January 2019 INVESTOR PRESENTATION INVESTOR. November 2018 PRESENTATION

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1 INVESTOR PRESENTATION November 2018 INVESTOR January 2019 PRESENTATION

2 REN s Equity Story Industry-leading energy infrastructure operator in Portugal with best-in-class efficiency and service quality Solid domestic business with stable regulatory framework and financial strategy Business profile strengthened during Robust business plan grounded on a stable financial position with investment grade credit metrics Attractive shareholder return underpinned by stable dividend policy 2

3 70-year track record as a leading energy infrastructure operator in Portugal Foundation of CNE (National Electricity Company) Foundation of REN Rede Eléctrica Nacional, S.A. (EDP s business unit spin-off) 2 nd privatization phase (State Grid of China 25%; Oman Oil 15%) 2 nd privatization phase concluded (sale of Portuguese State s 11% stake) Acquisition of Galp NG underground storage assets Electricity 50-year concession granted Portuguese State acquired a 70% stake 2012 Acquisition of natural gas transmission assets to Galp Natural gas 40-year concession granted 1 st privatization phase (IPO) New electricity concession until Acquisition of 42.5% of Electrogas in Chile Acquisition of NG distribution company EDPG First share capital increase 3

4 The sole electricity and natural gas TSO and the holder of the second-largest natural gas distribution concession Electricity Sole Transmission System Operator (TSO) Transmission of high voltage electricity and overall technical management of the system Concession until 2057 Natural Gas Sole TSO (concession until 2046) Transportation of high-pressure natural gas and overall technical management of the system Reception, storage and regasification of LNG and underground storage of natural gas In 2017, REN acquired the second-largest gas distribution network Generation Transmission Distribution Supply Import Transmission, Storage and LNG Terminal (1 of 11 concessions) Distribution Supply Regulated Activities Regulated Activities RAB ( M, Sep 2018) RAB ( M, Sep 2018) Network (Km, 2017) Network (Km, 2017)

5 Stable shareholder base with renowned investors from the industry Shareholder structure 2012 Shareholder structure % 1) Other investors 17.0% 0.6% 25.0% Other investors 38.3% 25.0% Columbia Wanger 2.0% 5.0% Oliren 5.0% 5.0% 15.0% 12.0% 5.8% 8.4% EGF 9.9% 1) 0.6% 2.1% 4.8% 5.0% 5.3% 7.0% 1) State-owned; 2) October

6 Best-in-class corporate governance Board composition Special committees and supervisory bodies 3 Executive Committee 3 Audit Committee (Independent) Remuneration Corporate governance 5 Other 12 BOARD MEMBERS 1 Independent Nomination and Appraisal Audit Committee Statutory Auditor 6

7 Social and environmental engagement at the core of REN s values and initiatives REN s Sustainability Strategy Achievements Promote internal wellbeing Equality of gender 30% of women in 1 st line management positions until 2018; 125% increase of women in top management positions since 2008 Training training hours in 2016; 43,78 training hours per employee in 2016 Contribute to the community REN Award Award to the best master theses in energy in Portugal AGIR Award Support projects which solve social problems MEDEA Project Nacional contest in the area of electromagnetic fields SHARE Program REN corporate volunteer program Promote environmental protection Heroes of all species Educational program on biodiversity for 3rd and 4th grade students Reforestation program Reforestation of right of way passages with native species (Online Annual Report) (REN s APP) (Investors APP) ( Europe, best overall investor (Online interactive relations) Annual Report) 1. Award to REN s project for the "conversion of easement corridors" (Energy APP) (Mobile APP REN) (REN s APP) (Online interactive Annual Report) (2016 Annual Report; REN s App) (Good Practice of the Year-Environmental Protection category 1 ) 7

8 REN s Equity Story Industry-leading energy infrastructure operator in Portugal with best-in-class efficiency and service quality Solid domestic business with stable regulatory framework and financial strategy Business profile strengthened during Robust business plan grounded on a stable financial position with investment grade credit metrics Attractive shareholder return underpinned by stable dividend policy 8

9 Fully regulated domestic business Regulatory framework Stable regulatory framework 3-year regulatory periods, during which the relevant parameters remain stable Stability is a guiding principle of the regulation No consumer credit risk Tariff revenues are not dependent on State payments Transmission/transportation operators do not have consumer credit risk Key regulatory stakeholders Allowed revenues Allowed revenues assure cost of capital remuneration and recovery of costs through revenue cap (allows REN to obtain efficiency gains by being below the revenue cap set by the regulator) Earned via tariffs charged to final consumers by suppliers Ministry of Economy Setting the energy policies and their implementation ERSE Energy independent regulator, responsible for setting tariffs DGEG Design policies on energy and geological resources 9

