Company Update Report September 19, 2016

Terna Energy

Overweight Expanding RES Portfolio Drives Growth Previous Rating: Overweight

Renewable Energy Renewable Share Price: €2.65 (close of September 16) Solid Top-Line Performance in Q2’16 – with sales rising by 10% y-

– 12M Price Target: €3.60 o-y to €43m, driven by the construction and electricity trading Previous Target: €3.90 divisions. On the other hand, RES division declined y-o-y, on lower Expected Total Return: 39.6% load factors, despite the 14% higher y-o-y installed capacity in wind

Estimates parks. The RES underperformance resulted in flattish group EBITDA 2015 2016e 2017e 2018e (€17.6m) and higher net losses (-€1.8m vs. -€0.9m last year). Sales (€m) 199 219 234 243 EBITDA (€m) 99 120 139 144 Minor Revisions in 2016e; 2017-18e adj. EPS Cut by c26% - to

Research margin (%) 50.0% 54.8% 59.3% 59.5% account mainly for less MW additions in and a higher tax rate. EBITDA adj. (€m) 97 120 139 144 In particular, we now exclude from our model two domestic wind park margin (%) 48.8% 55.1% 59.3% 59.5% Net profit (€m) 17 29 39 42 projects of 132MW in total, which more than offset the addition of the Net profit adj. (€m) 15 30 39 42 150MW project in USA that TE is constructing through a JV scheme. EPS (€) 0.16 0.27 0.36 0.39 For 2016e, we have left our previous adj. EPS forecasts (excl. FX Euroxx EPS New adj. (€) 0.14 0.27 0.36 0.39 losses of €1.3m and capital gains of €0.7m) broadly unchanged. All- EPS adj. chng (%) 118.3% 94.3% 33.0% 7.5% EPS adj. Old (€) - 0.28 0.49 0.53 in, we expect sales, adj. EBITDA and adj. EPS to exhibit 2015-18e EPS New vs. Old - -2.4% -26.4% -26.5% CAGRs of 7%, 14% and 41%, respectively, driven entirely by Source: Terna Energy, Euroxx Research capacity additions.

Ratios Greece Still Drives Growth – despite the addition of 16MW in 2015 2016e 2017e 2018e Poland in 2015 and the expected installation of 150MW in USA. The P/E adj. (x) 18.9 9.7 7.3 6.8 EV/EBITDA adj. (x) 6.3 5.7 4.6 4.2 group currently operates a total of 738MW in RES - 711MW in wind, EV/EBIT adj.(x) 10.1 8.7 7.0 6.5 of which 441MW are in Greece (TE is the largest Greek wind park EV/Sales (x) 3.1 3.1 2.8 2.5 developer), 132MW in Poland/Bulgaria and 138MW in the US. On our Dividend Yield (%) 3.4% 3.8% 4.2% 4.5% estimates, Greece will still account for the majority (56%) of TE’s total P/BV (x) 0.8 0.8 0.7 0.7 Net Debt / EBITDA 3.3 3.3 2.6 2.2 wind park capacity by 2018e, although we expect USA to contribute Source: Terna Energy, Euroxx Research more (30% from 19% currently).

Stock Performance Aims at Significant Portfolio Expansion – targeting at 790MW of 3M 6M 12M YTD installed RES capacity by end-2016e and at 1GW over the following Absolute 2.3% 5.2% -5.7% 7.7% years. We keep a slightly more cautious stance, expecting 738MW at Difference (ATG) 1.8% 7.3% 13.5% 19.1% end-2016e, while we forecast TE to conclude its investment plan in

Stock Data: 2017e with 982MW in operation. We expect the €211m total CapEx Market Cap (€ m) 289.7 requirement to be funded by a combination of internal cash flow Outstanding shares (#) 109,314,400 (30%), subsidies (17%) and additional debt (53%). We now see net Daily volume (#) 17,267 Low / High 52 w (€) 1.92 – 3.06 debt/EBITDA falling to 2.2x in 2018e (3.3x in 2015) aided by Free float 22.4% Operating CF of €353m in 2016-18e. We believe the latter will be Bloomberg / Reuters TERr.AT / TENERGY GA supported by lower receivables due to the new RES bill, which calls for the LAGIE (the electricity market operator) deficit elimination. Company Description: Terna Energy is one of Greece’s leading players in Remains at O/W / TP Cut to €3.60 (39.6% Upside Potential) – from green energy. It is involved in all types of Sources such as the wind farms, hydroelectric €3.90 due to our earnings downgrades in 2017-18e, and despite the and photovoltaic parks with 738MW of total RES decline in our WACC (now at 9.5% from 11%), which reflects the de- exposure as of H1’16. Apart from being a green asset escalation of Greek spreads to c860bps from >1,000bps previously. holder, it is also involved in the construction process Relative valuation wise, TE’s 2016e EV/EBITDA of 5.7x implies a for third parties. The company has also set footprint in Poland, Bulgaria and the US where it operates a total 32% discount to its European peers and a 44% premium to its of 270MW in wind parks. Terna Energy aims at 1GW smaller peer Eltech Anemos. We still prefer TE among our Greek of installed capacity over the following years. RES universe due to its significant earnings growth potential and its

Vangelis Karanikas larger and more geographically diversified RES portfolio. That said, Head of Research the new bill that calls for fluctuating tariffs regarding future RES [email protected] projects, imposes an additional risk to TE, as potentially adverse +30 210 68 79 322

price changes could negatively affect its profitability.

Please refer to important disclosures in the Disclosure Appendix.

September 19, 2016 Greece / Renewable Energy

Summary of Financials

in € m, unless otherwise stated PROFIT & LOSS (€m) 2015 2016e 2017e 2018e BALANCE SHEET (€m) 2015 2016e 2017e 2018e Sales 198.6 218.6 233.8 242.9 Net fixed assets 889.0 999.2 1,014.8 982.1 % chng 25.5% 10.0% 7.0% 3.9% Other non-current assets 30.7 34.6 34.6 34.6 EBITDA 99.3 119.8 138.7 144.5 Total non current assets 919.7 1,033.8 1,049.4 1,016.7 % chng 34.1% 20.7% 15.7% 4.2% Inventory 2.9 3.7 3.9 4.9 Adjusted EBITDA 96.9 120.5 138.7 144.5 Trade receivables, of which 59.5 35.2 32.2 30.0 % chng 27.5% 24.3% 15.1% 4.2% …LAGIE & DEDDIE receivables 50.2 25.0 22.0 20.0 Depreciation -37 -42 -47 -51 …other trade receivables 9.3 10.2 10.2 10.0 EBIT 62.7 77.7 92.0 93.6 Other current assets 73.5 76.5 79.5 82.6 % chng 44.1% 23.9% 18.4% 1.7% Cash & other liquid assets 166.7 125.0 154.9 162.3 Adjusted EBIT 60.3 78.3 92.0 93.6 Total current assets 302.6 240.3 270.6 279.8 % chng 32.7% 30.0% 17.4% 1.7% TOTAL ASSETS 1,222.3 1,274.1 1,320.0 1,296.5 Net Financials -32.2 -35.8 -35.8 -33.2 Other -0.1 -0.1 -0.1 -0.1 Total Bank Debt 488.9 520.4 509.3 476.2 Pre-tax profit 30.4 41.7 56.1 60.2 Net Debt / (Cash) 322.1 395.5 354.4 313.9 % chng 149.6% 37.3% 34.4% 7.4% Adjusted EBT 28.0 42.4 56.1 60.2 Share capital 32.8 32.8 32.8 32.8 % chng 98.7% 51.4% 32.4% 7.4% Share premium 219.2 219.2 219.2 219.2 Income tax 12.9 12.1 16.3 17.5 Reserves & retained earnings 89.8 107.3 135.9 166.4 % effective tax rate 42.6% 29.0% 29.0% 29.0% Shareholders' equity 341.9 359.4 388.0 418.4 Minority stake 0.5 0.5 0.5 0.5 Minority interest 4.9 5.4 6.0 6.5 Net profit 16.9 29.1 39.3 42.2 % chng 204.7% 72.0% 35.1% 7.5% Long-term liabilities 700.2 696.9 710.5 655.0 Adjusted Net Profit 15.2 29.6 39.3 42.2 Long - term loans 393.6 396.8 386.8 357.0 % chng 118.3% 94.3% 33.0% 7.5% Provisions 9.3 9.6 9.6 9.6 EPS (in €) 0.16 0.27 0.36 0.39 Deferred tax liability 8.8 10.0 10.0 10.0 % chng 204.7% 72.0% 35.1% 7.5% Grants 236.2 228.2 251.8 226.2 Adjusted EPS (€) 0.14 0.27 0.36 0.39 Other long-term liabilities 52.3 52.3 52.3 52.3 % chng 118.3% 94.3% 33.0% 7.5% Short-term liabilities 175.3 212.4 215.5 216.5 Dividends 9.6 10.7 11.8 12.8 Short - term loans 95.3 123.6 122.5 119.3 DPS (€) 0.09 0.10 0.11 0.12 Other short-term liabilities 80.0 88.8 93.0 97.3 % chng n/m 0.11 0.10 0.09 TOTAL EQUITY & LIABILITIES 1,222.3 1,274.1 1,320.0 1,296.5

