ERG S p A : The Board of Directors of ERG S.p.A. approves the interim financial report at 30 June 2021

Press release

The Board of Directors of ERG S.p.A. approves the interim financial report at 30 June 2021

Adjusted consolidated EBITDA1: EUR 281 million, EUR 263 million in the first half of 2020

Adjusted Group net profit (loss): EUR 100 million, EUR 70 million in the first half of 2020

• Results:best half-year results ever for ERG which shows a growth mainly thanks to the high availability of hydroelectricity and a positive pricing scenario that mitigated the lower windiness abroad compared with the particularly high values recorded last year, as well as the thermoelectricity down due to the end of the first decade of white certificates. Marked increase in net profit, thanks also to lower financial charges related to liability management operations and lower amortisation/depreciation due to changes made to amortisation also because of Life Time Extension programmes.
• Recent Developments: the Group's progress continues to be in line with the strategic objectives of the Business Plan and with the consolidation of ERG's presence in France through the acquisition of 80MW of operating assets, 22MW of which in the solar segment, which represent the first step into the French photovoltaic market. The installed capacity across the Alps is around 500 MW. The development in repowering also continues, with the participation in the auction of the first three projects for a total capacity of 143 MW. Construction is also progressing at a good pace, confirming the expectation of installing 77 MW in the UK and France by the end of 2021.
• PPA: the first two PPAs were signed in the UK for the supply of renewable energy from the Evishagaran and Craiggore onshore wind farms in Northern Ireland, with COD expected by the end of 2021. A further important step towards an infrastructure-type model by securitising revenues as set forth in the Business Plan. This is the largest PPA on wind merchant plants ever signed in the Irish market.
• Diversity & Inclusion: D&I policy for an increasingly inclusive ERG approved and published today.
• Lead independent director:the Independent Member Mara Anna Rita Caverni, Chairman of the Risk Control and Sustainability Committee, was appointed as Lead Independent Director.
• EMTN (Euro Medium Term Notes): The Board of Directors has resolved to renew the issuing programme completed the renewal of the programme for non-convertiblemedium/long-term bond issues (Euro Medium Term Notes Programme - EMTN) up to the overall maximum amount of EUR 3,000 million.
  At the same time, the Board of Directors authorised, in compliance with the EMTN Programme, the issuance of bonds, which may also qualify as "green bonds", up to a maximum of EUR 500 million, to be carried out within one year from the completion of the renewal of the EMTN Programme.
• Capital turnover:The programme was launched for the potential disposal of the hydro and thermoelectric plants, entrusting management with the initiation of negotiations and the relevant in-depth analyses for the potential disposal of the aforementioned assets. Based on the information currently available, it is reasonably believed that this disposal may be completed within the first half of 2022.
• Guidance 2021: the guidance of the consolidated EBITDA for 2021 was revised upwards in the range of EUR 505-525 million compared to the previous figure of EUR 490-510 million. Capital expenditure for 2021 was revised upwards in the range of between EUR 450 million and EUR 500 million compared to the

1In order to facilitate an understanding of the business segment's performance, the operating results are shown with the exclusion of significant special income components of an exceptional nature (special items): these results are indicated with the term "adjusted". For the definition of indicators and the reconciliation of the amounts involved, reference is made to that indicated in the section "Alternative Performance Indicators" of this press release.

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previous indication of between EUR 285 million and EUR 325 million, mainly as a result of the recent acquisition of wind and solar plants of 80 MW already put in operation in France, as well as an acceleration in organic investments. In light of this, the debt guidance is also revised upwards in the range of 1550-1650 million (vs. a previous range of 1390-1490).

Genoa, 30 July 2021 - Today the Board of Directors of ERG S.p.A. approved the interim financial report at 30 June 2021. The figures of the second quarter, not submitted to approval by the Board of Directors and not subject to audit, are to be considered pro-forma and are provided for the sake of completeness and continuity of information.

