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FY2014 and 2015-2019 Strategic Plan (26 marzo 2015)

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Terna SpA

Terna presented its 2015-2019 strategic plan focused on free cash flow generation to drive sustainable shareholder returns. Key elements include capex discipline with €3.2 billion planned, optimization of non-regulated activities like interconnectors and services to contribute €1.4 billion in revenues, and opex savings of €30 million annually by 2019. The plan aims to reduce net debt starting in 2017/2018 and maintain a dividend of €0.20 per share in 2015 as a basis for future dividends.

Investor Relations
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Investor Relations 1 CATIA BASTIOLI CHAIRWOMAN MATTEO DEL FANTE CHIEF EXECUTIVE OFFICER PIERPAOLO CRISTOFORI CHIEF FINANCIAL OFFICER Cash Flows to drive Shareholder Returns
Investor Relations 2 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
Investor Relations 3 Terna Today 309TWh energy demand 51.5GW highest peak of demand (12th June 2014) Terna is...  ...the largest independent Transmission System Operator (TSO) in Europe  ...the owner of the National High Voltage Transmission Grid  ...responsible for the transmission and dispatching of the electricity all over the Country with ~3,5001 employees  ...listed on the Italian Stock Exchange since 2004  … 3.8€bn cumulated dividends since IPO2 and Total Shareholder Return >300% ~ 63,900Km of three-phase conductors 21 interconnections3 491 substations Our Grid Electricity Market4 1.Excluding Tamini 2. Including 2014 final dividend. BoD proposal, subject to AGM approval. 3. Owned by Terna Focus on safety and technological innovation for sustainable Grid development 4. 2014 provisional figures - Italy
Investor Relations 4 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
Investor Relations 5 Highlights FY2014 at a Glance KEY FIGURES CAPEX, FREE CASH FLOW AND NET DEBT 1,096€mn Total capex 6,968€mn Net Debt 1,996€mn Revenues +5.3%yoy 545€mn Net profit +6.0%yoy 1,491€mn EBITDA +0.2%yoy 260€mn Free Cash Flow 20€cents 2014 Dividend per share1 1. BoD proposal, subject to EGM approval. Equal to 13€cents as a final dividend to be paid in June (ex date June 22nd 2015, Payment date June 24th 2015)
Investor Relations 6 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
Investor Relations 7 1,802 1,823 1,823 31 21 26 30 54 3064 90 143 FY13 Regulated Activities ∆ NRA (LFL) ∆ IFRIC FY14 (LFL) ∆ Perimeter FY14 Traditional Activities IFRIC12 Non Traditional Activities 1. Excluding Tamini 2. Tamini FY14 Results Revenues 1,896 1,996+100 1,943 KEY FIGURES TOTAL REVENUES EVOLUTION Total Revenues 1,996€mn +5.3%yoy Quality of Service 34€mn +22€mn €mn 2 1 Regulated Activities Non Regulated Act. IFRIC12 0 Non Regulated 90€mn +26€mn Tamini 54€mn
Investor Relations 8 360 400 400 31 39 4 30 53 30 17 21 75 FY13 ∆ Regulated Activities ∆ NRA (LFL) ∆ IFRIC 12 FY14 (LFL) ∆ Perimeter FY14 Traditional Activities IFRIC 12 NTA FY14 Results Costs 408 505+97 452 KEY FIGURES TOTAL COSTS EVOLUTION Total Costs 505€mn +23.7%yoy €mn 2 1 1. Excluding Tamini 2. Tamini Regulated Activities Non Regulated Act. IFRIC12 0 Provision for Voluntary Turnover Programme 37€mn € mn FY13 FY14 Ex Tamini Δmn Δ% Tamini Labour Costs 199 247 48 24% 12 External Services & Materials 132 137 5 4% 39 Other 46 38 -9 -19% 1 IFRIC12 31 30 0 -1% Total Costs 408 452 44 11% 53 FY14 LFL
Investor Relations 9 FY14 Results From EBITDA to Net Income KEY FIGURES Group EBITDA 1,491€mn Group EBITDA % 74.7% Group Net Income 545€mn +0.2%yoy +6.0%yoy €mn 1,491 1,011 883 545 481 128 338 EBITDA D&A EBIT Net Financial Expenses PBT Taxes Group Net Income € mn FY13 FY14 Δ Δ % EBITDA 1,488 1,491 3 0.2% Ebitda % 78.5% 74.7% -3.8pp D&A 450 481 30 6.7% EBIT 1,038 1,011 -27 -2.6% Net Financial Expenses 100 128 28 27.6% PBT 938 883 -55 -5.8% Tax Rate 45.2% 38.3% -6.9pp Taxes 424 338 -85 -20.1% Group Net Income 514 545 31 6.0% Cost of Net Debt 2.5%
Investor Relations 10 21% 34% 45% Base Return +1.5% +2% FY14 Results Capex Breakdown KEY FIGURES REGULATED CAPEX BREAKDOWN1 FY14 Total Capex 1,096€mn Development Capex 732€mn 1,048€mn 79% Development1 NOTE: Figures in accordance with AEEGSI resolutions 1. Incentivized based on current regulation 2. Capitalized Financial Charges + Non Regulated Capex Category (€mn) FY13 FY14 Δ yoy Δ % yoy +2% 459 469 10 2% +1.5% 479 355 -123 -26% Development Capex 937 824 -113 -12% Maintenance (Base Return) 229 224 -5 -2% Regulated Capex 1,166 1,048 -118 -10% Other2 46 48 2 Total Group Capex 1,212 1,096 -116 -10% Storage 92€mn +48%yoy
Investor Relations 11 2014 5,909 6,6981,035 109 1,212 100 402 Net Debt Evolution & Financial Structure 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 3. Calculated on Net Debt FY14 Results KEY FIGURES Net Debt 6,968€mn Fixed/floating ratio3 63/37 GROSS DEBT BREAKDOWN 64% 21% 15% Terna SpA Bonds EIB Loans Banks 6,9686,698 1,139 217 1,096 128 402 Dec.31, 2013 Operating Cash Flow1 Δ WC & Other2 Dec. 31, 2014 +270 Capex DividendsDebt Service FCF AND NET DEBT EVOLUTION €mn Free Cash Flow 260 2013 Dec.31, 2012 Operating Cash Flow1 Δ WC & Other2 Dec. 31, 2013 +789 Capex DividendsDebt Service €mn Free Cash Flow (287) 8.2€bn
