Terna. HOLD (new coverage) EUROMOBILIARE S.I.M. SpA TARGET Italy - Utility. TERNA s SOLE APPEAL IS DIVIDEND

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1 Terna Italy - Utility HOLD (new coverage) TARGT 1.96 August 5, 2004 Price : 1.80 BCI Index: 1,288 N 294 TRNA s SOL APPAL IS DIVIDND Terna owns 94% of the Italian national electricity transmission grid. Its activity is strictly regulated and consists of the maintenance and development of the portion of electricity grid owned. In 2003 revenues from regulated business accounted for 93% of the company s total. Terna also provides design and maintenance services to its parent company NL and to other operators in the sector. On December 31st 2003 Terna acquired two Brazilian companies (Novatrans and TSN) also active in the electricity transmission sector from NL Power for 570 mn. By October 31st 2005 Terna has to merge with GRTN (owned by the Italian Treasury), the company managing national electricity flows in the grid (whereas Terna is responsible for the latter s maintenance and development). Simultaneously with the merger NL s voting rights in Terna will be frozen at 5%. In theory, NL could therefore sell a 45% stake in Terna on the market by the end of 2005 even although it has to be underlined that one of the possible solutions on the table is apparently placement of some of these shares with the Cassa Depositi e Prestiti (Government controlled company) or with other institutional investors. Terna s main peer is SNAM Rete Gas (SRG). We believe that Terna should trade at a bigger discount to RAB than SRG, since the latter has a more favourable regulatory set-up in terms of allowed return (7.94% vs. Terna s 6.7%) and more interesting extra returns on development investments. We expect SRG s allowed return will be reduced in second regulatory period, but not lower than Terna s one. In addition, SRG s larger investment plan will, if approved, permit RAB growth at 5% CAGR in the period , as opposed to Terna s 4% CAGR. Today Terna trades at a 6% discount to its RAB vs. SRG s 5% discount. In our opinion Terna s sole appeal is its capacity to distribute dividends. Since the regulator has assigned electricity transmission a fairly low allowed return (6.7% real pre-tax) obtained with 40% leverage, the company can create value only if it increases its leverage (32% today) via acquisitions or by paying out high dividends. During the IPO road show the company did not indicate a specific dividend guideline. We have consequently assumed 85% payout of earnings, which assures a yield in the period of between 5% and 6%. We have constructed our best case assuming that, besides earnings, management also pays out some 400 mn of distributable reserves in the period ven although the consequent sumof-the-parts valuation would not increase significantly (going up to about 2 at the end 2005) versus the base case, dividend yield in the period would range from between 7.6% in 2004 to 8.6% in 2007 (vs. 5-6% in the base-case scenario), undoubtedly making the stock attractive. Pending information on management s intentions concerning dividend/acquisition policy, we are starting our coverage of Terna stock with a neutral recommendation and a DCF-driven valuation of 1.96 per share. STOCK DATA PRIC PRFORMANC Bloomberg Code TRN IM 1M 3M 12M 52-week range Absolute n.a. n.a. Daily Volumes (mn) 9.4 Rel. to BCI Index 1.81 n.a. n.a. Stefano GamberIni s.gamberini@eurosim.it CAPITALISATION FORCASTS/VALUATION 12/ /2004 Market Cap. 3,592 mn PS Latest Net Financial Position -1,806 ADJ. PS Free Float 50% ADJ. P n.m 16.8 Shares Outstanding 2,000 V/BITDA n.m. 8.0 IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