Adjusted consolidated financial results

2nd quarter	Key economic data (Million	1st half-year
Euro)
2021	2020	%		2021	2020	%
	change
121	107	13%	EBITDA	281	263	7%
54	32	67%	Operating profit (loss)	147	114	29%
35	16	112%	Profit attributable to owners of	100	70	43%
the parent
				30/06/2021	31/12/2020	Change
			Net financial indebtedness	1,692	1,439	252
			Leverage2	50%	45%

Paolo Merli, ERG's Chief Executive Officer, commented: "We are extremely satisfied both with the record results and with the execution, during the period, of major development investments in line with and ahead of the Business Plan. The excellent performance of hydroelectricity and the positive price scenarios contributed in the particular to the operating results. The strong profit growth also benefited from a further reduction in the cost of debt and lower depreciation and amortisation due to the extension of the useful life of assets, also as a result of specific Life Time Extension programmes. Our development path continues both through M&A, with the consolidation of 80MW in France, and through the advancement in construction and pipeline development, with the participation in the last auction in Italy of three of our Repowering projects for a total of 143MW.

We are revising our EBITDA guidance upwards for the year, which is now expected to be between EUR 505 and 525 million, our Capex guidance between EUR 450 and 500 million and, consequently, our debt guidance in the range of EUR 1550-1650 million".

• Ratio of total net financial debt (including project financing) to net invested capital.

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COVID-19 emergency

2021 saw a continuation of the international public-healthCOVID-19 emergency: in said context, ERG continued to implement all the necessary measures to ensure both the health of its employees and the operational continuity of its assets in safe conditions.

The main measure used by the organisation, as also recommended by the competent Authorities, was remote working, which was extended to all the Group's offices across Italy and abroad, involving over 70% of the corporate workforce, corresponding to all "white collar" staff, and excluding only personnel responsible for plant operation and maintenance in order to safeguard operational and management continuity and ensure the safety of company assets.

In the first half of 2021, staff continued to operate in remote working mode five days a week. Starting from July, until new information is released, this method was confirmed for two working days per week.

This option, as stated previously, has been extended to all the Group's Italian offices where the remote working option is compatible with the effective performance of the duties assigned, ensuring that the utmost attention is given to guaranteeing full business continuity.

ERG continues to manage the staff employed across its production sites very carefully, through the adoption of appropriate organisational safety measures (aimed at ensuring social distancing and the reconfiguration of operational and logistical activities) and prevention and protection measures (training and information, personal protective equipment, personal hygiene measures and cleaning/sanitisation of workplaces), in observance of the anti-COVID protocol in work environments, the guidelines of the competent authorities, and in agreement with trade union organisations. The corporate documents that regulate the actions taken are provided to all personnel in an appropriate section of the company intranet and periodically updated.

As part of the broader framework of the national vaccination campaign in progress and in an attempt to make a proactive contribution to it, ERG has launched a vaccine information campaign, to ensure people can participate in a fully informed manner. The initiative was entrusted to the Internal Managers of the Prevention and Protection Services and to the company doctors in the various offices.

No staff reductions have been planned or carried out during this period. Moreover, the company has not had to make use of so-called 'social shock absorbers' nor has it had to implement the forced reduction of working hours. By contrast, the Group welcomed 50 new hires in 2020 and a further 39 in the first half of 2021, in order to support the company's growth process. Engagement and partnership activities with the areas in which ERG is present have continued and financial resources have been allocated by group companies and employees themselves to meet the most urgent needs of healthcare facilities.