Investor Relations 12 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
Investor Relations 13 Unchanged Values and Focus Very Conservative approach to risk & Attractive shareholder returns Infrastructural gap filled Very relevant energy cost savings Excellent results for shareholders WITH UNCHANGED VALUES & FOCUS LEGACY ISSUES SOLVED NEW CHALLENGES …… 73 73 73 80 75 Pool Price 71€/MWh 2007 68 8€bn Capex in 8 years Critical Zones Pool Price 52€/MWh 50 50 49 81 52 2014 47
Investor Relations 14 Free Cash Flow to drive Sustainable and Attractive Shareholder Returns Strategic Focus on Free Cash Flow MANAGEMENT ACTIONSCHALLENGES MacroEconomic scenario Electricity market Regulation Capex and Opex Discipline Selective Grid Expansion Non Regulated Activities
Investor Relations 15 2.9% '1520142013 CPI LTM rolling Slowing inflation Decreasing yields '152014201320122011201020092008 5% 7% 5% Euribor 6m BTP 10 yrs Yield (%) 1.3% Feb. 2015 0.1% 0.1% Jan. 2015 CPI BTP/Euribor Unprecedented Macro Scenario Exceptional liquidity reducing yields in low growth environment '152014201320122011201020092008 TWh Weak but stabilizing demand 339 Energy Demand 309 Feb 2015 +0.7%
Investor Relations 16 Energy security, solidarity and trust A fully integrated energy grid Energy efficiency Renewables integration Research, Innovation, Environment European Electricity Market THE “ENERGY UNION” IS MOVING FORWARD TSOs fundamental to promote change LOOKING BEYOND ITALY
Investor Relations 17 AEEGSI 2015-2018 STRATEGIC GUIDELINES Secure, efficient and flexible electricity market Integration with other EU markets Review kicked off More selective approach on Capex Increase public financing attractiveness NEW REGULATORY PERIOD A Changing Regulatory Framework Review Timeline - 2015 January Consultation Document 5/2015/eel By Spring Consultation Docs By September Consultation Docs By November Final Resolutions
Investor Relations 18 Framework Enhancing Cash Flows Capex Discipline Optimization Non Traditional REGULATED NON REGULATED Grid Expansion RAB and third party financing Interconnectors Services Tamini Italian railway HV network Energy efficiency Interconnectors Potential Upside not included in the Plan 4 PILLARS Opex Discipline Excellence EPC, BOOT
Investor Relations 19 2015-2019 Targets 1. 2015-2019 cumulated Capex 2. 2015-2019 cumulated Revenues Capex Discipline1 Capex 3.2€bn Non Traditional2 Opex Discipline REGULATED NON REGULATED Grid Expansion Tariff RAB CAGR 3% up to 13.4€bn ~30€mn annual savings by 2019 Interconnectors ~400€mn Services ~400€mn Tamini ~600€mn Free Cash Flow >2.0€bn cumulated 20€cents DIVIDEND for 2015, a solid basis for future dividends Net Debt reduction starting from 2017/2018 Old Plan 3.6€bn Old Plan CAGR 5% area
Investor Relations 20 Reduction vs Old Plan driven by Roll-over effect More selective approach 00 00 01 01 01 02 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Capex Discipline 1. Including Capitalized Financial Charges and Non Regulated Activities (~0.2€bn). 80% of regulated Capex considered as incentivized, based on current regulation. 5.1€bn Ten Years NDP 1.6€bn beyond 6.7€bn NATIONAL DEVELOPMENT PLAN (NDP) 3.2€bn 2015-2019 Capex 1 2015-2019 CAPEX
Investor Relations 21 Continue to develop the Grid Terna and third party financing Tariff RAB 14 Tariff RAB 19 Incentivized Ordinary Grid Expansion TARIFF RAB EVOLUTION €bn 11.6 13.4 38% 54% 62% 46% 3.9BN TOTAL EFFORT FOR THE GRID 3.2 0.4 0.3 Interconnectors (EPC business model) EU Financing THIRD PARTY FINANCING No impact on RAB and Net Debt 2015-2019 Capex €bn 1 1. Based on current regulation
Investor Relations 221. The possibility to switch part of the capacity on interconnector regime (law 99/09) is under evaluation Regulated Interconnections Development Reinforcements Non Regulated (merchant lines) Interconnectors ongoing EPC for energy-intensive third-parties ~ 400mn cumulated revenues ~ 10% EBITDA Margin Main Projects included in the Plan Rationalization Metropolitan Areas Authorized / Work in progress Authorization ongoing Legend - - Avellino Rinforzi Nord Calabria Italy - France Udine - Redipuglia Cassano - Chiari Colunga - Calenzano Italy – Montenegro1 Montecorvino - Avellino Villanova - Gissi Gissi - Foggia Deliceto - Bisaccia Reinforcement North Calabria Sorgente - Rizziconi Paternò – Pantano - Priolo Melilli Priolo Cables Chiararamonte Gulfi - Ciminna Reinforcement HV Grid Interconnections Note: Italy–France and Sorgente – Rizziconi are projects Milan Turin Rome Naples Palermo Campania Islands connections Interconnectors – law 99/09 Strategic for Country's Economic Growth
Investor Relations 23 Potential Acquisition of Italian Railway HV Network Signed Non-Binding MoU on Dec.30, 2014 All assets to be included in the NTG Authority to publish regulatory parameters Negotiations subject to due diligence Rationalization of the Grid European best practice No headcount transfer STRATEGIC RATIONALE ASSETS EARMARKED ~ 9,300km Lines of high voltage grid ~ 420# primary stations TRANSACTION PROCESS Not Included in the Plan
