Terna — Investor Presentation 2017

Jul 27, 2017

1H17 Consolidated Results July 27th, 2017

Agenda

Highlights	3

Annexes	17
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Highlights (1/3) Italian Electricity Market Outlook

Thermal generation decommissioning trend ongoing

Adequacy issues both in winter and summer time

Extreme weather conditions call for further investments in Resiliency

New challenges from expected new RES targets and coal phase out

Investments as enabler of energy transition

Highlights (2/3) Demand Evolution

1H17 energy demand at 154 TWh

Highlights (3/3) 1H17 Key Numbers

€mn	1H 2016	1H 2017	Δ 1H2016 vs
Revenues	1,040	1,047	+0.7%
EBITDA	777	795	+2.3%
Group Net Income	325	351	+8.2%
Capex	347	326
	FY 2016	1H 2017
Net Debt	7,959	7,942

Solid numbers support positive cash flow generation

1H17 Results Revenues

Revenues increase driven by regulated activities

Revenues Analysis 1H17 Results

Full recognition of RHV Grid Regulated Revenues

Opex 1H17 Results

Maintaining a strict cost control

Opex Analysis 1H17 Results

RHV Grid O&M activities insourcing

Investor Relations 9

EBITDA 1H17 Results

Solid profitability margin

From EBITDA to Net Income 1H17 Results

€mn

8% growth YoY at net income level

Capex 1H17 Results

Projects execution in line with Strategic Plan

NOTE: Terna's estimates, subject to AEEGSI approval

• 1. I-NPR1 + O-NPR1
• 2. Of which about 7 €mn of Capitalized Financial Charges

Cash Flow & Net Debt Evolution 1H17 Results

Positive cash flow generation covers dividends and capex

1. Including Other Fixed Assets Changes, Change in Capital & Other 2. Including Cash Flow Hedge accruals and other

Net Debt Evolution & Financial Structure 1H17 Results

GROSS DEBT BREAKDOWN¹

KEY RATIOS

Maturity 5.3 years

Investor Relations ¹⁴ 73% Maintaining a solid balance sheet

Closing Remarks (1/2)

Further value creation for our stakeholders

Closing Remarks (2/2)

Optimizing our financial structure preserving a rock solid balance sheet

Maintaining a strict low risk profile

Enhancing efforts on sustainable investments to unlock value in particular in Italy

Combining yield and growth as a key value creation opportunity

Consolidated Income Statement¹ Annex

€ mn	1H16	1H17	Δmn	Δ %
Transmission	871	895	24	2.7%
Dispatching	55	56	1	1.5%
Other 2	17	12	-5	-29%
Regulated Activities	942	962	20	2.1%
Non Regulated Act.	90	79	-11	-12%
IFRIC12	7	6	-2	-21%
Total Revenues	1,040	1,047	7	0.7%
Labour Costs	95	107	12	13%
External Costs	72	66	-7	-9.1%
Other	15	12	-3	-19%
Regulated Activities	182	184	3	1.4%
Non Regulated Act.	74	62	-12	-16%
IFRIC12	7	6	-2	-21%
Total Costs	263	252	-11	-4.1%
EBITDA	777	795	18	2.3%
D&A	267	261	-6	-2.4%
EBIT	510	534	24	4.7%
Net Financial Charges	36	40	3	9.4%
Pre Tax Profit	474	494	21	4.4%
Taxes	151	144	-7	-4.5%
Tax Rate (%)	32%	29%
Total Net Income	323	351	28	8.5%
Minority Interest	-2	-1	1
Group Net Income	325	351	27	8.2%

