ERG S p A : The Board of Directors of ERG S.p.A. approves the interim financial report at 30 June 2022

Press release

The Board of Directors of ERG S.p.A. approves the interim financial report at 30 June 2022

Consolidated EBITDA adjusted10: EUR 277 million, EUR 178 million in the first half of 2021

proforma11

Adjusted net profit (loss) from continuing operations: EUR 122 million, EUR 53 million in the first

half of 2021 proforma

• Growing results in 1H22:mainly due to the contribution of around 445 MW of new capacity in France, Germany, UK and Spain as a result of acquisitions in the second half of 2021 and early 2022, as well as the entry into operation of internally developed parks.
• Accelerated renewable growth: thanks tothe reinvestment of resources from asset rotation and advances in plants under construction, a total renewable installed capacity of about 3,000 MW is expected by the end of 2022.
• Consolidation in the solar sector in Italy:through the agreement for the acquisition of 18 solar plants amounting to approximately 34 MW, concluded in the month of July, the Group consolidates its presence in the Italian photovoltaic market in line with the technological diversification strategy to be adopted in the 2022-2026 Business Plan.
• Leadership in wind power in Italy:ERG strengthen its leadership in the wind power market in Italy through the acquisition of a portfolio of 7 wind farms with a total installed capacity of 172 MW. The recently constructed plants benefit from long-termrevenue-stabilisation mechanisms (CFD) in line with the Group's strategy. The closing of the operation is expected by the end of September 2022.
• Progress in repowering: single authorisation obtained for two repowering plants in Italy with a total capacity of about 120MW in June.
• Fitch confirms the BBB- rating:Fitch Ratings confirmed ERG S.p.A.'s Long Term Default Rating (IDR) of BBB- with a stable outlook, underlining the resilience of the business model and the solid financial structure of the Group.
• ESG: ERG continues on its process towards a fair and inclusive energy transition by signing the Women's Empowerment Principles (WEP) and joining the UN Global Compact. Furthermore, MSCI has confirmed ERG's score of "AA" in the "leader" bracket and the Group was included in the TOP 10 of the "Integrated Governance Index 2022", among Italian corporate governance best practices.
• Guidance 2022: consolidated EBITDA guidance is revised upwards to the range of EUR 485-515 million from the previous range of EUR 450-480 million. Investments are revised in the range of EUR 900 million

1. In order to facilitate an understanding of the operating segments' performance, the operating results are shown with the exclusion of significant special income components of an extraordinary nature (special items): these results are indicated with the term "adjusted". A definition of the indicators and the reconciliation of the amounts involved are provided in the "Alternative Performance Indicators" section of this document.
2. The figure relating to the first six months of 2021 has been restated, for comparative purposes only, in consideration of the significant transformation of the Group's portfolio, therefore reclassifying the contribution of the hydroelectric and thermoelectric business under the item "Assets held for sale" in application of IFRS 5.

to EUR 1,000 million, up sharply from the previous estimate of a range of EUR 420 million to EUR 480 million to reflect the above-mentioned acquisitions. In light of this, the debt guidance is also revised upwards in the range of 1,400-1,500 million (vs. a previous range of 750-850).

Genoa, 4 August 2022 - Today the Board of Directors of ERG S.p.A. has approved the interim financial report at 30 June 2022. 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.

				2nd quarter										1st half-year
	2022			2021			%		Key economic data (EUR million)			2022			2021			% change
			Proforma			change							Proforma
110		79	39%	EBITDA	277		178		55%
56	31	84%	Operating profit (EBIT)	170		80	111%
38	19	105%		Profit (loss) from continuing operations	122		53	132%
												30/06/2022			31/12/2021			Change
									Net financial indebtedness continuing	1,019	2,051	-1,033
									operations (EUR million)
									Leverage12	34%	57%

Paolo Merli, ERG's Chief Executive Officer, commented: "We are satisfied with the results of the semester, which mainly reflect the contribution of the new solar and wind plants, that entered our portfolio during last 12 months, consolidated from the second half of 2021 against significant investments. The results only partially benefits from the context of higher market prices due to revenue stabilisation mechanism including fixed rates, Power Purchase Agreements, and forward sales carried out in previous years. What matters the most is the quick progress of our growth and re-investment goals. With recent acquisitions, we will strengthen our leadership in the wind sector and our positioning in the solar sector in Italy. In the meantime, we are pursuing an internationalisation path thanks to the new capacity installed in Spain, France and Poland already operational in the period, in addition to the one we are expecting in the UK by the end of the year, when an installed capacity of 3,000 MW is forecast to be reached. In light of the positive results and the strong growth momentum, we are revising our EBITDA guidance upwards for the year, the range of which is now expected to be between EUR 485 and 515 million of Capex, between EUR 900 and 1,000 million, and, consequently, of debt in the range of EUR 1,400 to 1,500million.