Investor Relations 24 2014 2015 2016 2017 2018 2019 Services Tamini Interconnectors ~0.4 ~0.4 ~0.6 1 Non Regulated - Capital Light to Sustain Growth EPC Energy Efficiency Revenues breakdown and EBITDA Margins DIVERSIFIED PORTFOLIO ALREADY CONTRACTED ~50% Margin ~10% Margin ~10% Margin target UPSIDE POTENTIAL Rigorous discipline for capital allocation across different projects 143 >300 ~1.4 2015-2019 Cumulated revenues Identified opportunities In Italy and abroad TaminiInterconnectorsServices €mn €bn BOOT
Investor Relations 25 Housing of optical fiber Design and development of electricity infrastructures O&M of HV and PV assets TLC EPC O&M Update on Services Consistency with Group risk profile Limited capital absorption Cumulated revenues1 ~ 400€mn EBITDA margin ~ 50% LEVERAGE ON CORE TECHNOLOGY AND SKILLS 1. 2015-2019
Investor Relations 26 Appointment of new experienced CEO Power transformers for generation plants and networks Specialized products for major Industrial energy users > 8,300 transformers sold in over 90 countries > 60% of revenues abroad WELL POSITIONED FOR TURNAROUND IN GROWING GLOBAL MARKETS 2015-2019 BUSINESS TARGETS Update on Tamini Growth driven by emerging markets and investments in new technology Margin enhancement through industrial and operating synergies ~ 600€mn Cum. Revenues ~ 10% EBITDA Margin Target
Investor Relations 27 Restructuring of staff and middle mgmt Clear role for companies in the Group Centralized services Unlocking Potential from Terna’s People ~ 20€mn additional annual savings by 2019 ~3,500 ~200 ~300 ~3,400 2015 Hirings Voluntary Exit 2017 37€mn accrued reserve already booked in 2014 to address voluntary exits VOLUNTARY TURNOVER PROGRAMMENEW ORGANIZATION Headcount Operational activities optimization Insourcing 6€mn savings already achieved in 2014 from Governance and Top Management
Investor Relations 28 External Costs Savings DISCIPLINE ON EXTERNAL COSTS Facilities services revised Fleet management optimized Information Technology simplified Contracts renegotiated 2014 2015 2016 2017 2018 2019 With actions With no action Up to 10€mn annual savings by 2019
Investor Relations 29 Summary Targets Group Revenues and Opex REVENUES OPEX 1. Total Opex excluding Tamini, Interconnectors , IFRIC 12 and provision for voluntary turnover Change in mix Non Regulated >2X 2019 vs 2014 Opex1 in control Broadly stable in real terms With actions With no action <10% Regulated Non Regulated 2014 >10% 2019 EBITDA supported by Non Regulated Activities and cost savings 2014 2015 2016 2017 2018 2019 ~ 30mn
Investor Relations 30 Summary Targets Free Cash Flow Dividends Debt Service Free Cash Flow Delta Net Financial Position CUMULATED 2015-2019EVOLUTION 2015 2016 2017 2018 2019 Improving FCF generation Healthy Cash Flow to sustain dividends €bn €bn 3.2 Operating Cash Flow Capex1 Free Cash Flow 1. Including Capitalized Financial Charges and Non Regulated Activities, net of EU financing Financial Charges Dividends TO SERVE>2.0 >5.2 Net Debt reduction from 2017/2018
Investor Relations 31 2014 2015 2016 2017 2018 2019 NET DEBT/CALENDAR RAB Maintain a solid financial structure Average kd in the period at 2% area 54% 56% 60% 0 300 600 900 1,200 1,500 2015 2016 2017 2018 2019 2020 FFO/NET DEBT DEBT MATURITIES (€mn) Already covered Summary Targets Financial KPIs 58% 2015 2016 2017 2018 2019 13% 15%
Investor Relations 32 Guidance 2015 REVENUES ~ 2.05€bn EBITDA ~ 1.52€bn DIVIDEND per SHARE 20€cents CAPEX ~ 1.0€bn Tariff RAB ~ 12.3€bn
Investor Relations 33 Closing Remarks Attractive and sustainable shareholder returns Further upside from growth of Non Regulated Business and potential new opportunities New business plan, based on clear management actions, will drive Free Cash Flows Terna has significantly modernized the Italian electricity Grid and has become a leading European TSO
Investor Relations 34 THANK YOU. QUESTIONS? Matteo Del Fante Chief Executive Officer Pierpaolo Cristofori Chief Financial Officer
Investor Relations 35 Annexes
Investor Relations 36 Transmission Dispatching + ~ 0.121 €bn ~1.64 €bn 1.82€bn Resolution 636/2013 Resolution 607/2013 2015 Total Grid Fee 1. Including other allowed costs and premia not directly attributable to dispatching activities 2015 Tariff Transmission Dispatching + 1.76€bn 2015 2014 = = ~ 0.121 €bn ~1.7 €bn Resolution 658/2014 Resolution 653/2014 Annex
Investor Relations 37 311 321 325 330 337 328 317 320 330 335 325 318 309 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Assumptions 1. Energy Demand “bull case” scenario CARG14-19 at +1.2% 2. 2014 provisional figures 3. 2014: as per Resolution 653/2014; 2015-18 assumptions based on main statistical data providers Energy Demand1 Macro Scenario CPI/Deflator3 Actual Base case 2 TWh 2015: tariff deflator at 0.1%; inflation at 0.7% 2016-2019: average deflator at 0.7%, inflation at 0.8%, back-end loaded Annex Fiscal Scenario No Robin Hood Tax from 2015