1. Managerial Accounting

2. Quality of Service + Other Revenues

P&L Quarterly Analysis Annex

€ mn	1Q16	1Q17	Δ	2Q16	2Q17	Δ
Regulated Activities	471	488	16	471	474	3
Non Regulated Act.	43	34	-9	47	46	-2
IFRIC 12	3	2	0	4	3	-1
Operating Revenues	517	524	7	523	523	0
Regulated Activities	84	91	7	98	94	-4
Non Regulated Act.	36	28	-7	38	34	-4
IFRIC 12	3	2	0	4	3	-1
Operating Expenses	122	121	-1	141	131	-10
EBITDA	395	403	8	382	392	10
D&A	131	130	-1	136	131	-5
EBIT	264	273	9	246	261	15
Net Financial Charges	19	21	1	17	19	2
Pre Tax Profit	245	252	8	229	242	13
Taxes	83	74	-10	67	70	3
Total Net Income	161	179	17	161	172	10
Minority Interest	-1	-1	0	-1	0	1
Group Net Income	162	179	17	163	172	9
Total Group Capex	158	100	-58	189	226	37
Net Debt (end of period)	7,687	7,445		8,172	7,942

Consolidated Balance Sheet Annex

€ mn	Dec. 31,2016	Jun. 30,2017	Δmn
PP&E	12,386	12,459	73
Intangible Asset	516	505	-12
Financial Inv. and Other	89	92	2
Total Fixed Assets	12,991	13,055	63
Net WC	-1,093	-1,109	-17
Funds	-385	-363	21
Total Net Invested Capital	11,514	11,582	68
Financed by
Consolidated Net Debt	7,959	7,942	-17
Total Shareholder's Equity	3,555	3,640	85
Total	11,514	11,582	68
D/E Ratio	2.2	2.2
D/D+E Ratio	0.7	0.7
Number of Shares ('000)	2,010	2,010

Consolidated Cash Flow Annex

€ mn	1H16	1H17	Δmn
Total Net Income	323	351	28
1 D&A	265	261	-5
Net Change in Funds	4	-21	-26
Operating Cash Flow	592	590	-3
2 ∆ Working Capital & Other	-135	19	153
Cash Flow from Operating Activities	458	608	151
Capital Expenditures	-347	-326	21
Free Cash Flow to Equity	111	283	172
3 Dividends & Equity	-280	-265	15
Change in Net Cash (Debt)	-170	17	187

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

3. Including Cash Flow Hedge accruals and other

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 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 "TIZIANO CECCARANI" 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.

THE SORGENTE-RIZZICONI PROJECT INTERCONNECTION IS CO-FINANCED BY THE EUROPEAN UNION'S EUROPEAN ENERGY PROGRAMME FOR RECOVERY PROGRAMME. THE SOLE RESPONSIBILITY OF THIS PUBLICATION LIES WITH THE AUTHOR. THE EUROPEAN UNION IS NOT RESPONSIBLE FOR ANY USE THAT MAY BE MADE OF THE INFORMATION CONTAINED THEREIN.

Disclaimer Notes

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
OTHERWISE ARISING	IN CONNECTION WITH THIS	DOCUMENT OR ANY	MATERIAL DISCUSSED	DURING THE PRESENTATION.
DOCUMENT MAY	NOT BE REPRODUCED OR	REDISTRIBUTED, IN WHOLE	OR IN PART, TO	ANY OTHER PERSON.	THE INFORMATION
THIS
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
DIFFER MATERIALLY FROM	THOSE CONTAINED IN ANY	FORWARD-LOOKING	STATEMENT. SUCH	FACTORS INCLUDE, BUT	ARE NOT LIMITED
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
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 "PIERPAOLO	CRISTOFORI" DECLARES,	PURSUANT
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.
THE SORGENTE-RIZZICONI	PROJECT AND THE	ITALY-FRANCE	INTERCONNECTION ARE	CO-FINANCED BY THE	EUROPEAN UNION'S
EUROPEAN ENERGY	PROGRAMME FOR RECOVERY	PROGRAMME. THE	SOLE RESPONSIBILITY	OF THIS PUBLICATION	LIES WITH THE
AUTHOR. THE EUROPEAN	UNION IS NO RESPONSIBLE	FOR ANY USE THAT	MAY BE MADE OF THE	INFORMATION CONTAINED	THEREIN.

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