Change in business scope

• Solar - Valentia

On 31 January 2022, ERG acquired from GEI Subasta 1 SA 100% of the capital of two Spanish project companies owning two operational solar plants located in southern Spain in the regions of Castilla de la Mancha and Andalusia, of 50.0 MW and 41.6 MW respectively.

The plants were commissioned in early 2020, having participated in the auctions regulated by Italian Royal Decree no. 359 of 2017 and have an estimated total annual production of 188 GWh, equal to over 2,050 equivalent hours/year, one of Europe's highest, corresponding to 110 kt of CO2 emissions avoided every year.

The consideration for the transaction amounts to EUR 96 million (asset value).

It should be noted that the newly acquired Spanish companies are consolidated on a line-by-line basis starting from 1 January 2022.

• Hydroelectric
  On 3 January 2022, ERG finalised an agreement with Enel Produzione S.p.A. for the sale of the entire share capital of ERG Hydro S.r.l. The transaction was concluded in line with what was announced on 2 August

12 Ratio of total net financial indebtedness continuing operations (including project financing) to net invested capital

2021.

• Thermoelectric
  On 9 February 2022, ERG signed an agreement with Enel Produzione S.p.A. for the sale of the entire share capital of ERG Power S.r.l., which owns the low-environmental-impact and high-efficiency Combined Cycle Gas Turbine (CCGT) cogeneration plant powered by natural gas located at Priolo Gargallo, in the province of Syracuse.
  The transaction is expected to be concluded in the third quarter of 2022.
  In consideration of the above, in this press release the Net Assets were recorded under Assets held for sale in the financial statements as the conditions set forth in paragraph 12 of IFRS 5 were met.

It should also be noted that, during the half year, two wind farms in the United Kingdom for a total capacity of 70 MW and two wind farms in France for a total capacity of 27 MW, all developed and built internally, entered into full operation. Furthermore, at the end of the half year, the Piotrkow wind farm in Poland for a total of 24.5 MW came into operation.

Second quarter 2022

In the second quarter of 2022, adjusted revenue amounted to EUR 159 million, an increase of EUR 38 million compared to the second quarter of 2021 proforma (EUR 121 million), whose main contribution is the due to the increased installed capacity of 366 MW (of which 217 MW from wind and 148 MW from solar) following the foreign acquisitions made in the second half of 2021 and early 2022 as well as the entry into operation of the farms developed internally and operational from the end of 2021 and in June 2022. Production amounted to 1.1 TWh, up 22% (0.2 TWh) compared to the same period of 2021. The higher market prices only partially affected the results for the period due to a hedging policy that provides for sales through fixed rates, PPAs under pre- established conditions and financial agreements. Higher prices had an effect abroad, especially in Germany and East Europe, depending on their specific incentive mechanisms.

Adjusted EBITDA13, net of special items, amounted to EUR 110 million, up by EUR 30 million compared with EUR 79 million recorded in 2021 proforma. In summary:

ITALY

• Wind: EBITDA of EUR 44 million, in line with the second quarter of 2021 pro forma due to the higher wind level experienced (468 GWh in the second quarter of 2022 compared to 454 GWh in 2021), partly offset by the negative effect on captured prices characterised by the lower value of the incentive and the prices prefixed with hedging derivatives.
• Solar (EUR + 1 million): EBITDA of EUR 23 million, a slight increase compared to the second quarter of 2021 proforma (EUR 22 million) due to the higher volumes recorded (77 GWh in the second quarter of 2022 compared to 74 GWh in 2021). The sales prices captured are in line with the same quarter of 2021.

ABROAD

• Wind (+EUR 21 million): EBITDA of EUR 40 million, up from the second quarter of 2021 pro forma (EUR 19 million), mainly due to the contribution of the 231 MW of new capacity and the better prices captured in certain regions, partly offset by less windiness in France and Germany.
• Solar (EUR +9 million): EBITDA of EUR 9 million in the second quarter of 2022 thanks to the full contribution of the farms consolidated in France (79 MW) between June and October 2021 and the new farms acquired in Spain (92 MW) in January 2022.

