Terna — Investor Presentation 2019

Jul 30, 2019

1H19 Consolidated Results

July 30th 2019

Agenda

Highlights	3
1H19 Results	9
Closing Remarks	19
Annexes	20

The Italian Energy Transition Highlights (1/5)

NATIONAL INTEGRATED ENERGY AND CLIMATE PLAN*

RES penetration on internal gross electricity consumption

27.5 27.7 27.9 28.1 28.3 28.5 28.7 28.9 29.1 29.3 29.5

MAIN ACTIONS TO SUPPORT DECARBONIZATION

Grid's investments Storage	Long-term market price signals	Market flexibility
-------------------------------	-----------------------------------	--------------------

Playing a key role in the ongoing energy transition

Demand Evolution – Last 12 months Highlights (2/5)

1H19 data:

• National Demand at 157 TWh, o/w 35.4% covered by RES
• Net Total Production at 139 TWh
  • Wind increased by 16%
  • PV increased by 10%

Accelerating the pace of energy transition

STRATEGIC GUIDELINES

Domestic Regulated	Playing a leading role in energy transition	▪ Capex: from plan to delivery
Domestic Non Regulated	Developing value-added solutions	▪ Connectivity: ongoing agreements to develop dark fiber project ▪ Energy Solutions: MoU with The Mobility House
International	Leveraging Terna's industrial know-how	▪ Brazil: entry into operation of Santa Lucia line

Execution well on track

Strategic Overview (2/2) Highlights (4/5)

ENABLING FACTORS

Innovation & Digitization	Enabling energy transition	▪ ▪	Grid Digitization: project ongoing, both for lines and for substations Opening of the first in Turin
People	Strengthening core competences and innovation openness	▪	Training: upskilling and reskilling

FINANCE

• New 500 €mn bond emission
  • Effective cost of issuance of 0.25%
  • Tenor of 6 years
  • Oversubscription of about 4 times

Execution well on track

€mn	1H 2019	1H 2018	Δ vs 1H18
Revenues	1,098	1,0631	+3%
EBITDA	846	815	+4%
Group Net Income2	367	360	+2%
Capex	396	338	+17%

Positive P&L results and strong capex acceleration

1H 2019 results

Revenues

Revenues increase in all business lines

Revenues Analysis 1H 2019 results

€mn NON REGULATED AND INTERNATIONAL

Higher contribution from Regulated, Tamini and International

Opex dynamics driven by Non Regulated and International higher volumes of activity

Opex Analysis 1H 2019 results

Maintaining Regulated Insourcing attività di O&M Rete FS Opex discipline

EBITDA 1H 2019 results

NON REGULATED AND INTERNATIONAL

4% growth at EBITDA level Insourcing attività di O&M Rete FS

€mn

From EBITDA to Net Income 1H 2019 results

2% growth at Net Income level

Note: figures may not add up due to rounding 1. Attributable to Terna. Excluding 1.8 €mn of Minorities in 1H19 and 1.9 €mn in 1H18

Capex 1H 2019 results

Capex acceleration in line with Strategic Plan Insourcing attività di O&M Rete FS

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 6 €mn of Capitalized Financial Charges

Cash Flow & Net Debt Evolution 1H 2019 results

Positive operating cash flow generation to support capex plan

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

Net Debt Evolution & Financial Structure 1H 2019 results

GROSS DEBT BREAKDOWN KEY RATIOS ^{1 1}

Duration 5.1 years

Enhanced solid financial structure

Closing Remarks

Domestic Regulated	Implementing capex acceleration
Domestic Non Regulated	Developing innovative services to support core activities
International	Leveraging Terna's core competences to finalize ongoing projects

Well on track on 2019 guidance

Consolidated Income Statement¹ Annex

€ mn	1H19	2 1H18	Δmn	Δ %
Total Revenue	1,098	1,063	35	3.3%
Regulated Activities	1,005	979	25	2.6%
Transmission	929	899	30	3.4%
Dispatching	56	60	-4	-7.2%
3 Other	16	15	1	5.4%
IFRIC12	5	6	-1	-20.6%
Non Regulated Activities	82	78	4	5.5%
International Activities	11	6	5	96.4%
Total Costs	252	248	4	1.5%
Regulated Activities	190	194	-3	-1.7%
Labour Costs	110	108	2	2.0%
External Costs	69	71	-3	-3.8%
3 Other	7	8	-2	-18.8%
IFRIC12	5	6	-1	-20.6%
Non Regulated Activities	56	51	5	10.5%
International Activities	5	4	2	47.2%
EBITDA	846	815	31	3.8%
D&A	289	267	21	8.0%
EBIT	558	548	10	1.8%
Net Financial Charges	39	43	-4	-9.1%
Pre Tax Profit	519	505	14	2.8%
Taxes	150	143	8	5.3%
Tax Rate (%)	29.0%	28.3%	+0.7 pp
Total Net Income	368	362	6	1.7%
Minority Interest	2	2	0	-5.3%
Group Net Income	367	360	6	1.8%

1. Managerial Accounting

2. 1H18 reclassified in accordance with new IFRS. No impact at EBITDA level

Annex

Consolidated Balance Sheet

€ mn	Jun. 30,2019	Dec. 31,2018	Δmn
PP&E	13.348	13.244	104
Intangible Asset	507	519	-12
Financial Inv. and Other	339	320	19
Total Fixed Assets	14.194	14.084	111
Net WC	-1.662	-1.823	160
Funds	-238	-308	70
Net Capital Invested	12.294	11.954	341
Financed by:
Consolidated Net Debt	8.294	7.899	394
Total Shareholder's Equity	4.001	4.054	-54
Total	12.294	11.954	341
D/E Ratio	2,1	1,9
D/D+E Ratio	0,7	0,7
Number of Shares (mn)	2.010	2.010

Consolidated Cash Flow Annex

€ mn	1H19	1H18
Total Net Income	368	362
1 D&A	287	266
Net Change in Funds	-70	-28
Operating Cash Flow	586	600
Δ Working Capital & Other 2	-162	-45
Cash Flow from Operating Activities	424	555
Capital Expenditures	-396	-338
Free Cash Flow to Equity	28	217
Dividends & Equity 3	-422	-316
Change in Net Cash (Debt)	-394	-99

Capex Annex

€ mn	1H18	1H19	Δ mn	Δ %
1 Incentivized Investment	47	29	-18	-38%
Other Reguleted	257	313	56	22%
Regulated Capex	305	343	38	13%
2 Other	33	54	20	60%
Total Group Capex	338	396	58	17%

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.

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Notes

Notes

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