CASH FLOW (€m) 2015 2016e 2017e 2018e RATIO ANALYSIS 2015 2016e 2017e 2018e EBT 30.4 41.7 56.1 60.2 P/E (x) - reported 17.0x 9.9x 7.3x 6.8x Depreciation 48.8 42.1 46.6 50.9 P/E (x) - adjusted 18.9x 9.7x 7.3x 6.8x Interest income -1.9 -1.7 -2.0 -2.5 Interest expense 34.1 37.5 37.8 35.7 EV/EBITDA (x) - reported 6.1x 5.7x 4.6x 4.2x Other (mainly amortisation of subsidies) -7.5 -15.0 -12.8 -12.8 EV/EBITDA (x) - adjusted 6.3x 5.7x 4.6x 4.2x Change in inventories -0.4 -0.8 -0.2 -1.0 Change in trade receivables -5.7 24.3 2.9 2.3 EV/EBIT (x) - reported 9.7x 8.8x 7.0x 6.5x Change in trade creditors 4.9 1.6 0.7 1.5 EV/EBIT (x) - adjusted 10.1x 8.7x 7.0x 6.5x Change in other current assets/liabilities -16.4 -6.4 -15.7 -17.8 Working capital chng -17.6 18.7 -12.3 -15.0 P/BV (x) 0.8x 0.8x 0.7x 0.7x CF from operations 86.2 123.4 113.4 116.5 Dividend Yield (%) 3.4% 3.8% 4.2% 4.5% Net CapEx (ex-subsidies) -85.9 -152.3 -62.3 -18.2 Other (Grants & Interest received) -8.9 4.7 38.5 -10.3 Net debt / Adjusted EBITDA (x) 3.3x 3.3x 2.6x 2.2x CF from investing activities -94.9 -147.6 -23.8 -28.5 Net debt / Equity (x) 0.9x 1.1x 0.9x 0.7x Operating FCF to the firm -8.7 -24.2 89.5 88.0 Change in Capital -7.3 0.0 0.0 0.0 EBITDA margin (%) 50.0% 54.8% 59.3% 59.5% Dividends -0.3 -9.6 -10.7 -11.8 Adjusted EBITDA margin (%) 48.8% 55.1% 59.3% 59.5% Debt chng 55.8 31.6 -11.1 -33.1 EBIT margin (%) 31.6% 35.6% 39.4% 38.5% Other (interest expenses, buybacks, etc) -41.5 -39.5 -37.8 -35.7 Adjusted EBIT margin (%) 30.4% 35.8% 39.4% 38.5% CF from financing activities 6.6 -17.5 -59.6 -80.6 Pre-tax profit margin (%) 15.3% 19.1% 24.0% 24.8% Change in Cash -2.1 -41.8 29.9 7.4 Adjusted Pre-Tax margin (%) 14.1% 19.4% 24.0% 24.8% Cash at the beginning 168.8 166.7 125.0 154.9 Net profit margin (%) 8.5% 13.3% 16.8% 17.4% Cash at end 166.7 125.0 154.9 162.3 Adjusted Net profit margin (%) 7.7% 13.5% 16.8% 17.4% Source: Terna Energy, Euroxx Research Notes: (a) 2015 adjusted figures exclude FX gains of €2.4m (b) 2016e group EBITDA adjusted figures exclude FX losses of €1.3m and capital gains of €0.7m

Euroxx Research / Terna Energy – Company Update Report 2

September 19, 2016 Greece / Renewable Energy

Table of Contents

Summary of Financials ...... 2

Strong Investment Case Still in Place ...... 4

RES Portfolio Expansion Improves Outlook ...... 4 New RES Regulatory Regime Leads to Price Fluctuation Exposure Post 2018e but Improves Working Capital ..... 4

Valuation Update & Rating ...... 5

Investment Risks & Future Potential Catalysts ...... 6 Relative Valuation: At Deep Discount vs. Foreign Peers and at Premium vs. Eltech Anemos ...... 7

Earnings Update ...... 8

Installed RES Capacity: 2015-18e CAGR of 14% ...... 8 Group Revenues: 2015-18e CAGR of 7% due to New Wind Parks ...... 10 Group Adj. EBITDA: 2015-18e CAGR of 14%, Driven by Wind Parks ...... 11 Adj. EPS: 2015-18e CAGR of 41% ...... 12 Balance sheet: Net Debt to Start Decelerating in 2017e ...... 13 Q2’16 Results: Construction and Electricity Trading Drive Sales Higher ...... 14

IMPORTANT DISCLOSURES 16

Euroxx Research / Terna Energy – Company Update Report 3

September 19, 2016 Greece / Renewable Energy

Strong Investment Case Still in Place

RES Portfolio Expansion Improves Outlook

High quality operating Taking on account the additions of 24MW of new wind parks in 2015 (both portfolio geographically domestically and abroad) and 73MW in domestic wind parks in H1’16, TE now dispersed across Greece, commands a total RES installed capacity of 738MW, of which 711MW are wind, Bulgaria, Poland and US; 18MW hydro, 9MW solar/PV and 1MW biomass. TE’s wind parks are geographically total RES installed capacity dispersed in prime locations around Greece (441MW), Bulgaria (30MW), Poland now at 738MW (102MW) and the US (138MW) and help it to achieve wind load factors above both the Greek and European sector’s 2015 respective averages of 25.9% and c26.6%. Chart 1. Group Average Wind Load Factor 2010-2018e 30.0% Going forward, we expect TE to proceed with the installation of another 244MW in 28.8% 28.9% 29.0% wind parks (94MW in Greece and 150MW in USA) by end-2017e, thus increasing its 28.7% 28.0% 27.9% total footage in RES to 982MW. We estimate the total CapEx at €211m, split into 27.0% 27.3% 27.4% 26.4% 27.0%

26.0% equity (€63m, or 30% of total), debt (€113m or 53% of total) and cash grants (€35m or Load Factor (%)

25.0% 25.4% 17% of total). This split is different from that of an exclusively Greek wind farm 24.0% developer with subsidized investment programme (i.e. 30% subsidy, 30% equity and 23.0% 2010 2011 2012 2013 2014 2015 2016e 2017e 2018e

40% debt), due to our assumption that TE’s upcoming installation in USA will not bear Source: Terna Energy for 2010-14, Euroxx Research estimates for 2015-18e any State subsidy. Following this, we expect TE to reach a net debt position of €314m in 2018e, implying a net debt/EBITDA of 2.2x vs. 3.3x in 2015 (adj.).

New additions in wind MWs All in all, we expect TE’s sales and adj. EBITDA to grow by 2015-18e CAGRs of 7% provide strong sales and and 14% respectively, mainly driven by the aforementioned capacity additions. The

earnings visibility improvement in the group adj. EBITDA margin also stems from our assumption of

zero and negative profitability from electricity trading and concessions division (e-

ticketing) respectively. Chart 2. TE’s MW Bridge by Region 1,000 150 94 0 0 800 Table 1. Strong Growth Potential Driven by Capacity Additions in Wind Parks 600 CAGR 982 400 738 2015 2016e 2017e 2018e 2015-18e 200 Installed RES capacity (MW) 663.9 737.9 981.9 981.9 13.9% 0 Revenues (€m) 198.6 218.6 233.8 242.9 6.9% June'16 Greece Bulgaria Poland USA 2018e MWs MWs Adj. EBITDA (€m) 96.9 120.5 138.7 144.5 14.2%

Source: Terna Energy, Euroxx Research Adj. EBITDA margin (%) 48.8% 55.1% 59.3% 59.5%

Adj. Net Profit (€m) 15.2 29.6 39.3 42.2 40.6%

Source: Terna Energy, Euroxx Research

New RES Regulatory Regime Leads to Price Fluctuation Exposure Post

2018e but Improves Working Capital

New RES bill calls for Despite TE’s currently stable cash flows, the new RES bill voted in August 2016 adds fluctuating tariffs regarding uncertainty to future revenue streams, in our view. Although the tariffs regarding future projects operating units and units currently in construction will remain unchanged, the price for

any additional capacity beyond 2018e will be determined by a tender process and will

be equal to the wholesale price plus a premium (contrary to the current fixed feed-in

tariffs), thus leaving TE exposed to price fluctuations.

The bill also has positive That said, the new bill calls for the reduction of LAGIE deficit since the electricity implications for TE’s suppliers should compensate the operator with the difference between the SMP and receivables, through the the implied SMP as calculated without taking into account the energy from RES. TE’s elimination of LAGIE’s management expects this amendment to result in the elimination of the deficit in deficit LAGIE’s account by 2018e with positive implications for the group receivables (84%

of which were related to LAGIE in 2015), hence for its working capital requirements.

Euroxx Research / Terna Energy – Company Update Report 4

September 19, 2016 Greece / Renewable Energy

Valuation Update & Rating

We value Terna Energy We continue to value TE through a two-stage DCF model, in which we form an

with a 2-stage DCF… explicit set of forecasts for the period up to 2020e, after which we still assign a

terminal growth of 2.0%. We have lowered our WACC at 9.5% from 11%, in order to

account for the de-escalation of Greek spreads to c860bps from >1,000bps

previously. Our WACC assumption is based on a market beta of 1.0, a risk-free rate

of -0.04% (German 10-year Bund Yield), and a risk premium of 9.2% (weighted

blended mix reflecting country risk exposure).

