Terna Energy. Overweight Previous Rating: Overweight. Expanding RES Portfolio Drives Growth. Euroxx Research Renewable Energy. Company Update Report

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1 Euroxx Research Renewable Energy Overweight Previous Rating: Overweight Company Update Report Terna Energy Share Price: 2.65 (close of September 16) 12M Price Target: 3.60 Previous Target: 3.90 Expected Total Return: 39.6% Estimates e 2017e 2018e Sales ( m) EBITDA ( m) margin (%) 50.0% 54.8% 59.3% 59.5% EBITDA adj. ( m) margin (%) 48.8% 55.1% 59.3% 59.5% Net profit ( m) Net profit adj. ( m) EPS ( ) EPS New adj. ( ) EPS adj. chng (%) 118.3% 94.3% 33.0% 7.5% EPS adj. Old ( ) EPS New vs. Old % -26.4% -26.5% Ratios e 2017e 2018e P/E adj. (x) EV/EBITDA adj. (x) EV/EBIT adj.(x) EV/Sales (x) Dividend Yield (%) 3.4% 3.8% 4.2% 4.5% P/BV (x) Net Debt / EBITDA Stock Performance 3M 6M 12M YTD Absolute 2.3% 5.2% -5.7% 7.7% Difference (ATG) 1.8% 7.3% 13.5% 19.1% Stock Data: Market Cap ( m) Outstanding shares (#) 109,314,400 Daily volume (#) 17,267 Low / High 52 w ( ) Free float 22.4% Bloomberg / Reuters TERr.AT / TENERGY GA Company Description: Terna Energy is one of Greece s leading players in green energy. It is involved in all types of Renewable Energy Sources such as the wind farms, hydroelectric and photovoltaic parks with 738MW of total RES exposure as of H1 16. Apart from being a green asset holder, it is also involved in the construction process for third parties. The company has also set footprint in Poland, Bulgaria and the US where it operates a total of 270MW in wind parks. Terna Energy aims at 1GW of installed capacity over the following years. Vangelis Karanikas Head of Research vkaranikas@euroxx.gr September 19, 2016 Expanding RES Portfolio Drives Growth Solid Top-Line Performance in Q2 16 with sales rising by 10% y- o-y to 43m, driven by the construction and electricity trading divisions. On the other hand, RES division declined y-o-y, on lower load factors, despite the 14% higher y-o-y installed capacity in wind parks. The RES underperformance resulted in flattish group EBITDA ( 17.6m) and higher net losses (- 1.8m vs m last year). Minor Revisions in 2016e; e adj. EPS Cut by c26% - to account mainly for less MW additions in Greece and a higher tax rate. In particular, we now exclude from our model two domestic wind park projects of 132MW in total, which more than offset the addition of the 150MW project in USA that TE is constructing through a JV scheme. For 2016e, we have left our previous adj. EPS forecasts (excl. FX losses of 1.3m and capital gains of 0.7m) broadly unchanged. Allin, we expect sales, adj. EBITDA and adj. EPS to exhibit e CAGRs of 7%, 14% and 41%, respectively, driven entirely by capacity additions. Greece Still Drives Growth despite the addition of 16MW in Poland in 2015 and the expected installation of 150MW in USA. The group currently operates a total of 738MW in RES - 711MW in wind, of which 441MW are in Greece (TE is the largest Greek wind park developer), 132MW in Poland/Bulgaria and 138MW in the US. On our estimates, Greece will still account for the majority (56%) of TE s total wind park capacity by 2018e, although we expect USA to contribute more (30% from 19% currently). Aims at Significant Portfolio Expansion targeting at 790MW of installed RES capacity by end-2016e and at 1GW over the following years. We keep a slightly more cautious stance, expecting 738MW at end-2016e, while we forecast TE to conclude its investment plan in 2017e with 982MW in operation. We expect the 211m total CapEx requirement to be funded by a combination of internal cash flow (30%), subsidies (17%) and additional debt (53%). We now see net debt/ebitda falling to 2.2x in 2018e (3.3x in 2015) aided by Operating CF of 353m in e. We believe the latter will be supported by lower receivables due to the new RES bill, which calls for the LAGIE (the electricity market operator) deficit elimination. Remains at O/W / TP Cut to 3.60 (39.6% Upside Potential) from 3.90 due to our earnings downgrades in e, and despite the decline in our WACC (now at 9.5% from 11%), which reflects the deescalation of Greek spreads to c860bps from >1,000bps previously. Relative valuation wise, TE s 2016e EV/EBITDA of 5.7x implies a 32% discount to its European peers and a 44% premium to its smaller peer Eltech Anemos. We still prefer TE among our Greek RES universe due to its significant earnings growth potential and its larger and more geographically diversified RES portfolio. That said, the new bill that calls for fluctuating tariffs regarding future RES projects, imposes an additional risk to TE, as potentially adverse price changes could negatively affect its profitability. Please refer to important disclosures in the Disclosure Appendix.

