TERNA'S BOARD OF DIRECTORS: RESULTS AT 30 JUNE 2017 APPROVED

Transcription

1 TERNA'S BOARD OF DIRECTORS: RESULTS AT 30 JUNE 2017 APPROVED Revenues at 1,046.9 million ( 1,039.9 million in 1H16, +0.7%) EBITDA at million ( 777 million in 1H16, +2.3%) EBIT at 534 million ( million in 1H16, +4.7%) Group s net profit for the period at million ( million in 1H16, +8.2%) Net financial debt at 7,941.7 million, down by 17.2 million vs. year end 2016 Rome, 27 July 2017 Results of the period, illustrated by the Chief Executive Officer Luigi Ferraris, were examined and approved by the Board of Directors of Terna S.p.A. ( Terna ), at a meeting held today, chaired by Catia Bastioli. The results achieved in the first half of the year confirm the economic and financial stability of the Group and represent a solid basis for an acceleration of our investment plan, above all in Italy, as well as the evaluation of an improvement in the current dividend policy said CEO, Luigi Ferraris. We will also continue to look for growth opportunities abroad, always keeping a strict financial approach and limited capital absorption. SUMMARY OF THE FIRST HALF 2017 CONSOLIDATED RESULTS million 1H H 2016 % change Revenues 1, , % EBITDA (Gross Operating Margin) % EBIT (Operating Profit) % Group net profit for the period % Revenues in the first half of 2017, of 1,046.9 million, recorded an increase of 7 million (+0.7%) compared to the same period in Operating expenses were million, down by 10.8 million compared to the first half of 2016 (-4.1%).

2 EBITDA (Gross Operating Margin) of the period, therefore, came out at million, up by 17.8 million (+2.3%) compared to 777 million in the first half of Amortisation, depreciation and impairment of the period were million and fell by 6.4 million compared to the corresponding period of 2016, mainly due to lower depreciation related to a review of the useful life of the electricity lines, partially offset by the entry into operation of new plants. EBIT (Operating Profit) came out at 534 million, compared to the million of the first six months of 2016 (+4.7%). Net financial expense was 39.6 million, an increase of 3.4 million compared to the 36.2 million in the first half of Profit before taxes came out at million, up by 20.8 million (+4.4%) compared to the first half of Income taxes amounted to million and fell by 6.8 million compared to the corresponding period of 2016 (-4.5%) essentially due to a reduction of the IRES (corporate income tax) rate from 27.5% to 24% for Therefore, the tax rate for the period fell to 29.1% compared to the 31.8% of the first half of The Group net profit for the period came out at million, up by 26.5 million compared to the of the first half of 2016 (+8.2%). Total investments made by the Terna Group in the first six months of 2017, million, were in line with the Guidance 2017 of the Strategic Plan, and compared with the million of the first half of the previous year. The main projects for the period included progress in the Italy-Montenegro and Italy-France electrical interconnections, and the completion of the electrical connection between Capri and the Italian peninsula (finished at the end of June 2017), as well as in the Venetian Lagoon.

3 Net financial debt came out at 7,941.7 million, down by 17.2 million compared to 31 December 2016 ( 7,958.9 million), mainly thanks to the strong operating cash flow generation. The consolidated statement of financial position at 30 June 2017 showed equity attributable to shareholders of the parent of 3,621.3 million, compared to 3,535.4 million at 31 December The Group s employees, at the end of June 2017, totalled 3,931, up by 62 compared to 31 December This increase is primarily attributable to the recruitment policy for internalisation of the infrastructure management acquired from FSI. SIGNIFICANT EVENTS IN THE FIRST HALF OF 2017 Sustainability Sustainability plays a central role in Terna s investment plan, to the benefit of stakeholders and to support the Group s growth strategy. In January 2017 Terna was included in the Silver Class of the RobecoSAM Sustainability Yearbook 2017 of the Electric Utilities sector. During the first half of 2017, Terna was confirmed in all the indices that update the composition of the respective baskets in the reference period, i.e. Ethibel (ESI), Euronext-Vigeo and FTSE4GOOD. Management and development of the NTG On 14 February 2017, the Ministry of Economic Development issued the new authorisation decree no. EL-146 bis Udine Ovest Redipuglia. On 31 March 2017, as part of the expansion in the Benevento area and the connection of renewable energy plants, the Benevento III electrical substation was activated. On 1 June 2017, Terna presented the Rationalisation of the high-voltage grid in the areas of Venice and Padua project to the Technical Committee for Evaluation of Environmental Impact

