Terna — Investor Presentation 2016

Nov 4, 2016

9M16 Consolidated Results November 4th, 2016

MATTEO DEL FANTE CHIEF EXECUTIVE OFFICER

TIZIANO CECCARANI CHIEF FINANCIAL OFFICER

Agenda

Strategic Update 3

6

14

9M16 Results

Next Catalysts

Strategic Update Sicily-Mainland Power Line

KEY HIGHLIGHTS

The longest 380 kV AC undersea power line in the world

Capacity of up to 1,100 MW

Total length 105 km o/w 38 km undersea

BENEFITS & POTENTIAL DEVELOPMENTS

RHV Grid Integration Strategic Update

READY TO DEPLOY THE EXPECTED SYNERGIES…

Phase out of the Railways O&M contract Terna standards and scale

Efficiency Strategic Update

9M16 Results Highlights

SOLID GROWTH TREND ACROSS ALL THE P&L…

…SUPPORTS DIVIDEND GROWTH

7.21€cents/share 2016 Interim Dividend²

• 1. Attributable to Terna
• 2. In line with dividend policy presented in the last Strategic Plan. Ex dividend date: November 21st 2016, Payment Date : November 23rd 2016

9M16 Results

Revenues

KEY FIGURES TOTAL REVENUES EVOLUTION

Revenues Analysis 9M16 Results

REGULATED ACTIVITIES

Opex 9M16 Results

Total Costs 375€mn

Regulated Activities 265€mn

Non Regulated Activities 99€mn

€ mn	9M15	9M16	Δ yoy	Δ %yoy
Regulated Activities	245	265	21	8.5%
Non Regulated Act.	99	99	1	0.5%
o/w Tamini	76	80	3	4.3%
Other Non Regulated Act.	23	20	-3	-12%
IFRIC12	13	10	-2	-20%
Total	356	375	19	5.3%

Opex Analysis 9M16 Results

REGULATED ACTIVITIES

From EBITDA to Net Income 9M16 Results

Group EBITDA 1,176€mn +1.3%yoy

Group EBITDA Margin 75.8%

Group Net Income¹ 487€mn +7.0%yoy

KEY FIGURES PROFIT & LOSS

Capex 9M16 Results

Category (€mn)	9M15	9M16	Δ yoy	Δ % yoy
Capex at 1% Incentive		202
Capex at Base Return		302
Regulated Capex	666	504	-162	-24%
Other	36	1 26	-10	-28%
Total Group Capex	702	530	-172	-24%

Net Debt Evolution & Financial Structure 9M16 Results

KEY FIGURES

Fixed/floating ratio Calculated on Net Debt 85/15

GROSS DEBT BREAKDOWN³

Next Catalysts for 1Q17

NEW 2017-2021 STRATEGIC PLAN

In the heart of the Electricity System

FY2016 RESULTS

Positive 9M results to support guidance

THANK YOU. QUESTIONS?

MATTEO DEL FANTE CHIEF EXECUTIVE OFFICER

TIZIANO CECCARANI CHIEF FINANCIAL OFFICER

Annex Electricity Market Trends – Last 12 Months

Consolidated Income Statement¹ Annex

€ mn	9M15	9M16	Δmn	Δ %
Transmission	1,261	1,306	45	3.6%
Dispatching	94	84	-11	-11%
Other 2	12	24	12	105%
Regulated Activities	1,367	1,413	47	3.4%
Non Regulated Act.	138	128	-10	-7.3%
IFRIC12	13	10	-2	-20%
Total Revenues	1,517	1,551	34	2.3%
Labour Costs	141	138	-2	-1.7%
External Costs	83	107	24	29%
Other	21	20	-1	-4.2%
Regulated Activities	245	265	21	8.5%
Non Regulated Act.	99	99	1	0.5%
IFRIC12	13	10	-2	-20%
Total Costs	356	375	19	5.3%
EBITDA	1,161	1,176	15	1.3%
D&A	362	403	41	11%
EBIT	799	773	-26	-3.2%
Net Financial Charges	117	60	-57	-48%
Pre Tax Profit	682	713	31	4.5%
Taxes	227	228	1	0.6%
Tax Rate (%)	33%	32%
Total Net Income	455	485	30	6.5%
Minority Interest	0	-2	-2
Group Net Income	455	487	32	7.0%

1. Managerial Accounting

2. Quality of Service + Other Revenues

Group Costs Breakdown Annex

€ mn	9M15	9M16	Δmn	Δ %
Labour Costs	163	166	2	1.5%
Services	97	121	24	25%
Materials	56	51	-6	-10%
Other	27	27	0	1.5%
IFRIC12	13	10	-2	-20%
Total Costs	356	375	19	5.3%

P&L Quarterly Analysis Annex

€ mn	1Q15	1Q16	Δ	2Q15	2Q16	Δ	3Q15	3Q16	Δ
Regulated Activities	479	471	-7	432	471	39	456	471	15
Non Regulated Act.	32	43	12	52	47	-4	54	37	-17
IFRIC 12	3	3	0	5	4	0	5	3	-2
Operating Revenues	513	517	4	489	523	34	515	511	-4
Regulated Activities	86	84	-2	83	98	15	76	83	7
Non Regulated Act.	23	36	12	36	38	2	40	25	-14
IFRIC 12	3	3	0	5	4	0	5	3	-2
Operating Expenses	112	122	10	124	141	17	121	112	-9
EBITDA	402	395	-7	365	382	17	394	399	5
D&A	120	131	11	123	136	13	119	136	17
EBIT	281	264	-17	242	246	4	275	263	-12
Net Financial Charges	31	19	-12	33	17	-16	53	24	-29
Pre Tax Profit	250	245	-6	210	229	19	222	239	17
Taxes	85	83	-2	65	67	2	77	78	1
Total Net Income	165	161	-4	145	161	17	145	162	17
Minority Interest		-1	-1		-1	-1		-0.4	-0.4
Group Net Income	165	162	-3	145	163	18	145	162	17
Total Group Capex	177	158	-19	262	189	-73	263	183	-80
Net Debt (end of period)	6,518	7,687		6,876	8,172		6,561	7,801

Consolidated Balance Sheet Annex

€ mn	Dec. 31,2015	Sep. 30,2016	Δmn
PP&E	12,079	12,225	146
Intangible Asset	530	514	-16
Financial Inv. and Other	90	93	4
Total Fixed Assets	12,698	12,832	134
Net WC	-977	-1,125	-149
Funds	-373	-359	15
Total Net Invested Capital	11,349	11,348	0
Financed by
Consolidated Net Debt	8,003	7,801	-202
Total Shareholder's Equity	3,346	3,547	202
Total	11,349	11,348	0
D/E Ratio	2.4	2.2
D/D+E Ratio	0.7	0.7
Number of Shares ('000)	2,010	2,010

Consolidated Cash Flow Annex

€ mn	9M15	9M16	Δmn
Total Net Income	455	485	30
1 D&A	361	398	37
Debt Service	117	60	-57
Net Change in Funds	-42	-15	28
Operating Cash Flow	890	928	37
2 ∆ Working Capital & Other	570	147	-422
Cash Flow from Operating Activities	1,460	1,075	-385
Capital Expenditures	-702	-530	172
Free Cash Flow	758	545	-213
3 Dividends & Equity	-236	-283	-47
Debt Service	-117	-60	57
Change in Net Cash (Debt)	405	202	-203

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

3. Including Cash Flow Hedge accruals and other

Disclaimer

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