ENGIE : Transcript

Q1 2021 PERFORMANCE AND STRATEGIC UPDATE

May 18, 2021

Aarti Singhal

Good morning, everyone. It's my pleasure to welcome you to our Q1 Results and Strategic Update presentation. We have three speakers this morning: Catherine MacGregor, Judith Hartmann and Paulo Almirante.

A quick view of the agenda for this morning: we will start with our Q1 results, with a brief presentation on Q1. This will be followed by Catherine leading us through the strategic update, Putting Strategy Into Action, and she will be joined by Paulo Almirante on Renewables, following which Catherine will walk us through Energy Solutions, Networks and Thermal activities, and future energy systems. And then Judith will present on the capital allocation and financial outlook. And, finally, concluding remarks from Catherine. And, as usual, there will be a Q&A at the end of this presentation, where you will be able to ask your question directly to Management. And, without further ado, I'd now like to hand you over to our CEO, Catherine MacGregor. Thank you.

Catherine MacGregor

Thank you so much, Aarti, and very good morning, everyone.

I am so pleased to be here with you this morning to first present to you quickly our strong Q1 2021 performance and then, switching gear, to show you how we are putting our strategy into actions.

We had indeed a strong start to the year, in Q1, where we delivered 10% organic growth in EBIT, and that was underpinned by solid operational performance.

We have also made strong progress on our Group simplification. We have set up a new organisation, which I will go back to later, and our strategic reviews are on track. We actually continue the rationalisation of our portfolio, with the disposal of EngieENGIEEPS, which was announced, and the exit of activities in Turkey.

For the full year 2021, we are reaffirming our Net Recurring Income, Group share guidance in the range of €2.3 billion to €2.5 billion.

Our first quarter was indeed underpinned by solid operational performance. We commissioned half a gigawatt of Renewables, including our first fixed offshore wind project, the SeaMade in Belgium, and we are on track to deliver the 3 GW that we have targeted for 2021. Also in Renewables, we have successfully integrated the

1.7 GW of Portuguese Hydro assets that we acquired in December last year. Our Networks maintain high levels of safety and reliability.

And, in Client Solutions, the activity level was fully in line with our expectations.

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Finally, our Belgian nuclear assets reached record levels of availability, at 95%, which is to be compared to last year, Q1 2020 (69%).

With that, I will hand it over to Judith for her financial commentary of Q1 results. Thank you.

Judith Hartmann

Thank you, Catherine, and good morning, everybody. It's great to be here with you today.

So, indeed, a very good starting to the year. You can see that we had growth on both EBITDA and EBIT. And I'm pleased to, in particular, talk about the 10% EBIT organic growth.

We had a negative foreign exchange impact of 77 million. This was mostly due to the Brazilian real. And a positive impact on scope,of 49 million, which was mostly driven by the Suez disposal, which in fact Suez had been negative last year in Q1the first quarter. And also a positive contribution from our Hydro acquisition in Portugal helped us to drive this growth.

Strong cash flow generation helped us to keep the net debt stable. And we are very pleased to reaffirm our guidance for 2021 today.

On the next page, you can see how this translates into the different activities. Operationally, I would mention the following items that had a very positive impact on our financials. The Renewables contribution from the additional commissionings were clearly a positive. Networks had a positive impact in Brazil from both power lines and our gas pipeline. And then of course the 95% nuclear availability contributed very positively to this result.

On the more exogenous factors, Texas' extreme weather event had a negative impact, in particular on Renewables, for about 80 million, the colder temperatures in France were clearly a tailwind for Networks,mostly, and then we also had a normalisation of our GEM performance, that you can see in "Others", where of course last year,in the first quarterQ1, with a very high volatility of commodity prices, GEM had had a very outstanding quarter.

We've also worked on SG&A during this quarter. It's one of the important topics that you will hear again later in this presentation. And that helped us also to improve the growth that you're seeing in front of you.