2 Summary of Financials in m, unless otherwise stated PROFIT & LOSS ( m) e 2017e 2018e BALANCE SHEET ( m) e 2017e 2018e Sales Net fixed assets , % chng 25.5% 10.0% 7.0% 3.9% Other non-current assets EBITDA Total non current assets , , ,016.7 % chng 34.1% 20.7% 15.7% 4.2% Inventory Adjusted EBITDA Trade receivables, of which % chng 27.5% 24.3% 15.1% 4.2% LAGIE & DEDDIE receivables Depreciation other trade receivables EBIT Other current assets % chng 44.1% 23.9% 18.4% 1.7% Cash & other liquid assets Adjusted EBIT Total current assets % chng 32.7% 30.0% 17.4% 1.7% TOTAL ASSETS 1, , , ,296.5 Net Financials Other Total Bank Debt Pre-tax profit Net Debt / (Cash) % chng 149.6% 37.3% 34.4% 7.4% Adjusted EBT Share capital % chng 98.7% 51.4% 32.4% 7.4% Share premium Income tax Reserves & retained earnings % effective tax rate 42.6% 29.0% 29.0% 29.0% Shareholders' equity Minority stake Minority interest Net profit % chng 204.7% 72.0% 35.1% 7.5% Long-term liabilities Adjusted Net Profit Long - term loans % chng 118.3% 94.3% 33.0% 7.5% Provisions EPS (in ) Deferred tax liability % chng 204.7% 72.0% 35.1% 7.5% Grants Adjusted EPS ( ) Other long-term liabilities % chng 118.3% 94.3% 33.0% 7.5% Short-term liabilities Dividends Short - term loans DPS ( ) Other short-term liabilities % chng n/m TOTAL EQUITY & LIABILITIES 1, , , ,296.5 CASH FLOW ( m) e 2017e 2018e RATIO ANALYSIS e 2017e 2018e EBT P/E (x) - reported 17.0x 9.9x 7.3x 6.8x Depreciation P/E (x) - adjusted 18.9x 9.7x 7.3x 6.8x Interest income Interest expense EV/EBITDA (x) - reported 6.1x 5.7x 4.6x 4.2x Other (mainly amortisation of subsidies) EV/EBITDA (x) - adjusted 6.3x 5.7x 4.6x 4.2x Change in inventories Change in trade receivables EV/EBIT (x) - reported 9.7x 8.8x 7.0x 6.5x Change in trade creditors EV/EBIT (x) - adjusted 10.1x 8.7x 7.0x 6.5x Change in other current assets/liabilities Working capital chng P/BV (x) 0.8x 0.8x 0.7x 0.7x CF from operations Dividend Yield (%) 3.4% 3.8% 4.2% 4.5% Net CapEx (ex-subsidies) Other (Grants & Interest received) Net debt / Adjusted EBITDA (x) 3.3x 3.3x 2.6x 2.2x CF from investing activities Net debt / Equity (x) 0.9x 1.1x 0.9x 0.7x Operating FCF to the firm Change in Capital EBITDA margin (%) 50.0% 54.8% 59.3% 59.5% Dividends Adjusted EBITDA margin (%) 48.8% 55.1% 59.3% 59.5% Debt chng EBIT margin (%) 31.6% 35.6% 39.4% 38.5% Other (interest expenses, buybacks, etc) Adjusted EBIT margin (%) 30.4% 35.8% 39.4% 38.5% CF from financing activities Pre-tax profit margin (%) 15.3% 19.1% 24.0% 24.8% Change in Cash Adjusted Pre-Tax margin (%) 14.1% 19.4% 24.0% 24.8% Cash at the beginning Net profit margin (%) 8.5% 13.3% 16.8% 17.4% Cash at end Adjusted Net profit margin (%) 7.7% 13.5% 16.8% 17.4% Notes: (a) 2015 adjusted figures exclude FX gains of 2.4m (b) 2016e group EBITDA adjusted figures exclude FX losses of 1.3m and capital gains of 0.7m Euroxx Research / Terna Energy Company Update Report 2

3 Table of Contents Summary of Financials... 2 Strong Investment Case Still in Place... 4 RES Portfolio Expansion Improves Outlook... 4 New RES Regulatory Regime Leads to Price Fluctuation Exposure Post 2018e but Improves Working Capital... 4 Valuation Update & Rating... 5 Investment Risks & Future Potential Catalysts... 6 Relative Valuation: At Deep Discount vs. Foreign Peers and at Premium vs. Eltech Anemos... 7 Earnings Update... 8 Installed RES Capacity: e CAGR of 14%... 8 Group Revenues: e CAGR of 7% due to New Wind Parks Group Adj. EBITDA: e CAGR of 14%, Driven by Wind Parks Adj. EPS: e CAGR of 41% Balance sheet: Net Debt to Start Decelerating in 2017e Q2 16 Results: Construction and Electricity Trading Drive Sales Higher IMPORTANT DISCLOSURES 16 Euroxx Research / Terna Energy Company Update Report 3

4 Strong Investment Case Still in Place High quality operating portfolio geographically dispersed across Greece, Bulgaria, Poland and US; total RES installed capacity now at 738MW Chart 1. Group Average Wind Load Factor e Load Factor (%) Source: Terna Energy for , Euroxx Research estimates for e New additions in wind MWs provide strong sales and earnings visibility Chart 2. TE s MW Bridge by Region 1, % 29.0% 28.0% 27.0% 26.0% 25.0% 24.0% 23.0% 27.0% 27.3% 27.4% 26.4% 25.4% 27.9% 28.8% 28.9% 28.7% e 2017e 2018e 738 June'16 MWs New RES bill calls for fluctuating tariffs regarding future projects The bill also has positive implications for TE s receivables, through the elimination of LAGIE s deficit 982 Greece Bulgaria Poland USA 2018e MWs RES Portfolio Expansion Improves Outlook Taking on account the additions of 24MW of new wind parks in 2015 (both domestically and abroad) and 73MW in domestic wind parks in H1 16, TE now commands a total RES installed capacity of 738MW, of which 711MW are wind, 18MW hydro, 9MW solar/pv and 1MW biomass. TE s wind parks are geographically dispersed in prime locations around Greece (441MW), Bulgaria (30MW), Poland (102MW) and the US (138MW) and help it to achieve wind load factors above both the Greek and European sector s 2015 respective averages of 25.9% and c26.6%. Going forward, we expect TE to proceed with the installation of another 244MW in wind parks (94MW in Greece and 150MW in USA) by end-2017e, thus increasing its total footage in RES to 982MW. We estimate the total CapEx at 211m, split into equity ( 63m, or 30% of total), debt ( 113m or 53% of total) and cash grants ( 35m or 17% of total). This split is different from that of an exclusively Greek wind farm developer with subsidized investment programme (i.e. 30% subsidy, 30% equity and 40% debt), due to our assumption that TE s upcoming installation in USA will not bear any State subsidy. Following this, we expect TE to reach a net debt position of 314m in 2018e, implying a net debt/ebitda of 2.2x vs. 3.3x in 2015 (adj.). All in all, we expect TE s sales and adj. EBITDA to grow by e CAGRs of 7% and 14% respectively, mainly driven by the aforementioned capacity additions. The improvement in the group adj. EBITDA margin also stems from our assumption of zero and negative profitability from electricity trading and concessions division (eticketing) respectively. Table 1. Strong Growth Potential Driven by Capacity Additions in Wind Parks CAGR e 2017e 2018e e Installed RES capacity (MW) % Revenues ( m) % Adj. EBITDA ( m) % Adj. EBITDA margin (%) 48.8% 55.1% 59.3% 59.5% Adj. Net Profit ( m) % New RES Regulatory Regime Leads to Price Fluctuation Exposure Post 2018e but Improves Working Capital Despite TE s currently stable cash flows, the new RES bill voted in August 2016 adds uncertainty to future revenue streams, in our view. Although the tariffs regarding operating units and units currently in construction will remain unchanged, the price for any additional capacity beyond 2018e will be determined by a tender process and will be equal to the wholesale price plus a premium (contrary to the current fixed feed-in tariffs), thus leaving TE exposed to price fluctuations. That said, the new bill calls for the reduction of LAGIE deficit since the electricity suppliers should compensate the operator with the difference between the SMP and the implied SMP as calculated without taking into account the energy from RES. TE s management expects this amendment to result in the elimination of the deficit in LAGIE s account by 2018e with positive implications for the group receivables (84% of which were related to LAGIE in 2015), hence for its working capital requirements. Euroxx Research / Terna Energy Company Update Report 4