2 Terna August 5, TRNA Terna (Trasmissione lettricità Rete Nazionale) is the main owner in Italy of high voltage and very high voltage electricity infrastructures forming the Italian national grid. Terna owns 94% of the national electricity transmission grid. ITALIAN NATIONAL GRID Power lines - km Power plants Total national grid 42, Portion of grid owned by Terna 37, Source: Company data Terna s business consists of the maintenance and development of the portion of grid owned as per the provisions of the operating convention with GRTN (the company managing the flows of the national electricity system) and the latter s instructions. In 2003 regulated activities accounted for 93% of the company s total revenues. In addition, Terna, in order to get value out of its know-how in the sector, provides design services both to power generation companies in the NL group and to other operators in the sector. The prime minister s decree issued on May 11th this year establishes that Terna and GRTN have to be merged by October 31st The entity of GRTN s assets and its figures (P&L and balance sheet) are not yet known. The decree also establishes that the Italian lectricity & Gas Authority must also devise mechanisms to achieve aggregation in Terna of the remaining portions of the national grid (about 6%) currently owned by other entities by April 30th Lastly, once the merger with GRTN has taken place, the new company will have to amend its set of bylaws assuming NL s loss of control of the company and freezing of all electricity operators voting rights (including those of NL) at 5%. The law also requires that NL reduce its stake in Terna to 20% by July BRAZILIAN ASSTS On December 31st 2003 Terna acquired control of two Brazilian companies Novatrans nergia SA and TSN SA which are active in electricity transmission in Brazil. Both companies hold concessions expiring in for the construction and management of two electricity transmission lines. TSN has constructed a 1,050-km line going from Northeast to Northwest Brazil, whilst Novatrans has a 1,278-km line going from North to South Brazil. The assets of TSN and Novatrans are remunerated regardless of the electricity volume transported. The annual fees (Brazilian acronym = RPI) defined by the regulator are updated according to the Brazilian price index. For the period July 2004-June 2005 the RPI has been set at BRL mn for TSN and BRL mn for Novatrans. After 16 years of activity the fee will be reduced by 50%. TSN s network started operation in 2003, whilst in Novatrans case the last two sections (some 517 km) of its network started operation in April The price paid for acquisition of the Brazilian networks was 570 mn in total. BRASILIAN P. &L. ( MN) 2004 % 2005 % 2006 % 2007 % 2008 % Novatrans 50 43% 63 50% 58 50% 56 50% 54 50% TSN 66 57% 63 50% 58 50% 56 50% 54 50% Sales % % % % % Increase % 8% -8% -3% -3% Labour costs -5-5% -5-4% -5-4% -5-4% -4-4% Services -4-4% -4-3% -4-3% -4-3% -4-3% other costs % % % % % BITDA 82 71% 94 74% 86 74% 83 74% 81 74% Increase % 14% -8% -3% -3% Depreciation % % % % % BIT 65 56% 77 61% 72 62% 70 63% 69 63% Increase % 19% -7% -2% -2% Source: uromobiliare SIM estimates IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

3 Terna August 5, RGULATORY ST-UP GRTN pays Terna an annual fee covering operating costs, depreciation, and remuneration of capital. This fee is established by the Authority according to a tariff system. The lectricity & Gas Authority establishes the tariffs and allowed return that must be assured for Terna. January 2004 marked the start of the second regulatory period, which will end in December The Authority has redefined the value Terna's invested capital (i.e. the so-called regulated asset base - RAB), extending assets' technical life. Terna's RAB value thus increased to about 4.9 bn at the end of 2003 (whereas if the first regulatory period's criteria had been maintained, RAB value would have been less than 4.5 bn). The allowed return assured for Terna is 6.7% (real pre-tax). The regulator has also established supplementary returns of 2% for development investments (net of depreciation) made in the second regulatory period. According to regulations, these extra returns on development capex should remain forever, even although, since they are calculated on RAB net of depreciation, their impact will decrease over time. XTRA RTURN ON 100 MN OF CAPX xtra return 2.00% 