4 of the Ministry of the Environment and the Protection of Land and Sea, as part of the authorisation procedure for the works. On 27 June 2017, the connection of the Island of Capri to the Italian peninsula came into operation. Non-Regulated and International Activities On 26 May 2017, Terna Plus was awarded the contract put out to tender by Proinversiòn (state agency for infrastructural investment controlled by the Peruvian Ministry of Energy and Mines) for the construction of a power line in Peru, extending 132 km, between Aguaytìa and Pucallpa. On 2 June 2017, on the occasion of the St. Petersburg International Economic Forum SPIEF 17, Terna and the Russian company Rosseti signed a non-binding MoU for a 36-month period, for the exchange of know-how, best practices and cooperation in certain key technological areas in the electricity-transmission sector, including storage and the integration of renewables, as well as the identification of advanced solutions in the context of planning and constructing High- Voltage networks and their management by automatic systems. On 26 June 2017, in Brazil an agreement with the Planova Group (a Brazilian company operating in the construction of civil works and infrastructure) was finalised with the aim of acquiring two concessions for the construction and operation for a 30-year period of approximately 500 km of electricity infrastructure. Following the signing of the agreement on 2 February 2017, the operation was completed through the subsidiary Terna Plus and resulted in the acquisition of two Brazilian vehicle companies (SPVs), SPE - Santa Maria Transmissora de Energia S.A. and SPE - Santa Lucia Transmissora de Energia S.A. Finance On 6 March 2017, Fitch Ratings confirmed the long-term rating of the issuer (IDR) and the rating of the unsecured senior debt of Terna SpA at 'BBB+', with Outlook Stable. At the same time, the Agency confirmed also the short-term rating of the issuer at F2.

5 On 21 June 2017 the final dividend for 2016 of 269,137, ( for each of the 2,009,992,000 shares) was made payable. On 27 June 2017, Terna S.p.A. signed an agreement with the European Investment Bank (EIB) for a 22-year loan of 85 million, in order to support investments for the development of the Capri-Continental connection and the restructuring of the Sorrento Peninsula, which involves the replacement of the current 60 kv network with a new 150 kv network. The agreement includes a fixed-rate tranche at 1.386% for a total of million, and a variable-rate tranche, subject to certain conditions, equal to EURIBOR 6m %, for a total of million. Security On 31 January 2017 Terna became the first company in Italy to obtain anti-corruption certification according to the new international regulation ISO 37001:2016 Anti-bribery management systems. SIGNIFICANT EVENTS AFTER 30 JUNE 2017 On 4 July 2017 the company Piemonte Savoia S.r.l. was sold to the Interconnector Italia SCpA syndicate. The agreements signed also relate to the construction and operation of the private part of the Italy-France interconnection. On 14 July 2017, Terna signed the Project Finance agreement for 81 million USD for the construction of a 500-kV transmission line in Uruguay, to connect the cities of Melo and Tacuarembó. The funding has been qualified as a green loan by Vigeo Eiris, an agency specialised in the assessment of sustainability in the field of business strategy and management, due to the positive impact of the new transmission line on electricity generation from renewables in Uruguay. On 19 July 2017 Terna launched successfully a fixed rate bond for a total of 1 billion as part of its Euro Medium Term Notes (EMTN) Programme of 8,000,000,000, which has been attributed a BBB rating by Standard and Poor s, (P)Baa1 by Moody s and BBB+ by Fitch. The operation is part of Terna s financial optimisation programmes serving the Group's investment plan, designed to modernise the electricity grid and create a transmission grid that is even more sustainable,

