Terna Capital Markets Day 2024
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Record investment in the new Terna 2024-2028 Industrial Plan

The highest-ever economic commitment to countrywide infrastructure development, the key role of sustainability and people, digitalisation for network innovation and solidarity to ensure a fairer transition for all. These are the pillars of the company's strategy: a broader vision is needed to achieve decarbonisation goals.

With the new 2024-2028 Industrial Plan Terna will galvanise its investments for the energy and digital transition of the country, which is increasingly leaning towards the decarbonisation of the electricity system. With the presentation of its five-year investment strategy on 19 March 2024, the national transmission grid operator unveiled its concrete commitment to our energy future: 16.5 billion euros for electricity grids – an all-time record amount for the Group. A significant increase – 65% more than in the previous plan – to consolidate the company's strategic role as an enabler of the Italian electricity system and to strengthen its commitment of service to the country at this time of momentous change in the sector.

The Terna plan aims to strengthen and expand the Italian transmission grid and develop interconnection capacity with other countries, to ensure a more secure, reliable and efficient electricity system and allow greater integration of renewable sources. The investments will also help increase the grid’s resilience in the face of ever-increasing extreme weather events by introducing new digital and technological solutions for efficient and rapid system management, thereby ensuring electricity supply quality and continuity at the lowest possible cost to the end consumer. The success of Italy's decarbonisation path will depend on the development of the following action areas: increased renewable generation capacity, the development of the electricity grid's transmission capacity and storage systems, and, lastly, the improved fitness for purpose of the electricity system. Terna will play an increasingly key role in this scenario.

Giuseppina Di Foggia AD DG Terna Capital Markets Day 2024

Terna CEO and GM Giuseppina Di Foggia, during the Capital Markets Day, held in Milan on 19 March 2024. Terna chose this occasion to present its new 2024-2028 Industrial Plan and 2023 results (photo by Terna)

Appreciation from the market. Group revenues in 2028 are expected to increase to 4.60 billion euros and EBITDA to 3.25 billion euros, with a compound annual growth rate (CAGR) over the Plan period of about 8% for revenues and more than 8% for EBITDA. Group net profit is also expected to improve, leading to Earnings Per Share (EPS) of 49 euro cents in 2024 and 55 euro cents in 2028, for a 5% compound annual growth rate over the Plan period. The new dividend policy ensures steady and predictable growth, as well as full visibility. Over the course of the plan, the new policy envisages a minimum annual growth in dividend per share (DPS) of 4%, taking 2023 as the reference year. The world of international finance was pleased with the new plan. The world's leading ratings agencies in fact confirmed the company's long-term ratings on the very day that Terna's new strategy to 2028 was presented. Specifically, Moody’s Investor Service (Moody’s) confirmed the long-term rating at Baa2 with stable outlook and S&P Global Ratings (S&P) confirmed the long-term rating at BBB+ with stable outlook. This is further recognition of the soundness of the Industrial Plan, boosting Terna's central role as an enabler of the energy transition and of an increasingly structured, sustainable and innovative electricity system.

The key role of sustainability for a just transition. Terna's strategy increasingly takes on board the environment and sustainability: the sustainability of investments is in fact an integral part of creating value for the company and benefits for the system and the environment. Terna's actions are considered 99% sustainable according to the eligibility criteria introduced by the European Taxonomy. Additionally, for the first time in the Group's history the Sustainability Plan is an integral part of the Industrial Plan: the company can in this way make its commitment to structural sustainability even more concrete and pervasive. The activities provided by the Sustainability Plan include projects and actions that confirm Terna's commitment to pursuing a just transition.

CNC Palmiano nuova sede Terna 2

The Market Operation room of Terna's electricity system National Control Centre in Rome, renovated in its sixtieth year in 2024 (photo by Terna)

As Terna's CEO Giuseppina Di Foggia emphasised during the presentation of the new 2024-2028 plan and 2023 results at Capital Markets Day, the company «has put sustainability and social impacts at the very heart of its strategy, encapsulating them in the Just Transition concept. By this we refer to a process that is fair, inclusive and attentive to the possible impacts on all stakeholders, including workers, local communities and suppliers. All this combined with the fair distribution of transition costs. Each of our projects must have positive effects on the electricity system and be sustainable for everyone. This is what we mean by a Just Transition: a fair solution for all» with no one left behind.

Sustainability is Terna's DNA: as a transmission system operator (TSO), it plays a vital role in driving the energy transition and giving the coming generations a decarbonised future. This is why Giuseppina Di Foggia again emphasised that «Terna is green by nature», but also sustainable in how it chooses to perform its activities, so that «our work is based on a solid foundation of protection and attention to the needs of all stakeholders, making us social by purpose». In her speech to analysts, investors and journalists, she also declared that «we are facing a challenge for everyone's future, and it requires of Terna a broader vision and a commitment to elevate our mission to new levels of excellence. We are ready for this challenge and are determined to do whatever it takes to enable the twin transition, ensuring that it has a positive impact on all stakeholders and the environment. In other words, our broader vision is a twin transition for a just transition».