A few words about the balance sheet. The CFFO of 1.7 billion is funding our Capex of the first quarterQ1, and hence the debt is stable. On the CFFO maybe two comments. One is on GEM: lower margin calls helped us to drive this improvement, that's about two-thirds of the amount; and one-third very good performance from our WorkingCapitalRequirement, and again very pleased about this since this is a big focus area for us.

With that, Catherine, over to you for the strategic update.

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Catherine MacGregor

Thank you very much, Judith, and indeed I am very, very proud, to be here today with you to share with you our strategy roadmap for EngieENGIE: a roadmap that is completely,fully aligned with the strategic orientations that were decided by the Board last year, as you will see, and I'm enjoying full support from the Board while presenting this to you today.

At EngieENGIE, we have tremendous strengths, stared by highly professional and committed teams. These teams are very mobilised around our raison d'être, our purpose, which is to accelerate the energy transition. The world is at a pivotal moment for the energy industry, with tremendous opportunities, which EngieENGIEcan and will seize. But there is tough global competition. A competition that does not stand still. So, to remain a leader, EngieENGIEis taking several steps. These include an in-depth review of our portfolio of activities, a simpler and more efficient organisation, and a stronger focus on execution.

It is my conviction, it is my commitment, that EngieENGIEhas to be managed in a more integrated and in a more industrial approach. It is this project that I am carrying today, together with my Executive Committee, who

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is with me this morning. It is this project that I want to embark all EngieENGIEemployees on. And it is this project that I'm presenting to you today.

We have a buoyant and transforming energy sector. It is indeed an incredible moment for us and for the industry. We are entering a new growth cycle, which is driven by increasing climate commitments and robust energy demand. Renewables development is booming. And the world is expecting to more than triple - triple - its Renewable capacity over the next 20 years, which represents more than 7,000 GW.

In the same time, events such as the Uri storm in Texas, acutely highlight the need for the transition, this energy transition, to bring affordability, reliability and security of supply.

Many governments are prioritising climate action in their recovery plans. There is such a strong momentum. Policymakers, cities and corporates have now to decide what should be the energy systems of the future. The new energy world is really at the heart of all these major developments, and we have all intention, at EngieENGIE, to play a leading role.

Today, we are building a simpler, more industrial EngieENGIE, focused on Renewables and Infrastructure. We are setting four Global Business Units, who are all contributing to this reliable, affordable and sustainable energy transition: Renewables to generate clean power; Energy Solutions, developing low -carbon distributed energy infrastructure; Networks, delivering affordable energy for customers; and Thermal & Supply, offering flexibility to balance this Renewables'intermittency.

These four Global Business Units have Infra-like business models, with largely contracted earnings, and in fact complementary profiles.

Renewables and Energy Solutions, on one hand, offer strong earnings growth opportunity. Networks, Thermal & Supply activities, on the other hand, provide stability and strong free cash flow generation.

In this buoyant market, one of our priorities is to simplify the Group at pace. We are concentrating on core activities. We are refocusing our geographic footprint and business development effort, from 70 countries in 2018 to less than 30 by 2023. And we are streamlining our organisation. We are simplifying drastically, from 25 multiactivity business units to four focused global business units. They all have clear P&L and Cash accountability, to drive delivery of growth and operational performance targets.

Renewables are led by Paulo Almirante, who will talk very shortly after. Networks by Edouard Sauvage, Energy Solutions by Cécile Prévieu, and Thermal & Supply by Sébastien Arbola.

Now this organisation will continue to leverage our longstanding presence in our geographies, as it is critical to maintain strong relationships with all our stakeholders, including our customers.

On Client Solutions, we are progressing on the creation of two new leaders in their respective domains: Energy Solutions, which is a leader of low -carbon distributed energy infrastructures and related services, and I will talk more about Energy Solutions later; and then "Bright", which is temporarily named, which is a new leader in multi- technical services, with differentiated skills around air conditioning, electrical systems, and building renovation. And this very important project is being led by Jérôme Stubler. Both entities are supported by very strong tailwinds to fuel their development.