Overall the perimeter effect linked to the new operating MW is approximately 20 million.

It should be noted that the total gross operating profit (EBITDA) is impacted by the electricity price hedging policies implemented in line with the Group's risk policies. It should be noted that, in compliance with the risk policy, the entire merchant generation for the year 2022 is sold forward, therefore the operating results do not include any

13 Adjusted EBITDA is shown net of the positive effects arising from the application of IFRS 16, equal to approximately EUR 3 million, as well as other negative effects of special items for approximately EUR 5 million. It should be noted that the adjusted EBITDA does not include the contribution of the thermoelectric business, in the process of being sold, reclassified to the item "Profit (loss) from assets held for sale".

penalising effect deriving from the application of Italian Law no. 25 of 28 March 2022, which provides for two-way compensation mechanisms on the basis of a reference price, substantially in line with the prices of existing hedges.

Adjusted operating profit was EUR 56 million (EUR 31 million in the second quarter of 2021 proforma) after amortisation and depreciation of EUR 53 million, a slight increase compared to 2021 (EUR 49 million in the second quarter of 2021 proforma) mainly as a result of the full contribution of the wind and solar assets acquired in the second half of 2021, the contribution of the new plants acquired in Spain in January 2022 and the contribution of the new farms in the United Kingdom, French and Poland developed internally.

The adjusted net profit (loss) from continuing operations amounted to EUR 38 million, a significant increase compared to the second quarter of 2021 proforma (EUR 19 million) in consideration of the aforementioned operating results and lower financial expense, which were reduced as a result of the full contribution of the liability management operations carried out in 2021. It should be noted that the item does not include the impact of the application in Romania of the "Windfall Tax" legislation (expense of EUR 1 million) and in Italy the impact deriving from Article 37 of the Italian Decree Law no. 21/2022 equal to approximately EUR 22 million14; these items, of an extraordinary and temporary nature, have been isolated as special items.

Adjusted profit attributable to the owners of the parent, including also the contribution of ERG Power S.r.l., owner of the CCGT plant in the process of being sold and recognised in discontinued operations under IFRS 5 rules, was EUR 46 million, a significant increase compared to the 2021 result (EUR 35 million), in view of the aforementioned better operating results and lower financial expense.

First half of 2022

In the first semester of 2022, adjusted revenue amounted to EUR 374 million, an increase of EUR 115 million compared to the first semester of 2021 proforma (EUR 259 million), whose main contribution is the due to the increased capacity of 366 MW (of which 217 MW from wind and 148 MW from solar) following the foreign acquisitions made in the second half of 2021 and early 2022 as well as the entry into operation of the farms developed internally and operational from the end of 2021 and in June 2022. Generation amounted to 2.7 TWh, up by almost 30% (0.5 TWh) compared to 2021, also as a result of the better wind conditions recorded in the period. The higher market prices only partially affected the results as the group adopts a hedging policy that provides for sales through fixed rates, PPAs under pre-established conditions and financial agreements. Higher prices had an effect abroad, especially in Germany and East Europe, depending on their specific incentive mechanisms.

Adjusted EBITDA15, net of special items, came to EUR 277 million, up EUR 99 million from the EUR 178 million recorded in 2021 pro forma. In summary:

ITALY

• Wind (EUR +8 million): EBITDA of EUR 113 million, up from the first half of 2021 pro forma (EUR 105 million) entirely as a result of the increased wind levels experienced (1,129 GWh in the first half of 2022 compared to 1,070 GWh in 2021). Captured sales prices were in line since the price scenario effect was offset by the lower value of the incentive and hedging derivatives.
• Solar (EUR + 3 million): EBITDA of EUR 36 million, up from the first half of 2021 pro forma (EUR 34 million) due to higher volumes recorded (122 GWh in the first half of 2022 compared to 115 GWh in 2021). The price scenario effect, net of hedging derivatives, was neutral.

ABROAD

• Wind (EUR +74 million): EBITDA of EUR 127 million (about 50% of the total), up from the first half of 2021 pro forma (EUR 52 million) due to the contribution of the 218 MW of new capacity, as a result of the better prices captured in some geographic areas and the higher wind level experienced.
• Solar (EUR +14 million): EBITDA of EUR 14 million in the first half of 2022 thanks to the full contribution of

1. The impact detected in the second quarter is the consequence of the changes introduced by the "Aid" decree which increased the rate from 10% to 25% and extended the relevant time observation period for determining the tax base also to April 2022.
2. Adjusted EBITDA is shown net of the positive effects arising from the application of IFRS 16, equal to approximately EUR 6 million, as well as other negative effects of special items for approximately EUR 8 million. It should be noted that the adjusted EBITDA does not include the contribution of the thermoelectric business, in the process of being sold, reclassified to the item "Profit (loss) from assets held for sale".

the farms consolidated in France (79 MW) between June and October 2021 and the new farms acquired in Spain (92 MW) in January 2022.