The Terna Foundation for energy culture. In order to pursue an inclusive transition, Terna has established the Terna Foundation as a major innovation of the Group's Sustainability Plan. Its activities will focus on three action areas: the dissemination of an energy culture, including through educational initiatives to get younger generations involved; the fight against energy poverty; and the implementation of programmes to facilitate access to the labour market and professional opportunities in the energy sector.

CMD2024 AD Giuseppina Di Foggia stampa 21032024 Terna

Terna CEO Giuseppina Di Foggia on the fringes of the presentation of the 2024-2028 Industrial Plan on 19 March 2024 in Milan (photo by Terna)

Innovation and digitalisation: the pillars of the transition. Before explaining the Twin Transition concept, we must set out a premise. The growing complexity and decentralisation of the electricity system, marked by the increasing integration of renewable sources – in themselves non-programmable and intermittent – poses new and formidable challenges to all players in the chain, including Terna, whose task it is to manage high and extra-high voltage electricity flows. It is therefore essential to develop and strengthen the national transmission grid in order to support the energy transition; but such a process also requires the ongoing development of digital technologies. To put it plainly, there cannot be an energy transition without digital transition: advanced digital technology will serve as a boost towards decarbonisation goals. So, the 2024-2028 Industrial Plan rests upon the concept of the twin transition of energy and digital, which, including through technology and innovative tools such as artificial intelligence and robotics, will keep the electricity grid increasingly connected, smart, secure, resilient, efficient and sustainable, to the benefit of the entire system.

Terna will inject around 2 billion euros worth of investment into this area for digitalisation and innovation initiatives, amounting to around 12% of total planned capex. The figure is consistent with the digital expenditure ambitions of its main European competitors and with the global forecasts of the International Energy Agency. The key initiatives will include grid engineering: software to support planning (BIM – Building Information Modelling) for the digitalisation of construction sites and to optimise order management, in order to help projects reach completion in accordance with planned schedules. Dispatching will increase the algorithmic capacities of its systems, including developments in artificial intelligence, in order to strengthen transmission capacity. Asset management, faced with the expected increasing complexity of grid management, will continue to make use of digital technologies such as Digital Twin, the Internet of Things (IoT) and predictive tools. Lastly, digitisation will also involve human resources management processes.

Metaverso Visore Persone Terna

Terna's innovation and digitalisation initiatives include artificial intelligence, robotics and the use of augmented reality visors (photo by Terna)

A key asset: people and their unique skills. The digital transformation will also affect grid management systems, supply chain monitoring, and the efficiency of the Group’s people. Indeed, the Twin Transition cannot take place without solid and properly organised labour, based also on new skills and capabilities that will be taught and enhanced in-house or acquired from outside, with the aim of moulding professionals equipped to manage the electricity system’s forward evolution. Terna’s People Strategy is the enabling factor of the 2024-2028 Industrial Plan. It recognises the key role of the Group's people in facing the challenges of the energy “trilemma” – environmental sustainability, fairness and energy security issues combined – and in promoting a sustainable transition. The Plan envisages a major workforce increase to support the development of the Group's activities and the growing need for new skills to manage the energy and digital transition in the years to come.

«We are facing a challenge for everyone's future, and it requires of Terna a broader vision and a commitment to elevate our mission to new levels of excellence. We are ready for this challenge and are determined to do whatever it takes to enable the twin transition, ensuring that it has a positive impact on all stakeholders and the environment. In other words, in our broader vision: “A twin transition for a just transition”».

GIUSEPPINA DI FOGGIA Chief Executive Officer and General Manager of Terna

Context: 130 billion euros for the energy transition. One hundred and thirty billion euros worth of investment until 2030 for grid infrastructure, new production capacity and storage: this is the economic commitment our country must make for energy transition in the electricity sector. A commitment that will demand the involvement of all system actors if we are to create a more sustainable future for ourselves and the generations to come. A further effect is that it will help reduce our energy dependence: we are still one of the European countries most exposed and vulnerable to global geopolitical tensions and most dependent on foreign countries for supplying our energy needs. This is especially so in the case of fossil fuels, which make up the bulk of global demand. Another issue to consider is climate change, which has greatly impacted the entire sector in recent years: extreme weather events are increasingly frequent and disastrous for the areas they hit and also cause serious damage to network infrastructure and production plants, with significant economic, environmental and social consequences.

The inexorable growth of CO2 emissions has been officially confirmed by several international scientific studies. However, the trend can be countered, and Europe has acted by setting an ambitious greenhouse gas reduction target. The Fit-For-55 package envisages a 55% emissions cut by the end of the decade and a sweeping revision of the energy mix, based on a policy of replacing fossil fuels with clean energies. The reference scenario on energy system development policies in this country was outlined in the italian Integrated National Energy and Climate Plan, published in July 2023 and now under review. The document determines that 65% of Italy's consumption will have to be met by renewables. It will therefore be necessary to install new wind and photovoltaic plants for a total capacity of 74 GW, and to invest in grids, interconnections with foreign countries and storage systems. Only then will we be able to meet the decarbonisation targets set out in FF55. Apart from the climate aspects, the energy transition is crucial also for the political and economic security of this country, which can become a Mediterranean electricity hub. It is with this is mind that Terna has outlined its new 2024-2028 Industrial Plan, looking to the future and planning actions to support the energy transition.