6 efficient and interconnected at European level. The bonds, with a duration of 10 years and maturity on 26 July 2027, will pay a coupon of 1.375%, and were issued at a price of %, with a spread of 50 basis points with respect to the midswap (the Bonds ). The bonds have been admitted to listing on the Luxembourg stock exchange. On 21 July 2017 Terna signed an agreement with the European Investment Bank (EIB) for a 130 million euro loan to support investments for the public part of the "Piemonte-Savoia project, the new 320 kv DC electrical interconnection that will link Italy and France. The loan, with a term of 22 years, provides for a single tranche at a fixed rate of 1.64%. On 25 July 2017 Terna, through its subsidiary Terna Plus, and Avvenia formalised a partnership, with the aim to identify and implement new commercial opportunities for services and work involving energy efficiency. This partnership allows Terna to further strengthen its role as a 360- degree integrated energy services provider, paying increasing attention to energy efficiency, and to enrich its offer of innovative solutions as an Energy Solutions Provider. BUSINESS OUTLOOK In the second half of the year Terna Group will continue to pursue its own strategic objectives, focusing on the development of the grid to enhance the integration of renewables and improve the system security while also accelerating the renewal of its own assets, with the aim of mitigating service-outage risk, increasing environmental sustainability and supporting maintenance through the use of digital grid technologies. With specific reference to the National Transmission Grid, approximately 0.9 billion of capital expenditure is planned by the end of the year. Among the key electricity infrastructure projects currently underway, the interconnections with Montenegro and France, due to enter into service in 2019, are particularly important. In the second half of the year, the Udine Ovest-Redipuglia 380 kv power line designed to optimise the Friuli electricity system is due online, bringing the additional benefit of a lower risk that energy will not be supplied and increasing the security of cross-border exchanges with Eastern Europe. Furthermore, in the context of activities to reduce congestion with the aim of improving the security and reliability of high user-density networks, the activities in the city of Palermo are due for completion.

7 With reference to Non-Regulated and International Activities, Terna plans to consolidate its industrial approach based on Group s key skills, thus increasing Terna s position as an Energy Solution Provider and focusing on value creation through activities for third-parties in the areas of engineering, construction and maintenance services, mainly for the electricity and telecommunications sectors. As for international activities, in the second half of the year, Terna will start the construction of power lines in Uruguay, Brazil and Peru, for a total length of over 850 km and a total invested capital of around 260 million for the period. In addition, the Group will continue to scout for possible international opportunities which may also be developed through partnerships and will be selected through careful evaluation processes to guarantee a low risk profile. As in previous years, the Group will maintain its focus on cost-excellence programmes, continuing to improve its operating processes and rationalise costs, also regarding the integration of the grid acquired from the FSI Group. PAYMENT OF 2017 INTERIM DIVIDEND The amount of the 2017 interim dividend will be announced to the Market in the coming months. The current projected dates for the 2017 interim dividend notified to the market in a press release of 30 January 2017 set the payment date as 22 November, with ex-dividend date at 20 November 2017 (pursuant to Article 83-terdecies of Italian Legislative Decree no. 58 of 24 February 1998 the CLF : 21 November 2017). Today, at 2.30 p.m. (CEST) a conference call will be held to illustrate the 2017 interim results to financial analysts and institutional investors. Journalists may also connect in listening mode. The supporting material for the conference call will be available on the Company's website ( in the Investor Relations/Presentations section at the starting time of the conference call. In the same section it will also be possible to follow the presentation via audio webcasting. The Presentations will also be made available, via emarket SDIR, on the website of Borsa Italiana S.p.A. ( and of the authorised storage service "1Info" ( The Executive in Charge of Preparing the Company s Financial Reports, Tiziano Ceccarani, pursuant to paragraph 2 of Art. 154-bis of the Consolidated Law on Finance (TUF), declares that the accounting information included in this press release corresponds to the document results, books and accounts records. The Interim Financial Report at 30 June 2017, with the certification required by Article 154 bis, paragraph 5 of Italian Legislative Decree 58/98 (Consolidated Law on Finance) and the report by the audit company, will be made available to the public at the Company s registered office, published on the Company's website ( and on the internet site of the authorized storage service "1Info" ( and filed with

