REN REDES ENERGÉTICAS NACIONAIS, S.G.P.S., S.A. Sociedade Aberta Sede: Avenida dos Estados Unidos da América, n.º 55, Lisboa Capital social: 667.191.262 Euros Pessoa coletiva e matrícula na CRC de Lisboa n.º 503 264 032 COMUNICADO Nos termos e para os efeitos do disposto no artigo 17.º do Regulamento (UE) número 596/2014 do Parlamento Europeu e do Conselho, de 16 de abril de 2014, no artigo 248.º - A do Código dos Valores Mobiliários e na demais regulamentação em vigor, a REN Redes Energéticas Nacionais, SGPS, S.A. vem pelo presente informar e juntar em anexo a apresentação que hoje será divulgada no evento designado Capital Markets Day da REN e que inclui a atualização estratégia 2018-2021 (versão em Inglês). Lisboa, 4 de maio de 2018 Fim de comunicado
AGENDA FOR TODAY 10h30 12h00 12h30 A successful journey Strategic guidelines Operational excellence Core business consolidation Disciplined growth Solid financials Robust business plan Closing remarks Q&A Lunch RODRIGO COSTA CHIEF EXECUTIVE OFFICER JOÃO FARIA CONCEIÇÃO CHIEF OPERATIONS OFFICER GONÇALO MORAIS SOARES CHIEF FINANCIAL OFFICER RODRIGO COSTA CHIEF EXECUTIVE OFFICER 2
2014 Today A domestic-only player Focused on domestic but with international presence (Electrogas, Chile) A transmission-only player With a distribution business (Portgás) Sub investment grade ratings Investment grade ratings Solid shareholder base Solid base with higher liquidity after 250 Mn capital increase (39% free float) Maintaining operational excellence and efficiency, while committing to public service 3
A SUCCESSFUL JOURNEY Grid investments: electricity and natural gas 2014 2018 Underground gas storage Electrogas Portgás 4
A SUCCESSFUL JOURNEY Supporting Portugal s energy policy and backbone Substations V. Nova Famalicão (new) Lines ~ 560 Mn CAPEX in 2015-17 Carregado (upgrade) V. Minho- Pedralva (new) 86% fulfilled efficiency criteria Alcochete (new) Lavos- Rio Maior (upgrade) 0.22 min/year average interruption time 1 in 2015-17 1 Including exceptional events and force majeur 5
A SUCCESSFUL JOURNEY Delivering on growth 2015 Underground gas storage, becoming the only player in Portugal 70 Mn 2017 First international investment with 42.5% of Electrogas 169 Mn 2017 Expansion to distribution network with Portgás 530 Mn 6
A SUCCESSFUL JOURNEY Marked by highly disciplined debt management, resulting in a strong credit profile Financial costs ( Mn) Investment grade since 2015 131 73 2014 2017 1st Portuguese company 7
A SUCCESSFUL JOURNEY With a robust financial performance EBITDA ( Mn) Special levy (CESE) ( Mn) 505 138 +25 487 152 +26 Net income ( Mn) 113 126 2014 2017 8
A SUCCESSFUL JOURNEY Delivering value to the shareholders Dividend yield (2017) 6.5% 4.1% 4.1% 5.3% 4.0% 31.3% Total shareholder return (Jan 2015-Jan 2018) 6.6% 16.2% 10.9% 24.5% STOXX Europe 600 Utilities EURO STOXX Utilities Peer group (TSOs) 1 PSI-20 1 National Grid, REE, Elia, Terna, Fluxys, SNAM and Enagás 9
A SUCCESSFUL JOURNEY Enabling a renewable future 2016 4 consecutive days 100% renewable 2018 Two 70-hour periods 100% renewable Production in March exceeded consumption of mainland Portugal 10 10
A SUCCESSFUL JOURNEY With best-in-class corporate governance and a stable shareholder base 1 Several special committees in place Other investors 38.5% 25.0% Remuneration Corporate governance Nomination and Appraisal Independence of supervisory bodies 12.0% Audit Committee Statutory Auditor 0.6% 2.1% 4.8% 5.0% 5.3% 6.7% 1 Shareholder base as of March 2018 11 11
UNPARALLELED RELEVANCE ON THE NATIONAL SCENE Responsible for high-quality energy transmission and distribution > 3.0 Bn invested in energy infrastructure in Portugal, 2006-17 Top quartile in quality of service and efficiency among European TSOs Total tax contribution of ~ 750 Mn in 2006-17 Consistent reduction in weight on final consumer tariff 1 Top quartile in sustainability performance 2 vs. peers 1 >1pp reduction from 2014 to 2018 in electricity tariff, including transport and system management 2 Environmental impact, social impact, and governance model (Oekom Corporate Rating 2017) 12
STRATEGIC GUIDELINES Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 13
STRATEGIC GUIDELINES Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 14