…which now returns a TP Our updated DCF model returns a new TP of €3.60 per TE’s share, which implies a of €3.60; Remains at 39.6% total upside potential from the current share price levels, including the 2016e Overweight DPS of €0.10 (yield 3.8%). Hence, we reiterate our Overweight rating on the stock.

Table 2. TE Valuation Assumptions % 2016e 2017e 2018e 2019e 2020e Terminal Growth Rate (Sales) 10.0 7.0 3.9 0.7 (0.1) 2.0 EBIT Margin 35.8 39.4 38.5 38.6 38.9 38.0 Tax Rate 29.0 29.0 29.0 29.0 29.0 29.0 WC Δ (% of sales) (12.3) (0.8) (0.7) (0.1) 0.2 2.2 CapEx (% of sales) 70.5 26.7 7.5 7.5 7.5 7.5 Depreciation (% of sales) 19.3 19.9 21.0 20.8 20.4 20.4 Cost of Capital 9.5 9.5 9.5 9.5 9.5 9.5

Valuation (in €m) 2016e 2017e 2018e 2019e 2020e Terminal Revenues 219 234 243 245 244 249 EBIT 78 92 94 94 95 95 Less: Adjusted Tax 23 27 27 27 28 40

NOPAT 56 65 66 67 67 54 Depreciation & Other 42 47 51 51 50 51 Working Capital Δ (27) (1.9) (1.8) (0.3) 0.4 5 CapEx 154 62 18 18 18 39 Cash Flow to the Firm (FCFF) (29) 52 101 100 99 60 Present Value of Cash Flows (28) 45 80 73 66 536

% Terminal Value of Total 69.5% Enterprise Value 772 Less: Net debt (H1'16a) 372 Minorities 6 Value of Equity 394 Number of Shares (m) 109.3 Current Price (€) 2.57 Value of share (€) 3.60 % total upside potential 39.6% Source: Euroxx Research

TP sensitivity to WACC and terminal growth 1.0% 1.5% 2.0% 2.5% 3.0% 8.5% € 3.73 € 4.13 € 4.59 € 5.13 € 5.76 9.0% € 3.32 € 3.67 € 4.06 € 4.51 € 5.04 9.5% € 2.96 € 3.26 € 3.60 € 3.99 € 4.43 10.0% € 2.64 € 2.91 € 3.20 € 3.53 € 3.92 10.5% € 2.36 € 2.59 € 2.85 € 3.14 € 3.47 Source: Euroxx Research

TP sensitivity to WACC and The table above shows our sensitivity analysis based on WACC and long-term long-term growth growth. For every 50bps delta in our 9.5% WACC assumption there is c€0.4- 0.5/share sensitivity (c11-13%) on average in our DCF-based appraised value.

Euroxx Research / Terna Energy – Company Update Report 5

September 19, 2016 Greece / Renewable Energy

Investment Risks & Future Potential Catalysts

Medium risk profile with We believe TE offers a medium risk profile. The revenue stream of the units currently stable cash flows that will be operational by mid-2018 is determined largely from state- but in heavily regulated incentivized FiTs, PPAs over the life of the wind farm and wind conditions industry with future fluctuating that have been relatively stable in recent years. On the other hand, TE

tariffs operates in heavily regulated markets both in Greece and abroad, while the

recently voted RES bill calls for fluctuating tariffs regarding future projects,

which implies future revenue uncertainty.

In our view, TE’s key downside risks include the following:

 Future Price Fluctuations - The new RES bill voted in Aug‘16 calls for a

tender process for the entrance of the units to the system with a minimum

tendered power of 40MW and at a price that will be equal to the wholesale price

plus a premium (contrary to the current fixed FiT). The units that have signed electricity sales contract by 31 Dec’15 may be excluded from the new procedure. These are mainly wind and hydro power stations with biomass or biogas, which will commence operation by June 30, 2018, as well as RES units that will be put into service by December 21, 2017. Although this implies that TE’s agreed tariffs regarding operating units and units in construction will be unchanged, any additional capacity beyond 2018e should be subject to price fluctuations, hence implying a future additional risk to TE, as potential adverse prices changes would negatively affect its profitability.

 Execution Risks - in the form of installation and/or interconnection delays, mainly in Greece where 39% or 94MW of TE’s incremental capacity additions of 244MW until 2018e will be located. Such delays are most common at the licensing stage.

 Project Financing / Borrowing Costs – A potential turmoil in credit/equity markets and/or Greek banks’ limited flow of financing to Greek enterprises may affect TEs’ ability to raise the necessary capital to develop its pipeline, or at rates that will be attractive enough to generate an adequate ROI.

 Political & Macro Risks in Greece: Although the operation of wind farms per se has little to do with the domestic economic or political environment, in our view, any renewed political and macro uncertainty could affect the timing and magnitude of the expected economic recovery, as well as, increase the country’s risk premium and hence borrowing costs.

 Lower-than-expected Wind Capacity Factors - at the company’s domestic and/or foreign sites may adversely impact profitability. For example, wind conditions in 2014 were exceptionally depressed compared to other years.

On the contrary, future potential catalysts to TE’s performance include:

 The Implementation of its Large RES Pipeline: Higher-than-expected installation rates in wind parks would positively affect TE’s long-term financials.

 Lower Wind Turbine Prices: A lower-than-expected growth of the EU economy (EC calls for a real GDP growth of 1.8% in 2016e) may result in investment cuts in RES. This would create an overcapacity of turbines, hence leading to lower prices; this could lower CapEx requirements and increase returns for a wind developer like TE.

 The Implementation of an Awarded Waste Management Project – in Peloponnese with an investment budget of €130m (50% subsidised). However, as the contractual agreement (with the Peloponnese prefecture) is subject to approval by the Court of Audit and the financing has not yet been agreed, we believe that the implementation of this project may face delays also due to red tape. To this end, we have not included this project in our model.

Euroxx Research / Terna Energy – Company Update Report 6

September 19, 2016 Greece / Renewable Energy

Relative Valuation: At Deep Discount vs. Foreign Peers and at

Premium vs. Eltech Anemos

th

TE’s closest domestic peer is Eltech Anemos, the 5 largest Greek RES player, which

was listed on the ASE in 2014. We have also considered a selection of quoted wind-

farm developers in Europe. Note, however, that direct cross-border comparisons may be difficult, due to differences in size, geographical dispersion, regulatory framework and production mix.

Table 3. Peer Group Valuation Company Bloomberg Price Mcap EV/EBITDA EV/Sales P/E Net Debt / EBITDA Installed MW Name Ticker (€) (€m) 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e H1 2016 EV / MW EDP Renovaveis EDW GR 6.72 5,865 8.6x 8.0x 7.4x 6.0x 5.6x 5.2x 40.0x 32.6x 28.6x 3.0x 3.0x 2.9x 9,722 1.08 Alerion ARN IM 2.01 88 7.8x 7.1x 7.1x 5.5x 5.1x 5.1x 37.2x 17.5x 16.8x 5.1x 4.1x 3.7x 270 1.06 Acciona ANA SM 64.33 3,684 8.2x 7.7x 7.3x 1.6x 1.5x 1.4x 13.5x 16.3x 13.5x 4.1x 4.3x 4.0x 8,676 1.08 Weighted average of foreign peers 8.4x 7.9x 7.3x 4.3x 4.0x 3.7x 29.9x 26.3x 22.7x 3.5x 3.5x 3.4x 1.08 Eltech Anemos ANEMOS GA 0.74 61 4.0x 3.5x 3.0x 3.0x 2.7x 2.3x 4.3x 3.6x 3.3x 2.4x 2.1x 1.7x 265 0.67 Terna Energy TENERGY GA 2.65 290 5.7x 4.6x 4.2x 3.1x 2.8x 2.5x 9.9x 7.3x 6.8x 3.3x 2.6x 2.2x 738 0.93 Premium / (discount) to foreign peers -32% -41% -43% -28% -31% -34% -67% -72% -70% -5% -27% -35% -14% Premium / (discount) to Eltech Anemos 44% 33% 39% 3% 3% 9% 130% 103% 104% 37% 23% 32% 37% Source: Closing prices as of September 13, Bloomberg data for foreign peers, Exx estimates for Anemos and Terna Energy, Companies H1'16 presentations, Euroxx Research Source: Closing prices as of September 16, Bloomberg data for foreign peers, Exx estimates for Anemos and Terna Energy, Companies H1'16 presentations

Anemos is the only other Eltech Anemos, 64.5%-owned by the largest and most diversified domestic listed RES producer in construction group , currently has 265MW of installed capacity, expected to Greece and the 5th largest reach 279MW in 2017e and 294MW by end-2018e. We have an Overweight rating on

market player Anemos and a TP of €1.25.

TE trades at discounts TE trades at a 2016-18e P/E of 6.8-9.9x and EV/EBITDA of 4.2-5.7x, which imply compared to international deep discounts of 32-72% vs. international peers. Based on total installed capacity of

peers… 738MW as of June’16, TE trades at an implied EV of €0.93m per installed MW vs. an

average of €1.08m for European peers.