5 We value Terna Energy with a 2-stage DCF which now returns a TP of 3.60; Remains at Overweight Valuation Update & Rating We continue to value TE through a two-stage DCF model, in which we form an explicit set of forecasts for the period up to 2020e, after which we still assign a terminal growth of 2.0%. We have lowered our WACC at 9.5% from 11%, in order to account for the de-escalation of Greek spreads to c860bps from >1,000bps previously. Our WACC assumption is based on a market beta of 1.0, a risk-free rate of -0.04% (German 10-year Bund Yield), and a risk premium of 9.2% (weighted blended mix reflecting country risk exposure). Our updated DCF model returns a new TP of 3.60 per TE s share, which implies a 39.6% total upside potential from the current share price levels, including the 2016e DPS of 0.10 (yield 3.8%). Hence, we reiterate our Overweight rating on the stock. Table 2. TE Valuation Assumptions % 2016e 2017e 2018e 2019e 2020e Terminal Growth Rate (Sales) (0.1) 2.0 EBIT Margin Tax Rate WC Δ (% of sales) (12.3) (0.8) (0.7) (0.1) CapEx (% of sales) Depreciation (% of sales) Cost of Capital Valuation (in m) 2016e 2017e 2018e 2019e 2020e Terminal Revenues EBIT Less: Adjusted Tax NOPAT Depreciation & Other Working Capital Δ (27) (1.9) (1.8) (0.3) CapEx Cash Flow to the Firm (FCFF) (29) Present Value of Cash Flows (28) % Terminal Value of Total 69.5% Enterprise Value 772 Less: Net debt (H1'16a) 372 Minorities 6 Value of Equity 394 Number of Shares (m) Current Price ( ) 2.57 Value of share ( ) 3.60 % total upside potential 39.6% Source: Euroxx Research TP sensitivity to WACC and terminal growth 1.0% 1.5% 2.0% 2.5% 3.0% 8.5% % % % % Source: Euroxx Research TP sensitivity to WACC and long-term growth The table above shows our sensitivity analysis based on WACC and long-term growth. For every 50bps delta in our 9.5% WACC assumption there is c /share sensitivity (c11-13%) on average in our DCF-based appraised value. Euroxx Research / Terna Energy Company Update Report 5

6 Medium risk profile with currently stable cash flows but in heavily regulated industry with future fluctuating tariffs Investment Risks & Future Potential Catalysts We believe TE offers a medium risk profile. The revenue stream of the units that will be operational by mid-2018 is determined largely from stateincentivized FiTs, PPAs over the life of the wind farm and wind conditions that have been relatively stable in recent years. On the other hand, TE operates in heavily regulated markets both in Greece and abroad, while the recently voted RES bill calls for fluctuating tariffs regarding future projects, which implies future revenue uncertainty. In our view, TE s key downside risks include the following: Future Price Fluctuations - The new RES bill voted in Aug 16 calls for a tender process for the entrance of the units to the system with a minimum tendered power of 40MW and at a price that will be equal to the wholesale price plus a premium (contrary to the current fixed FiT). The units that have signed electricity sales contract by 31 Dec 15 may be excluded from the new procedure. These are mainly wind and hydro power stations with biomass or biogas, which will commence operation by June 30, 2018, as well as RES units that will be put into service by December 21, Although this implies that TE s agreed tariffs regarding operating units and units in construction will be unchanged, any additional capacity beyond 2018e should be subject to price fluctuations, hence implying a future additional risk to TE, as potential adverse prices changes would negatively affect its profitability. Execution Risks - in the form of installation and/or interconnection delays, mainly in Greece where 39% or 94MW of TE s incremental capacity additions of 244MW until 2018e will be located. Such delays are most common at the licensing stage. Project Financing / Borrowing Costs A potential turmoil in credit/equity markets and/or Greek banks limited flow of financing to Greek enterprises may affect TEs ability to raise the necessary capital to develop its pipeline, or at rates that will be attractive enough to generate an adequate ROI. Political & Macro Risks in Greece: Although the operation of wind farms per se has little to do with the domestic economic or political environment, in our view, any renewed political and macro uncertainty could affect the timing and magnitude of the expected economic recovery, as well as, increase the country s risk premium and hence borrowing costs. Lower-than-expected Wind Capacity Factors - at the company s domestic and/or foreign sites may adversely impact profitability. For example, wind conditions in 2014 were exceptionally depressed compared to other years. On the contrary, future potential catalysts to TE s performance include: The Implementation of its Large RES Pipeline: Higher-than-expected installation rates in wind parks would positively affect TE s long-term financials. Lower Wind Turbine Prices: A lower-than-expected growth of the EU economy (EC calls for a real GDP growth of 1.8% in 2016e) may result in investment cuts in RES. This would create an overcapacity of turbines, hence leading to lower prices; this could lower CapEx requirements and increase returns for a wind developer like TE. The Implementation of an Awarded Waste Management Project in Peloponnese with an investment budget of 130m (50% subsidised). However, as the contractual agreement (with the Peloponnese prefecture) is subject to approval by the Court of Audit and the financing has not yet been agreed, we believe that the implementation of this project may face delays also due to red tape. To this end, we have not included this project in our model. Euroxx Research / Terna Energy Company Update Report 6