Change in business scope

• Wind -Sweden
  On 10 May 2021 ERG, through its Swedish holding, completed the acquisition from the BayWa r.e. Group, active in the development, construction and management of renewable energy plants, of the permits for the construction of a wind farm with a capacity of 62 MW in southern Sweden. The project involves the installation of 10 latest generation Siemens Gamesa turbines of 6.2 MW, whose estimated annual production is roughly 210 GWh, equal to almost 3,400 equivalent hours and roughly 140 kt of avoided CO2 emissions every year. Construction started on the wind farm in the first half of this year and is expected to enter into operation by the end of 2022.The total capital expenditure amounts to EUR 99 million, including both construction permits and construction costs. BayWa r.e will support ERG through the entire phase of construction, until commissioning of the plant.
• Wind, Solar - France
  On 24 June 2021 ERG, through its subsidiary ERG Eolienne France SAS, signed an agreement with FPCI Capenergie 3, the fund managed by the Parisian private equity investor Omnes Capital, for the acquisition of 100% of the share capital of Omniwatt, a French company that owns a portfolio composed of 5 wind farms, for a total of 58 MW and two solar plants for a total of 22 MW.

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The average entry into operation of the portfolio is 2017; the plants benefit from an incentive tariff regime with average expiry in 2034.Total annual estimated production is 174 GWh, equal to more than 2,400 equivalent hours for wind assets and over 1,200 equivalent hours for photovoltaic assets, and corresponding to 95 kt of avoided CO2 emissions every year.

The value of the transaction in terms of equity value is EUR 45 million. Average expected EBITDA is roughly EUR 11 million and the net financial indebtedness at the end of 2020 is EUR 101 million.

In consideration of the fact that the companies were acquired at the end of the half-year, this Report reflects only the equity effects of the consolidation of the new assets, given that the contribution to the income statement was not significant.

If the companies had been consolidated retroactively from 1 January 2021, the acquired companies would have contributed revenue of EUR 7.5 million to the Group's income statement, and an adjusted gross operating profit of EUR 5 million.

Second quarter 2021

Consolidated financial results

In the second quarter of 2021, adjusted revenue totalled EUR 245 million, an increase of EUR 25 million compared to the second quarter of 2020 (EUR 221 million), mainly due to greater hydroelectric production, the increase in energy sale prices and in the unit value of the incentive in Italy (from 99.0 to 109.4 EUR/MWh).These effects were partly offset by the end of the first decade of high cogeneration of the CCGT plant.

Adjusted EBITDA, net of special items, amounted to EUR 121 million, up by EUR 14 million compared with the EUR 107 million recorded in the second quarter of 2020.The change is a result of the following factors:

• Wind (EUR +6 million): EBITDA equal to EUR 63 million, up compared to 2020 (EUR 57 million) mainly due to the better result in Italy, which came to EUR 44 million and up compared to the same period of 2020 (EUR 40 million), which was mostly affected by the better energy sale prices and the higher value of the GRIN incentive. Added to these effects are the better results abroad, totalling EUR 19 million, showing an increase compared to the second quarter of 2020 (EUR 17 million), due to the greater price scenario in Eastern Europe and the larger productions in France.
• Solar: EBITDA, amounting to EUR 22 million, is essentially in line with the second quarter of 2020 (EUR 22 million), with slightly lower volumes (74 GWh in the second quarter of 2021 compared to 76 GWh in the second quarter of 2020), largely offset by the increased market prices with respect to the same period in 2020.
• Hydroelectric (EUR +13 million): EBITDA of EUR 30 million (EUR 16 million in the second quarter of 2020), up considerably compared with the same period of the previous year. The result derives from notably higher production (331 GWh in the second quarter of 2021 compared to 229 GWh in the second quarter of 2020), thanks to the high resource availability in central Italy, in contrast to 2020, which was well below the average historical levels. The effect of the higher value of the GRIN incentive contributed to the positive result. The large amount of rainfall during the period led to higher reservoir levels than the historical average.
• Thermoelectric (EUR -5million): thermoelectric EBITDA, amounting to EUR 9 million, is below the EUR 15 million in the second quarter of 2020, mainly as a result of the end of the high yield cogeneration period on both modules of the CCGT plant for approximately EUR 6 million, partly mitigated by the greater proceeds coming from the dispatching services (MSD) compared to the same period of 2020, in a scenario context marked by the significant increase in gas and CO2 prices. It should also be noted that the second quarter of 2020 benefitted from steam adjustments from site customers (EUR +5 million).