The project Bright: it is progressing on track. The consultation with employee representatives that started mid- February is expected to be completed by the end of Q2. We are therefore on track for Bright to be managed as a full-fledged entity, within EngieENGIE, by 1 July. And this will be followed, immediately after, by a marketing phase. Bright is a very significant project for us. I'm very pleased with its progress. Jérôme Stubler and his team are doing a tremendous work to embark the 74,000 employees of future Bright and to position this new entity as a leader in its markets.

For the rest of this presentation, we will be focusing on EngieENGIE's future perimeter.

Turning now to performance improvement, we have defined a performance plan with clear accountability of each EVP, with dedicated actions. We will put focus on sharp execution to drive improved efficiency. We are leveraging our deep industrial expertise across all our businesses, and we will set clear operational performance KPIs and targets to link with financial results, with a renewed focus on cash management.

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Alongside operational excellence, we are also looking to increase the efficiency of our Support Functions through deployed… increased use of shared services and standard processes and systems. Ultimately, we aim to deliver over €1 billion of gross improvement, driving a net EBIT contribution of €600 million during the period 21 to 2023.

Our strong capabilities in data and digital will be instrumental to achieve this performance. Globally, EngieENGIEhas 2,000 data specialists, which include 350 data scientists and 1,000 developers (software developers) who are building,together, our software platforms. They have indeed a deep understanding of our industrial activities. And, over the recent years, we have crystallised this knowledge, which has been gained over years of experience, hundreds of studies and hundreds of projects, into seven global proprietary platforms. These software platforms, they cover the whole value chain, from origination to operation and maintenance.

Nemo, for example, offers a full software suite to support the design as well as the development of complex district heating and cooling networks. It models their energy needs and it optimises the necessary Capex. The platform is now deployed on all our major DHC networks and has become a true competitive advantage. A great example is our carbon and energy performance contract that we have with the Canadian government in Ottawa. Through advanced modelling, Nemo made it possible to commit to achieving up to 30% of energy savings while limiting the risk for our company. And our goal, with all these tools, is really to accelerate the deployment of these platforms across each of the GBUs.

While our performance plan leverages our digital and data competences, of course none of this would be possible without the commitment of our people. EngieENGIEemployees are truly making the difference, through their professionalism, their unique expertise across the whole energy value chain and their engagement, which is rooted in the energy transition, to contribute always further to the decarbonisation. In our yearly employee survey, 90% of them - 90% of them - are proud to work for EngieENGIE, and more than 80% are committed. Last year alone, we received 800,000 CVs. Our ability to attract the best talent is, in my view, an additional competitive advantage for EngieENGIE. Social improvements are an integral part of our key objectives. We are targeting, by 2030, full gender parity in our management, a 10% level in apprenticeships across Europe, and of course continuous improvement in our injury frequency rate for employees and our subcontractors.

We will leverage the strengths of our human capital to enhance our culture of performance, to focus on execution and increase accountability.

One of the reasons I was so proud to join EngieENGIEis that this company is recognised as an early mover in climate commitments, for years. And while we are of course pleased that our peers have joined this fight, we clearly intend to remain at the forefront of the race against climate change. This is at the heart of EngieENGIE's purpose. And it is our societal and business responsibility.

This is why I am very proud to announce today our commitment to Net Zero by 20242045across all scopes.

The combination of speed and breadth of this commitment, which includes the use of sole products, makes this more challenging that most of our peers' carbon ambitions.

And our strategic update today already shows how we are ready to translate this into action. We will achieve our ambition following a well-below-2°C trajectory with intermediate targets. We are currently working to obtain SBT certification accordingly.

Our teams have achieved tremendous work over the past year to take this challenging commitment and to translate it into a concrete roadmap.

Some of the actions we are taking is rolling out our coal-exit plan by 2027, reducing the carbon intensity of our power generation, as well as the emissions linked to the use of sole products - and this reduction will be drastic to 2045.