ENABLERS Digital path Further effort on digital integration across the company Asset management: Condition assessment and predictive analytics based on extended monitoring and automation Operations: Use of digital tools by field workforce to facilitate productivity through real-time interconnection Support: Increased automation in support functions, improving productivity Cibersecurity: Consolidate company-wide initiatives and optimize current set-up especially in OT systems System management: Renewables integration (with growing support of data analytics) and optimization towards energy savings Evolution of skills and culture Diversity, Development and Collaboration Cross-functional teams to further promote collaboration, accelerate improvements, decision-making and project delivery Focused talent management strategy to identify, develop and retain talent Development of workforce with focus on increasing the gender and academic background diversity Promotion of intercompany mobility and professional development opportunities Network planning: Infrastructure design and development with positive environment impact 15 15
STRATEGIC GUIDELINES Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 16
OPERATIONAL EXCELLENCE Leverage REN s DNA of INNOVATION Consolidate PORTGÁS Invest > 500 Mn in the network in Portugal until 2021 Experience managing systems with high penetration of renewables Service level above average of European TSOs 1 Maintain top-industry SAFETY and QUALITY of service Maintain focus on EFFICIENCY Support REGULATORY and ENERGY POLICY agenda 0.22 min/year average interruption time in 2015-17 2 Full response of gas infrastructure in 2017 (record consumption) Resilient performance in extremely adverse conditions (2017 devastating forest fires) 1 ITOMS 2017, International Electricity TSOs 2 Including exceptional events and force majeur 17
OPERATIONAL EXCELLENCE Electricity TSOs Electricity Line costs/km Average Leverage REN s DNA of INNOVATION Consolidate PORTGÁS Maintain focus on EFFICIENCY Support REGULATORY and ENERGY POLICY agenda Invest > 500 Mn in the network in Portugal until 2021 Substation costs/circuit end Average Performance above European average SOURCE: ITOMS 2017 18
OPERATIONAL EXCELLENCE International peers Natural gas OPEX/complexity factor Average Leverage REN s DNA of INNOVATION Consolidate PORTGÁS First quartile Maintain focus on EFFICIENCY Support REGULATORY and ENERGY POLICY agenda Invest > 500 Mn in the network in Portugal until 2021 LNG terminal costs/complexity factor Average Best performance SOURCE: Gas Transmission Benchmarking Initiative 2017; LNG Receiving Terminals Benchmarking 2017 19
CORE BUSINESS CONSOLIDATION <6% 1 <10% 1 ELECTRICITY Limited weight on consumer tariff GAS Leverage REN s DNA of INNOVATION Achieved regulatory efficiency targets Support REGULATORY and ENERGY POLICY agenda Invest > 500 Mn in the network in Portugal until 2021 Consolidate PORTGÁS 86% CAPEX within efficiency targets 4% efficiency per year in OPEX ~ 20 Mn incentives per year for end-of-life extension Partner for the national energy policy agenda 1 According to ERSE 20
CORE BUSINESS CONSOLIDATION Domestic organic CAPEX ( Mn) ~190 120-145 ~90-110 ~40 Replacement Invest > 500 Mn in the network in Portugal until 2021 Consolidate PORTGÁS Leverage REN s DNA of INNOVATION 2015-17 yearly average 2018-21 per year ~50-70 Expansion ~10 Electricity Gas transmission ~20-25 Gas distribution 21
CORE BUSINESS CONSOLIDATION Ponte de Lima- Famalicão (line) Vieira do Minho- R. Pena-Feira axis (line and substation) Natural gas underground storage (compression upgrade) Invest > 500 Mn in the network in Portugal until 2021 Consolidate PORTGÁS Leverage REN s DNA of INNOVATION Falagueira-Estremoz- Divor-Pegões axis (line and substation) Fundão- Falagueira axis (line and substation) Examples of potential upside (additional projects) Further boost in renewables Interconnection to Morocco Underground cables in Lisbon and Oporto 22
CORE BUSINESS CONSOLIDATION Other gas distribution companies in Portugal 2nd largest gas distribution company in Portugal (km) PORTGÁS Most efficient gas distribution company in Portugal OPEX/km Consolidate PORTGÁS Leverage REN s DNA of INNOVATION OPEX/connection point PORTGÁS PORTGÁS SOURCE: ERSE 23