7 Relative Valuation: At Deep Discount vs. Foreign Peers and at Premium vs. Eltech Anemos TE s closest domestic peer is Eltech Anemos, the 5 th largest Greek RES player, which was listed on the ASE in We have also considered a selection of quoted windfarm developers in Europe. Note, however, that direct cross-border comparisons may be difficult, due to differences in size, geographical dispersion, regulatory framework and production mix. Table 3. Peer Group Valuation Company Bloomberg Price Mcap EV/EBITDA EV/Sales P/E Net Debt / EBITDA Installed MW Name Ticker ( ) ( m) 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e H EV / MW EDP Renovaveis EDW GR , x 8.0x 7.4x 6.0x 5.6x 5.2x 40.0x 32.6x 28.6x 3.0x 3.0x 2.9x 9, Alerion ARN IM x 7.1x 7.1x 5.5x 5.1x 5.1x 37.2x 17.5x 16.8x 5.1x 4.1x 3.7x Acciona ANA SM , x 7.7x 7.3x 1.6x 1.5x 1.4x 13.5x 16.3x 13.5x 4.1x 4.3x 4.0x 8, Weighted average of foreign peers 8.4x 7.9x 7.3x 4.3x 4.0x 3.7x 29.9x 26.3x 22.7x 3.5x 3.5x 3.4x 1.08 Eltech Anemos ANEMOS GA x 3.5x 3.0x 3.0x 2.7x 2.3x 4.3x 3.6x 3.3x 2.4x 2.1x 1.7x Terna Energy TENERGY GA x 4.6x 4.2x 3.1x 2.8x 2.5x 9.9x 7.3x 6.8x 3.3x 2.6x 2.2x Premium / (discount) to foreign peers -32% -41% -43% -28% -31% -34% -67% -72% -70% -5% -27% -35% -14% Premium / (discount) to Eltech Anemos 44% 33% 39% 3% 3% 9% 130% 103% 104% 37% 23% 32% 37% Source: Closing prices as of September 13, Bloomberg data for foreign peers, Exx estimates for Anemos and Terna Energy, Companies H1'16 presentations, Euroxx Research Source: Closing prices as of September 16, Bloomberg data for foreign peers, Exx estimates for Anemos and Terna Energy, Companies H1'16 presentations Anemos is the only other listed RES producer in Greece and the 5 th largest market player TE trades at discounts compared to international peers and at a premium vs. Anemos We believe TE is an excellent play to gain exposure in the RES Greek sector Eltech Anemos, 64.5%-owned by the largest and most diversified domestic construction group Ellaktor, currently has 265MW of installed capacity, expected to reach 279MW in 2017e and 294MW by end-2018e. We have an Overweight rating on Anemos and a TP of TE trades at a e P/E of x and EV/EBITDA of x, which imply deep discounts of 32-72% vs. international peers. Based on total installed capacity of 738MW as of June 16, TE trades at an implied EV of 0.93m per installed MW vs. an average of 1.08m for European peers. Turning to domestic comparisons, TE trades at 33-44% premium vs. Anemos in terms of e EV/EBITDA and at >100% premium in terms of e P/E. Moreover, TE trades at 37% premium vs. Anemos on an EV/MW basis. TE Remains Our Preferred Stock In Our Greek RES Universe Despite the premium in terms of P/E and EV/EBITDA, we still prefer TE to Eltech Anemos, based on its larger RES portfolio, which currently stands at 738MW, and we expect it to grow by 33% to 982MW by 2018e. On the other hand, Eltech Anemos operates 265MW in RES, which we see growing by 11% to 294MW in 2018e. Finally, we also favour TE s international presence, as the group currently holds 270MW in wind parks in Bulgaria (30MW), Poland (102MW) and the US (138MW), accounting for 37% of its total RES exposure in 2016e. Euroxx Research / Terna Energy Company Update Report 7

8 Earnings Update Installed RES Capacity: e CAGR of 14% In 2015 TE installed 24MW of new wind parks (8MW in Greece and 16MW in Poland), resulting in 664MW of installed RES capacity at the end of the year. The latter exceeded our previous estimates, since we were initially expecting the new wind parks in Poland to commence operations in From the total 2015 capacity, 59% or 394MW were located in Greece, 21% or 138MW in the US, 15% or 102MW in Poland, while the rest 5% were located in Bulgaria. Chart 3. Evolution of TE s Installed RES Capacity by Country Installed MWs Greece Bulgaria Poland USA 2016e: Already added 73MW in wind parks, increasing RES capacity by 11% YTD to 738MW 2017e: To add 244MW in wind parks resulting in a total installed RES capacity CAGR of 14% over e 2016e: 73MW in Wind Parks Installed So far in 2016, TE has commissioned the 73MW off-shore wind park in St. George island (Attica region), as well as a 1MW biomass plant. Note that the St. George wind park bears no cash grant (state subsidy) but enjoys a c30% higher FiT of 137/MWh vs. that of a regular on-shore non-subsidised wind park ( 105/MWh). Assuming no further additions during the year, TE s RES exposure should stand 11% higher y-o-y to 738MW by end-2016e, with 711MW or 96% of total RES capacity coming from wind parks. 2017e: We Expect TE to Install Another 244MW in Wind Parks We still estimate that construction works related to 50MW in Viotia (Central Greece) and 44MW in Macedonia (Northern Greece), should be concluded by early-2017e. That said, erring on the cautious side, we now exclude from our model the 67MW in Evritania (Central Greece) and the 65MW in Evia island (North-East to Attica region), on lower visibility. On the other hand, we incorporate in our model a 150MW wind park in Texas, USA, which TE is constructing through a JV scheme (we assume TE participates with 50%) and is expected to commence operations at end Following this, we do not expect any wind capacity additions in 2018e. We still account for no new installations in both hydro and solar parks, as the focus will remain on wind parks, in our view. All in all, we expect TE to increase its total RES operating capacity by 14% (CAGR) over e, reaching 982MW (installed) by end-2018e. This should consist of 955MW in wind parks (535MW in Greece, 288MW in US, 102MW in Poland and 30MW in Bulgaria), 18MW in hydro parks (100% in Greece), 9MW in solar farms (all in Greece) and finally a biomass plant of 1MW. Euroxx Research / Terna Energy Company Update Report 8