10 Transparent and stable return mechanism Base RoR indexed to the average Portuguese government 10-Y bond yields RoR starting point set at the beginning of the regulatory period and adjusted annually RoR indexation mechanism 9.30% 9.00% 9.50% Electricity Transmission ( ) Natural Gas Transmission ( ) Natural Gas Distribution ( ) Cap 9.50% 9.00% 9.30% 6.20% 5.70% 5.90% 5.40% Starting point 5.50% 5.90% 6.20% 4.50% 5.50% Floor 4.50% 5.40% 5.70% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% Avg. 10-Y PT 0.822% 2.7% % Gov. bond yields Base RoR evolution % 7.48% 5.99% 7.20% % 6.70% % 6.02% 6.32% 9M % 5.52% 5.82% 10

11 Solid domestic business with stable financial performance Average RAB ( M) 3,382 3,490 3,529 3,580 3,537 3,925 REN s core business benefits from a stable regulatory context leading to stable results CAPEX ( M) EBITDA ( M) Net income and extraordinary levy ( M) Extraordinary levy Net income

12 REN s Equity Story Industry-leading energy infrastructure operator in Portugal with best-in-class efficiency and service quality Solid domestic business with stable regulatory framework and financial strategy Business profile strengthened during Robust business plan grounded on a stable financial position with investment grade credit metrics Attractive shareholder return underpinned by stable dividend policy 12

13 Strengthened business profile First Portuguese company recovering the investment grade in the three main rating agencies after the crisis Investment in natural gas distribution in Portugal allowing REN to vertically diversify its business portfolio in the natural gas value chain First international investment completed with success in 2017 through the acquisition of 42.5% of the Chilean natural gas operator Electrogas Capital increase of 250 M strengthening REN s strong capital structure 13

14 Debt management policy allowed to optimize financial costs Average cost of debt (%) Financial costs ( M) 4.7 REN s peers REN % REN was able to decrease its average cost of debt at a faster pace than other European TSOs REN already captured the effect of interest rates decrease on financial costs, anticipating future losses due to regulated returns adjustment 14

15 Stable credit profile with investment grade credit metrics Gross debt maturity profile (9M 2018, M) 2, Gross debt funding sources 1 (9M 2018) Commercial paper Banks 16% Bonds EIB 6% 13% REN s credit rating (April 2018) (April 2017) BBB Stable outlook Baa3 Stable outlook -1,882 Total gross debt 2 66% (October 2018) BBB Stable outlook Recently upgraded Maturity slightly extended by taking advantage of market conditions 4.63 years (9M 2018) REN s goal is to maintain its liquidity over two years years (9M 2018) The three major rating agencies have been reaffirming REN s rating as investment grade 1) Fixed/variable rates: 62%/38%; 2) Adjusted by interest accruals and hedging on yen denominated debt; 3) European Investment Bank; 4) Cash and bank deposits and undrawn committed credit facilities that are available to cover all funding needs for at least the following two years 15

16 First international investment successfully completed in 2017 through the acquisition of Electrogas Electrogas On February 7 th 2017, REN acquired 42.5% of Electrogas from Enel Impact on REN (2017) Acquisition price ($M) 180 Electrogas operates a (i) a km natural gas and a (ii) 20.5 km diesel oil pipeline The only gas pipeline connecting Quintero s regasification terminal to Chile s largest population centre (Santiago) Established long-term take-or-pay gas transportation contracts Dividends received ( M) EBITDA 1 ( M) Key customers comprise blue-chip electricity generators, industrial companies and major local gas distribution players Shareholder structure (state-owned) 15.0% 42.5% 42.5% 1) Including one-off costs of 1.2 M 16

17 Recently expanded to the Portuguese natural gas distribution activity Distribution market The natural gas distribution market in Portugal is comprised of 11 regional companies All the companies operate under exclusive regional concessions Portgás (acquired in October 2017) Second-largest gas distribution concession in Portugal Provides services in the coastal region of Northern Portugal Operates under a 40-year concession contract (ending in January 2048) km Network (June 2018) Supply via Autonomous Gas Units Distribution Network Connection points (June 2018) 7,182 GWh Distributed gas (in 2017) Transmission network Distribution network Natural gas area of influence 17

18 Portgás integration into REN s Group as well as its performance in line with planned Integration status Organizational structure Portgás will continue to work as an independent business unit, as required by law Financial performance EBITDA ( M) 48 EBITDA reduction due to regulatory review with impact on RoR reduction 42-13% REN has appointed a new Board of Directors, adding two of its own seasoned managers (the President and one Director) to the existing CEO and CFO Migration of shared services Average RAB ( M) In line with expected, REN will be migrating IT support systems and other support functions until the first half of % Implementation of new branding REN recently launched new Portgás brand

19 New businesses allowed to offset the decrease in domestic transmission businesses EBITDA ( M) Portgás Electrogas +10% New businesses allow REN to pave the way for future growth 2014 Average RAB ( M) ,529 3,580 3, , Proforma % 3, Expected sustained RAB growth in Natural Gas Distribution 21.7% of total households in Portugal (vs. 20.4% of Lisboagás 3 ) 26.4% of gas penetration rate (vs. 45.3% of Lisboagás 3 ) Concession region has colder weather, favouring higher energy demand 1) As reported. Includes 3 months of Portgás consolidation; 2) Including 12 months of Portgás consolidation; 3) Lisbon metropolitan area concession Connection points are expected to grow 4% per year until

