Terna’s 2021-25 plan: record investments and sustainability

Strong acceleration on investments in the 2021-25 Industrial Plan, approved by Terna’s Board of Directors and presented to the financial community via a “video story” by CEO Stefano Donnarumma. Driving Energy: the new strategy’s title emphasizes the role of Terna, the Group chaired by Valentina Bosetti which manages the Italian transmission grid, as manager and facilitator of the energy transition. The plan is centred around Italy but also has one eye on its development as a Mediterranean hub, strengthening its cross-border interconnections with Africa, on the one side, and Europe, on the other. According to CEO Stefano Donnarumma, the ultimate goal is to “deliver an increasingly reliable, efficient and decarbonised electrical system to future generations”, centred around sustainability.

The new plan, which will be launched under the campaign title “Driving Energy”, has its foundation in the grid’s safety, the qualification of renewable energy sources, the achievement of the objectives of the European Green New Deal and the integrated National Energy and Climate Plan (NECP) and the creation of value for the economy and employment. To achieve this, Terna plans to make record-breaking investments, with plans like never before: € 9.2 billion in total, of which € 8.9 billion (+22% compared to the previous plan) to accelerate the development of infrastructures in Italy, of which € 1.4 billion in 2021. Terna will also be investing € 300 million in new foreign projects, above all in South America.

Grid development. Regulated activities in Italy, which continue to be the Group’s core business, are the focus of Terna’s commitment over the next five years to develop, modernise and strengthen the transmission grid and secure the system in view of the 30 additional GW of renewable power planned for 2030 in order to achieve the Italian government’s green targets. Such investments will generate important benefits for the overall system, well above their cost: according to recent studies, in fact, every billion euros in infrastructure investments generates between two and three billion euros in terms of GDP and about a thousand new jobs. As for Terna, this plan will lead regulated assets (RAB) to reach € 21.8 billion in 2025, with a CAGR of 6% and a forecast to increase the workforce by over 5,000 employees.

Of the total € 8.9 billion to be invested, € 5.4 billion will be invested in increasing transport capacity by overcoming current congestion in some market areas, facilitate the North-South transit (and vice versa) and increase cross-border interconnections. Projects currently featured in the Plan include the Tyrrhenian Link, the interconnection between Campania, Sicily and Sardinia which will contribute to the decarbonisation of Sardinia, integrating different market areas and bringing important benefits in terms of efficiency; the power line which will link the Colunga area (in the province of Bologna) to the Calenzano area (in the province of Florence), thus ensuring a significant increase in exchange capacity between the Centre-South and Centre-North; the power line which will connect the two sides of Sicily from Chiaramonte Gulfi (in the province of Ragusa) to Ciminna (in the province of Palermo) improving the quality and continuity of the electricity supply in the region; and SA. CO.I.3, which will strengthen the connection between Sardinia, Corsica and the Italian Peninsula.

The latter is expected to be in operation by 2025, while the Italy-France interconnection should enter into operation in 2021. “In the first part of next year,” says Donnarumma, “we also hope to get the green light to start the connection with Tunisia, which will create a corridor between Africa and Europe, whose construction should be completed by 2027, if not before”. In addition, € 2.4 billion will be allocated to renewing and improving the efficiency of our assets, while € 1.2 billion will be allocated to the security plan, to support the interventions needed to regulate the voltage and dynamic stability of the electricity system, which undergoes sudden changes due to the natural intermittence of renewable sources. As for foreign investment, Terna is now active in various Latin American countries, where it aims to maintain its presence: in addition to its current work in Brazil, Peru and Uruguay, the 2021-2025 plan envisages taking advantage of new opportunities, with investments of up to € 300 million.

Innovation. A considerable effort is dedicated to new technologies and digitalisation, which will become increasingly important for Terna’s future, as such elements are now essential to facilitate the energy transition and benefit the entire system. Terna will dedicate around € 900 million, of the € 8.9 billion, to digitalization and innovation, continuing its remote control of electricity substations and infrastructure and installing sensor, monitoring and diagnostics systems, including predictive systems, for the security of the grid and Italian territory. Innovation and new technologies will also generate value for the whole system and the market.

Guidance. With the acceleration of investments and the development strategy adopted, Terna expects to increase revenues to € 3.04 billion in 2025 and EBITDA to € 2.21 billion, with a compound annual growth rate (CAGR) of over 4% over five years. In particular, in 2021, revenues are expected to increase to € 2.57 billion and EBITDA to € 1.84 billion. Group net income is also expected to improve: expected earnings per share (Mps) are at 39 cents in 2021 and 49 cents in 2025, with a compound annual growth rate of over 5%. Shareholder remuneration will increase by 8% per annum in the first three years compared to the dividend for the 2020 financial year. For 2024 and 2025, a payout of 75% is expected, with a minimum guaranteed dividend equal to the dividend pertaining to the year 2023.

Sustainability. Sustainability is the cornerstone of the entire plan, as mentioned by President Valentina Bosetti at the media conference, who recalled that “these investments are designed to meet the long-term goal of decarbonisation”. According to the criteria of the European Taxonomy now being defined, 95% of Terna’s commitments are, by their nature, sustainable: the goals are in line with the European Green New Deal and the integrated National Energy and Climate Plan, first of all the 55% reduction of emissions by 2030, to achieve net zero emissions by 2050. Terna also has the fundamental role of facilitator of an increasingly complex electrical system, with an increase of 30 gigawatts of renewable power expected over the next few years.

Moreover, protecting the environment also means protecting the Italian territory, which is why Terna continues its commitment to minimising the visual and landscape impact of its electricity infrastructure in the new plan, also removing around 500 kilometres of power lines made obsolete by new grid development investments. “However, we can’t talk about environmental sustainability without consideration for welfare and safety at work”, said President Bosetti. In this vein, the plan also includes a chapter on “Human Resources”, which outlines the company’s continued commitment to health and safety and includes the “Continuous Improvement of Safety at Work” programme initiatives and the launch of “New Ways of Working”, which aims to increase employee involvement in the implementation of the plan.