CORE BUSINESS CONSOLIDATION Increased REN s RAB in 11% 460 Mn 2016 2017 Consistent with regulatory framework Growth potential from lower penetration (penetration rate) Consolidate PORTGÁS Leverage REN s DNA of INNOVATION 44% 37% 30% 26% 26% 25% 21% 21% 19% 10% 9% LISBOAGÁS SETGÁS PAXGÁS PORTGÁS LUSITANIAGÁS DIANAGÁS DURIENSEGÁS SONORGÁS MEDIGÁS TAGUSGÁS BEIRAGÁS Ongoing systems integration according to plan SOURCE: PDIRD-GN 24
CORE BUSINESS CONSOLIDATION Direct impact on operations, e.g., solar photovoltaic forecasting tool Partnership with State Grid for R&D Leverage REN s DNA of INNOVATION Recognition of the scientific community (publications and conferences) Proprietary tools developed, including in partnership with universities EV charging ongoing technological development and upcoming pilot 25
STRATEGIC GUIDELINES Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 26
DISCIPLINED GROWTH Inorganic investments ( Mn) 769 Invest up to 4Q 2017: 100% of EDP Gás (Portgás) 1Q 2017: 42.5% stake in Electrogas 530 169 Up to 400 400 Mn until 2021 in additional growth opportunities 2015: underground gas storage 70 2015-17 2018-21 27
DISCIPLINED GROWTH 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 28
DISCIPLINED GROWTH Clear focus on Portugal and Regulated Assets while also considering further incremental opportunities/ investments in LatAm Potential upside on domestic CAPEX always the top priority for REN 29
STRATEGIC GUIDELINES Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 30
SOLID FINANCIALS Debt management strategy Optimize cost of debt Tools Protect net income Fixed vs. floating rates Maturity Liquidity buffer Allows for flexibility to grow while ensuring performance 31
SOLID FINANCIALS Debt management strategy Optimize cost of debt 5.7% 5.5% 4.7% 4.1% 3.2% 2.5% 2012 2013 2014 2015 2016 2017 >50% reduction in cost of debt in 1Q 2018 vs. 2014 (from 4.7% to 2.3%), aligning with European peers Increase in average maturity from 3.9 to 5.0 years in 2014-1Q 2018 Bonds representing 63% of funding sources in 1Q 2018 60% with fixed rate in 1Q 2018 Funding needs fully covered for >2 years on a constant basis REN has been significantly reducing its cost of debt 32
SOLID FINANCIALS Debt management strategy Protect net income Recurrent net income ( Mn) Return on RAB ( Mn) Yield on 10y treasury bonds Portugal (%) Fixed vs. floating Maturity Duration 2014 2015 2016 2017 REN has been successfully protecting its net income by aligning debt management with its regulated revenues profile 33
ROBUST BUSINESS PLAN 34
ROBUST BUSINESS PLAN Average RAB. Historical costs ( Bn) Expected lower domestic organic CAPEX enables additional investment capacity 3.5 Gas: 1.1 Electricity: 2.4 3.9 Portgás: 0.46 1.1 2.3 3.6-3.7 0.49 0.9-1.0 2.2-2.3 2014 2017 2018-21 Domestic organic CAPEX ~ 190 Mn/year 120-145 Mn/year 35
ROBUST BUSINESS PLAN 2014 2017 2018-21 Avg. RAB 1 ( Bn) 3.5 Gas: 1.1 Electricity: 2.4 3.9 Portgás: 0.46 1.1 2.3 3.6-3.7 0.49 0.9-1.0 2.2-2.3 Total asset base will remain stable up to 400 Mn Holdings ( Bn) 0.1 2 0.3 3 0.3 3 Total assets ( Bn) 3.6 4.2 4.2-4.3 1 Historical costs 2 REE and HCB 3 REE, HCB and Electrogas 36
ROBUST BUSINESS PLAN Domestic organic CAPEX ( Mn) ~190 120-145 484 475-500 Performance going forward will remain strong EBITDA ( Mn) Net income ( Mn) 114 110-115 Free Cash Flow before inorganic investment and dividends 1 ( Mn) ~135 2015-17 yearly average 170-175 2018-21 per year 1 FCF before inorganic growth and dividends = EBITDA cash - Delta WK - Taxes - Organic capex - Net interest paid + Dividends received 37
ROBUST BUSINESS PLAN FFO/Net debt 11.7% 11-12% REN will maintain credit metrics consistent with investment grade rating Net debt ( Bn) 2.8 2.7-2.9 2017 EOY 2018-21 38
SUSTAINABLE DIVIDEND POLICY Dividend ( /share) 0.171 0.171 0.171 0.171 0.171 REN plans to maintain the dividend policy 2013-17 2018 2019 2020 2021 One of the highest dividend yields in the industry High sustainability given REN s capacity of generating cash flow 39
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STRATEGIC GUIDELINES Operational excellence and core business consolidation Disciplined growth Solid financials Digital path ENABLERS Evolution of skills and culture 41
CLOSING REMARKS REN is now at an intermediate point of a path that started in 2015 2015-17 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 2018-21, 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 investment grade rating and attractive shareholder returns as well as the highest sustainability standards 42
MUITO OBRIGADO 43