TerniEnergia : Green light from the BoD on the update of the 2018-2022 relaunch and recovery plan and the related financial maneuver

Press Release

Terni - 27 June 2019

TERNIENERGIA: green light from the BoD on the update of the 2018-2022 relaunch and recovery plan and the related financial maneuver

• Confirmed the asset disposal measures and the merger by way incorporation of Softeco into TerniEnergia to complete the industrial turnaround process; the updated financial maneuver for the rescheduling of the financial indebtedness;
• As a consequence of the measures provided under the Plan the group's financial indebtedness would be reduced by 31 December 2020 from around Euro 142 million to approximately Euro 33.5 million;
• Continuation of the negotiations with the main creditors
• Call of the bondholders' meeting of the bond named "TerniEnergia Euro 25,000,000.00 Notes due 2019" for the approval by the bondholders in relation to their participation to the recovery plan and to the amendments of the bond regulation
• Update of the calendar of corporate events: the approval of the draft financial statements and the consolidated financial statements as of December 31, 2018 deferred within August 31, 2019

The Board of Directors of TerniEnergia S.p.A. ("TerniEnerga" or the "Company"), a smart company listed on the Italian Stock Exchange's electronic share market (MTA) and part of the Italeaf Group, met today and has resolved upon the approval of the update of the relaunch and recovery plan compared to the version previously approved on October 25, 2018, aimed at the rebalancing of the Company's financial situation in the medium term, it being understood that the feasibility of the aforementioned plan is still subject to the certification of Mr. Massilimiano Bonamini in its quality as expert who has been appointed by the Company for such purposes, according to article 67, paragraph 3, letter d) of the Italian insolvency law (the "Plan").

The update of the Plan which has been prepared with the help of KPMG (in its quality as industrial and financial advisor of the Company) and DLA Piper (in its quality as legal advisor of the Company) confirms the main of goal of strategic repositioning based on:

1. the disposal of assets related to (a) the construction and sale of photovoltaic plants and those related to the management such plants which represented as of today the core business of the group, (b) the business unit Clean Tech, to be completed within 31 December 2020. In addition to the above, the
   Company aims at focusing on the business unit related to the "digital energy";
2. the merger by way incorporation of Softeco into TerniEnergia, 100% owned by the latter, to be completed within 31 December 2019, in order to accelerate the development of TerniEnergia in the
   "hi tech" and "digital energy" sector;
3. a financial maneuver the amendments of which (compared to the previous version thereof approved

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Press Release

Terni - 27 June 2019

on 25 October 2019) are rather the consequence of an activity carried out by the expert, dott. Massimiliano Bonamini, appointed by the Company to carry out the analysis required by the law in order to ascertain mainly the truthfulness of the Company's financial data and the feasibility of the Plan. As part of these analysis, the assumptions of the Plan were in fact subjected to important stress tests that led to amendments of the financial maneuver. In detail, the sensitivity analysis carried out by the expert are of a different nature and, in particular:

1. industrial sensitivity: (i) significant reduction of Softeco's revenues; (ii) worsening of operating performance in terms of invoicing of contracts with effects on warehouse hours (LIC); (iii) increase of costs related to external consultancy to support business growth (starting from 2020); and (iv) generic contingencies;
2. sensitivity disposals (in relation to the value and timing of such disposals): (i) postponement to 2020 of collections related to the sale of Cheremule, Bonannaro and Oristano plants; and (ii) postponement to 2020 of the sales of environmental plants (from which the Calimera plant has been excluded) and of the photovoltaic plants not included in the perimeter of sale to LCF, with a reduction of the proceeds deriving therefrom (compared to those envisaged by the original Plan) equal to 10%;
3. other sensitivities: (i) increase in the cost of TerniEnergia personnel in 2019; and (ii) higher payments resulting from tax and social security due diligence activities in relation to

TerniEnergia and Softeco.

We hereby represent the main terms of the Plan approved today by the Board of Directors, which is still subject to negotiations with the financial creditors and to the expert's analysis in relation to the truthfulness of the financial data and the feasibility of the Plan by the expert. The updated financial maneuver includes the effects of the aforementioned sensitivities in terms of cash available for the service of the Company's indebtedness. As a consequence, compared to the previous version of the Plan: (i) noteholders and financial institutions that do not adhere to the partial write-off of their claims vis a vis the Company see their satisfaction reduced from around 47% to around 36% (of which about 14% by 31 December 2019 and about 22% by 31 December 2020); (ii) financial institutions participating to the partial write-off (which has to be implemented on 31 December 2020) see their satisfaction reduced as at 31 December 2020 from around 67% to around 59.5%; and (iii) noteholders and financial institutions that do not adhere to the partial and write-off see the amortization period for the full repayment of their receivables extended from 31 December 2026 to 31 December 2027.

