Preliminary Results and 2013-2017 Strategic Plan (February 6, 2013)

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<ul><li> 1. ANALYST PRESENTATION Investor Relations 1</li></ul> <p> 2. ANALYST PRESENTATIONAgenda Highlights3 2013 - 2017 Strategic Plan6 Annexes19 Investor Relations 2 3. ANALYST PRESENTATIONHighlights2012 Preliminary Figures Another good year for Terna Double-digit growth in Revenues and EBITDA EBITDA contribution from Non Traditional Activities exceeded 60mn A record year for EBITDA margin, above 76% Capex rallied further Net Debt in line with guidanceFY 11 FY 12 Total Revenues 1,636&gt;1,80010% EBITDA 1,230&gt;1,380&gt;12%EBITDA Margin 75% &gt;76%Total Group Capex 1,2291,240 1% Net Debt 5,12376% Rewarding Equity Story for the 2.5bn of dividends distributedShareholders Risk averse attitude Value creation from M&amp;AInvestor Relations 4 5. ANALYST PRESENTATIONHighlightsUpdate on Regulatory Framework Regulators green-light on projects eligible to incentives (resolution 40/2013)Framework News flow on remuneration schemes on batteries due soon Transmission ~1.64 bnResolution 565/20122013 Grid Fee + Grid Fee 2013 1.75bnDispatching ~ 0.11 bnResolution 576/2012 Investor Relations 5 6. ANALYST PRESENTATION2013-2017 Strategic PlanStrategic Overview Dual Strategy confirmed and fine-tuned TraditionalActivities regulated by Italian Regulator Activities (including Storage, assimilated to other Regulated Activities) Non TraditionalOther Activities Activities Macro assumptions consistent with recent evolutions and trends Solidity and profitability in a low risk environmentInvestor Relations 6 7. ANALYST PRESENTATION2013-2017 Strategic PlanTargets3.8bn 0.3bn Confirmed CAPEX4.1bn o/w GridBatteries4.1bn ConfirmedGrowth Tariff RAB CAGR7% area6.9%Average Confirmed Blended Return8% area (despite WACC assumptions)OperationalEBITDA Marginfrom &gt;76% to &gt;80%Enhanced Profile Efficiency 75% &gt;80%Enhanced Profile D/RAB &lt; 60%Capital 2x Confirmed RAB CAGR in theCAGR 7.2%7% areaCAGR 6.8% 2017 turnaround year for mix: 10.0%16000Incentivized &gt; Ordinary13.7 9.5%14000 In a decade (2008-2017) RAB12000more than doubled 9.0% 9.9 9.0 51% 10000 8.5% 28% 8.2% 28%8.1% 80006.323% 8.0%9% 6000 7.5% 4000Blended Return 7.5% 72%91% 7.0%77% 72% 49% 2000 Blended returns consistent7.1% 6.5%0with WACC assumptionsTariff RAB 08 Tariff RAB 11Tariff RAB 12Tariff RAB 17 Tariff Rab - Ordinary Tariff Rab - Incentivized Blended ReturnInvestor Relations 11 12. ANALYST PRESENTATION2013-2017 Strategic PlanNon Traditional ActivitiesAll activities not regulated by the Italian Regulator (batteries not included)Value (5yr cumulated) Service-based activitiesPipeline Engineering(Included in the BP) O&amp;M400mn Housing of optical fibre Developer-style activitiesPotential Contracts for Third Parties (engineering services) 900mn(Not included in the BP) No capital intensive and rolling Deal-by-deal focus during the Plan periodInvestor Relations 12 13. ANALYST PRESENTATION2013-2017 Strategic PlanOperational EfficiencyEBITDA Group EBITDA and Ebitda Margin 2017 2012 11.9x 2 2005EBITDA Margin66%&gt;76%&gt;80% 31 Since 2005 profitability increased by 10pps and 2 EBITDA almost doubled,3targeting profitability above 80% Investor Relations 13 14. ANALYST PRESENTATION2013-2017 Strategic PlanCapital Structure Net Debt EvolutionConsolidated Cash Flow Consolidated bn2012-2016 2013-2017 Cash Flow 4.6 5.1 Further contained Debt Growth-4.3-4.2 RollingCashFlow -1.9-1.9Change in ~ 1.6 ~1 enhancedNet Debt-0.6bnOperating Cash Flow Capex Dividends Investor Relations 14 15. ANALYST PRESENTATION2013-2017 Strategic PlanCapital Structure Leverage and Ratios Positive trend in financial