1.98% 1.93% 1.88% 1.83% 1.78% 1.73% 1.68% Source: uromobiliare SIM estimates We estimate that Terna s average return will rise from 6.7% today to 6.84% at the end of the period in On the other hand, the company is motivated to invest, increasing its RAB value, which we estimate will increase at 4% CAGR in the second regulatory period. AVG. ALLOWD RTURN % 6.73% 6.79% 6.84% Source: uromobiliare SIM estimates The investment plan totals 991 mn, of which some 570 mn should be development capex of the transmission grid, therefore qualifying for receipt the extra returns. TAX SHILD In addition, Terna benefits from a tax shield, which stems from the different treatment of depreciation for tax purposes vs. the treatment established by the Authority and applied by Terna as regards calculation of economic/technical depreciation rates. COMPARISON BTWN TCHNICAL AND TAX- DRIVN DPRCIATION RATS Depreciation Rates Technical Tax-Driven Non-industrial and industrial 2.50% 3.00% The technical depreciation rates applied by Terna in 2003 led to lower depreciation of 144 mn vs. the amount calculated for tax purposes. The table shows the different tax-driven rates, which enable Terna to create a major tax shield since assets are depreciated in some 40 years in economic/technical terms, whereas, on a tax-driven basis they are depreciated in less than 20 years on average (excluding use of the accelerated depreciation mechanism which further shorten the latter period). According to our estimates, the present value of Terna s tax shield is about 186 mn. Transport cables 2.50% 4.00% Transformer stations lectrical machinery 2.38% 7.00% Apparatus and equipment 3.13% 7.00% Automation systems 6.70% 10.00% Remote operation and control lectrical and auxiliary equipment 5.00% 9.00% Computers 10.00% 20.00% Others 14.00% 16.00% Source: Company prospectus TAX SHILD - MN Tax-driven depreciation Total depreciation Tax savings PV of tax savings 186 Tax rate: Corporate income tax (IRS) 33%; Regional business tax (IRAP) 4.5% Source: uromobiliare SIM estimates IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

4 Terna August 5, TRNA PARNT-COMPANY AND CONSOLIDATD RSULTS Our estimates include growth of Terna s regulated revenues at 2.5% CAGR in the period thanks to volume growth at 2.9% CAGR. Revenues from development investments should rise to 31 mn by the end of the period. LCTRICITY TARIFFS Operating costs Depreciation RAB 6.7% RAB 8.7% lectricity transport revenues Increase 2.4% 2.6% 2.4% -2.3% Source: uromobiliare SIM estimates We expect the parent company s operating costs to remain substantially stable in the period. BITDA should therefore grow at 3.5% CAGR in Conversely, in 2004 we expect the parent company s earnings to be down by 11% YoY due to higher financial charges and to contribution from other revenues some 28 mn lower than in PARNT CO. P. &L. ( MN) 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % Sales % % % % % % Increase % 5.7% -1.7% 2.2% 2.4% 2.3% -2.0% Labour costs % % % % % % Services % % % % % % other costs % % % % % % BITDA % % % % % % Increase % 12% -2% 3% 4% 4% -3% Operating provisions % % % % % % Depreciation % % % % % % BIT % % % % % % Increase % -4% 3% 4% 3% -5% Financial income (costs) % % % % % % Other income (costs) % 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% Pre-tax Profit % % % % % % change % 0% -10% 5% 4% 4% -7% Tax % % % % % % Net profit % % % % % % change % -11% 6% 5% 4% -7% Source: uromobiliare SIM estimates At consolidated level, thanks to consolidation of the Brazilian businesses BITDA in 2004 will increase by 10%, then growing at 3% CAGR in the subsequent 3-year period. Consequently, the bottom line should progress from 209 mn in 2004 (-5% due to parent company s lower earnings) to 244 mn in 2007 (CAGR = 5.3%). We expect net debt to decrease slightly, assuming payout of 85% at consolidated level (90% at parent-company level) and a 1-bn capex plan concentrated in the parent company. IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