…and at a premium vs. Turning to domestic comparisons, TE trades at 33-44% premium vs. Anemos in terms

Anemos of 2016-18e EV/EBITDA and at >100% premium in terms of 2016-18e P/E. Moreover,

TE trades at 37% premium vs. Anemos on an EV/MW basis.

TE Remains Our Preferred Stock In Our Greek RES Universe

We believe TE is an Despite the premium in terms of P/E and EV/EBITDA, we still prefer TE to Eltech excellent play to gain Anemos, based on its larger RES portfolio, which currently stands at 738MW, and we exposure in the RES Greek expect it to grow by 33% to 982MW by 2018e. On the other hand, Eltech Anemos sector operates 265MW in RES, which we see growing by 11% to 294MW in 2018e. Finally, we also favour TE’s international presence, as the group currently holds 270MW in wind parks in Bulgaria (30MW), Poland (102MW) and the US (138MW), accounting for 37% of its total RES exposure in 2016e.

Euroxx Research / Terna Energy – Company Update Report 7

September 19, 2016 Greece / Renewable Energy

Earnings Update

Installed RES Capacity: 2015-18e CAGR of 14%

In 2015 TE installed 24MW of new wind parks (8MW in Greece and 16MW in Poland),

resulting in 664MW of installed RES capacity at the end of the year. The latter

exceeded our previous estimates, since we were initially expecting the new wind

parks in Poland to commence operations in 2016. From the total 2015 capacity, 59%

or 394MW were located in Greece, 21% or 138MW in the US, 15% or 102MW in

Poland, while the rest 5% were located in Bulgaria.

Chart 3. Evolution of TE’s Installed RES Capacity by Country

1050

982 982 1000

950

900

850

288 288

800

738 750

700

664

138 640

650 102 102

600 138

30 30 138

550 102

510

499 562 562

500

30 102

86 450

138 138 468

30 400 30

MWsInstalled

350 327 394 386 74 66

32 300

30 30 30

250

268 265 265

200

150

149 149 149 100

118 118

50

39 39 39 39 65 22

0

Greece Bulgaria Poland USA

Source: Terna Energy, Euroxx Research

2016e: 73MW in Wind Parks Installed

2016e: Already added So far in 2016, TE has commissioned the 73MW off-shore wind park in St. George 73MW in wind parks, island (Attica region), as well as a 1MW biomass plant. Note that the St. George wind increasing RES capacity by park bears no cash grant (state subsidy) but enjoys a c30% higher FiT of €137/MWh 11% YTD to 738MW vs. that of a regular on-shore non-subsidised wind park (€105/MWh). Assuming no

further additions during the year, TE’s RES exposure should stand 11% higher y-o-y

to 738MW by end-2016e, with 711MW or 96% of total RES capacity coming from

wind parks.

2017e: We Expect TE to Install Another 244MW in Wind Parks

2017e: To add 244MW in We still estimate that construction works related to 50MW in Viotia (Central Greece)

wind parks… and 44MW in Macedonia (Northern Greece), should be concluded by early-2017e.

That said, erring on the cautious side, we now exclude from our model the 67MW in

Evritania (Central Greece) and the 65MW in Evia island (North-East to Attica region),

on lower visibility. On the other hand, we incorporate in our model a 150MW wind

park in Texas, USA, which TE is constructing through a JV scheme (we assume TE

participates with 50%) and is expected to commence operations at end-2017.

Following this, we do not expect any wind capacity additions in 2018e. We still

account for no new installations in both hydro and solar parks, as the focus will

remain on wind parks, in our view.

…resulting in a total All in all, we expect TE to increase its total RES operating capacity by 14% (CAGR) installed RES capacity over 2015-18e, reaching 982MW (installed) by end-2018e. This should consist of CAGR of 14% over 2015- 955MW in wind parks (535MW in Greece, 288MW in US, 102MW in Poland and 18e 30MW in Bulgaria), 18MW in hydro parks (100% in Greece), 9MW in solar farms (all in Greece) and finally a biomass plant of 1MW.

Euroxx Research / Terna Energy – Company Update Report 8

September 19, 2016 Greece / Renewable Energy

Table 4. TE’s Installation Forecasts 2014-18e 2014 2015 2016e 2017e 2018e CAGR RES - Wind parks (MW) 2014 2015 2016e 2017e 2018e2020e y-o-y y-o-y y-o-y y-o-y y-o-y 2015-18e Existing installed capacity 483.5 613.6 637.6 710.6 954.6 1.7% 26.9% 3.9% 11.4% 34.3% 15.9% - Greece 241.5 359.6 367.6 440.6 534.6 0.0% 48.9% 2.2% 19.9% 21.3% 14.1% - Abroad 242.0 254.0 270.0 270.0 420.0 3.4% 5.0% 6.3% 0.0% 55.6% 18.3% …of which in Poland 74.0 86.0 102.0 102.0 102.0 12.1% 16.2% 18.6% 0.0% 0.0% 5.9% …of which in Bulgaria 30.0 30.0 30.0 30.0 30.0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% …of which in USA 138.0 138.0 138.0 138.0 288.0 0.0% 0.0% 0.0% 0.0% 108.7% 27.8% Capacity additions 130.1 24.0 73.0 244.0 0.0 - Greece 118.1 8.0 73.0 94.0 0.0 - Abroad 12.0 16.0 0.0 150.0 0.0 …of which in Poland 12.0 16.0 0.0 0.0 0.0 …of which in Bulgaria 0.0 0.0 0.0 0.0 0.0 …of which in USA 0.0 0.0 0.0 150.0 0.0

Total installed capacity (YE) 613.6 637.6 710.6 954.6 954.6 26.9% 3.9% 11.4% 34.3% 0.0% 14.4% - Greece 359.6 367.6 440.6 534.6 534.6 48.9% 2.2% 19.9% 21.3% 0.0% 13.3% - Abroad 254.0 270.0 270.0 420.0 420.0 5.0% 6.3% 0.0% 55.6% 0.0% 15.9% …of which in Poland 86.0 102.0 102.0 102.0 102.0 16.2% 18.6% 0.0% 0.0% 0.0% 0.0% …of which in Bulgaria 30.0 30.0 30.0 30.0 30.0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% …of which in USA 138.0 138.0 138.0 288.0 288.0 0.0% 0.0% 0.0% 108.7% 0.0% 27.8% 2014 2015 2016e 2017e 2018e CAGR RES - Hydro plants (MW) 2014 2015 2016e 2017e 2018e2020e y-o-y y-o-y y-o-y y-o-y y-o-y 2015-18e Existing installed capacity 17.8 17.8 17.8 17.8 17.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% - Greece 17.8 17.8 17.8 17.8 17.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Capacity additions 0.0 0.0 0.0 0.0 0.0 - Greece 0.0 0.0 0.0 0.0 0.0 Total installed capacity (YE) 17.8 17.8 17.8 17.8 17.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% - Greece 17.8 17.8 17.8 17.8 17.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2014 2015 2016e 2017e 2018e CAGR RES - PV farms (MW) 2014 2015 2016e 2017e 2018e2020e y-o-y y-o-y y-o-y y-o-y y-o-y 2015-18e Existing installed capacity 8.5 8.5 8.5 8.5 8.5 42.4% 0.0% 0.0% 0.0% 0.0% 0.0% - Greece 8.5 8.5 8.5 8.5 8.5 42.4% 0.0% 0.0% 0.0% 0.0% 0.0% Capacity additions 0.0 0.0 0.0 0.0 0.0 - Greece 0.0 0.0 0.0 0.0 0.0 Total installed capacity (YE) 8.5 8.5 8.5 8.5 8.5 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% - Greece 8.5 8.5 8.5 8.5 8.5 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

RES - Biomass plants (MW) 2014 2015 2016e 2017e 2018e Existing installed capacity 0.0 0.0 0.0 1.0 1.0 - Greece 0.0 0.0 0.0 1.0 1.0 Capacity additions 0.0 0.0 1.0 0.0 0.0 - Greece 0.0 0.0 1.0 0.0 0.0 Total installed capacity (YE) 0.0 0.0 1.0 1.0 1.0 - Greece 0.0 0.0 1.0 1.0 1.0