Investor Relations 38 Annex Electricity Market Trends – Last 12 Months DEMAND ADJUSTED1 (TWh) 26.2 24.0 25.2 26.3 28.3 23.7 26.2 26.4 25.2 25.6 26.4 25.2 23 25 27 29 31 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Monthy energy demand Prior Year 26.0 24.8 24.7 26.8 28.0 23.8 26.3 25.7 25.9 25.6 26.5 27.3 23 25 27 29 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Montly Energy Demand (normalized) Prior Year TWh Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb YoY Chg% -2.7% -2.6% -2.0% -0.6% -2.7% -3.5% -0.2% -1.4% -3.0% -2.9% -1.1% -0.7% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb YoY Chg% -3.6% -2.7% -2.6% -0.1% -4.8% -5.9% 0.4% -1.4% -3.7% -3.4% -2.0% 0.7% TWh FY13 FY14 Δ % 318 309 -3.0% FY13 FY14 Δ % 319 312 -2.1% YtD Δ % -0.7% Jan-Feb 2014 Jan-Feb 2015 52.0 51.6 YtD Δ % -0.9% Jan-Feb 2014 Jan-Feb 2015 54.3 53.8 DEMAND AS REPORTED (TWh) NOTE: 2013 final figures, 2014 provisional figures (as of February 2015) 1. for temperature and number of days
Investor Relations 39 Technology evaluation Storage Ginestra and Flumeri among the biggest installations in Europe Excellence in technological Know-how Ciminna Installed Power: ≈ 8 MW Status: 3.2 MW completed Codrongianos Installed Power: ≈ 8 MW Status: 5.4 MW completed Power Intensive Energy Intensive Scope: Safe management of the grid Total Capacity: 40 MW Number of Sites: (Phase I) : 2 Scope: Solve Grid congestion / bottlenecks Total Capacity: 35 MW Number of Sites: 3 Scampitella Installed Power: ≈ 12 MW Status: building in progress Ginestra Installed Power: ≈ 12 MW Status: completed Flumeri Installed Power: ≈ 12 MW 12 MW Status: 6.0 MW completed Casuzze and Codrongianos: to be started Phase II: 24 MW Phase I: 16 MW Storage Lab Annex
Investor Relations 40 FY14 - Consolidated Income Statement1 Annex NOTE: 2014 figures include Tamini 1. Managerial Accounting 2. Quality of Service + Other Revenues € mn FY13 FY14 Δmn Δ% Transmission 1,644 1,651 6 0.4% Dispatching 114 117 3 2.5% Other 2 43 55 12 27.9% Regulated Activities 1,802 1,823 21 1.2% Non Regulated Act. 64 143 79 124% IFRIC12 31 30 0 -1.3% Total Revenues 1,896 1,996 100 5.3% Labour Costs 191 236 45 23.8% Services 128 129 1 0.7% Other 41 35 -7 -16.3% Regulated Activities 360 400 39 11.0% Non Regulated Act. 17 75 58 338% IFRIC12 31 30 0 -1.3% Total Costs 408 505 97 23.7% EBITDA 1,488 1,491 3 0.2% D&A 450 481 30 6.7% EBIT 1,038 1,011 -27 -2.6% Net Financial Charges 100 128 28 27.6% Pre Tax Profit 938 883 -55 -5.8% Taxes 424 338 -85 -20.1% Tax Rate (%) 45.2% 38.3% Group Net Income 514 545 31 6.0%
Investor Relations 41 FY14 - Group Costs Breakdown Annex NOTE: 2014 figures include Tamini € mn FY13 FY14 Δmn Δ% Labour Costs 199 259 60 30.2% Services 121 140 19 15.5% Materials 11 37 26 225% Other 46 39 -7 -15.9% IFRIC12 31 30 0 -1.3% Total Costs 408 505 97 23.7%
Investor Relations 42 FY14 – P&L Quarterly Analysis Annex NOTE: 2014 figures include Tamini € mn 1Q13 1Q14 Δ 2Q13 2Q14 Δ 3Q13 3Q14 Δ 4Q13 4Q14 Δ Regulated Activities 456 457 1 431 430 -1 454 456 2 461 481 19 Non Regulated Act. 9 17 8 11 34 23 24 37 13 20 55 36 IFRIC 12 5 4 0 7 8 1 5 6 0 14 13 -1 Operating Revenues 470 478 8 449 472 23 482 498 15 495 549 54 Regulated Activities 81 81 0 87 81 -5 71 80 9 122 157 35 Non Regulated Act. 4 3 -1 4 20 16 5 29 24 4 22 18 IFRIC 12 5 4 0 7 8 1 5 6 0 14 13 -1 Operating Expenses 89 88 -1 98 110 12 82 115 34 140 192 52 EBITDA 381 390 9 352 363 11 401 382 -18 355 357 2 D&A 106 113 7 108 122 14 109 108 0 128 137 9 EBIT 275 277 3 244 241 -3 292 274 -18 227 219 -8 Net Financial Charges 18 31 14 25 33 8 28 36 7 29 28 -1 Pre Tax Profit 257 246 -11 219 208 -11 264 239 -25 198 191 -6 Taxes 116 101 -15 96 78 -18 116 95 -21 96 65 -31 Group Net Income 142 145 4 122 129 7 148 144 -4 102 127 25
Investor Relations 43 FY14 - Consolidated Balance Sheet Annex NOTE: 2014 figures include Tamini € mn Dec. 31,2013 Dec. 31,2014 Δmn PP&E 10,120 10,779 659 Intangible Asset 462 453 -9 Financial Inv. and Other 83 91 8 Total Fixed Assets 10,665 11,322 658 Net WC -573 -821 -247 Funds -453 -441 12 Total Net Invested Capital 9,638 10,061 422 Financed by Consolidated Net Debt 6,698 6,968 270 Total Shareholder's Equity 2,941 3,093 152 Total 9,638 10,061 422 D/E Ratio 2.3 2.3 D/D+E Ratio 0.69 0.69 Number of Shares ('000) 2,010 2,010
Investor Relations 44 € mn FY13 FY14 Δmn Net Income 514 545 31 D&A 1 450 481 30 Net Financial Charges 100 128 28 Net Change in Funds -29 -14 16 Operating Cash Flow 1,035 1,139 104 ∆ Working Capital & Other 2 -109 217 326 Cash Flow from Operating Activities 926 1,356 430 Capital Expenditures -1,212 -1,096 116 Free Cash Flow -287 260 547 Dividends -402 -402 0 Debt Service -100 -128 -28 Change in Net Cash (Debt) -789 -270 FY14 - Consolidated Cash Flow Annex NOTE: 2014 figures include Tamini 1. Net of assets’ disposal 2. Including Other Fixed Assets Changes, Change in Capital & Other
Investor Relations 45 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 “PIERPAOLO CRISTOFORI” 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 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. DisclaimerNotes