5 Terna August 5, CONS. P. & L. ACCOUNTS ( MLN) 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % Parent co. revenues % % % % % % Brazilian subsidires revenues % % % % % Net sales % % % 1, % 1, % % change % 9.5% 2.1% 2.0% 5.0% -5.7% Operating costs % % % % % % Parent co. BITDA Brazilian subsidires BITDA Consolidated BITDA % % % % % % change % 10% 5% 2% 3% -3% Depreciation & provision % % % % % % Amortization of goodwill 0 0.0% % % % % % BIT % % % % % % change % 9% 5% 2% 3% -5% Financial income (costs) % % % % % % Other income (costs) % 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% Pre-tax Profit % % % % % % change % -4% 5% 5% 5% -5% Tax % % % % % % Minority 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% Net profit % % % % % % change % -5% 6% 5% 5% -5% Adj. net profit % % % % % % change % -3% 5% 7% 5% -5% Source: uromobiliare SIM estimates CASH FLOW STATMNT Profit Before Minorities Depreciation Working Capital Provided by Operations (Increase in Working Capital) (Purchase of Capital Goods) (Net Purchase of Other Fixed Assets) (Total Purchase of Assets) (Distribution of Dividends) (80) (178) (188) (197) (208) Other (60) (13) (1) (Increase) Decrease in Net Debt Source: uromobiliare SIM estimates CAPITAL MPLOYD Fixed Investments 4,236 4,310 4,380 4,478 4,411 Intangible Assets Holdings Working Capital Capital employed 4,151 4,190 4,206 4,246 4,111 Source: uromobiliare SIM estimates IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

6 Terna August 5, COMPARISON WITH SNAM RT GAS (SRG) Terna s characteristics are similar to those of SRG for the following reasons: 1. Both companies are natural monopolists in anti-cyclical businesses with very similar forecast volume growth rates in future years (2.5% CAGR up to 2010) 2. Terna has a more stable regulatory scenario since its current regulatory period ends in SRG will instead start negotiation for renewal of its regulation only in 2H04. We expect SRG s current return of 7.94% to be reduced. In the worst of cases it will be the same as that of Terna, but certainly not lower, since SRG has a higher beta than Terna. Applying the same criteria used by the regulator for Terna except for beta (0.83 vs. Terna s 0.55) SRG s return would be 7.7%. ALLOWD RTUN - TRNA Vs SRG Terna SRG - current SRG - using regulation Terna regulation Real Return Real Return Real Return WACC pre-tax 6.7% 7.9% 7.7% WACC post-tax 4.5% 4.8% 5.2% Ke - cost of equity 6.5% 5.9% 7.5% Kd - cost of debt 4.7% 6.3% 4.7% Beta levered Beta unlevered D/ 70% 48% 70% D 41% 32% 41% 59% 68% 59% Corporate tax rate 40% 40% 40% Tax shield on debt 33% 37% 33% Source: uromobiliare SIM estimates 3. The regulator as assured Terna extra returns of 2% on development investments in the second regulatory period. This extra return should continue throughout the assets life. Already in its first regulatory period, the incentive system assured for SRG for its development capex is more attractive than that of Terna since it assures extra returns spread over 6 years (estimated to be about 5.5%/year on average). We believe that, for the second regulatory period, the Authority will maintain extra returns on development investments, since SRG is ready to invest 3.5 bn by the end of 2008, i.e. about 23% of RAB, whereas in Terna s case development capex is worth about 13% of RAB. 4. We estimate Terna s tax shield to be worth around 180 mn, i.e. about 5% of the company s value, whilst for SRG we estimate a figure equivalent to some 10% of the company s value. According to SRG management s indications, with inclusion of the 3.5 bn of development capex not included in our calculation, the tax shield s value would increase to over 1.2 bn. SRG s tax savings should thus be higher than those of Terna assuring, on the plus side, faster reduction of debt but, on the minus side, increasing risk in the eventuality of a change in tax regulations for the sector (apparently not been considered today by the Italian Government). 