2014 2015 2016e 2017e 2018e CAGR Total RES (MW) 2014 2015 2016e 2017e 2018e2020e y-o-y y-o-y y-o-y y-o-y y-o-y 2015-18e Existing installed capacity 509.9 639.9 663.9 737.9 981.9 2.1% 25.5% 3.8% 11.1% 33.1% 15.3% - Greece 267.9 385.9 393.9 467.9 561.9 1.0% 44.1% 2.1% 18.8% 20.1% 13.3% % of total 53% 60% 59% 63% 57% - Abroad 242.0 254.0 270.0 270.0 420.0 3.4% 5.0% 6.3% 0.0% 55.6% 18.3% % of total 47% 40% 41% 37% 43% …of which in Poland 74.0 86.0 102.0 102.0 102.0 12.1% 16.2% 18.6% 0.0% 0.0% 5.9% …of which in Bulgaria 30.0 30.0 30.0 30.0 30.0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% …of which in USA 138.0 138.0 138.0 138.0 288.0 0.0% 0.0% 0.0% 0.0% 108.7% 27.8% Capacity additions 130.1 24.0 74.0 244.0 0.0 - Greece 118.1 8.0 74.0 94.0 0.0 % of total 91% 33% 100% 39% n/m - Abroad 12.0 16.0 0.0 150.0 0.0 % of total 9% n/m 0% n/m n/m …of which in Poland 12.0 16.0 0.0 0.0 0.0 …of which in Bulgaria 0.0 0.0 0.0 0.0 0.0 …of which in USA 0.0 0.0 0.0 150.0 0.0 Total installed capacity (YE) 639.9 663.9 737.9 981.9 981.9 25.5% 3.8% 11.1% 33.1% 0.0% 13.9% - Greece 385.9 393.9 467.9 561.9 561.9 44.1% 2.1% 18.8% 20.1% 0.0% 12.6% % of total 60% 59% 63% 57% 57% - Abroad 254.0 270.0 270.0 420.0 420.0 5.0% 6.3% 0.0% 55.6% 0.0% 15.9% % of total 40% 41% 37% 43% 43% …of which in Poland 86.0 102.0 102.0 102.0 102.0 16.2% 18.6% 0.0% 0.0% 0.0% 0.0% …of which in Bulgaria 30.0 30.0 30.0 30.0 30.0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% …of which in USA 138.0 138.0 138.0 288.0 288.0 0.0% 0.0% 0.0% 108.7% 0.0% 27.8% Source: Terna Energy, Euroxx Research

Euroxx Research / Terna Energy – Company Update Report 9

September 19, 2016 Greece / Renewable Energy

Group Revenues: 2015-18e CAGR of 7% due to New Wind Parks

Total RES Capacity to We have left our previous 2016e RES electricity generation estimates broadly reach 982MW in 2017e unchanged, while we have downgraded our 2017-18e generation forecasts by 5-12%. (97% wind); RES Revenues The latter results from the exclusion from our model of the two domestic wind park to Grow at a 2015-18e projects (132MW in total) that we were previously assuming to commence operations

CAGR of 13% at early-2017e. Note that this exclusion more than offsets the positive effect from the

addition of the 150MW project in Texas, USA, at late-2017e (we assume that TE

participates by 50% in the JV).

We expect TE to produce Consequently, we forecast that TE will generate 2.3GWh in 2018e (down 5% vs. our 2.3GWh in 2018e, implying previous call), implying a 2015-18e CAGR of 12%. Accounting also for an average

a 2015-18e CAGR of 12% FiT of €88.4/MWh in 2018e, we now expect group RES revenues to stand at €202m

during that year (8% below our previous estimate), exhibiting a 2015-18e CAGR of

13%.

Chart 4. 2015-18e Sales Bridge All in all, we have decreased our previous 2017-18e sales estimates by 8-11% mainly 300 0.0 0.0 0.3 -16.8 270 61.6 9.8 -10.6 240 210 due to the exclusion from our model of two wind parks in Greece. We now expect 180 150 120 242 TE’s group revenues to grow by 10% in 2016e to €219m, reaching €243m in 2018e, 90 187 60 30 0 which implies a 2015-18e CAGR of 7%. On our estimates, RES activity (mainly wind parks) will contribute 83% of total revenues in 2018e from 71% in 2015, with (amounts in € m)

Source: Terna Energy, Euroxx Research construction-related contribution standing at 12% and electricity trading accounting for 4% of total sales.

Table 5. TE’s Group Revenue Forecasts 2014-18e 2014 2015 2016e 2017e 2018e CAGR Group RES Capacity (MW) 2014 2015 2016e 2017e 2018e2020e y-o-y y-o-y y-o-y y-o-y y-o-y 2015-18e Existing MW 509.9 639.9 663.9 737.9 981.9 2.1% 25.5% 3.8% 11.1% 33.1% 15.3% ….of which Wind Parks 483.5 613.6 637.6 710.6 954.6 1.7% 26.9% 3.9% 11.4% 34.3% 15.9% ….of which Hydro Plants 17.8 17.8 17.8 17.8 17.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% ….of which P/V Farms 8.5 8.5 8.5 8.5 8.5 42.4% 0.0% 0.0% 0.0% 0.0% 0.0% ….of which Biomass Plants 0.0 0.0 0.0 1.0 1.0

New MW 130.1 24.0 74.0 244.0 0.0 ….of which Wind Parks 130.1 24.0 73.0 244.0 0.0 ….of which Hydro Plants 0.0 0.0 0.0 0.0 0.0 ….of which P/V Farms 0.0 0.0 0.0 0.0 0.0 ….of which Biomass Plants 0.0 0.0 1.0 0.0 0.0

Total Group Installed Capacity (MW) 639.9 663.9 737.9 981.9 981.9 25.5% 3.8% 11.1% 33.1% 0.0% 13.9% ….of which Wind Parks 613.6 637.6 710.6 954.6 954.6 26.9% 3.9% 11.4% 34.3% 0.0% 14.4% % of total 95.9% 96.0% 96.3% 97.2% 97.2% ….of which Hydro Plants 17.8 17.8 17.8 17.8 17.8 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% % of total 2.8% 2.7% 2.4% 1.8% 1.8% ….of which P/V Farms 8.5 8.5 8.5 8.5 8.5 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% % of total 1.3% 1.3% 1.2% 0.9% 0.9% ….of which Biomass Plants 0.0 0.0 1.0 1.0 1.0 % of total 0.0% 0.0% 0.1% 0.1% 0.1%

Group RES Production (MWh/year) 1,356,883 1,641,793 1,855,000 2,118,315 2,285,845 12.3% 21.0% 13.0% 14.2% 7.9% 11.7% ….of which Wind Parks 1,286,474 1,571,384 1,783,324 2,046,592 2,214,123 13.0% 22.1% 13.5% 14.8% 8.2% 12.1% ….of which Hydro Plants 59,253 59,253 59,253 59,253 59,253 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% ….of which P/V Farms 11,156 11,156 11,156 11,156 11,156 6.3% 0.0% 0.0% 0.0% 0.0% 0.0% ….of which Biomass Plants 0 0 1,267 1,314 1,314 3.7% 0.0%

Group Average Capacity Load Factor 25.6% 29.1% 28.8% 29.2% 26.6% Wind Parks 25.4% 27.9% 28.8% 28.9% 28.7% Hydro Plants 38.0% 38.0% 38.0% 38.0% 38.0% P/V Farms 15.0% 15.0% 15.0% 15.0% 15.0% Biomass Plants 0.0% 0.0% 15.0% 15.0% 15.0%

Average FiTs (€/MWh) 81.3 85.4 90.4 91.1 88.4 -7.1% 5.1% 5.8% 0.7% -2.9% 1.1% Wind Parks 79.6 84.2 89.5 90.3 87.6 -5.9% 5.8% 6.2% 0.9% -3.0% 1.3% Hydro Plants 87.0 87.0 87.0 87.0 87.0 -3.3% 0.0% 0.0% 0.0% 0.0% 0.0% P/V Farms 251.4 251.4 251.4 251.4 251.4 -36.0% 0.0% 0.0% 0.0% 0.0% 0.0% Biomass Plants 0.0 0.0 200.0 200.0 200.0

Group Revenues (€m) 158.3 198.6 218.6 233.8 242.9 13.4% 25.5% 10.0% 7.0% 3.9% 6.9% RES revenues 110.4 140.3 167.8 193.0 202.1 4.4% 27.1% 19.6% 15.0% 4.7% 12.9% % of total revenues 69.7% 70.6% 76.8% 82.5% 83.2% Wind Parks 102.4 132.3 159.5 184.7 193.9 6.3% 29.2% 20.6% 15.8% 5.0% 13.6% % of total revenues 64.7% 66.6% 73.0% 79.0% 79.8% Hydro Plants 5.2 5.2 5.2 5.2 5.2 -3.3% 0.0% 0.0% 0.0% 0.0% 0.0% % of total revenues 3.3% 2.6% 2.4% 2.2% 2.1% Solar Farms 2.8 2.8 2.8 2.8 2.8 -32.0% 0.0% 0.0% 0.0% 0.0% 0.0% % of total revenues 1.8% 1.4% 1.3% 1.2% 1.2% Biomass Plants 0.0 0.0 0.3 0.3 0.3 % of total revenues 0.0% 0.0% 33.0% 31.8% 31.6% Electricity trading 12.4 26.8 20.0 10.0 10.0 116.6% -25.3% -50.0% 0.0% -28.0% % of total revenues 7.8% 13.5% 9.2% 4.3% 4.1% Construction revenues 35.5 20.2 30.0 30.0 30.0 5.0% -43.2% 48.6% 0.0% 0.0% 14.1% % of total revenues 22.5% 10.2% 13.7% 12.8% 12.3% Concessions revenues 0.0 11.4 0.8 0.8 0.8 -93.0% 1.0% 2.0% -58.3% % of total revenues 0.0% 5.7% 0.4% 0.3% 0.3% Source: Terna Energy, Euroxx Research

Euroxx Research / Terna Energy – Company Update Report 10

September 19, 2016 Greece / Renewable Energy

Group Adj. EBITDA: 2015-18e CAGR of 14%, Driven by Wind Parks

We expect TE’s RES adj. We have downgraded our 2016-18e RES EBITDA estimates by 3-12%, mostly to EBITDA to post a 2015-18e reflect our lower revenue forecasts. We now expect EBITDA of €119m in 2016e,

CAGR of 15% growing to €143m in 2018e (96% of which is stemming from wind parks), implying a

2015-18e CAGR of 15%. EBITDA growth is mainly attributed to capacity additions

(244MW in wind parks by 2017e to be added to the 73MW already installed in 2016e),

while we account for flattish RES EBITDA margins, hovering around 71%.