Investor Relations 46 investor.relations@terna.it I +39 06 8313 9041 I www.terna.it

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FY2014 and 2015-2019 Strategic Plan (26 marzo 2015)

  • 1. Investor Relations 1 CATIA BASTIOLI CHAIRWOMAN MATTEO DEL FANTE CHIEF EXECUTIVE OFFICER PIERPAOLO CRISTOFORI CHIEF FINANCIAL OFFICER Cash Flows to drive Shareholder Returns
  • 2. Investor Relations 2 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
  • 3. Investor Relations 3 Terna Today 309TWh energy demand 51.5GW highest peak of demand (12th June 2014) Terna is...  ...the largest independent Transmission System Operator (TSO) in Europe  ...the owner of the National High Voltage Transmission Grid  ...responsible for the transmission and dispatching of the electricity all over the Country with ~3,5001 employees  ...listed on the Italian Stock Exchange since 2004  … 3.8€bn cumulated dividends since IPO2 and Total Shareholder Return >300% ~ 63,900Km of three-phase conductors 21 interconnections3 491 substations Our Grid Electricity Market4 1.Excluding Tamini 2. Including 2014 final dividend. BoD proposal, subject to AGM approval. 3. Owned by Terna Focus on safety and technological innovation for sustainable Grid development 4. 2014 provisional figures - Italy
  • 4. Investor Relations 4 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
  • 5. Investor Relations 5 Highlights FY2014 at a Glance KEY FIGURES CAPEX, FREE CASH FLOW AND NET DEBT 1,096€mn Total capex 6,968€mn Net Debt 1,996€mn Revenues +5.3%yoy 545€mn Net profit +6.0%yoy 1,491€mn EBITDA +0.2%yoy 260€mn Free Cash Flow 20€cents 2014 Dividend per share1 1. BoD proposal, subject to EGM approval. Equal to 13€cents as a final dividend to be paid in June (ex date June 22nd 2015, Payment date June 24th 2015)
  • 6. Investor Relations 6 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
  • 7. Investor Relations 7 1,802 1,823 1,823 31 21 26 30 54 3064 90 143 FY13 Regulated Activities ∆ NRA (LFL) ∆ IFRIC FY14 (LFL) ∆ Perimeter FY14 Traditional Activities IFRIC12 Non Traditional Activities 1. Excluding Tamini 2. Tamini FY14 Results Revenues 1,896 1,996+100 1,943 KEY FIGURES TOTAL REVENUES EVOLUTION Total Revenues 1,996€mn +5.3%yoy Quality of Service 34€mn +22€mn €mn 2 1 Regulated Activities Non Regulated Act. IFRIC12 0 Non Regulated 90€mn +26€mn Tamini 54€mn
  • 8. Investor Relations 8 360 400 400 31 39 4 30 53 30 17 21 75 FY13 ∆ Regulated Activities ∆ NRA (LFL) ∆ IFRIC 12 FY14 (LFL) ∆ Perimeter FY14 Traditional Activities IFRIC 12 NTA FY14 Results Costs 408 505+97 452 KEY FIGURES TOTAL COSTS EVOLUTION Total Costs 505€mn +23.7%yoy €mn 2 1 1. Excluding Tamini 2. Tamini Regulated Activities Non Regulated Act. IFRIC12 0 Provision for Voluntary Turnover Programme 37€mn € mn FY13 FY14 Ex Tamini Δmn Δ% Tamini Labour Costs 199 247 48 24% 12 External Services & Materials 132 137 5 4% 39 Other 46 38 -9 -19% 1 IFRIC12 31 30 0 -1% Total Costs 408 452 44 11% 53 FY14 LFL
  • 9. Investor Relations 9 FY14 Results From EBITDA to Net Income KEY FIGURES Group EBITDA 1,491€mn Group EBITDA % 74.7% Group Net Income 545€mn +0.2%yoy +6.0%yoy €mn 1,491 1,011 883 545 481 128 338 EBITDA D&A EBIT Net Financial Expenses PBT Taxes Group Net Income € mn FY13 FY14 Δ Δ % EBITDA 1,488 1,491 3 0.2% Ebitda % 78.5% 74.7% -3.8pp D&A 450 481 30 6.7% EBIT 1,038 1,011 -27 -2.6% Net Financial Expenses 100 128 28 27.6% PBT 938 883 -55 -5.8% Tax Rate 45.2% 38.3% -6.9pp Taxes 424 338 -85 -20.1% Group Net Income 514 545 31 6.0% Cost of Net Debt 2.5%
  • 10. Investor Relations 10 21% 34% 45% Base Return +1.5% +2% FY14 Results Capex Breakdown KEY FIGURES REGULATED CAPEX BREAKDOWN1 FY14 Total Capex 1,096€mn Development Capex 732€mn 1,048€mn 79% Development1 NOTE: Figures in accordance with AEEGSI resolutions 1. Incentivized based on current regulation 2. Capitalized Financial Charges + Non Regulated Capex Category (€mn) FY13 FY14 Δ yoy Δ % yoy +2% 459 469 10 2% +1.5% 479 355 -123 -26% Development Capex 937 824 -113 -12% Maintenance (Base Return) 229 224 -5 -2% Regulated Capex 1,166 1,048 -118 -10% Other2 46 48 2 Total Group Capex 1,212 1,096 -116 -10% Storage 92€mn +48%yoy
  • 11. Investor Relations 11 2014 5,909 6,6981,035 109 1,212 100 402 Net Debt Evolution & Financial Structure 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 3. Calculated on Net Debt FY14 Results KEY FIGURES Net Debt 6,968€mn Fixed/floating ratio3 63/37 GROSS DEBT BREAKDOWN 64% 21% 15% Terna SpA Bonds EIB Loans Banks 6,9686,698 1,139 217 1,096 128 402 Dec.31, 2013 Operating Cash Flow1 Δ WC & Other2 Dec. 31, 2014 +270 Capex DividendsDebt Service FCF AND NET DEBT EVOLUTION €mn Free Cash Flow 260 2013 Dec.31, 2012 Operating Cash Flow1 Δ WC & Other2 Dec. 31, 2013 +789 Capex DividendsDebt Service €mn Free Cash Flow (287) 8.2€bn
  • 12. Investor Relations 12 Agenda FY2014 Results 2015-2019 Strategic Plan Introduction: Terna Today