5. Lastly, as regards the two stocks overhang, the situation is very similar. Both NL and NI in fact have to reduce their respective interests in the two stocks to 20% by In Terna s case, however, a new placement could already take place during The prime minister s decree issued on May 11th this year establishes that Terna must merge with GRTN by the end of October 2005 and that NL s voting rights will be frozen at 5%. In theory, NL could therefore sell a 45% stake in Terna on the market by the end of 2005 even although it has to be underlined that one of the possible solutions on the table is apparently placement of some of these shares with the Cassa Depositi e Prestiti (Government controlled company) or with other institutional investors. We believe that Terna should trade at a bigger discount to RAB than SRG, since the latter has a more favourable regulatory set-up in terms of allowed return (7.94% vs. Terna s 6.7%) and extra returns on development investments and we do not expect this state of affairs to worsen in the second regulatory period. In addition, SRG s larger investment plan will, if approved, permit RAB growth at 5% CAGR in the period , as opposed to Terna s 4% CAGR. Today Terna trades at a 6% discount to its RAB vs. SRG s 5% discount. On the other hand, SRG has a more inefficient capital structure than Terna since its leverage (D/D+) is just under 30% as opposed to Terna s 32%. But we also believe that, during 2005, the company will purchase regulated businesses such as gas storage and distribution from NI, which would restore leverage to over 40%. IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT MULTIPL COMPARISON TRNA V/RAB - parent company 98% 94% 91% 88% Mkt Cap./RAB - parent company 97% 92% 88% 84% V/BITDA P/ adj Free cash flow yield 4.3% 6.5% 7.1% 5.9% Yield 4.9% 5.2% 5.5% 5.8% SRG V/RAB 98% 93% 87% 81% MKT CAP/RAB 97% 90% 84% 78% V/BITDA P/ adj Free cash flow yield 9% 8% 9% 13% Yield 5.5% 5.5% 5.5% 5.5% Source: uromobiliare SIM estimates

7 Terna August 5, VALUATION For the second regulatory period the regulator (the AG the Italian lectricity & Gas Authority) has assured Terna real pre-tax allowed return of 6.7%, obtained applied 41% leverage. We have transformed this return into a nominal post-tax return of 4.95%. The theoretical WACC obtained applying Terna s present market cap as weight for calculation of leverage and using the 10-year swap rate as the risk-free rate is 5.33%. This means that, in theory, at current prices Terna is destroying value at a rate of 18 mn/year. ALLOWD RTURN VS. WACC Real Nominal Nominal Note AG AG OURS WACC pre-tax 6.65% WACC post-tax 4.95% 5.33% Ke - cost of equity 6.45% 6.45% 6.62% Kd - cost of debt pre-tax 2.96% 4.66% 4.83% D/ 70.0% 70.0% 53.1% D/Mkt. cap. D 41% 41% 35% 59% 59% 65% Company tax rate 40.00% 40.00% 40% Tax shield on debt 33.00% 33.00% 33% Beta levered Rf - BTP 10 years 4.25% 4.25% 4.42% 10-year swap rate Source: uromobiliare SIM estimates We expect the increase of leverage to be achieved via payment of high dividends, in view of the probable placement of a second Terna tranche in Since the company has not given any precise indications on future payout, merely indicating that it would be in line with that of the sector, we have tried creating two different scenarios, assuming (Base case) an 85% payout (in the high range of the utility sector s average payout and at the top end (Best case) a 130% payout, implying total distribution in the period of the company s 400 mn of distributable reserves. 1. BAS CAS (PAYOUT = 85%) RAB 5,031 5,231 5,425 5,653 Spread Allowed return / Wacc -0.41% -0.31% -0.21% -0.07% value distruction to perpetuity Theorethical discount on RAB -8% -6% -4% -1% Dividends Pay-out 0% 85% 85% 85% Tax shield Brasilian assets - 20% discount to acq. price ngeneering activities nterprise value 5,381 5,783 6,023 6,386 net debt -1,729-1,674-1,607-1,590 quity Valuation 3,651 4,110 4,416 4,796 Number of shares (milion) 2,000 2,000 2,000 2,000 Per share Valuation ( ) Yearly-return 5% 13% 7% 9% Dividend per share ( cents) Dividend Yield 4.9% 5.2% 5.5% 5.8% Source: uromobiliare SIM estimates ven although the outright valuation does not change substantially in the two cases, the financial structure would manage to create value at the end of the period distributing the 400 mn of reserves. In addition, dividend yield in the period would settle at between 7.6% and 8.6%, undoubtedly making the stock attractive and virtually eliminating the risk of re-investment. IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