Chart 5. 2015-18e EBITDA Bridge Allowing also for 3x increase in our previous 2016-18e construction-related EBITDA 200

180

160 47.9 estimates to €1.3m (reflecting the strong trend of H1’16) and the zero/negative 0.0 0.0 0.2 0.0 1.2 0.0 140 120 profitability from electricity trading/concessions division (e-ticketing) respectively, we 100

80 145 60 now expect TE’s group EBITDA to reach €120.5m in 2016e (+24% y-o-y) and 96 40 20 €144.5m in 2018e, exhibiting a 2015-18e CAGR of 14% (adj.). On our estimates, RES 0 activity (and mainly wind parks) will contribute 99% of total EBITDA in 2018e, with

(amounts in €m) construction accounting for the remaining 1%. Source: Terna Energy, Euroxx Research

Table 6. TE’s EBITDA Forecasts 2014-18e 2014e 2015e 2016e 2017e 2018e CAGR (€m) 2014* 2015** 2016e*** 2017e 2018e2020e y-o-y y-o-y y-o-y y-o-y y-o-y 2015-18e RES Adj. EBITDA 75.7 95.2 119.1 137.2 143.0 -3% 26% 25% 15% 4% 14.5% % of total Adj. EBITDA 99.6% 98.2% 98.8% 98.9% 99.0% EBITDA margin 68.6% 67.8% 71.0% 71.1% 70.8% - Wind Parks 69.4 89.0 112.8 131.0 136.8 -1% 28% 27% 16% 4% 15.4% % of total RES Adj. EBITDA 91.8% 93.5% 94.8% 95.5% 95.7% % of total Adj. EBITDA 91.4% 91.8% 93.7% 94.5% 94.7% EBITDA margin 67.8% 67.2% 70.7% 70.9% 70.6% - Hydro Plants 4.0 4.0 4.0 4.0 4.0 -4% 0% 0% 0% 0% -0.1% % of total RES Adj. EBITDA 5.3% 4.2% 3.3% 2.9% 2.8% % of total Adj. EBITDA 5.2% 4.1% 3.3% 2.9% 2.7% EBITDA margin 77.1% 77.0% 77.0% 76.9% 76.8% - Solar Farms 2.2 2.2 2.2 2.2 2.2 -32% 0% 0% 0% 0% 0.0% % of total RES Adj. EBITDA 3.0% 2.4% 1.9% 1.6% 1.6% % of total Adj. EBITDA 2.9% 2.3% 1.9% 1.6% 1.6% EBITDA margin 79.8% 79.8% 79.8% 79.8% 79.8% - Biomass Plants 0.0 0.0 0.2 0.2 0.2 % of total RES Adj. EBITDA 0.0% 0.0% 0.2% 0.2% 0.2% % of total Adj. EBITDA 0.0% 0.0% 0.2% 0.2% 0.2% EBITDA margin n/m n/m 0.0% 0.0% 0.0% - Electricity trading 0.0 0.4 0.0 0.0 0.0 0% >100% -100% n/m n/m n/m % of total Adj. EBITDA 0.0% 0.4% 0.0% 0.0% 0.0% EBITDA margin 0.1% 1.4% 0.0% 0.0% 0.0% - Construction 0.3 1.3 1.5 1.5 1.5 n/m >100% 19% 0% 0% 6.0% % of total Adj. EBITDA 0.4% 1.3% 1.2% 1.1% 1.0% EBITDA margin 0.9% 6.2% 5.0% 5.0% 5.0% - Concessions 0.0 0.1 -0.1 0.0 0.0 % of total Adj. EBITDA 0.0% 0.1% -0.1% 0.0% 0.0% EBITDA margin n/m 0.8% -10.0% -5.0% -5.0% Total Group Adj. EBITDA 76.0 96.9 120.5 138.7 144.5 -1.8% 27.5% 24.3% 15.1% 4.2% 14.2% EBITDA margin 48.0% 48.8% 55.1% 59.3% 59.5% Source: Terna Energy, Euroxx Research Notes: (*) 2014e group EBITDA is adjusted for the Special Levy of €1.9m as this was replaced by the "New Deal" in RES from April onwards. (**) 2015 group EBITDA is adjusted for FX gains of €2.4m. (***) 2016 group EBITDA is adjusted for FX losses of €1.3m and capital gains of €0.7m

Euroxx Research / Terna Energy – Company Update Report 11

September 19, 2016 Greece / Renewable Energy

Adj. EPS: 2015-18e CAGR of 41%

Additional capacity in wind All-in, we have cut our 2017-18e EPS by 26-27% to €0.36-0.39, as we also account parks will support top-line for higher tax rates. Regarding 2016e, we slightly upgraded our sales forecast by 4%, growth and enhance accounting for higher electricity trading sales, while our adj. EPS estimate remains profitability broadly unchanged. Summing up, we expect sales, adj. EBITDA and adj. EPS to exhibit 2015-18e CAGRs of 7%, 14% and 41% respectively, driven entirely by new capacity additions in wind parks.