9 Table 4. TE s Installation Forecasts e RES - Wind parks (MW) e 2017e 2018e CAGR e 2017e 2018e 20e y-o-y y-o-y y-o-y y-o-y y-o-y e Existing installed capacity % 26.9% 3.9% 11.4% 34.3% 15.9% - Greece % 48.9% 2.2% 19.9% 21.3% 14.1% - Abroad % 5.0% 6.3% 0.0% 55.6% 18.3% of which in Poland % 16.2% 18.6% 0.0% 0.0% 5.9% of which in Bulgaria % 0.0% 0.0% 0.0% 0.0% 0.0% of which in USA % 0.0% 0.0% 0.0% 108.7% 27.8% Capacity additions Greece Abroad of which in Poland of which in Bulgaria of which in USA Total installed capacity (YE) % 3.9% 11.4% 34.3% 0.0% 14.4% - Greece % 2.2% 19.9% 21.3% 0.0% 13.3% - Abroad % 6.3% 0.0% 55.6% 0.0% 15.9% of which in Poland % 18.6% 0.0% 0.0% 0.0% 0.0% of which in Bulgaria % 0.0% 0.0% 0.0% 0.0% 0.0% of which in USA % 0.0% 0.0% 108.7% 0.0% 27.8% RES - Hydro plants (MW) e 2017e 2018e CAGR e 2017e 2018e 20e y-o-y y-o-y y-o-y y-o-y y-o-y e Existing installed capacity % 0.0% 0.0% 0.0% 0.0% 0.0% - Greece % 0.0% 0.0% 0.0% 0.0% 0.0% Capacity additions Greece Total installed capacity (YE) % 0.0% 0.0% 0.0% 0.0% 0.0% - Greece % 0.0% 0.0% 0.0% 0.0% 0.0% RES - PV farms (MW) e 2017e 2018e CAGR e 2017e 2018e 20e y-o-y y-o-y y-o-y y-o-y y-o-y e Existing installed capacity % 0.0% 0.0% 0.0% 0.0% 0.0% - Greece % 0.0% 0.0% 0.0% 0.0% 0.0% Capacity additions Greece Total installed capacity (YE) % 0.0% 0.0% 0.0% 0.0% 0.0% - Greece % 0.0% 0.0% 0.0% 0.0% 0.0% RES - Biomass plants (MW) e 2017e 2018e Existing installed capacity Greece Capacity additions Greece Total installed capacity (YE) Greece Total RES (MW) e 2017e 2018e CAGR e 2017e 2018e 20e y-o-y y-o-y y-o-y y-o-y y-o-y e Existing installed capacity % 25.5% 3.8% 11.1% 33.1% 15.3% - Greece % 44.1% 2.1% 18.8% 20.1% 13.3% % of total 53% 60% 59% 63% 57% - Abroad % 5.0% 6.3% 0.0% 55.6% 18.3% % of total 47% 40% 41% 37% 43% of which in Poland % 16.2% 18.6% 0.0% 0.0% 5.9% of which in Bulgaria % 0.0% 0.0% 0.0% 0.0% 0.0% of which in USA % 0.0% 0.0% 0.0% 108.7% 27.8% Capacity additions Greece % of total 91% 33% 100% 39% n/m - Abroad % of total 9% n/m 0% n/m n/m of which in Poland of which in Bulgaria of which in USA Total installed capacity (YE) % 3.8% 11.1% 33.1% 0.0% 13.9% - Greece % 2.1% 18.8% 20.1% 0.0% 12.6% % of total 60% 59% 63% 57% 57% - Abroad % 6.3% 0.0% 55.6% 0.0% 15.9% % of total 40% 41% 37% 43% 43% of which in Poland % 18.6% 0.0% 0.0% 0.0% 0.0% of which in Bulgaria % 0.0% 0.0% 0.0% 0.0% 0.0% of which in USA % 0.0% 0.0% 108.7% 0.0% 27.8% Euroxx Research / Terna Energy Company Update Report 9