  • 13. Investor Relations 13 Unchanged Values and Focus Very Conservative approach to risk & Attractive shareholder returns Infrastructural gap filled Very relevant energy cost savings Excellent results for shareholders WITH UNCHANGED VALUES & FOCUS LEGACY ISSUES SOLVED NEW CHALLENGES …… 73 73 73 80 75 Pool Price 71€/MWh 2007 68 8€bn Capex in 8 years Critical Zones Pool Price 52€/MWh 50 50 49 81 52 2014 47
  • 14. Investor Relations 14 Free Cash Flow to drive Sustainable and Attractive Shareholder Returns Strategic Focus on Free Cash Flow MANAGEMENT ACTIONSCHALLENGES MacroEconomic scenario Electricity market Regulation Capex and Opex Discipline Selective Grid Expansion Non Regulated Activities
  • 15. Investor Relations 15 2.9% '1520142013 CPI LTM rolling Slowing inflation Decreasing yields '152014201320122011201020092008 5% 7% 5% Euribor 6m BTP 10 yrs Yield (%) 1.3% Feb. 2015 0.1% 0.1% Jan. 2015 CPI BTP/Euribor Unprecedented Macro Scenario Exceptional liquidity reducing yields in low growth environment '152014201320122011201020092008 TWh Weak but stabilizing demand 339 Energy Demand 309 Feb 2015 +0.7%
  • 16. Investor Relations 16 Energy security, solidarity and trust A fully integrated energy grid Energy efficiency Renewables integration Research, Innovation, Environment European Electricity Market THE “ENERGY UNION” IS MOVING FORWARD TSOs fundamental to promote change LOOKING BEYOND ITALY
  • 17. Investor Relations 17 AEEGSI 2015-2018 STRATEGIC GUIDELINES Secure, efficient and flexible electricity market Integration with other EU markets Review kicked off More selective approach on Capex Increase public financing attractiveness NEW REGULATORY PERIOD A Changing Regulatory Framework Review Timeline - 2015 January Consultation Document 5/2015/eel By Spring Consultation Docs By September Consultation Docs By November Final Resolutions
  • 18. Investor Relations 18 Framework Enhancing Cash Flows Capex Discipline Optimization Non Traditional REGULATED NON REGULATED Grid Expansion RAB and third party financing Interconnectors Services Tamini Italian railway HV network Energy efficiency Interconnectors Potential Upside not included in the Plan 4 PILLARS Opex Discipline Excellence EPC, BOOT
  • 19. Investor Relations 19 2015-2019 Targets 1. 2015-2019 cumulated Capex 2. 2015-2019 cumulated Revenues Capex Discipline1 Capex 3.2€bn Non Traditional2 Opex Discipline REGULATED NON REGULATED Grid Expansion Tariff RAB CAGR 3% up to 13.4€bn ~30€mn annual savings by 2019 Interconnectors ~400€mn Services ~400€mn Tamini ~600€mn Free Cash Flow >2.0€bn cumulated 20€cents DIVIDEND for 2015, a solid basis for future dividends Net Debt reduction starting from 2017/2018 Old Plan 3.6€bn Old Plan CAGR 5% area
  • 20. Investor Relations 20 Reduction vs Old Plan driven by Roll-over effect More selective approach 00 00 01 01 01 02 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Capex Discipline 1. Including Capitalized Financial Charges and Non Regulated Activities (~0.2€bn). 80% of regulated Capex considered as incentivized, based on current regulation. 5.1€bn Ten Years NDP 1.6€bn beyond 6.7€bn NATIONAL DEVELOPMENT PLAN (NDP) 3.2€bn 2015-2019 Capex 1 2015-2019 CAPEX
  • 21. Investor Relations 21 Continue to develop the Grid Terna and third party financing Tariff RAB 14 Tariff RAB 19 Incentivized Ordinary Grid Expansion TARIFF RAB EVOLUTION €bn 11.6 13.4 38% 54% 62% 46% 3.9BN TOTAL EFFORT FOR THE GRID 3.2 0.4 0.3 Interconnectors (EPC business model) EU Financing THIRD PARTY FINANCING No impact on RAB and Net Debt 2015-2019 Capex €bn 1 1. Based on current regulation
  • 22. Investor Relations 221. The possibility to switch part of the capacity on interconnector regime (law 99/09) is under evaluation Regulated Interconnections Development Reinforcements Non Regulated (merchant lines) Interconnectors ongoing EPC for energy-intensive third-parties ~ 400mn cumulated revenues ~ 10% EBITDA Margin Main Projects included in the Plan Rationalization Metropolitan Areas Authorized / Work in progress Authorization ongoing Legend - - Avellino Rinforzi Nord Calabria Italy - France Udine - Redipuglia Cassano - Chiari Colunga - Calenzano Italy – Montenegro1 Montecorvino - Avellino Villanova - Gissi Gissi - Foggia Deliceto - Bisaccia Reinforcement North Calabria Sorgente - Rizziconi Paternò – Pantano - Priolo Melilli Priolo Cables Chiararamonte Gulfi - Ciminna Reinforcement HV Grid Interconnections Note: Italy–France and Sorgente – Rizziconi are projects Milan Turin Rome Naples Palermo Campania Islands connections Interconnectors – law 99/09 Strategic for Country's Economic Growth
  • 23. Investor Relations 23 Potential Acquisition of Italian Railway HV Network Signed Non-Binding MoU on Dec.30, 2014 All assets to be included in the NTG Authority to publish regulatory parameters Negotiations subject to due diligence Rationalization of the Grid European best practice No headcount transfer STRATEGIC RATIONALE ASSETS EARMARKED ~ 9,300km Lines of high voltage grid ~ 420# primary stations TRANSACTION PROCESS Not Included in the Plan