ratios Net Debt / RAB well below the 60% threshold Net Debt/RABNet Debt/EBITDA Threshold 60%4.2x53%52% 4.2x50%3.8x 49%3.8x 2012 20132014 20152016 20172012 2013 2014 20152016 2017 New Plan Old PlanInvestor Relations 15 16. ANALYST PRESENTATION2013-2017 Strategic PlanDividend PolicyConfirmed dividend policy Safe and sound 19cents from Traditional Activities Potential extra yield from Non Traditional Activities: 60% payout on resultsAn attractive Total Return PlayTSR ~ 10% Sustainable dividend yield Sound Equity RAB growth No downside to 19cents but upside flexibility from NTA Investor Relations 16 17. ANALYST PRESENTATION2013-2017 Strategic PlanKey TakeawayDual Strategy Confirmed Combining good value (TA) and catalyst (NTA) Turning vision into action Batteries on the go Always thinking ahead for Value Creation Solid earnings profile and improved cashflow generation An attractive Total Return Play Investor Relations 17 18. ANALYST PRESENTATIONTHANK YOU.QUESTIONS?Luigi Roth ChairmanFlavio Cattaneo Chief Executive OfficerGiuseppe Saponaro Chief Financial Officer2013-2017 Strategic PlanFEBRUARY 6th, 2013 Investor Relations 18 19. ANALYST PRESENTATIONANNEXES Investor Relations 19 20. ANALYST PRESENTATIONAnnexMain Assumptions 346 CAGR 12-17Pre- crisis level+1.2% 3403391 335 CAGR 12-17 Energy329330+0.3% Demand2 325 Actual320Base case Bull case 2007 2008 2009 20102011 20122013 2014 2015 2016 2017Macro Assumed within the range 2-3% during plan period CPI/Deflator ScenarioRegulatory 2013 WACC WACC assumed at 6.9% starting from 20143Frameworkinterim reviewFiscal Robin Hood 2013 : 10.5%FrameworkTax 2014: 6.5% 1) 2011 actual figures. Source: Dati Statistici sullEnergia Elettrica in Italia 2011 2) 2012 provisional figuresInvestor Relations 20 3) Assuming a RfR level at 4.84% 21. ANALYST PRESENTATIONAnnexElectricity Market TrendsJanuary 2013 Energy Demand TWh -2.0% yoy32Range last 5 years12 Months Rolling30Yr -1 at 27.5TWh (vs 28.1TWh)282624 Feb Feb Mar MarApr Apr May MayJun JunJul Jul AugAug Sep SepOct OctNov NovDec Dec Jan Jan2011 actual figures, 2012-2013 provisional figures YoY Chg % 4.0% -4.1%-4.0% -4.7% -1.9% 1.2% 0.3% -9.6% -3.7% -5.6% -3.6% -2.0%(as of January 2013)Historical Energy Demand TWh 340 3373391 335 330 -5.7%330-2.8% 2 Back again to 2004 level325325 In 2012 another significant drop 320 2004 2005 2006 2007 2008 2009 2010 2011 2012 1) 2011 actual figures. Source: Dati Statistici sullEnergia Elettrica in Italia 2011 2) 2012 provisional figures Investor Relations21 22. ANALYST PRESENTATIONAnnexElectricity Market Trends Capex on the Grid allowed to increase the competitiveness of the market, by reducing the critical zones20072011Sep-Dec 2012SAPEI functionality: 100%Minimum +1% Price+3%+3%+7% +3%+2% +7%+3% +7%Minimum Minimum+10% +16% Minimum Price Price Price +18% +35% +42% Pool Price &gt;+5% vs minimum price zone68/MWh Up to +5% vs minimum price zone Investor Relations 22 23. ANALYST PRESENTATIONAnnexThe Main 6 Development Projects ** * Investor Relations 23 24. ANALYST PRESENTATIONAnnexInterconnectionsInvestor Relations 24 25. ANALYST PRESENTATIONAnnexFunding and Refinancingbn Existing Debt Maturity Profile Funding available at an average Spread slightly above 100bps 1200 Debt Maturity: 8 yrs No financial needs until the end of 2015 800 Stand Alone strong Credit Rating, better than Sovereign1 40002013 2014 2015 2016 20171) Ratings of the Republic of Italy: S&amp;Ps BBB+, Negative Outlook; Moodys Baa2, Negative Outlook; Fitch A- Negative Outlook.Investor Relations 25 26. ANALYST PRESENTATIONAnnexCorporate Social Responsibility Our commitment to Sustainability has been widely recognized over the last years through the inclusion