10 Total RES Capacity to reach 982MW in 2017e (97% wind); RES Revenues to Grow at a e CAGR of 13% We expect TE to produce 2.3GWh in 2018e, implying a e CAGR of 12% Chart e Sales Bridge (amounts in m) Group Revenues: e CAGR of 7% due to New Wind Parks We have left our previous 2016e RES electricity generation estimates broadly unchanged, while we have downgraded our e generation forecasts by 5-12%. The latter results from the exclusion from our model of the two domestic wind park projects (132MW in total) that we were previously assuming to commence operations at early-2017e. Note that this exclusion more than offsets the positive effect from the addition of the 150MW project in Texas, USA, at late-2017e (we assume that TE participates by 50% in the JV). Consequently, we forecast that TE will generate 2.3GWh in 2018e (down 5% vs. our previous call), implying a e CAGR of 12%. Accounting also for an average FiT of 88.4/MWh in 2018e, we now expect group RES revenues to stand at 202m during that year (8% below our previous estimate), exhibiting a e CAGR of 13%. All in all, we have decreased our previous e sales estimates by 8-11% mainly due to the exclusion from our model of two wind parks in Greece. We now expect TE s group revenues to grow by 10% in 2016e to 219m, reaching 243m in 2018e, which implies a e CAGR of 7%. On our estimates, RES activity (mainly wind parks) will contribute 83% of total revenues in 2018e from 71% in 2015, with construction-related contribution standing at 12% and electricity trading accounting for 4% of total sales. Table 5. TE s Group Revenue Forecasts e Group RES Capacity (MW) e 2017e 2018e CAGR e 2017e 2018e 20e y-o-y y-o-y y-o-y y-o-y y-o-y e Existing MW % 25.5% 3.8% 11.1% 33.1% 15.3%.of which Wind Parks % 26.9% 3.9% 11.4% 34.3% 15.9%.of which Hydro Plants % 0.0% 0.0% 0.0% 0.0% 0.0%.of which P/V Farms % 0.0% 0.0% 0.0% 0.0% 0.0%.of which Biomass Plants New MW of which Wind Parks of which Hydro Plants of which P/V Farms of which Biomass Plants Total Group Installed Capacity (MW) % 3.8% 11.1% 33.1% 0.0% 13.9%.of which Wind Parks % 3.9% 11.4% 34.3% 0.0% 14.4% % of total 95.9% 96.0% 96.3% 97.2% 97.2%.of which Hydro Plants % 0.0% 0.0% 0.0% 0.0% 0.0% % of total 2.8% 2.7% 2.4% 1.8% 1.8%.of which P/V Farms % 0.0% 0.0% 0.0% 0.0% 0.0% % of total 1.3% 1.3% 1.2% 0.9% 0.9%.of which Biomass Plants % of total 0.0% 0.0% 0.1% 0.1% 0.1% Group RES Production (MWh/year) 1,356,883 1,641,793 1,855,000 2,118,315 2,285, % 21.0% 13.0% 14.2% 7.9% 11.7%.of which Wind Parks 1,286,474 1,571,384 1,783,324 2,046,592 2,214, % 22.1% 13.5% 14.8% 8.2% 12.1%.of which Hydro Plants 59,253 59,253 59,253 59,253 59, % 0.0% 0.0% 0.0% 0.0% 0.0%.of which P/V Farms 11,156 11,156 11,156 11,156 11, % 0.0% 0.0% 0.0% 0.0% 0.0%.of which Biomass Plants 0 0 1,267 1,314 1, % 0.0% Group Average Capacity Load Factor 25.6% 29.1% 28.8% 29.2% 26.6% Wind Parks 25.4% 27.9% 28.8% 28.9% 28.7% Hydro Plants 38.0% 38.0% 38.0% 38.0% 38.0% P/V Farms 15.0% 15.0% 15.0% 15.0% 15.0% Biomass Plants 0.0% 0.0% 15.0% 15.0% 15.0% Average FiTs ( /MWh) % 5.1% 5.8% 0.7% -2.9% 1.1% Wind Parks % 5.8% 6.2% 0.9% -3.0% 1.3% Hydro Plants % 0.0% 0.0% 0.0% 0.0% 0.0% P/V Farms % 0.0% 0.0% 0.0% 0.0% 0.0% Biomass Plants Group Revenues ( m) % 25.5% 10.0% 7.0% 3.9% 6.9% RES revenues % 27.1% 19.6% 15.0% 4.7% 12.9% % of total revenues 69.7% 70.6% 76.8% 82.5% 83.2% Wind Parks % 29.2% 20.6% 15.8% 5.0% 13.6% % of total revenues 64.7% 66.6% 73.0% 79.0% 79.8% Hydro Plants % 0.0% 0.0% 0.0% 0.0% 0.0% % of total revenues 3.3% 2.6% 2.4% 2.2% 2.1% Solar Farms % 0.0% 0.0% 0.0% 0.0% 0.0% % of total revenues 1.8% 1.4% 1.3% 1.2% 1.2% Biomass Plants % of total revenues 0.0% 0.0% 33.0% 31.8% 31.6% Electricity trading % -25.3% -50.0% 0.0% -28.0% % of total revenues 7.8% 13.5% 9.2% 4.3% 4.1% Construction revenues % -43.2% 48.6% 0.0% 0.0% 14.1% % of total revenues 22.5% 10.2% 13.7% 12.8% 12.3% Concessions revenues % 1.0% 2.0% -58.3% % of total revenues 0.0% 5.7% 0.4% 0.3% 0.3% Euroxx Research / Terna Energy Company Update Report 10

11 We expect TE s RES adj. EBITDA to post a e CAGR of 15% Chart e EBITDA Bridge (amounts in m) 145 Group Adj. EBITDA: e CAGR of 14%, Driven by Wind Parks We have downgraded our e RES EBITDA estimates by 3-12%, mostly to reflect our lower revenue forecasts. We now expect EBITDA of 119m in 2016e, growing to 143m in 2018e (96% of which is stemming from wind parks), implying a e CAGR of 15%. EBITDA growth is mainly attributed to capacity additions (244MW in wind parks by 2017e to be added to the 73MW already installed in 2016e), while we account for flattish RES EBITDA margins, hovering around 71%. Allowing also for 3x increase in our previous e construction-related EBITDA estimates to 1.3m (reflecting the strong trend of H1 16) and the zero/negative profitability from electricity trading/concessions division (e-ticketing) respectively, we now expect TE s group EBITDA to reach 120.5m in 2016e (+24% y-o-y) and 144.5m in 2018e, exhibiting a e CAGR of 14% (adj.). On our estimates, RES activity (and mainly wind parks) will contribute 99% of total EBITDA in 2018e, with construction accounting for the remaining 1%. Table 6. TE s EBITDA Forecasts e 2014e 2015e 2016e 2017e 2018e CAGR ( m) 2014* 2015** 2016e*** 2017e 2018e 20e y-o-y y-o-y y-o-y y-o-y y-o-y e RES Adj. EBITDA % 26% 25% 15% 4% 14.5% % of total Adj. EBITDA 99.6% 98.2% 98.8% 98.9% 99.0% EBITDA margin 68.6% 67.8% 71.0% 71.1% 70.8% - Wind Parks % 28% 27% 16% 4% 15.4% % of total RES Adj. EBITDA 91.8% 93.5% 94.8% 95.5% 95.7% % of total Adj. EBITDA 91.4% 91.8% 93.7% 94.5% 94.7% EBITDA margin 67.8% 67.2% 70.7% 70.9% 70.6% - Hydro Plants % 0% 0% 0% 0% -0.1% % of total RES Adj. EBITDA 5.3% 4.2% 3.3% 2.9% 2.8% % of total Adj. EBITDA 5.2% 4.1% 3.3% 2.9% 2.7% EBITDA margin 77.1% 77.0% 77.0% 76.9% 76.8% - Solar Farms % 0% 0% 0% 0% 0.0% % of total RES Adj. EBITDA 3.0% 2.4% 1.9% 1.6% 1.6% % of total Adj. EBITDA 2.9% 2.3% 1.9% 1.6% 1.6% EBITDA margin 79.8% 79.8% 79.8% 79.8% 79.8% - Biomass Plants % of total RES Adj. EBITDA 0.0% 0.0% 0.2% 0.2% 0.2% % of total Adj. EBITDA 0.0% 0.0% 0.2% 0.2% 0.2% EBITDA margin n/m n/m 0.0% 0.0% 0.0% - Electricity trading % >100% -100% n/m n/m n/m % of total Adj. EBITDA 0.0% 0.4% 0.0% 0.0% 0.0% EBITDA margin 0.1% 1.4% 0.0% 0.0% 0.0% - Construction n/m >100% 19% 0% 0% 6.0% % of total Adj. EBITDA 0.4% 1.3% 1.2% 1.1% 1.0% EBITDA margin 0.9% 6.2% 5.0% 5.0% 5.0% - Concessions % of total Adj. EBITDA 0.0% 0.1% -0.1% 0.0% 0.0% EBITDA margin n/m 0.8% -10.0% -5.0% -5.0% Total Group Adj. EBITDA % 27.5% 24.3% 15.1% 4.2% 14.2% EBITDA margin 48.0% 48.8% 55.1% 59.3% 59.5% Notes: (*) 2014e group EBITDA is adjusted for the Special Levy of 1.9m as this was replaced by the "New Deal" in RES from April onwards. (**) 2015 group EBITDA is adjusted for FX gains of 2.4m. (***) 2016 group EBITDA is adjusted for FX losses of 1.3m and capital gains of 0.7m Euroxx Research / Terna Energy Company Update Report 11