Stazione elettrica Partanna Terna

Aerial view of the Partanna electricity substation in Sicily, serving as the terminal on the Italian side of the ELMED project – the interconnection between Italy and Tunisia (photo by Terna)

Regulated Activities and major infrastructural development works. Let's look again at the contents of the Plan. It is an «ambitious» industrial plan, to use the words of Giuseppina Di Foggia again, and one that envisages a strong acceleration in the realisation of the works «but also in terms of authorisations and the supply chain. I would emphasise that for regulated activities, we are making good progress on the authorisations and procurement front. In fact, out of the total investments planned for 2024-2028, about 80% of the works have already been authorised and more than 70% are covered by already signed supply contracts».

Regulated activities in Italy will continue to be the Group's core business. Terna has in fact put together its highest ever investment, totalling 15.5 billion euros – with roughly 1.1 billion financed through non-repayable public grants – to strengthen and expand the transmission grid and to develop interconnection capacity with foreign countries, thereby ensuring greater system security, resilience, and efficiency also in the face of increasing integration of energy from renewable sources. In the 2024-2028 Industrial Plan, Terna has earmarked an increase in investment in the development of the national transmission grid, amounting to 10.8 billion euros overall. Actions will be linked to the creation of direct-current lines and the construction of submarine cable connections, the resolution of grid congestions, an increase in the transport capacity between the different market zones, the integration of renewable sources and the improvement of service quality. Moreover, international interconnections will increasingly position Italy as the Mediterranean electricity hub, increasing the reliability and security of the system.

Nave Posacavo Terna

One of the special cable-laying vessels used by Terna to position submarine power cables (photo by Terna)

The major infrastructure projects in the 2024-2028 Industrial Plan include the Tyrrhenian Link – the submarine power line that will connect Sicily to Sardinia and Campania, with a consequent improvement in the use of renewables and the phasing-out of the most polluting coal- and oil-fired power plants; the Adriatic Link – the submarine link that will unite Abruzzo and Marche, the Sa.Co.I.3 – the infrastructure between Sardinia, Corsica and the Italian mainland; and the 380 kV Chiaramonte Gulfi-Ciminna power line in Sicily. Interconnections with other countries will also be crucial, none more so than the Elmed invisible energy bridge, which will unite Italy and Tunisia, thus facilitating the optimisation of resources between Europe and North Africa.

Around 1.7 billion euros will be allocated to the Security Plan, which aims to strengthen and enhance the technical and technological functionalities of the electricity system and, thus, the actions necessary for the voltage regulation and dynamic stability of the electricity system, such as synchronous compensators and so-called statcoms for energy flow management.

Finally, around 2,9 billion euros will be earmarked for asset renewal and efficiency actions, primarily for the rationalisation of existing infrastructure and the replacement of obsolete components.

Non-Regulated Activities in support of the energy transition. In keeping with previous years, the 2024-2028 Industrial Plan envisages that Non-Regulated Activities will be oriented towards developing innovative technological and digital solutions consistent with the Terna Group's institutional role and contributing to the creation of new business opportunities. In particular, Terna's main Non-Regulated Activities include: businesses involved in the procurement of essential grid development components such as transformers (Tamini) and cables (Brugg Cables); market activities adjacent to the core business, such as services for the management and development of high-, medium- and low-voltage grids and substations for third parties (Terna Energy Solutions and Terna Rete Italia), consulting services for energy efficiency (Avvenia) and for the development of Operation&Maintenance of photovoltaic plants (LT); connectivity offers for telecommunications operators through the provision of dark fibre and housing services and, finally, development and management of interconnection lines.

Capital Markets Day 2024 Terna

An instance of the Terna Capital Markets Day presentation to analysts (Milan, 19 March 2024). At the centre of the speakers' table is Terna's CEO and General Manager, Giuseppina Di Foggia; to her left is the Group CFO, Francesco Beccali, and to her right is Terna's Head of Investor Relations, Corporate Development and Sustainability, Omar Al Bayaty (photo by Terna)

The 2023 results. In a very challenging context where there is an evident and pressing need for Italy to fully reduce its dependence on fossil fuels and to increase its national energy security, Terna has strengthened its commitment to the country's energy security with a significant investment increase amounting to 2,290.0 million euros in 2023, a sharp (+30.4%) increase over the previous year. The company also recorded a marked improvement in all economic-financial indicators, reaching and exceeding the guidance provided to the markets for the year 2023, among which the 3 billion euros-plus revenue figure stands out. Speaking to an audience of investors and analysts, Terna CFO Francesco Beccali pointed out that «the Group's revenues and EBITDA increased respectively by 7% and 5% in 2023 over the previous year. The Group recorded a net profit of 885 million euros, a 3% increase over 2022. Group investments amounted to 2.3 billion euros, again confirming strong growth, in line with Terna's institutional role for the country».