  • 24. Investor Relations 24 2014 2015 2016 2017 2018 2019 Services Tamini Interconnectors ~0.4 ~0.4 ~0.6 1 Non Regulated - Capital Light to Sustain Growth EPC Energy Efficiency Revenues breakdown and EBITDA Margins DIVERSIFIED PORTFOLIO ALREADY CONTRACTED ~50% Margin ~10% Margin ~10% Margin target UPSIDE POTENTIAL Rigorous discipline for capital allocation across different projects 143 >300 ~1.4 2015-2019 Cumulated revenues Identified opportunities In Italy and abroad TaminiInterconnectorsServices €mn €bn BOOT
  • 25. Investor Relations 25 Housing of optical fiber Design and development of electricity infrastructures O&M of HV and PV assets TLC EPC O&M Update on Services Consistency with Group risk profile Limited capital absorption Cumulated revenues1 ~ 400€mn EBITDA margin ~ 50% LEVERAGE ON CORE TECHNOLOGY AND SKILLS 1. 2015-2019
  • 26. Investor Relations 26 Appointment of new experienced CEO Power transformers for generation plants and networks Specialized products for major Industrial energy users > 8,300 transformers sold in over 90 countries > 60% of revenues abroad WELL POSITIONED FOR TURNAROUND IN GROWING GLOBAL MARKETS 2015-2019 BUSINESS TARGETS Update on Tamini Growth driven by emerging markets and investments in new technology Margin enhancement through industrial and operating synergies ~ 600€mn Cum. Revenues ~ 10% EBITDA Margin Target
  • 27. Investor Relations 27 Restructuring of staff and middle mgmt Clear role for companies in the Group Centralized services Unlocking Potential from Terna’s People ~ 20€mn additional annual savings by 2019 ~3,500 ~200 ~300 ~3,400 2015 Hirings Voluntary Exit 2017 37€mn accrued reserve already booked in 2014 to address voluntary exits VOLUNTARY TURNOVER PROGRAMMENEW ORGANIZATION Headcount Operational activities optimization Insourcing 6€mn savings already achieved in 2014 from Governance and Top Management
  • 28. Investor Relations 28 External Costs Savings DISCIPLINE ON EXTERNAL COSTS Facilities services revised Fleet management optimized Information Technology simplified Contracts renegotiated 2014 2015 2016 2017 2018 2019 With actions With no action Up to 10€mn annual savings by 2019
  • 29. Investor Relations 29 Summary Targets Group Revenues and Opex REVENUES OPEX 1. Total Opex excluding Tamini, Interconnectors , IFRIC 12 and provision for voluntary turnover Change in mix Non Regulated >2X 2019 vs 2014 Opex1 in control Broadly stable in real terms With actions With no action <10% Regulated Non Regulated 2014 >10% 2019 EBITDA supported by Non Regulated Activities and cost savings 2014 2015 2016 2017 2018 2019 ~ 30mn
  • 30. Investor Relations 30 Summary Targets Free Cash Flow Dividends Debt Service Free Cash Flow Delta Net Financial Position CUMULATED 2015-2019EVOLUTION 2015 2016 2017 2018 2019 Improving FCF generation Healthy Cash Flow to sustain dividends €bn €bn 3.2 Operating Cash Flow Capex1 Free Cash Flow 1. Including Capitalized Financial Charges and Non Regulated Activities, net of EU financing Financial Charges Dividends TO SERVE>2.0 >5.2 Net Debt reduction from 2017/2018
  • 31. Investor Relations 31 2014 2015 2016 2017 2018 2019 NET DEBT/CALENDAR RAB Maintain a solid financial structure Average kd in the period at 2% area 54% 56% 60% 0 300 600 900 1,200 1,500 2015 2016 2017 2018 2019 2020 FFO/NET DEBT DEBT MATURITIES (€mn) Already covered Summary Targets Financial KPIs 58% 2015 2016 2017 2018 2019 13% 15%
  • 32. Investor Relations 32 Guidance 2015 REVENUES ~ 2.05€bn EBITDA ~ 1.52€bn DIVIDEND per SHARE 20€cents CAPEX ~ 1.0€bn Tariff RAB ~ 12.3€bn
  • 33. Investor Relations 33 Closing Remarks Attractive and sustainable shareholder returns Further upside from growth of Non Regulated Business and potential new opportunities New business plan, based on clear management actions, will drive Free Cash Flows Terna has significantly modernized the Italian electricity Grid and has become a leading European TSO
  • 34. Investor Relations 34 THANK YOU. QUESTIONS? Matteo Del Fante Chief Executive Officer Pierpaolo Cristofori Chief Financial Officer
  • 36. Investor Relations 36 Transmission Dispatching + ~ 0.121 €bn ~1.64 €bn 1.82€bn Resolution 636/2013 Resolution 607/2013 2015 Total Grid Fee 1. Including other allowed costs and premia not directly attributable to dispatching activities 2015 Tariff Transmission Dispatching + 1.76€bn 2015 2014 = = ~ 0.121 €bn ~1.7 €bn Resolution 658/2014 Resolution 653/2014 Annex
  • 37. Investor Relations 37 311 321 325 330 337 328 317 320 330 335 325 318 309 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Assumptions 1. Energy Demand “bull case” scenario CARG14-19 at +1.2% 2. 2014 provisional figures 3. 2014: as per Resolution 653/2014; 2015-18 assumptions based on main statistical data providers Energy Demand1 Macro Scenario CPI/Deflator3 Actual Base case 2 TWh 2015: tariff deflator at 0.1%; inflation at 0.7% 2016-2019: average deflator at 0.7%, inflation at 0.8%, back-end loaded Annex Fiscal Scenario No Robin Hood Tax from 2015