8 Terna August 5, BST CAS SCNARIO RAB 5,031 5,231 5,425 5,653 Spread Allowed return / Wacc -0.46% -0.26% -0.05% 0.19% value distruction to perpetuity Theorethical discount on RAB -9% -5% -1% 4% Dividends Pay-out 0% 130% 130% 130% Tax shield Brasilian assets - 20% discount to acq. price ngeneering activities nterprise value 5,341 5,934 6,296 6,796 net debt -1,729-1,768-1,794-1,888 quity Valuation 3,611 4,166 4,502 4,907 Number of shares (milion) 2,000 2,000 2,000 2,000 Per share Valuation ( ) Yearly-return 5% 15% 8% 9% Dividend per share ( cents) Dividend Yield 7.6% 8.0% 8.3% 8.6% Source: uromobiliare SIM estimates Based on a DCF-based valuation obtained applying a 5% discount to RAB at the end of the period, we get a value for Terna of some 1.96 per share, which does not reflect any leverage effect relating to dividend policy. DISCOUNTD FCF ANALYSIS New RAB Sales New RAB 5,653 BITDA margin 67% 67% 68% 69% xpect. Discount -5% BIT margin 46% 47% 47% 48% Valuation 5,371 Discount factor 1.18 Tax Rate 41% 40% 40% 40% Current valuation 4,565 BITDA BIT Taxes on BIT Depreciation & Amortisation Operating Cash Flow (1) Replacement Fixed Capex Incremental Fixed Capex Increase in Working Capital Total Investments (2) Operating FCF (1+2) Operating Free Cash Flow after minorities Discount Factor PV of Free Cash Flow Discount Rate 5.6% PV of Free Cash Flow 522 Gross Debt (%) 33% PV of third regulated period RAB 4,565 quity (%) 67% Tax shield 185 Cost of debt 5.10% Brasilian assets - 20% discount to acq. price 456 Beta 0.55 nterprise Value 5,729 Risk Premium 4.0% Net Debt 12/03-1,806 Risk free rate 4.4% Source: uromobiliare SIM estimates quity Valuation 3,923 Number of shares (milion) 2,000 Per share Valuation ( ) 1.96 upside 9% Pending information on management s intentions concerning dividend/acquisition policy which we consider to be the most sensitive and interesting variable for Terna s valuation - we are starting our coverage of the stock with a neutral recommendation and a target price of 1.96 per share. IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

9 Terna August 5, MAIN FIGURS ( mn) 2002 % 2003 % 2004 % 2005 % 2006 % Sales n.a , Change 9.5% 2.1% 2.0% BITDA n.a Change 10.4% 4.7% 2.0% BITA n.a Change 10.4% 4.7% 2.0% BIT n.a Change 9.4% 5.5% 1.9% Pre Tax Inc. n.a Change -4.5% 5.3% 4.9% Net Income n.a Change -5.1% 5.7% 5.1% Free cash flow n.a Change 4.3% 6.5% 7.1% FINANCIAL FIGURS Cap. xp. n.a NWC n.a Net Fin. Pos. n.a. -1,806-1,729-1,674-1,607 D/ n.a. 102% 91% 86% 81% Cap. employed n.a. 4,135 4,151 4,190 4,206 ROC n.a. 4% 7% 7% 7% PR SHAR DATA ( cent) ps n.a Change -5.1% 5.7% 5.1% Adj ps n.a Change -2.6% 5.2% 6.7% Dividend ord. n.a MARKT RATIOS P n.a Adj P n.a PBV n.a Yield ord. n.a. 0.0% 4.9% 5.2% 5.5% FCF yield n.a. 4.7% 4.3% 6.5% 7.1% V FIGURS DISCOUNTD FCF ( mn) Sales BITDA margin 67% 67% 68% 69% Depreciation & Amortisation Operating Cash Flow (1) Replacement Fixed Capex Incremental Fixed Capex Total Investments (2) Operating FCF (1+2) New RAB 5,653 xpect. Discount -5% Valuation 5,371 Discount Rate 5.5% PV of Free Cash Flow 523 PV of third regulated period RAB 4,576 Tax 90% 182 nterprise Value 5,736 quity Valuation 3,931 Number of shares (milion) 2,000 Per share Valuation ( ) 1.97 ALLOWD RTUN - TRNA Vs SRG Terna SRG - curr. SRG - using Real regulation Terna regulation Return Real Return Real Return WACC pre-tax 6.7% 7.9% 7.7% WACC post-tax 4.5% 4.8% 5.2% Ke - cost of equity 6.5% 5.9% 7.5% Kd - costo of debt 4.7% 6.3% 4.7% Beta levered Beta unlev ered D/ 70% 48% 70% D 41% 32% 41% 59% 68% 59% Corporate tax rate 40% 40% 40% Tax shield on debt 33% 37% 33% ITALIAN POWR GRID V/Sales n.a V/BITDA n.a Power lines Power plants V/BIT n.a Total national grid 42, V/C n.a Portion of grid owned by Terna 37, Source: uromobiliare SIM estimates IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT

