation 2015

Jul 28, 2015

1H15 Consolidated Results July 28th, 2015

MATTEO DEL FANTE CHIEF EXECUTIVE OFFICER

PIERPAOLO CRISTOFORI CHIEF FINANCIAL OFFICER

Agenda

Strategic Update 3

1H15 Results

Annexes

7

Electricity Market Trends

• Signs of stabilization
• Electricity consumption at peak level in July
• Higher Dispatching Market Efficiency

Demand as Reported (TWh)

Regulatory Review

Published Consultation Documents on WACC and Transmission

Working on the responses

2015 Expected Timeline

Executing the Strategy – 1H15 Highlights (1/2)

Non Regulated Activities

• Progresses on Main Projects
• Dedicated SPVs Incorporated

Opex Discipline

New Organizational Structure

Business Process Reengineering

Efficiency and Effectiveness enhanced

Voluntary Turnover Programme

Requests of Exits ahead of target

Hirings/Exits ratio confirmed at ~70%

Executing the Strategy – 1H15 Highlights (2/2)

Italian Railway HV Grid

Proceeding with the due diligence

Costs/Benefits Analysis

Bond Buyback

Bought ~480mn of 2017 4.125% Notes

Proactive Debt Maturities Management

Financial Charges Profile Rebalanced

Financial highlights H1 2015 at a glance

KEY FINANCIALS

1H15 Results

Revenues

Total Revenues 1,002€mn +5.5%yoy Regulated Activities 911€mn +2.8% yoy Non Regulated Activities 83€mn

KEY FIGURES TOTAL REVENUES EVOLUTION

1H15 Results Revenues Analysis

REGULATED ACTIVITIES

1H15 Results Opex

Total Costs

235€mn Regulated Activities 169€mn

Non Regulated Activities 59€mn

KEY FIGURES TOTAL COSTS EVOLUTION

1H15 Results Opex Analysis

REGULATED ACTIVITIES

From EBITDA to Net Income 1H15 Results

Group EBITDA 767€mn Group EBITDA Margin 76.5% Group Net Income 310€mn +1.9%yoy +13.1%yoy Cost of Net Debt 2.3%

KEY FIGURES PROFIT & LOSS

Investor Relations 12

Capex 1H15 Results

1H15 Total Capex 439€mn

Development Capex 332€mn

KEY FIGURES BREAKDOWN

Category (€mn)	1H14	1H15	Δ yoy	Δ % yoy
+2%	148	189	41	27%
+1.5%	124	143	19	16%
Development Capex	272	332	60	22%
Maintenance (Base Return)	93	80	-14	-15%
Regulated Capex	366	412	46	13%
Other1	20	27	7	33%
Total Group Capex	386	439	53	14%

Net Debt Evolution & Financial Structure 1H15 Results

1. Net Income + D&A + Net Financial Charges +/- Net Change in Funds (see Annex "Consolidated Cash Flow" for details) 2. Including Other Fixed Assets Changes, Change in Capital & Other

THANK YOU. QUESTIONS?

MATTEO DEL FANTE CHIEF EXECUTIVE OFFICER

PIERPAOLO CRISTOFORI CHIEF FINANCIAL OFFICER

Annex Electricity Market Trends – Last 12 Months

Consolidated Income Statement¹ Annex

€ mn	1H14	1H15	Δmn	Δ %
Transmission	817	839	23	2.8%
Dispatching	58	62	4	7.8%
Other 2	13	10	-3	-22%
Regulated Activities	887	911	24	2.8%
Non Regulated Act.	51	83	32	64%
IFRIC12	12	8	-5	-38%
Total Revenues	950	1,002	52	5.5%
Labour Costs	97	97	0	0.1%
External Costs	59	56	-3	-5.2%
Other	7	16	9	142%
Regulated Activities	162	169	6	3.9%
Non Regulated Act.	23	59	36	159%
IFRIC12	12	8	-5	-38%
Total Costs	197	235	38	19.3%
EBITDA	753	767	14	1.9%
D&A	235	243	8	3.4%
EBIT	517	524	6	1.2%
Net Financial Charges	64	64	-1	-0.9%
Pre Tax Profit	453	460	7	1.5%
Taxes	179	150	-29	-16%
Tax Rate (%)	40%	33%
Group Net Income	274	310	36	13.1%

NOTE: Tamini consolidation since 20th May 2014

1. Managerial Accounting

2. Quality of Service + Other Revenues

Group Costs Breakdown Annex

€ mn	1H14	1H15	Δmn	Δ %
Labour Costs	104	112	8	8%
Services	58	66	8	13%
Materials	15	32	18	121%
Other	8	18	10	113%
IFRIC12	12	8	-5	-38%
Total Costs	197	235	38	19.3%

Annex 1H15 – P&L Quarterly Analysis

€ mn	1Q14	1Q15	Δ	2Q14	2Q15	Δ
Regulated Activities	457	479	22	430	432	3
Non Regulated Act.	17	32	15	34	52	18
IFRIC 12	4	3	-1	8	5	-4
Operating Revenues	478	513	35	472	489	17
Regulated Activities	81	85	5	81	83	2
Non Regulated Act.	3	23	20	20	36	16
IFRIC 12	4	3	-1	8	5	-4
Operating Expenses	88	112	24	110	124	14
EBITDA	390	402	11	362	365	3
D&A	113	120	7	122	123	1
EBIT	277	281	4	240	242	2
Net Financial Charges	31	31	0	33	33	0
Pre Tax Profit	246	250	4	207	210	2
Taxes	101	85	-16	78	65	-13
Group Net Income	145	165	20	129	145	16
Total Group Capex	164	177	13	222	262	40
Net Debt (end of period)	6,629	6,518		7,083	6,876

Consolidated Balance Sheet Annex

€ mn	Dec. 31,2014	Jun. 30,2015	Δmn
PP&E	10,779	10,983	204
Intangible Asset	453	436	-16
Financial Inv. and Other	89	90	0
Total Fixed Assets	11,320	11,509	188
Net WC	-821	-1,056	-235
Funds	-441	-413	28
Total Net Invested Capital	10,059	10,040	-19
Financed by
Consolidated Net Debt	6,966	6,876	-90
Total Shareholder's Equity	3,093	3,164	71
Total	10,059	10,040	-19
D/E Ratio	2.3	2.2
D/D+E Ratio	0.69	0.68
Number of Shares ('000)	2,010	2,010

Consolidated Cash Flow Annex

€ mn	1H14	1H15	Δmn
Group Net Income	274	310	36
1 D&A	235	242	7
Debt Service	64	64	-1
Net Change in Funds	-3	-28	-25
Operating Cash Flow	570	587	17
2 ∆ Working Capital & Other	-286	266	552
Cash Flow from Operating Activities	284	854	569
Capital Expenditures	-386	-439	-53
Free Cash Flow	-102	415	516
Dividends	-261	-261	0
Debt Service	-64	-64	1
Change in Net Cash (Debt)	-427	90

1. Net of assets' disposal

2. Including Other Fixed Assets Changes, Change in Capital & Other

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