We are aligning our future Capex and we will only invest in projects, of course, that are compatible with our carbon ambition. And we will assign - we are assigning - carbon budgets to each of our GBUs. We are also incentivising our top management on carbon objectives.

I announced in February our exit from coal by 2025 in Europe and in2027 globally. At the end of 2020, it's important to note that our coal in our power generation portfolio had already decreased by more than 70% since

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2015. For the remaining capacity in our portfolio, which was 4.3 GW at the end of 2020, we have a clear exit plan, an exit plan that implies: first, closing of the coal plants; then converting to gas or biomass the plants when it makes economic sense; and ultimately, when the decision of closing or converting is not in our hands, we will consider disposal of our participation. We will always favour a just transition when considering this plan. All in all, disposals should concern only two plants out of ten.

I would like to take some time to share with you our recent joint announcement, that we did with the Chilean government, where we presented EngieENGIE's coal exit plan by 2025 in Chile. Our ambition there is threefold. First to develop 1.8 GW of renewables capacity. We will close our oldest coal plants and we will convert the most recent ones to gas or biomass. Ultimately, by 2025, we will have transformed our generation portfolio in Chile from 1.9 GW installed capacity, with 60% coal, to 3.4 GW installed capacity with 60% renewables.

I am very proud of our teams in Chile. They have worked really hard and now they are contributing so positively to the country. They are setting the energy transition in motion. And I would like to take this opportunity to thank them again.

Turning now to the highlights of our medium-term plan, and how we are indeed putting our strategy into action, the major focus areas I just covered, of simplification, strong commitment to tackling climate change, performance improvement, will together help drive value creation through disciplined capital allocation. During this plan, we anticipate €9 billion to €10 billion of disposals to significantly simplify the Group. We have moved at pace since the announcement last July.

EngieENGIEhas repositioned its strategy towards Renewables and Infrastructure, as we see significant opportunities to allocate capital to projects with attractive returns and high predictability. Overall, during this plan, we are planning to invest €15 billion to €16 billion of Gross Capex, of which 40 to 45% will go to Renewables. And of course Paulo will elaborate more on this in detail.

The investment plan will enable us to increase earnings and deliver sustainable growth in shareholder returns. The Board has reaffirmed the Group payout policy of 65% - 65 to 75%.

Through the 3-year plan announced today, EngieENGIEexpects the dividend per share to increase, driven by earnings growth.

Separately, EngieENGIEis also introducing a dividend floor of €0.65 per share for the period 21 to 2023.

And, importantly, we will maintain key credit metrics, with Economic Net Debt to EBITDA of less than or equal to 4x.

We have already adjusted our investment process, as rigour in execution is critical. We have clear financial and ESG criteria, of course, and Judith will cover them later, but we will also have greater selectivity. We are already today prioritising projects which are in line with our strategic and geographic priorities. We will also make sure that we always leverage our industrial and operational know-how to generate value.

Shortly you will hear from Paulo on how the Renewables GBU for example is working and improving its competitiveness.

So a disciplined approach to capital allocation, which is aligned with Top Management incentives. We are proposing for shareholder approval new short-term and long-term incentives. These incentives apply to the 500 top leaders at EngieENGIE. The short-term incentives focus on profitability, cash flow, balance sheet and ESG criteria. These ESG criteria include safety, CO2 emissions, growth in Renewables and gender diversity. With respect to the long-term incentives, I would like to highlight that half of the total will be measured relative to performance of our peers, namely Net Income growth and Total Shareholder Returns. And we have updated our benchmark to reflect our new ambition.

Turning now to the financial outlook to 2023, where we expect Net Recurring Income, Group share, of between €2.7 billion and €2.9 billion in 2023, Net Income is expected to grow throughout the period, driven by investment, and performance improvements. It's important to note that 2023 figures reflect the future EngieENGIEperimeter, assuming no contribution from Bright. And, as I've said, the Board has reaffirmed the Group's payout policy of 65 to 75%, and we are maintaining our commitment to a strong investment-grade rating.

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