Table 7. TE’s Financial Forecast Revisions (2016-18e) 2016e 2017e 2018e (amounts in €m) 2014 2015 y-o-y Old New chng % y-o-y Old New chng % y-o-y Old New chng % y-o-y - RES revenues 110.4 140.3 27.1% 165.7 167.8 1.2% 19.6% 218.6 193.0 -11.7% 15.0% 219.4 202.1 -7.9% 4.7% % of total sales 69.7% 70.6% 79.0% 76.8% 83.2% 82.5% 83.3% 83.2% - Construction revenues 35.5 20.2 -43.2% 34.0 30.0 -11.8% 48.6% 34.0 30.0 -11.8% 0.0% 34.0 30.0 -11.8% 0.0% % of total sales 22.5% 10.2% 16.2% 13.7% 12.9% 12.8% 12.9% 12.3% - Electricity Trading revenues 0.0 26.8 10.0 20.0 10.0 10.0 10.0 10.0 % of total sales 0.0% 13.5% 4.8% 9.2% 3.8% 4.3% 3.8% 4.1% - Concessions 0.0 11.4 0.0 0.8 0.0 0.8 0.0 0.8 % of total sales 0.0% 5.7% 0.0% 0.4% 0.0% 0.3% 0.0% 0.3% Group Sales 158.3 198.6 25.5% 209.7 218.6 4.2% 10.0% 262.6 233.8 -11.0% 7.0% 263.4 242.9 -7.8% 3.9% - RES EBITDA 73.7 97.6 32.3% 116.8 118.4 1.4% 21.4% 156.6 137.2 -12.4% 15.9% 156.7 143.0 -8.7% 4.3% % of total EBITDA 99.5% 98.2% 99.7% 98.8% 99.8% 98.9% 99.8% 99.0% EBITDA margin 66.8% 69.6% 70.5% 70.6% 71.6% 71.1% 71.4% 70.8% - Construction EBITDA 0.3 1.3 n/m 0.3 1.5 396.2% 19.0% 0.3 1.5 396.2% 0.0% 0.3 1.5 396.2% 0.0% % of total EBITDA 0.4% 1.3% 0.3% 1.3% 0.2% 1.1% 0.2% 1.0% EBITDA margin 0.9% 6.2% 0.9% 5.0% 0.9% 5.0% 0.9% 5.0% - Electricity Trading EBITDA 0.0 0.4 0.0 0.0 n/m -100.0% 0.0 0.0 n/m n/m 0.0 0.0 n/m n/m % of total EBITDA 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBITDA margin n/m 1.4% 0.1% 0.0% 0.1% 0.0% 0.1% 0.0% - Concessions EBITDA 0.0 0.1 0.0 -0.1 n/m -185.1% 0.0 0.0 n/m -49.5% 0.0 0.0 n/m 2.0% % of total EBITDA 0.0% 0.1% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% EBITDA margin n/m 0.8% 0.0% -10.0% 0.0% -5.0% 0.0% -5.0% Group EBITDA 74.1 99.3 34.1% 117.1 119.8 2.4% 20.7% 156.9 138.7 -11.6% 15.7% 157.0 144.5 -8.0% 4.2% EBITDA margin 46.8% 50.0% 55.8% 54.8% 59.8% 59.3% 59.6% 59.5% Group Adj. EBITDA 76.0 96.9 27.5% 117.1 120.5 2.9% 24.3% 156.9 138.7 -11.6% 15.1% 157.0 144.5 -8.0% 4.2% Recurring EBITDA margin 48.0% 48.8% 55.8% 55.1% 59.8% 59.3% 59.6% 59.5% - RES EBIT 43.3 61.1 41.0% 76.9 76.4 -0.7% 25.1% 106.9 90.7 -15.2% 18.7% 107.0 92.3 -13.8% 1.7% % of total EBIT 99.5% 97.4% 99.8% 98.4% 99.8% 98.6% 99.8% 98.6% EBIT margin 39.2% 43.5% 46.4% 45.6% 48.9% 47.0% 48.8% 45.6% - Construction EBIT 0.2 1.1 n/m 0.2 1.4 >100% 18.7% 0.2 1.4 671.1% 0.0% 0.2 1.4 671.1% 0.0% % of total EBIT 0.4% 1.8% 0.2% 1.7% 0.2% 1.5% 0.2% 1.4% EBIT margin 0.5% 5.6% 0.5% 4.5% 0.5% 4.5% 0.5% 4.5% - Electricity Trading EBIT 0.0 0.4 n/m 0.0 0.0 n/m -100.0% 0.0 0.0 n/m n/m 0.0 0.0 n/m n/m % of total EBIT 0.0% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBIT margin n/m 1.4% 0.1% 0.0% 0.1% 0.0% 0.1% 0.0% - Concessions EBIT 0.0 0.1 n/m 0.0 -0.1 n/m n/m 0.0 0.0 n/m -49.5% 0.0 0.0 n/m 2.0% % of total EBIT 0.0% 0.1% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% EBIT margin n/m 0.8% 0.0% -10.0% 0.0% -5.0% 0.0% -5.0% Group EBIT 43.5 62.7 44.1% 77.1 77.7 0.7% 23.9% 107.1 92.0 -14.1% 18.4% 107.2 93.6 -12.7% 1.7% EBIT margin 27.5% 31.6% 36.8% 35.6% 40.8% 39.4% 40.7% 38.5% Group Adj. EBIT 45.4 60.3 32.7% 77.1 78.3 1.6% 30.0% 107.1 92.0 -14.1% 17.4% 107.2 93.6 -12.7% 1.7% Recurring EBIT margin 28.7% 30.4% 36.8% 35.8% 40.8% 39.4% 40.7% 38.5% Net financials (31.3) (32.2) 2.6% (35.8) (35.8) 0.1% 11.4% (34.6) (35.8) 3.5% -0.1% (29.1) (33.2) 14.0% -7.2% Group EBT 12.2 30.4 149.6% 41.3 41.7 0.9% 37.3% 72.5 56.1 -22.7% 34.4% 78.1 60.2 -22.9% 7.4% EBT margin 7.7% 15.3% 19.7% 19.1% 27.6% 24.0% 29.6% 24.8% Group Adj. EBT 14.1 28.0 98.7% 41.3 42.4 2.5% 51.4% 72.5 56.1 -22.7% 32.4% 78.1 60.2 -22.9% 7.4% Recurring EBT margin 8.9% 14.1% 19.7% 19.4% 27.6% 24.0% 29.6% 24.8% Taxes (6.3) (12.9) 104.6% (10.7) (12.1) 12.6% -6.5% (18.9) (16.3) -13.7% 34.4% (20.3) (17.5) -14.0% 7.4% Effective tax rate 52.0% 42.6% 26.0% 29.0% 26.0% 29.0% 26.0% 29.0% Group Net Profit 5.6 16.9 >100% 30.3 29.1 -4.0% 72.0% 53.4 39.3 -26.4% 35.1% 57.5 42.2 -26.5% 7.5% Net margin 3.5% 8.5% 14.4% 13.3% 20.3% 16.8% 21.8% 17.4% Group Adj. Net Profit 7.0 15.2 >100% 30.3 29.6 -2.4% 94.3% 53.4 39.3 -26.4% 33.0% 57.5 42.2 -26.5% 7.5% Recurring net margin 4.4% 7.7% 14.4% 13.5% 20.3% 16.8% 21.8% 17.4% EPS (€) 0.05 0.16 >100% 0.28 0.27 -4.0% 72.0% 0.49 0.36 -26.4% 35.1% 0.53 0.39 -26.5% 7.5% Adjusted EPS (€) 0.06 0.14 >100% 0.28 0.27 -2.4% >100% 0.49 0.36 -26.4% 33.0% 0.53 0.39 -26.5% 7.5% DPS (€) 0.00 0.09 n/m 0.10 0.10 0.0% n/m 0.11 0.11 0.0% 10.0% 0.12 0.12 0.0% 9.1% Capital return (€) 0.09 0.00 n/m 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 0.00 0.0% Source: Terna Energy, Euroxx Research Notes: (a) 2014 group EBITDA is adjusted for the Special Levy of €1.9m as this was replaced by the "New Deal" in RES from April onwards. (b) 2015 group EBITDA is adjusted for FX gains of €2.4m (b) 2016 group EBITDA is adjusted for FX losses of €1.3m and capital gains of €0.7m

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September 19, 2016 Greece / Renewable Energy

Balance sheet: Net Debt to Start Decelerating in 2017e

Net Debt / EBITDA of 3.3x In 2015, TE’s net debt rose by 25% y-o-y to €322m (total group debt up by 15% y-o-y in 2015; to reach 2.2x in to €489m), implying a net debt / EBITDA ratio of 3.3x. This is mainly attributed to the

2018e implementation of the group project pipeline that resulted in 664MW of total installed

capacity in 2015, vs. €640MW in the previous year. Going forward, we expect net

debt to increase further in 2016e due to the implementation of new investments,

whereas upon the full deployment of group’s upcoming 244MW in wind parks in

2017e, we expect Net Debt / EBITDA to slide to 2.2x in 2018e, supported by higher

group profitability.

Chart 6. Net Debt & Net Debt / Adj. EBITDA 2014-18e

500.0 4.0x

3.4x 450.0 3.3x 3.3x 3.5x

400.0

2.6x 3.0x

2.2x 350.0

m)

€ 2.5x

300.0

( in

250.0 2.0x

200.0 395.5

1.5x

354.4

322.1 313.9 150.0

257.6 1.0x

100.0

0.5x

50.0

0.0 0.0x

2014 2015 2016e 2017e 2018e

Net Debt (€m, LHS) Net debt/Adj. EBITDA (x, RHS)

Source: Terna Energy, Euroxx Research

New RES bill should lead to Furthermore, we expect the new RES bill that calls for the elimination of LAGIE deficit lower receivables through to have positive implications on group receivables, leading to lower working capital LAGIE deficit elimination needs and supporting operating cash flow. Note that in 2015, total receivables stood at €60m, with €50m of them relating to LAGIE, whereas we now expect them to fall to €35m (€25m from LAGIE) this year and reach €30m (€20m from LAGIE) by 2018e.

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September 19, 2016 Greece / Renewable Energy

Q2’16 Results: Construction and Electricity Trading Drive Sales

Higher

Strong Q2’16 top-line TE’s Q2’16 top-line was strong, driven by the construction and electricity trading performance driven by the divisions. In particular, Q2’16 sales rose by 10% y-o-y to €43m (3% above our construction and electricity estimates), with construction revenues reaching €6.8m from €3.4m last year (vs. our

trading divisions estimate for €5.5m), while electricity revenues increased by 36% y-o-y at €9.2m (Exx

at €8.1m). On the other hand, lower load factors led RES sales 6.5% lower y-o-y to

€27m (3.5% below our call), despite the 14% higher y-o-y installed capacity in wind

parks.

EBITDA improved Going down the P&L, EBITDA coming from RES fell by 7% y-o-y to €17m, while marginally by 1% y-o-y with construction division posted zero gains from €0.7m losses last year and electricity RES division falling by 7% trading turned positive to €0.4m from -€0.4m in Q2’15. All in all, group EBITDA

y-o-y improved marginally by 1% y-o-y to €17.6m (vs. our estimate for €16m), with the

respective margin dropping by 380bps to 40.5%. Note that profitability was impacted

by FX losses and capital gains from the sale of securities. Excluding these, EBITDA

Adjusted EBITDA fell by 6% stood 5.9% lower y-o-y at €17.3m. Furthermore, the group reported net losses of €1.8m, vs. -€0.9m last year (our call stood at -€1.4m), while on an adjusted basis, net y-o-y

losses reached €1.9m from -€0.1m last year.

H1’16 group sales and Regarding H1’16, sales came in 10% higher y-o-y at €94m (1% above our forecast), EBITDA up 10% and 3% y- again driven by the construction and electricity trading divisions. On the profitability o-y to €94m and €48m, front, EBITDA grew by 3% y-o-y to €48m (4% above Exx), while reported net profit respectively stood at €5.3m, down 54% y-o-y. On an adjusted basis (i.e. excluding FX losses of

€1.3m and capital gains of €0.7m in H1’16 and FX gains of €2.5m in H1’15), EBITDA

increased by 10% y-o-y to €48.7m, and net profit reached €5.7m from €9.5m last year. Finally, group net debt settled at €372m in H1’16 from €319m in FY’15.