Taking into account the foregoing as well as the expected timing for the disposal of the assets (i.e. no later than 31 December 2020), the group's indebtedness towards financial institutions and noteholders, outstanding as at 31 March 2018 (the "Reference Date"), would be reduced by 31 December 2020 from around Euro 142 million to approximately Euro 33.5 million. The residual exposures as at 31 December 2020 would be reimbursed pari passu among the different types of exposures (described below), with the proceeds deriving from the business continuity of TerniEnergia (post merger with Softeco), until full repayment of the indebtedness towards financial institutions (with the exception of the lenders having financial exposures

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Terni - 27 June 2019

towards Softeco) and noteholders, scheduled for December 31, 2027.

A. Disposal of assets

In order for the whole restructuring transaction to be successful is represented by the disposal of the photovoltaic plants and of those assets related to the Business Unit Clean Tech. In particular the Plan envisages: (i) the disposal of the photovoltaic plants (owned by TerniEnergia directly or indirectly through special purpose vehicles); (ii) the sale of the plants for the treatment and recycling of used tires; (iii) the sale of a liquids purification plant (impianto di depurazione di liquidi) and two biodigesters (biodigestori). As a consequence of such disposals, the Plan provides for a financial benefit of approximately Euro 90.7 million (of which approximately Euro 39.5 million of Equity Value and approximately Euro 51.2 million of reduction of financial indebtedness of the group as a consequence of the assumption of the relevant debt by the purchasers of the assets).

Notwithstanding the unfavorable economic and financial situation of the Group, as known by the Board of Directors, the Company has successfully carried out the negotiations in relation to the disposal of the assets described above. The Company's commitment to find third parties interested in the purchase of its asset, has led to:

1. the sale of certain photovoltaic plants to Sonnedix (published on 10 September 2018) for an amount equal to Euro 5,700,000.00 used to bear the cost of the current activity carried out by the Company (e.g. the payment of financial costs and part of the overdue suppliers payables);
2. the execution of a preliminary sale and purchase agreement among some companies controlled by TerniEnergia, as sellers, TerniEnergia as guarantor, Mareccio Energia S.r.l. (an Italian special purpose vehicle controlled by the Basalt fund) in partnership with LCF Alliance (through the Italian special purpose vehicle Italia T1 Roncolo S.r.l.), as purchaser, for the transfer of no. 22 photovoltaic plants with a total capacity of 19.3 MW (published on 6 June 2019).
3. the execution of a preliminary quota purchase agreement between Next Power II Alpha S.r.l., an investment vehicle managed by the London merchant bank NextEnergy Capital (as purchaser), and TerniEnergia (as seller) to take over 50% of the share capital of the company Next Power II Prima S.r.l., owner of 2 photovoltaic plants with a total capacity of 1.9 MW (published on 7 June 2019). The closing of such transaction is scheduled on 8 August 2019 (the execution of which is subject to conditions precedent). The value of the transaction has been set at Euro 1,300,000.00 plus the assumption of the financial debts by the purchaser for an amount equal to Euro 4 million (the details of such transactions are available on the website of TerniEnergia). In addition to the above, negotiations for the disposal of further assets, whose sale is set out by the Plan, are still ongoing.

1. Meger by way of incorporation of Softeco into TerniEnergia

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The Plan envisages the process of the rationalization of the Group through the merger by way incorporation of Softeco Sismat Srl into TerniEnergia by the end of 2019. This transaction will allow TerniEnergia to complete the industrial turnaround process with the access of TerniEnergia into the hi-tech sector, qualifying the Company as a player fully engaged in sector of energy digitalization, thanks to the positive industrial results achieved by Softeco and the positive forecasts of the latter, based on research and development activities. The merger by way incorporation will allow the presence and development in the new "digital energy" market, allowing TerniEnergia to fully exploit Softeco's skills in the development of increasingly advanced digital technologies for the entire energy supply chain, covering all phases, from production to the sale, to the final consumption. In addition, the merger will simplify the corporate architecture of the group, confirming the industrial vocation of TerniEnergia, optimizing decision-making processes and management efficiency (corporate, accounting and administrative), with a consequent benefit in terms of costs saving.

