Terna Rete Elettrica Nazionale : The grid at the core of the change. Terna presents the 2017-2021 Strategic Plan

Acceleration of grid investments to enable the energy transition and to generate greater benefits

• Achieved all targets for 2016 indicated in the previous Strategic Plan
• About € 4 billion investments expected in 5 years - around 30% higher vs previous Plan - to develop and modernise the grid
• Increase in revenues and EBITDA respectively to around € 2.3 billion and € 1.7 billion in 2021, with an average annual growth of 2%
• Contribution from Non-Regulated Activities for approximately € 350 million to the Group's EBITDA in 5 years
• Strong capital structure maintained, due to a robust cash flow generation
• Dividend policy at 3% annual growth extended until 2021

Milan, 20 February 2017- Today, CEO Matteo Del Fante presents the Terna Group's 2017-2021 Strategic Plan, approved by the Board of Directors of Terna S.p.A., chaired by Catia Bastioli.

'We have achieved all objectives foreseen for 2016 which has been a significant year. With the completion of the Sorgente-Rizziconi project, we have now solved the last major bottleneck of the Italian electricity market. The world of electricity is currently undergoing a deep change and the energy transition we are experiencing is bringing new challenges. Grids are at the core of these changes and Terna's new Strategic Plan has a solid base to continuously make the transmission system more efficient, technologically advanced and interconnected. That is why in the forthcoming years we will focus on strengthening the grid in Italy and on developing interconnections with other countries, in order to continue generating benefits for both companies and citizens, as well as safeguarding the environment.

Our core activities are the pillars of the value creation that allows us to maintain a solid financial structure and to guarantee attractive remuneration for our shareholders'.

2017-2021 STRATEGIC PLAN

INVESTMENTS IN THE NATIONAL GRID

The reference scenario of the electricity sector in Italy and Europe that is undergoing a steady growth of non-programmable renewables and, at the same time, the decommissioning of traditional plants, makes it necessary to change the development of grids. In particular, also in line with the EU guidelines, all projects aimed at the decarbonisation of energy production, achieving more efficient markets and security of supply have become fundamental.

From this perspective, we will focus on new electricity interconnections between neighbouring countries and higher technological and smart energy infrastructure, with low environmental impact.

Opportunities and challenges in a context where the Terna Group is a trigger for the change, by increasing its commitment for renewables integration in the grid and for security of the system, strengthening interconnections and accelerating investments to solve local congestions. Terna is at the heart of the energy transition in Italy and in Europe, and therefore confirms its commitment to a greater integration in the electricity system, thanks to advanced technologies with increasing attention to environmental and sustainability issues.

Therefore, in the next 5 years, Terna Group envisages investments inthe electricity grid that will reach around € 4 billion, with an average annual spending about 30% higher vs previous Strategic Plan.

The main ongoing electricity infrastructure projects include the interconnections with Montenegro and France that should be both completed in 2019. During the Plan period, we will begin the new projects SACOI3 - that will connect Sardinia, Corsica and Italy - and the Italy-Austria interconnection.

Further projects aimed at improving exchange capacity between the different Italian market zones are: Colunga-Calenzano, Foggia-Gissi, Paternò-Pantano-Priolo and Chiaramonte Gulfi-Ciminna.

The 'Sorgente-Rizziconi' line became operational in 2016, linking Sicily to the rest of Italy and therefore Europe through the Italian high-voltage electricity system. With the 'Sorgente-Rizziconi' line, Terna has solved an important bottleneck and eliminated the price differential between Sicily and the rest of the country, with estimated savings at about € 600 million, in addition to lower emissions for 700 thousand tons of CO2 every year.

The Regulated Asset Base (RAB) will reach € 15.6 billion by 2021, with an average annual growth rate over the Plan (CAGR) of around 2%.

NON-REGULATED ACTIVITIES AND INTERNATIONAL DEVELOPMENT

The 2017-2021 Strategic Plan envisages for a new industrial approach to Non-Regulated Activities focused on the group's core capabilities, positioning Terna as an Energy Solution Provider.

The activities on interconnectors (financed by third-party resources) are ongoing.

Within this context, following the acquisition of the Railways high-voltage electricity grid, the Group signed an agreement with Rete Ferroviaria Italiana (RFI) to build photovoltaic plants with a capacity up to 200 MW, which will guarantee around 300 GWh of clean energy production per year. This is the first large-scale operation in the photovoltaic sector to be achieved in a context of 'grid parity' in Italy, i.e. without state incentives and, therefore, without additional costs for companies and families.

Thanks to the expertise gained in the core business, the contribution from these activities to the Group's EBITDA will be about € 350 million over the Plan period. In the new Plan the annual EBITDA contribution from these activities will increase by 40% on average vs the old plan.

In line with the international strategy announced last year, the new Strategic Plan foresees approximately € 250 million equity commitment for regulated activities abroad, to support long term growth and value creation. These initiatives, leveraging on Terna's industrial role, will be selected through evaluation processes that guarantee value creation with a low risk profile and may be also developed through partnerships.

At the international level Terna has recently been awarded a tender for the construction of over 200 km of electricity lines in Uruguay - an investment of about €70 million - and signed an agreement for the acquisition of the concessions to build two electricity lines in Brazil for an overall 500 km - an investment of about € 180 million.

MAIN TARGETS

We expect Group's revenues to around € 2.3 billion and EBITDA to around€ 1.7 billion in 2021, with a2% annualaverage growth of both indicators startingfrom 2016. Net profit will also improve, with a 3% annual average growth.

These results will guarantee a Free Cash flow of about € 2 billion during the Plan period, which will contribute to maintaining the flexibility required to support an attractive dividend policy. Terna's financial structure will remain solid and the net debt/RAB ratio will remain below 60%.

2017 OUTLOOK

For 2017 investments will be around € 900 million, while revenue is expected at around € 2.25 billion, with an EBITDA of around € 1.58 billion. Finally, earnings per share (EPS) are expected around € 0.34.

DIVIDEND POLICY

With regard to the dividend policy, the assumptions of the previous Plan have been confirmed and extended to the broader 2017-2021 period, with an annual 3% dividend growth, in line with the expected evolution of earnings and main capital parameters.

This policy reflects, however, a payout ratio that will remain below 70% during the Plan period.

Today, at 14:00, a meeting is scheduled with the financial community and the media to present corporate strategy and the preliminary 2016 results to financial analysts and institutional investors. The support material for the event will be made available on the Company's website (www.terna.it), in the Investor Relations/Presentations section, at the beginning of the meeting. In the same section it will be possible to follow the presentation through web-streaming. The Presentations will also be made available, via SDIR-NIS, on the website of Borsa Italiana S.p.A. (www.borsaitaliana.it) and through the authorised storage service '1Info' (www.1info.it).

A number of 'alternative performance indicators' (EBITDA, Net financial debt and Free cash Flow) are used in the present communication. The meaning and content of these are illustrated here below in line with the ESMA/2015/1415 recommendation published on 03 December 2015:

- EBITDA (Gross Operating Margin): this is an indicator of operating performance; it is calculated by combining the operating profit (EBIT) with amortisation and depreciation;

- Net financial debt: this is an indicator of financial structure; it is determined as the result of short- and long-term financial debt and of related derivative instruments, net of cash and cash equivalents and of financial assets.