Table 8. TE’s Q2/H1’16 Results (in € m) Q2'15 Q2'16 y-o-y Exx vs Exx H1'15 H1'16 y-o-y Exx vs Exx -Construction revenues 3.4 6.8 101.1% 5.5 24.8% 5.8 10.6 83.5% 9.2 14.7% -RES revenues 29.2 27.3 -6.5% 28.3 -3.5% 66.8 66.5 -0.5% 67.4 -1.4% -Electricity Trading revenues 6.7 9.2 36.3% 8.1 13.3% 12.8 16.4 28.4% 15.4 7.0% -Concessions revenues 0.0 0.1 n/a 0.4 -78.9% 0.0 0.3 n/a 0.6 Sales 39.4 43.4 10.3% 42.3 2.7% 85.4 93.8 9.9% 92.7 1.3%

-Construction EBITDA (0.7) (0.0) n/a 0.7 -105.9% (1.1) 0.6 n/a 1.3 -57.6% EBITDA Margin -19.4% -0.6% 13.1% -19.0% 5.3% 14.2% -RES EBITDA 18.6 17.3 -7.0% 15.1 14.3% 47.9 47.2 -1.5% 45.1 4.8% EBITDA Margin 63.5% 63.2% 53.4% 71.8% 71.1% 66.8% -Electricity Trading EBITDA (0.4) 0.4 n/a (0.1) (0.1) 0.3 n/a (0.2) EBITDA Margin 0.0% 4.3% -0.7% -1.0% 1.7% -1.1% -Concessions EBITDA 0.0 (0.0) n/a 0.0 0.0 (0.0) n/a 0.0 EBITDA Margin n/m n/m n/m n/m 0.0% 0.0% EBITDA 17.5 17.6 0.7% 15.8 11.5% 46.7 48.0 2.8% 46.2 3.9% EBITDA Margin 44.3% 40.5% 37.3% 54.7% 51.2% 49.9% Adjusted EBITDA 18.4 17.3 -5.9% 15.8 9.9% 44.2 48.7 10.1% 47.1 3.3% Adjusted EBITDA Margin 46.8% 39.9% 37.3% 51.8% 51.9% 50.9% EBIT 6.9 6.9 0.0% 4.3 61.8% 30.2 27.8 -8.2% 25.1 10.6% EBIT Margin 17.6% 16.0% 10.2% 35.4% 29.6% 27.1% Adjusted EBIT 7.9 6.7 -15.2% 4.3 56.0% 27.7 28.4 2.5% 26.0 9.2% Adjusted EBIT Margin 20.0% 15.4% 10.2% 32.5% 30.3% 28.1% Net earnings (0.9) (1.8) n/a (1.4) n/a 11.3 5.3 -53.6% 5.6 -6.1% Net margin -2.3% -4.0% -3.3% 13.3% 5.6% 6.0% Adjusted net earnings (0.1) (1.9) n/a (1.4) n/a 9.5 5.7 -40.0% 6.2 -8.3% Adjusted Net Margin -0.3% -4.4% -3.3% 11.2% 6.1% 6.7% Note: H1'15 adjusted figures exclude FX gains of €2.5m Note: H1'16 adjusted figures exclude FX losses of €1.3m and capital gains of €0.7m Source: Terna Energy, Euroxx Research

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September 19, 2016 Greece / Renewable Energy

IMPORTANT DISCLOSURES

This report has been issued by Euroxx Securities S.A., a member of the Exchange, a member of the Cyprus Stock Exchange and a member of EUREX Frankfurt.

Euroxx Securities S.A. is regulated by the Hellenic Capital Markets Commission (HCMC) with authorization No 45/23.06.95/item 3rd. This report may not be reproduced in any manner or provided to any other persons. Each person that receives a copy by acceptance thereof represents and agrees that it will not distribute or provide it to any other person. This report is not an offer to buy or sell or a solicitation of an offer to buy or sell securities or other financial instruments mentioned herein. The investments discussed in this report may be unsuitable for investors, depending on their specific investment objectives and financial position. The investments discussed in this report are subject to risks and in respect of some investments there is risk for multiplied losses to be caused in respect of the capital invested.

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The information contained herein has been obtained from sources believed to be reliable but it has not been verified by Euroxx Securities S.A. No representation or warranty (express or implied) is made as to the accuracy, completeness, correctness, timeliness or fairness of the information or opinions herein, all of which are subject to change without notice. No responsibility of liability whatsoever or howsoever arising is accepted in relation to the contents hereof by Euroxx Securities S.A. or any of its directors, officers or employees.

Euroxx Securities S.A. follows procedures under its policies that set up Chinese Walls, restricting communication between Research and other departments inside the Company so that Euroxx Securities S.A. complies with regulations on confidential information and market abuse.

Euroxx Securities S.A., does not hold shareholdings exceeding 5% of the total issued share capital in Terna Energy.

Terna Energy does not hold shareholdings exceeding 5% of the total issued share capital of Euroxx Securities S.A.

Euroxx Securities S.A. is not a market maker of Terna Energy.

Euroxx Securities S.A. is not a party to an agreement relating to the production of this report with Terna Energy.

Euroxx Securities S.A. had an investment banking services agreement in place with Terna Energy and has received compensation for investment banking services provided, within the last twelve months, from Terna Energy.

Euroxx Securities S.A. occasionally trades for own account on investment instruments related to Terna Energy.

This report was not sent to Terna Energy for factual verification prior to publication.

Analyst Certification This report has been written by Vangelis Karanikas, Head of Research (Certified Analyst).

Analyst Compensation The remuneration of Vangelis Karanikas, Head of Research (Certified Analyst) is not tied to the investment banking services performed by Euroxx Securities S.A.

Vangelis Karanikas, Head of Research (Certified Analyst) did not receive or purchase the shares of OPAP prior to a public offering of such shares.

Vangelis Karanikas, Head of Research (Certified Analyst) does not have a significant financial interest in one or more of the financial instruments which are the subject of this report or a significant conflict of interest with respect to the subject companies mentioned in this report a) that are accessible or reasonably expected to be accessible to the persons involved in the preparation of this report or b) known to persons who, although not involved in the preparation of this report, had or could reasonably be expected to have access to this report prior to its dissemination to customers or the public.

Planned Frequency of Updates: Euroxx Securities S.A. provides daily and monthly updates as well as updates on companies based on company-specific developments or quarterly financial results announcements or any other publicly available information.

Euroxx Research / Terna Energy – Company Update Report 15

September 19, 2016 Greece / Renewable Energy

Risks and sensitivity The views and recommendations for all the companies that Euroxx Securities covers or refers to in the report have various levels of risk depending on company, industry and market events. Furthermore, our estimates for each company we cover are affected by various factors such as interest rates, inflation, local economic environment, market volatility, currency, management continuity or other company specific events. Investors should be informed that the investment strategies discussed or recommended in these reports may not be realised and each company may fail to reach its targets or the analyst’s targets.

Recommendation System Our recommendation system is based on the unbiased personal views of our analysts. The target prices have a time horizon of one year. Euroxx Securities S.A. aims in updating the covered companies on any new future material that may lead to a different recommendation but does not have a regular policy to update reports.

Coverage Universe (#) in Coverage % Companies covered that are Rating Explanation the last quarter Universe (%) investment banking clients

Overweight Expected total return >10% 18 75% 0% Equalweight Expected total return betw een -10% and +10% 1 4% 0% Underweight Expected total return < -10% 0 0% 0% Under Review Recommendation and Target Price are subject to revision 5 21% 0% *The target price and rating have a time horizon of one year

Investment recommendations are determined by the ranges described above at the time of initiation or review of coverage. Furthermore, the aforementioned ratings and target prices are subject to constant changes. Any unauthorised use, disclosure, copying, distribution, or taking of any action in reliance on these reports is strictly prohibited. Euroxx Securities S.A. and its employees are neither liable for the proper and complete transmission of these reports nor for any delay in their receipt.

In producing its research reports, Euroxx Securities SA research departments may have received assistance from the subject company such as access to the company’s sites, visits to certain operations of the subject company, meetings with management or employees and the handing by them of historical data regarding the subject company, as well as of all the publicly available information regarding strategy and financial targets.

Valuation Method We value Terna Energy through a two-stage DCF model. We form an explicit set of forecasts for the period up to 2020, after which we assign a terminal value. The resulting cash flows are discounted back to the present with a WACC rate of 9.5% and netted out with outstanding debt in order to produce a “fair” value for the stock.

Rating History Date Rating Share Price Target Price 27/08/2013 Under Review 2.88 U/R 17/11/2014 Overw eight 2.55 4.00 12/06/2015 Overw eight 3.20 3.90 19/09/2016 Overw eight 2.65 3.60

Euroxx Securities S.A. 7 Paleologou Str. Member of , Cyprus Stock Exchange and EUREX Frankfurt. 152 32 Chalandri, Athens, Greece Reg. by the Hellenic Capital Markets Commission Tel: 210 6879400 Authorization No: 45/23.06.95/item 3rd Fax: 210 6879401 T.I.N.: 094475921, www.euroxx.gr General Commercial Registry (GEMI) No 002043501000 [email protected]

Research Vangelis Karanikas +30-210-6879322 [email protected] Yiannis Sinapis +30-210-6879353 [email protected]

Vangelis Pilios, CFA +30-210-6879486 [email protected]

Sales George Polites +30-210-6879520 [email protected] Ilias Dimitros +30-210-6879485 [email protected]

George Lymberopoulos +30-210-6879494 [email protected] Kristi Rokhvadze +30-210-6879480 [email protected]

Euroxx Research / Terna Energy – Company Update Report 16