20 REN s Equity Story Industry-leading energy infrastructure operator in Portugal with best-in-class efficiency and service quality Solid domestic business with stable regulatory framework and financial strategy Business profile strengthened during Robust business plan grounded on a stable financial position with investment grade credit metrics Attractive shareholder return underpinned by stable dividend policy 20

21 Renewed strategic guidelines for Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 21

22 Core business remains on the top of REN s priorities Domestic organic CAPEX ( M) ~ expected to be lower than average Ponte de Lima- Famalicão (line) ~ ~40 ~50-70 Replacement Expansion Natural gas underground storage (compression upgrade) Vieira do Minho-R. Pena-Feira axis (line and substation) ~10 ~ yearly average per year Electricity Gas transmission Gas distribution Falagueira-Estremoz- Divor-Pegões axis (line and substation) Fundão-Falagueira axis (line and substation) REN in planning to invest > 500M in the network in Portugal until

23 Investment in additional growth opportunities fitting REN s DNA Inorganic investments ( M) 4Q 2017: 100% of EDP Gás (Portgás) Up to 400 Clear focus on Portugal and Regulated Assets while also considering further incremental opportunities/ investments in LatAm 1Q 2017: 42.5% stake in Electrogas : underground gas storage Any potential upside on domestic CAPEX will always be the top priority for REN 23

24 Disciplined growth framework Keep growth path in light of market opportunities and leveraging strong track record Regulated assets/ long-term contracts Attractive risk-return profile Leveraging REN s know-how Pace set to maintain credit rating 24

25 Total asset base will remain stable Transmission business evolution offset by Portgás and new investments Avgerage RAB 1 ( B) Holdings ( B) Gas 1.1 Electricity Portgás up to 400 M Total assets ( B) ) Historical costs; 2) REE and HCB; 3) REE, HCB and Electrogas 25

26 Debt management priorities focused on cost of debt optimization and net income protection Tools Optimize cost of debt Protect net income Fixed vs. floating rates Maturity Liquidity buffer Allows for flexibility to grow while ensuring performance 26

27 Net income protection by aligning debt management with regulated revenues profile Net income 1 Avg. cost of debt (%) Electricity base RoR (%) Locking in costs at very low rates Rapidly adjust the cost of debt to an improving market environment Benefiting from the spread to RoR floor or from future potential for RoR increase Save costs through arbitrage between funding sources Close alignment of debt maturities with the regulatory cycles M Manage liquidity coverage efficiently by utilising undrawn facilities 1) Excluding extraordinary levy 27

28 Solid financials Consistent financial performance yearly average per year ~ EBITDA ( Mn) Net income ( Mn) Free Cash Flow 1 ( Mn) Net debt ( Bn) Attractive shareholder return Dividend ( /share) 1) FCF before inorganic growth and dividends = EBITDA cash - Delta WK - Taxes - Organic capex - Net interest paid + Dividends received 28

29 REN s Equity Story Industry-leading energy infrastructure operator in Portugal with best-in-class efficiency and service quality Solid domestic business with stable regulatory framework and financial strategy Business profile strengthened during Robust business plan grounded on a stable financial position with investment grade credit metrics Attractive shareholder return underpinned by stable dividend policy 29

30 Compelling returns to shareholders Cumulative Total Shareholder Return 1 since REN s IPO, indexed from 100 Overall 10y Performance 83% Eurostoxx Utilities (9%) PSI20 (43%) REN dividends paid ( /per share) Source: REN, Bloomberg 1) Total Shareholder Return = (Stock price end of period - Stock price beginning of period + Dividends) / Stock price beginning of period 30

31 supported by a stable dividend per share REN has been delivering a stable and attractive remuneration to its shareholders Dividend per share ( ) Avg Dividend yield (December 2018; %) E 2019E 2020E 2021E TS0 4 TS0 5 Euro Stoxx Utilities Source: Factset, Company information 31 TS0 1 TS0 2 TS0 3

32 Closing Remarks REN benefits from a stable regulatory framework which contributes to a solid domestic business cycle was marked by excellence in delivering core business and strong investment REN was able to initiate a move to inorganic growth anticipating the impact from a maturing grid while tightly managing funding costs In , REN will keep its focus on delivering energy in Portugal, also investing up to 400 Mn in attractive opportunities in line with its DNA (skills and risk profile) REN will continue its commitment to keep credit metrics consistent with investment grade rating REN is committed to a stable and attractive dividend policy 32

33 REN s IR & Media app: Visit our web site at or contact us: Ana Fernandes Head of IR Alexandra Martins Telma Mendes Av. EUA, Lisboa Telephone: ir@ren.pt Thank you