12 Additional capacity in wind parks will support top-line growth and enhance profitability Adj. EPS: e CAGR of 41% All-in, we have cut our e EPS by 26-27% to , as we also account for higher tax rates. Regarding 2016e, we slightly upgraded our sales forecast by 4%, accounting for higher electricity trading sales, while our adj. EPS estimate remains broadly unchanged. Summing up, we expect sales, adj. EBITDA and adj. EPS to exhibit e CAGRs of 7%, 14% and 41% respectively, driven entirely by new capacity additions in wind parks. Table 7. TE s Financial Forecast Revisions ( e) 2016e 2017e 2018e (amounts in m) y-o-y Old New chng % y-o-y Old New chng % y-o-y Old New chng % y-o-y - RES revenues % % 19.6% % 15.0% % 4.7% % of total sales 69.7% 70.6% 79.0% 76.8% 83.2% 82.5% 83.3% 83.2% - Construction revenues % % 48.6% % 0.0% % 0.0% % of total sales 22.5% 10.2% 16.2% 13.7% 12.9% 12.8% 12.9% 12.3% - Electricity Trading revenues % of total sales 0.0% 13.5% 4.8% 9.2% 3.8% 4.3% 3.8% 4.1% - Concessions % of total sales 0.0% 5.7% 0.0% 0.4% 0.0% 0.3% 0.0% 0.3% Group Sales % % 10.0% % 7.0% % 3.9% - RES EBITDA % % 21.4% % 15.9% % 4.3% % of total EBITDA 99.5% 98.2% 99.7% 98.8% 99.8% 98.9% 99.8% 99.0% EBITDA margin 66.8% 69.6% 70.5% 70.6% 71.6% 71.1% 71.4% 70.8% - Construction EBITDA n/m % 19.0% % 0.0% % 0.0% % of total EBITDA 0.4% 1.3% 0.3% 1.3% 0.2% 1.1% 0.2% 1.0% EBITDA margin 0.9% 6.2% 0.9% 5.0% 0.9% 5.0% 0.9% 5.0% - Electricity Trading EBITDA n/m % n/m n/m n/m n/m % of total EBITDA 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBITDA margin n/m 1.4% 0.1% 0.0% 0.1% 0.0% 0.1% 0.0% - Concessions EBITDA n/m % n/m -49.5% n/m 2.0% % of total EBITDA 0.0% 0.1% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% EBITDA margin n/m 0.8% 0.0% -10.0% 0.0% -5.0% 0.0% -5.0% Group EBITDA % % 20.7% % 15.7% % 4.2% EBITDA margin 46.8% 50.0% 55.8% 54.8% 59.8% 59.3% 59.6% 59.5% Group Adj. EBITDA % % 24.3% % 15.1% % 4.2% Recurring EBITDA margin 48.0% 48.8% 55.8% 55.1% 59.8% 59.3% 59.6% 59.5% - RES EBIT % % 25.1% % 18.7% % 1.7% % of total EBIT 99.5% 97.4% 99.8% 98.4% 99.8% 98.6% 99.8% 98.6% EBIT margin 39.2% 43.5% 46.4% 45.6% 48.9% 47.0% 48.8% 45.6% - Construction EBIT n/m >100% 18.7% % 0.0% % 0.0% % of total EBIT 0.4% 1.8% 0.2% 1.7% 0.2% 1.5% 0.2% 1.4% EBIT margin 0.5% 5.6% 0.5% 4.5% 0.5% 4.5% 0.5% 4.5% - Electricity Trading EBIT n/m n/m % n/m n/m n/m n/m % of total EBIT 0.0% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBIT margin n/m 1.4% 0.1% 0.0% 0.1% 0.0% 0.1% 0.0% - Concessions EBIT n/m n/m n/m n/m -49.5% n/m 2.0% % of total EBIT 0.0% 0.1% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% EBIT margin n/m 0.8% 0.0% -10.0% 0.0% -5.0% 0.0% -5.0% Group EBIT % % 23.9% % 18.4% % 1.7% EBIT margin 27.5% 31.6% 36.8% 35.6% 40.8% 39.4% 40.7% 38.5% Group Adj. EBIT % % 30.0% % 17.4% % 1.7% Recurring EBIT margin 28.7% 30.4% 36.8% 35.8% 40.8% 39.4% 40.7% 38.5% Net financials (31.3) (32.2) 2.6% (35.8) (35.8) 0.1% 11.4% (34.6) (35.8) 3.5% -0.1% (29.1) (33.2) 14.0% -7.2% Group EBT % % 37.3% % 34.4% % 7.4% EBT margin 7.7% 15.3% 19.7% 19.1% 27.6% 24.0% 29.6% 24.8% Group Adj. EBT % % 51.4% % 32.4% % 7.4% Recurring EBT margin 8.9% 14.1% 19.7% 19.4% 27.6% 24.0% 29.6% 24.8% Taxes (6.3) (12.9) 104.6% (10.7) (12.1) 12.6% -6.5% (18.9) (16.3) -13.7% 34.4% (20.3) (17.5) -14.0% 7.4% Effective tax rate 52.0% 42.6% 26.0% 29.0% 26.0% 29.0% 26.0% 29.0% Group Net Profit >100% % 72.0% % 35.1% % 7.5% Net margin 3.5% 8.5% 14.4% 13.3% 20.3% 16.8% 21.8% 17.4% Group Adj. Net Profit >100% % 94.3% % 33.0% % 7.5% Recurring net margin 4.4% 7.7% 14.4% 13.5% 20.3% 16.8% 21.8% 17.4% EPS ( ) >100% % 72.0% % 35.1% % 7.5% Adjusted EPS ( ) >100% % >100% % 33.0% % 7.5% DPS ( ) n/m % n/m % 10.0% % 9.1% Capital return ( ) n/m % % % Notes: (a) 2014 group EBITDA is adjusted for the Special Levy of 1.9m as this was replaced by the "New Deal" in RES from April onwards. (b) 2015 group EBITDA is adjusted for FX gains of 2.4m (b) 2016 group EBITDA is adjusted for FX losses of 1.3m and capital gains of 0.7m Euroxx Research / Terna Energy Company Update Report 12