C. Financial Maneuver

1. standstill of the short-term credit facilities within the limits of the maximum commitments (importi affidati) at the Reference Date (net of the short-term credit facilities granted on the Reference Date by Banca CariGe SpA and Credito Emiliano SpA) between Softeco and the relevant financial institutions, it being understood that the amount granted in relation to such credit facilities will be reduced, starting from the financial year 2021 (included), by an amount equal to (i) Euro 476,000.00 relating to the portion of short-term credit facilities granted by UniCredit; and (ii) Euro 500,000.00 relating to the portion of short-term credit facilities granted by Banco BPM S.p.A. (the Short-TermCredit Facilities);
2. consolidation and rescheduling of the exposures relating to short-credit facilities (and no longer used as such) existing on the Reference Date between the Group and the relevant financial institutions for a total amount of Euro 14.1 million (the Consolidated Short-TermCredit Facilities). The repayment of the Consolidated Short-Term Credit Facilities will be made by TerniEnergia in favor of the relevant financial institutions as follows:
3. 1. by 31 December 2019, for a total amount of approximately Euro 2 million in order to reduce exposures related to the Consolidated Short-Term Credit Facilities of approximately 14% compared to the exposures related to the Consolidated Short-Term Credit Facilities outstanding at the Reference Date;
   2. by 31 December 2020, for around Euro 5.2 million in order to reduce the exposures related to the Consolidated Short-Term Credit Facilities outstanding at the Reference Date of approximately 35,4%. The aforementioned amount will be used (a) for approximately Euro 3.8 million (equal to approximately 46% of the exposures of the financial institutions that have adhered to the proposal consisting in the partial write-off of the exposures related to the

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Consolidated Short-Term Credit Facilities at the Reference Date) to repay the portion of exposures related to the Consolidated Short-Term Credit Facilities originally granted by the financial institutions that have adhered to the proposal consisting in the partial write-off of the exposures related to the Consolidated Short-Term Credit Facilities; and (b) for approximately Euro 1.4 million (equal to approximately 22% of the exposures of the financial institutions that have not adhered to the proposal consisting in the partial write-off of the exposures related to the Consolidated Short-Term Credit Facilities at the Reference Date) to repay the portion of exposures related to the Consolidated Short-Term Credit Facilities originally granted by the financial institutions that did not adhere to the proposal consisting in the partial write-off of the exposures related to the Consolidated Short-Term Credit Facilities, which will therefore be paid according to the terms and conditions better described below.

The payments described under points i. and ii. mentioned above will be carried out utilizing the proceeds deriving from the disposal of assets for a total amount of approximately Euro 7.3 million. Exposures related to the Consolidated Short-Term Credit Facilities which are outstanding at December 31, 2020 equal to approximately Euro 7.5 million will be reimbursed with the proceeds deriving from the operational management of TerniEnergia (post merger with Softeco) pari-passu compared to the other types of exposures, up to their full repayment, with the last installment scheduled for 31 December 2027. Without prejudice to the above, the Plan provides that should the Company for any reason whatsoever fail to comply (in whole or in part) with its payment obligations towards the relevant financial institutions falling on 31 December 2019 in relation to the Consolidated Short-Term Credit Facilities, then the maturity of such payment obligations, being equal to the difference between (i) the amount due on 31 December 2019 in relation to the Consolidated Short-Term Credit Facilities; and (ii) the amount effectively paid on 31 December 2019 in relation to the Consolidated Short-Term Credit Facilities, should automatically be postponed to 31 December 2020. Should the Company not comply with the payment obligations scheduled on 31 December 2019, such circumstance would not constitute an event of default of the relevant financing agreement which will be executed for the implementation of the Plan.

1. consolidation and rescheduling of the exposures relating to medium term-credit facilities existing on the Reference Date between the Group and the relevant financial institutions for a total amount of Euro approximately 55.9 million (the Medium Term Credit Facilities). The repayment of the exposures related to the Medium Term Credit Facilities will be made by TerniEnergia in favour of the relevant financial institutions as follows:
2. 1. by December 31, 2019, for a total amount of approximately Euro 2.9 million in order to reduce exposures related to the Medium Term Credit Facilities of approximately 14% compared to

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