8 the stock exchange management company Borsa Italiana S.p.A. ( The prescribed disclosure regarding the filing will be issued. The reclassified Consolidated Income Statement, Statement of Financial Position and Statement of Cash Flows of the Terna Group are attached. It should be noted that, pursuant to Communication No. DME/ of 16 September 2009, the reclassified statements presented below are those included in the Interim Report on Operations at 30 June 2017, included in the interim financial report of the Terna Group at 30 June 2017, for which the Independent Auditing Company, in compliance with Article 14 of Italian Legislative Decree No. 39 dated 27 January 2010 will verify consistency with the Condensed Consolidated Interim Financial Statements. In this release, some "alternative performance measures" (EBITDA and Net Financial Debt) are used, whose meaning and contents are explained below pursuant to ESMA/2015/1415 guideline published on 03 December EBITDA (Gross Operating Margin): this is a measure of operating performance; it is calculated by combining the operating profit (EBIT) with amortisation, depreciation and impairment. - Net Financial Debt: this represents a measure of the company s financial structure; it is determined as the sum of the short- and longterm financial debts and the related derivative instruments, net of cash and cash equivalents and of financial assets.

9 Terna Group reclassified income statement million 1H2017 1H2016 Δ Δ % TOTAL REVENUE 1, , Transmission fee (1) Dispatching and other (1) Other operating revenue (15.8) (14.8) of which other revenue from Regulated Activities(1) (4.8) (29.1) of which revenue from Non-Regulated Activities (11.0) (12.2) - IFRIC 12 effects (2) (1.5) (21.1) TOTAL OPERATING EXPENSES (10.8) (4.1) - Personnel Services, leases and rentals (10.4) (12.4) - Materials (6.1) (15.7) - Other expenses (4.2) (26.3) - Quality of service Costs from construction activities under concession (2) (1.5) (21.1) EBITDA (GROSS OPERATING MARGIN) Amortisation, depreciation and impairment (6.4) (2.4) EBIT (OPERATING PROFIT) Net financial income/(expense) (39.6) (36.2) (3.4) 9.4 PROFIT BEFORE TAXES Income taxes for the period (6.8) (4.5) NET PROFIT FOR THE PERIOD Profit attributable to non-controlling interests (0.8) (1.9) 1.1 (57.9) GROUP NET PROFIT FOR THE PERIOD (1) Revenue from Regulated Activities (totalling million in 1H2017). (2) Recognised pursuant to IFRIC 12 Service Concession Arrangements.

10 Terna Group reclassified statement of financial position million at at Δ Total Net Non-Current Assets 13, , Intangible assets and goodwill (11.5) - Property, plant and equipment 12, , Financial assets Total net working capital (1,109.4) (1,092.5) (16.9) - Net energy-related pass-through payables (599.1) (545.9) (53.2) - Net receivables from margin energy items Net trade payables (487.8) (633.5) Net tax liabilities (6.7) 52.0 (58.7) - Other net liabilities (369.1) (307.1) (62.0) Gross invested capital 11, , Provisions (363.2) (384.6) 21.4 NET INVESTED CAPITAL 11, , Equity attributable to shareholders of the parent 3, , Non-controlling interests (0.8) Net financial debt 7, ,958.9 (17.2) TOTAL 11, ,

11 Terna Group Cash Flow million Cash flow 1H 2017 Cash flow 1H Net profit for the period Amortisation, depreciation and impairment Net change in provisions (21.4) Net losses (gains) on asset disposals (0.2) (2.0) Operating Cash Flow Change in net working capital 16.9 (136.2) - Other changes in non-current assets Changes in equity investments (1.9) (0.4) Cash Flow from Operating Activities Total investments (325.7) (346.9) Free Cash Flow Dividends paid to the owners of the Parent (269.1) (261.3) Cash flow hedge reserve net of the tax effect and other changes in equity attributable to the owners of the Parent 3.7 (19.0) Change in net financial debt 17.2 (169.6)