in the main Sustainability Indexes Worldwide. The main sustainability agencies rate Terna at the top of the electricity sector worldwide. Terna aims at maintaining this excellent recognition by carrying out improvement programs in line with the targets of the PlanCSR TargetsIn line with medium term priorities and objectives, we will further progress in the following fields: Build and implement partnerships with the most relevant environmental associations for a sustainable development of the Grid Improve the consideration of ESG aspects in our supply chain management Develop a more integrated reporting by participating to the IIRC pilot program Increase the effectiveness of our investment in the communities Increase our contacts with SRI investorsInvestor Relations 26 27. ANALYST PRESENTATIONDisclaimerTHIS DOCUMENT HAS BEEN PREPARED BY TERNA S.P.A. (THE COMPANY) FOR THE SOLE PURPOSE DESCRIBED HEREIN. IN NO CASEMAY IT BE INTERPRETED AS AN OFFER OR INVITATION TO SELL OR PURCHASE ANY SECURITY ISSUED BY THE COMPANY OR ITSSUBSIDIARIES.THE CONTENT OF THIS DOCUMENT HAS A MERELY INFORMATIVE AND PROVISIONAL NATURE AND THE STATEMENTS CONTAINED HEREINHAVE NOT BEEN INDEPENDENTLY VERIFIED. NEITHER THE COMPANY NOR ANY OF ITS REPRESENTATIVES SHALL ACCEPT ANY LIABILITYWHATSOEVER (WHETHER IN NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY FROM THE USE OF THIS DOCUMENT OR ITS CONTENTSOR OTHERWISE ARISING IN CONNECTION WITH THIS DOCUMENT OR ANY MATERIAL DISCUSSED DURING THE PRESENTATION.THIS DOCUMENT MAY NOT BE REPRODUCED OR REDISTRIBUTED, IN WHOLE OR IN PART, TO ANY OTHER PERSON. THE INFORMATIONCONTAINED HEREIN AND OTHER MATERIAL DISCUSSED AT THE CONFERENCE CALL MAY INCLUDE FORWARD-LOOKING STATEMENTSTHAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT THE COMPANYS BELIEFS AND EXPECTATIONS. THESE STATEMENTSARE BASED ON CURRENT PLANS, ESTIMATES, PROJECTIONS AND PROJECTS, AND CANNOT BE INTERPRETED AS A PROMISE ORGUARANTEE OF WHATSOEVER NATURE.HOWEVER, FORWARD-LOOKING STATEMENTS INVOLVE INHERENT RISKS AND UNCERTAINTIES AND ARE CURRENT ONLY AT THE DATETHEY ARE MADE. WE CAUTION YOU THAT A NUMBER OF FACTORS COULD CAUSE THE COMPANYS ACTUAL RESULTS AND PROVISIONS TODIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITEDTO: TRENDS IN COMPANYS BUSINESS, ITS ABILITY TO IMPLEMENT COST-CUTTING PLANS, CHANGES IN THE REGULATORY ENVIRONMENT,DIFFERENT INTERPRETATION OF THE LAW AND REGULATION, ITS ABILITY TO SUCCESSFULLY DIVERSIFY AND THE EXPECTED LEVEL OFFUTURE CAPITAL EXPENDITURES. THEREFORE, YOU SHOULD NOT PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS.TERNA DOES NOT UNDERTAKE ANY OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT ANY CHANGES IN TERNASEXPECTATIONS WITH REGARD THERETO OR ANY CHANGES IN EVENTS.EXECUTIVE IN CHARGE OF THE PREPARATION OF ACCOUNTING DOCUMENTS LUCIANO DI BACCO DECLARES, PURSUANT TOPARAGRAPH 2 OF ARTICLE 154-BIS OF THE CONSOLIDATED LAW ON FINANCE, THAT THE ACCOUNTING INFORMATION CONTAINED IN THISPRESENTATION, FOR WHAT CONCERNS THE ACTUAL FIGURES, CORRESPONDS TO THE DOCUMENT RESULTS, BOOKS AND ACCOUNTINGRECORDS.THE SORGENTE-RIZZICONI PROJECT AND THE ITALY-FRANCE INTERCONNECTION ARE CO-FINANCED BY THE EUROPEAN UNIONSEUROPEAN ENERGY PROGRAMME FOR RECOVERY PROGRAMME. THE SOLE RESPONSIBILITY OF THIS PUBLICATION LIES WITH THEAUTHOR. THE EUROPEAN UNION IS NO RESPONSIBLE FOR ANY USE THAT MAY BE MADE OF THE INFORMATION CONTAINED THEREINInvestor Relations 27 28. ANALYST PRESENTATIONNotes Investor Relations 28 29. ANALYST PRESENTATIONNotes Investor Relations 29 30. ANALYST PRESENTATIONNotes Investor Relations 30 31. ANALYST PRESENTATIONNotes Investor Relations 31 32. ANALYST PRESENTATION Investor Relations 32</p>