13 Net Debt / EBITDA of 3.3x in 2015; to reach 2.2x in 2018e Balance sheet: Net Debt to Start Decelerating in 2017e In 2015, TE s net debt rose by 25% y-o-y to 322m (total group debt up by 15% y-o-y to 489m), implying a net debt / EBITDA ratio of 3.3x. This is mainly attributed to the implementation of the group project pipeline that resulted in 664MW of total installed capacity in 2015, vs. 640MW in the previous year. Going forward, we expect net debt to increase further in 2016e due to the implementation of new investments, whereas upon the full deployment of group s upcoming 244MW in wind parks in 2017e, we expect Net Debt / EBITDA to slide to 2.2x in 2018e, supported by higher group profitability. Chart 6. Net Debt & Net Debt / Adj. EBITDA e x ( in m) x 3.3x 3.3x 2.6x 2.2x 3.5x 3.0x 2.5x 2.0x x 1.0x 0.5x e 2017e 2018e Net Debt ( m, LHS) Net debt/adj. EBITDA (x, RHS) 0.0x New RES bill should lead to lower receivables through LAGIE deficit elimination Furthermore, we expect the new RES bill that calls for the elimination of LAGIE deficit to have positive implications on group receivables, leading to lower working capital needs and supporting operating cash flow. Note that in 2015, total receivables stood at 60m, with 50m of them relating to LAGIE, whereas we now expect them to fall to 35m ( 25m from LAGIE) this year and reach 30m ( 20m from LAGIE) by 2018e. Euroxx Research / Terna Energy Company Update Report 13

14 Q2 16 Results: Construction and Electricity Trading Drive Sales Higher Strong Q2 16 top-line performance driven by the construction and electricity trading divisions EBITDA improved marginally by 1% y-o-y with RES division falling by 7% y-o-y Adjusted EBITDA fell by 6% y-o-y H1 16 group sales and EBITDA up 10% and 3% y- o-y to 94m and 48m, respectively TE s Q2 16 top-line was strong, driven by the construction and electricity trading divisions. In particular, Q2 16 sales rose by 10% y-o-y to 43m (3% above our estimates), with construction revenues reaching 6.8m from 3.4m last year (vs. our estimate for 5.5m), while electricity revenues increased by 36% y-o-y at 9.2m (Exx at 8.1m). On the other hand, lower load factors led RES sales 6.5% lower y-o-y to 27m (3.5% below our call), despite the 14% higher y-o-y installed capacity in wind parks. Going down the P&L, EBITDA coming from RES fell by 7% y-o-y to 17m, while construction division posted zero gains from 0.7m losses last year and electricity trading turned positive to 0.4m from - 0.4m in Q2 15. All in all, group EBITDA improved marginally by 1% y-o-y to 17.6m (vs. our estimate for 16m), with the respective margin dropping by 380bps to 40.5%. Note that profitability was impacted by FX losses and capital gains from the sale of securities. Excluding these, EBITDA stood 5.9% lower y-o-y at 17.3m. Furthermore, the group reported net losses of 1.8m, vs m last year (our call stood at - 1.4m), while on an adjusted basis, net losses reached 1.9m from - 0.1m last year. Regarding H1 16, sales came in 10% higher y-o-y at 94m (1% above our forecast), again driven by the construction and electricity trading divisions. On the profitability front, EBITDA grew by 3% y-o-y to 48m (4% above Exx), while reported net profit stood at 5.3m, down 54% y-o-y. On an adjusted basis (i.e. excluding FX losses of 1.3m and capital gains of 0.7m in H1 16 and FX gains of 2.5m in H1 15), EBITDA increased by 10% y-o-y to 48.7m, and net profit reached 5.7m from 9.5m last year. Finally, group net debt settled at 372m in H1 16 from 319m in FY 15. Table 8. TE s Q2/H1 16 Results (in m) Q2'15 Q2'16 y-o-y Exx vs Exx H1'15 H1'16 y-o-y Exx vs Exx -Construction revenues % % % % -RES revenues % % % % -Electricity Trading revenues % % % % -Concessions revenues n/a % n/a 0.6 Sales % % % % -Construction EBITDA (0.7) (0.0) n/a % (1.1) 0.6 n/a % EBITDA Margin -19.4% -0.6% 13.1% -19.0% 5.3% 14.2% -RES EBITDA % % % % EBITDA Margin 63.5% 63.2% 53.4% 71.8% 71.1% 66.8% -Electricity Trading EBITDA (0.4) 0.4 n/a (0.1) (0.1) 0.3 n/a (0.2) EBITDA Margin 0.0% 4.3% -0.7% -1.0% 1.7% -1.1% -Concessions EBITDA 0.0 (0.0) n/a (0.0) n/a 0.0 EBITDA Margin n/m n/m n/m n/m 0.0% 0.0% EBITDA % % % % EBITDA Margin 44.3% 40.5% 37.3% 54.7% 51.2% 49.9% Adjusted EBITDA % % % % Adjusted EBITDA Margin 46.8% 39.9% 37.3% 51.8% 51.9% 50.9% EBIT % % % % EBIT Margin 17.6% 16.0% 10.2% 35.4% 29.6% 27.1% Adjusted EBIT % % % % Adjusted EBIT Margin 20.0% 15.4% 10.2% 32.5% 30.3% 28.1% Net earnings (0.9) (1.8) n/a (1.4) n/a % % Net margin -2.3% -4.0% -3.3% 13.3% 5.6% 6.0% Adjusted net earnings (0.1) (1.9) n/a (1.4) n/a % % Adjusted Net Margin -0.3% -4.4% -3.3% 11.2% 6.1% 6.7% Note: H1'15 adjusted figures exclude FX gains of 2.5m Note: H1'16 adjusted figures exclude FX losses of 1.3m and capital gains of 0.7m Euroxx Research / Terna Energy Company Update Report 14

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