Overall the perimeter effect linked to the new operating MW is approximately 46 million.

It should be noted that the total gross operating profit (EBITDA) is impacted by the electricity price hedging policies implemented in line with the Group's risk policies. It should be noted that, in compliance with the risk policy, the entire merchant generation for the year 2022 is sold forward; therefore the operating results do not include any penalising effect deriving from the application of Italian Law no. 25 of 28 March 2022, which provides for two-way compensation mechanisms on the basis of a reference price, substantially in line with the prices of existing hedges.

Adjusted operating profit was EUR 170 million (EUR 80 million in the first half of 2021 proforma) after amortisation and depreciation of EUR 107 million, a slight increase compared to 2021 (EUR 98 million in the first half of 2021 proforma) mainly as a result of the full contribution of the wind and solar assets acquired in the second half of 2021, the contribution of the new plants acquired in Spain in January 2022 and the contribution of the new farms in the United Kingdom, France and Poland developed internally.

The adjusted net profit (loss) from continuing operations amounted to EUR 122 million, a significant increase compared to the first half of 2021 proforma (EUR 53 million) in consideration of the aforementioned operating results and lower financial expense, which were reduced as a result of the full contribution of the liability management operations carried out in 2021. It should be noted that the item does not include the impact of the application of the "Windfall Tax"16 legislation (expense of EUR 4 million) in Romania and the impact deriving from Article 37 of the Italian Decree Law of 21 March 2022 in Italy equal to approximately EUR 36 million; these items, of an extraordinary and temporary nature, have been isolated as special items.

Adjusted Group net profit, also including the contribution of ERG Power S.r.l., owner of the CCGT plant currently being sold and recognised in discontinued operations in accordance with IFRS 5 rules, amounted to EUR 135 million, significantly higher than the 2021 result (EUR 100 million), in consideration of the already commented improved operating results and lower financial expenses.

Profit attributable to the owners of the parent was EUR 405 million, an increase compared to EUR 92 million in 2021 proforma. The result includes primarily the net capital gain recognised following the sale of the Terni hydroelectric complex on 3 January 2022 (equal to approximately EUR 324 million), as well as the impairment of the wind assets subject to repowering (equal to approximately EUR 5 million) and the costs related to the liability management operations carried out in the first half of 2022 (equal to approximately EUR 2 million), as well as the aforementioned effects linked to the urgent tax measures regarding the containment of energy prices, in particular in Italy and Romania and the contribution of ERG Power S.r.l., owner of the CCGT plant being sold.

Adjusted net financial indebtedness of "continuing operations" totalled EUR 1,019 million, down significantly (EUR -1,033 million) compared to 31 December 2021 (EUR 2,051 million). The change mainly reflects the proceeds from the sale of the Terni hydroelectric complex (EUR 1,265 million) and the positive cash flow for the period (EUR 307 million17), partly offset by the investments for the period (EUR 218 million), the dividends distributed to shareholders (EUR 136 million), the payment of taxes (EUR 46 million)18 as well as the change of the consolidation scope with the exit of the hydroelectric and thermoelectric businesses, the latter reported under discontinued operations. It should be noted that ERG Power, owner of the CCGT plant, has a cash position at 30 June 2022 equal to EUR 9 million.

It should also be noted that the indebtedness at the end of the period reflects the negative fair value of commodity futures of roughly EUR 216 million (EUR 344 million at 31 December 2021).

Adjusted net financial indebtedness is presented net of the effects deriving from the application of IFRS 16, therefore excluding the discounting of future lease payments of approximately EUR 142 million at 30 June 2022.

1. This impact is calculated on the basis of a rate equal to 25% for the period between 1 October 2021 and 30 April 2022. The amount shown considers the scope of the continuing operations, not including an additional EUR 4 million related to the thermoelectric business, which is in the process of being sold, recognised in discontinued operations.
2. Includes the adjusted EBITDA, the change in working capital and net financial income (expense).
3. The amount includes the payment of the deposit pursuant to Italian Legislative Decree no. 50/2022 equal to approximately EUR 14 million.