It should be noted that the overall gross operating margin was impacted by the hedging policies implemented in line with the Group's risk policies.

Adjusted EBIT amounted to EUR 54 million (EUR 32 million in the second quarter of 2020), after depreciation and amortisation of EUR 67 million, appreciably down compared to the second quarter of 2020 (EUR 75 million), mainly as a result of the review of the useful life of some assets relating to hydroelectric and wind

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plants.

Adjusted profit attributable to the owners of the parent was EUR 35 million, an increase compared to the result of the second quarter of 2020 (EUR 16 million), in consideration of the better operating results and lower financial charges, already commented on.Net financial expense was significantly lower than the second quarter of 2020 due to the reduction in the cost of gross debt thanks to the full contribution of significant liability management operations initiated in the second half of 2020.

First half of 2021

Consolidated financial results

In the first half of 2021, adjusted revenue totalled EUR 526 million, an increase of EUR 28 million compared to the first half of 2020 (EUR 498 million), mainly due to greater hydroelectric production, the increase in energy sale prices and in the unit value of the incentive in Italy (from 99.0 to 109.4 EUR/MWh).These effects were partly offset by the reduction in wind production abroad and the end of the first decade of high cogeneration of the CCGT plant.

Adjusted EBITDA3, net of special items, amounted to EUR 281 million, up by EUR 18 million compared with the EUR 263 million recorded in the first half of 2020. The change is a result of the following factors:

• Wind (EUR -9million): EBITDA of EUR 157 million, down compared with 2020 (EUR 166 million) due to the poorer results abroad, amounting to EUR 52 million (EUR 70 million in the same period of 2020), affected by the low wind speeds compared to the particularly high values in the first half of 2020 (925 GWh in 2021 compared to 1,146 GWh in 2020), in a general context of recovery of the market scenario. These effects were only partially offset by the better result in Italy, amounting to EUR 105 million (EUR 97 million in the first half of 2020), primarily due to the better market scenario and the higher value of the GRIN incentive.
• Solar (EUR -1million): EBITDA, amounting to EUR 34 million, is essentially in line with the first half of 2020 (EUR 35 million), with slightly lower volumes (115 GWh in the first half of 2021 compared to 120 GWh in the first half of 2020), largely offset by the increased market prices with respect to the same period in 2020.
• Hydroelectric (EUR +43 million): EBITDA of EUR 84 million (EUR 40 million in the first half of 2020), up considerably compared with the same period of the previous year. The result benefits from notably higher outputs than the first half of 2020 (998 GWh in the first half of 2021 compared to 553 GWh in the first half of 2020), thanks to the high resource availability, in particular when compared to 2020, which was well below the average historical levels. The large amount of rainfall at the end of 2020 and in the first few months of 2021 led to higher reservoir levels than the historical average.
• Thermoelectric (EUR -15million): thermoelectric EBITDA, amounting to EUR 15 million, is below the EUR 30 million in the first half of 2020, mainly as a result of the end of the high yield cogeneration period on both modules of the CCGT plant for approximately EUR 12 million, partly offset by higher margins deriving from dispatching services. The scenario effect with contracted generation margins following the significant increase in gas and CO2 prices was mitigated by the hedging transactions. The first half of 2020 had benefited from insurance reimbursements and adjustments relating to site contracts.

It should be noted that the overall gross operating profit (loss) is impacted by the electricity price hedging policies implemented in line with the Group's risk policies.

Adjusted EBIT amounting to EUR 147 million (EUR 114 million in the first half of 2020), after depreciation and amortisation of EUR 135 million, was down compared to the first half of 2020 (EUR 149 million), mainly as a result of the review of the useful life of some assets relating to hydroelectric and wind plants.

Adjusted profit attributable to the owners of the parent was EUR 100 million, an increase compared to the first half of 2020 (EUR 70 million), in consideration of the better operating results and lower financial charges,

• Adjusted EBITDA is shown net of the positive effects arising from the application of IFRS 16, equal to approximately EUR 5 million.

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