10 Terna August 5, This publication has been prepared by Stefano Gamberini In the past uromobiliare SIM has published studies on Terna DISCLAIMR uromobiliare SIM is distributing this publication to some 500 qualified operators and to unqualified operators by mail and electronic communications systems as from October 4, uromobiliare SIM intends to provide continuous coverage of the financial instrument forming the subject of the present publication, with a semiannual frequency and, in any case, with a frequency consistent with the timing of the issuer s periodical financial reporting and of any exceptional event occurring in the issuer s sphere of activity. The information contained in this publication is based on sources believed to be reliable. Although uromobiliare SIM makes every reasonable endeavour to obtain information from sources that it deems to be reliable, it accepts no responsibility or liability as to the completeness, accuracy or exactitude of such information uromobiliare SIM has adopted internal procedures able to assure the independence of its financial analysts and that establish appropriate rules of conduct for them. However, it is pointed out that uromobiliare SIM SpA is an intermediary licensed to provide all investment services as per Italian Legislative Decree no. 58/98. Given this, uromobiliare SIM might hold positions in and execute transactions concerning the financial instruments covered by the present publication, or could provide, or wish to provide, investment and/or related services to the issuers of the financial instruments covered by this publication. Consequently, it might have a potential conflict of interest concerning the issuers, financial issuers and transactions forming the subject of the present publication. As on today s date it has been ascertained that, as regards the listed companies covered by the present publication, the Credem group (to which uromobiliare SIM belongs) does not have relationships of control or major shareholdings, either direct or indirect, with/in the same. However, Credem group could provide them with corporate finance services, could have issued financial instruments linked to the issuers stock and could have directors who are members of the issuers corporate bodies. In addition, it is pointed out that, within the constraints of current internal procedures, uromobiliare SIM s directors, employees and/or outside professionals might hold long or short positions in the financial instruments covered by this publication and buy or sell them at any time, both on their own account and that of third parties. The purpose of this publication is merely to provide information that is up to date and as accurate as possible. The publication does not represent to be, nor can it be construed as being, an offer or solicitation to buy, subscribe or sell financial products or instruments, or to execute any operation whatsoever concerning such products or instruments. uromobiliare SIM does not guarantee any specific result as regards the information contained in the present publication, and accepts no responsibility or liability for the outcome of the transactions recommended therein or for the results produced by such transactions. ach and every investment/divestiture decision is the sole responsibility of the subject receiving the advice and recommendations, who is free to decide whether or not to implement them. Therefore, uromobiliare SIM and/or the author of the present publication cannot in any way be held liable for any losses, damage or lower earnings that the subject using the publication might suffer following execution of transactions on the basis of the information and/or recommendations contained therein. The estimates and opinions expressed in the publication may be subject to change without notice. IMPORTANT DISCLOSURS APPAR AT TH BACK OF THIS RPORT