  • 38. Investor Relations 38 Annex Electricity Market Trends – Last 12 Months DEMAND ADJUSTED1 (TWh) 26.2 24.0 25.2 26.3 28.3 23.7 26.2 26.4 25.2 25.6 26.4 25.2 23 25 27 29 31 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Monthy energy demand Prior Year 26.0 24.8 24.7 26.8 28.0 23.8 26.3 25.7 25.9 25.6 26.5 27.3 23 25 27 29 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Montly Energy Demand (normalized) Prior Year TWh Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb YoY Chg% -2.7% -2.6% -2.0% -0.6% -2.7% -3.5% -0.2% -1.4% -3.0% -2.9% -1.1% -0.7% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb YoY Chg% -3.6% -2.7% -2.6% -0.1% -4.8% -5.9% 0.4% -1.4% -3.7% -3.4% -2.0% 0.7% TWh FY13 FY14 Δ % 318 309 -3.0% FY13 FY14 Δ % 319 312 -2.1% YtD Δ % -0.7% Jan-Feb 2014 Jan-Feb 2015 52.0 51.6 YtD Δ % -0.9% Jan-Feb 2014 Jan-Feb 2015 54.3 53.8 DEMAND AS REPORTED (TWh) NOTE: 2013 final figures, 2014 provisional figures (as of February 2015) 1. for temperature and number of days
  • 39. Investor Relations 39 Technology evaluation Storage Ginestra and Flumeri among the biggest installations in Europe Excellence in technological Know-how Ciminna Installed Power: ≈ 8 MW Status: 3.2 MW completed Codrongianos Installed Power: ≈ 8 MW Status: 5.4 MW completed Power Intensive Energy Intensive Scope: Safe management of the grid Total Capacity: 40 MW Number of Sites: (Phase I) : 2 Scope: Solve Grid congestion / bottlenecks Total Capacity: 35 MW Number of Sites: 3 Scampitella Installed Power: ≈ 12 MW Status: building in progress Ginestra Installed Power: ≈ 12 MW Status: completed Flumeri Installed Power: ≈ 12 MW 12 MW Status: 6.0 MW completed Casuzze and Codrongianos: to be started Phase II: 24 MW Phase I: 16 MW Storage Lab Annex
  • 40. Investor Relations 40 FY14 - Consolidated Income Statement1 Annex NOTE: 2014 figures include Tamini 1. Managerial Accounting 2. Quality of Service + Other Revenues € mn FY13 FY14 Δmn Δ% Transmission 1,644 1,651 6 0.4% Dispatching 114 117 3 2.5% Other 2 43 55 12 27.9% Regulated Activities 1,802 1,823 21 1.2% Non Regulated Act. 64 143 79 124% IFRIC12 31 30 0 -1.3% Total Revenues 1,896 1,996 100 5.3% Labour Costs 191 236 45 23.8% Services 128 129 1 0.7% Other 41 35 -7 -16.3% Regulated Activities 360 400 39 11.0% Non Regulated Act. 17 75 58 338% IFRIC12 31 30 0 -1.3% Total Costs 408 505 97 23.7% EBITDA 1,488 1,491 3 0.2% D&A 450 481 30 6.7% EBIT 1,038 1,011 -27 -2.6% Net Financial Charges 100 128 28 27.6% Pre Tax Profit 938 883 -55 -5.8% Taxes 424 338 -85 -20.1% Tax Rate (%) 45.2% 38.3% Group Net Income 514 545 31 6.0%
  • 41. Investor Relations 41 FY14 - Group Costs Breakdown Annex NOTE: 2014 figures include Tamini € mn FY13 FY14 Δmn Δ% Labour Costs 199 259 60 30.2% Services 121 140 19 15.5% Materials 11 37 26 225% Other 46 39 -7 -15.9% IFRIC12 31 30 0 -1.3% Total Costs 408 505 97 23.7%
  • 42. Investor Relations 42 FY14 – P&L Quarterly Analysis Annex NOTE: 2014 figures include Tamini € mn 1Q13 1Q14 Δ 2Q13 2Q14 Δ 3Q13 3Q14 Δ 4Q13 4Q14 Δ Regulated Activities 456 457 1 431 430 -1 454 456 2 461 481 19 Non Regulated Act. 9 17 8 11 34 23 24 37 13 20 55 36 IFRIC 12 5 4 0 7 8 1 5 6 0 14 13 -1 Operating Revenues 470 478 8 449 472 23 482 498 15 495 549 54 Regulated Activities 81 81 0 87 81 -5 71 80 9 122 157 35 Non Regulated Act. 4 3 -1 4 20 16 5 29 24 4 22 18 IFRIC 12 5 4 0 7 8 1 5 6 0 14 13 -1 Operating Expenses 89 88 -1 98 110 12 82 115 34 140 192 52 EBITDA 381 390 9 352 363 11 401 382 -18 355 357 2 D&A 106 113 7 108 122 14 109 108 0 128 137 9 EBIT 275 277 3 244 241 -3 292 274 -18 227 219 -8 Net Financial Charges 18 31 14 25 33 8 28 36 7 29 28 -1 Pre Tax Profit 257 246 -11 219 208 -11 264 239 -25 198 191 -6 Taxes 116 101 -15 96 78 -18 116 95 -21 96 65 -31 Group Net Income 142 145 4 122 129 7 148 144 -4 102 127 25
  • 43. Investor Relations 43 FY14 - Consolidated Balance Sheet Annex NOTE: 2014 figures include Tamini € mn Dec. 31,2013 Dec. 31,2014 Δmn PP&E 10,120 10,779 659 Intangible Asset 462 453 -9 Financial Inv. and Other 83 91 8 Total Fixed Assets 10,665 11,322 658 Net WC -573 -821 -247 Funds -453 -441 12 Total Net Invested Capital 9,638 10,061 422 Financed by Consolidated Net Debt 6,698 6,968 270 Total Shareholder's Equity 2,941 3,093 152 Total 9,638 10,061 422 D/E Ratio 2.3 2.3 D/D+E Ratio 0.69 0.69 Number of Shares ('000) 2,010 2,010
  • 44. Investor Relations 44 € mn FY13 FY14 Δmn Net Income 514 545 31 D&A 1 450 481 30 Net Financial Charges 100 128 28 Net Change in Funds -29 -14 16 Operating Cash Flow 1,035 1,139 104 ∆ Working Capital & Other 2 -109 217 326 Cash Flow from Operating Activities 926 1,356 430 Capital Expenditures -1,212 -1,096 116 Free Cash Flow -287 260 547 Dividends -402 -402 0 Debt Service -100 -128 -28 Change in Net Cash (Debt) -789 -270 FY14 - Consolidated Cash Flow Annex NOTE: 2014 figures include Tamini 1. Net of assets’ disposal 2. Including Other Fixed Assets Changes, Change in Capital & Other
  • 45. Investor Relations 45 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 “PIERPAOLO CRISTOFORI” 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 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. DisclaimerNotes
  • 46. Investor Relations 46 [email protected] I +39 06 8313 9041 I www.terna.it