Terna’s 2020-2024 strategic plan: € 7 billion in record-breaking investments

Terna has its foot firmly on the investment accelerator and has allocated € 7.3 billion, its highest ever figure, to facilitate energy transition and the sustainable development of the Italian transmission grid and its cross-border interconnections.

The Board of Directors approved the accounts for 2019 - closed with profits and revenues on the rise - and the 2020-2024 Strategic Plan, the main aim of which is to facilitate the integration of renewable sources, placing itself in the role of “key accelerator” of the ongoing energy transition and establishing “Italy as a European Energy Hub in the Mediterranean area, in line with the European Green New Deal”, reads a statement from the company.

The new plan’s reach will be developed on 3 lines. If the core business remains the Italian regulated market, which Terna will prioritise for all activities which will enable Italy to face energy challenges “in a safe, efficient and sustainable way through technological expertise and the enhancement of the specific features of the Italian territory”, the second strategic line will focus on the non-regulated market and new services to facilitate the energy transition. The third pillar is international growth, which will aim to enhance the grid operator (TSO) skills for electricity transmission, developed in Italy, through growth opportunities abroad.

“Terna's new strategic plan anticipates a significant increase in investments, first and foremost in Italy, aimed at facilitating the energy transition", said Luigi Ferraris, the Group's CEO. “We intend to invest over € 7 billion in Italy over five years. Within this € 7 billion, € 900 million will be invested in innovation and digitalisation. We consider these to be key investments, because they enable us to facilitate a transition that involves a significant increase in the generation points in the Italian system and an increase in its complexity”.

Talking of division of resources, over the next five years, Terna will be investing € 4 billion in the development of the Italian electricity grid. The new plan confirms the crucial nature of initiatives such as the Tyrrhenian Link, the interconnection between Campania, Sicily and Sardinia, and SA.CO.I.3, which will strengthen the connection between Sardinia, Corsica and the Italian Peninsula. A further € 2 billion will be used to improve the quality of service, implement sustainable grid solutions and accelerate digitalisation. € 1 billion will be allocated to the “Defence Plan”, which involves the installation of devices to increase the security, adequacy, resilience and stability of the grid. Finally, there are plans for a series of new Innovation Hubs after current ones in Turin, Milan and Naples.

The financial targets for 2024 are no less ambitious. Over the course of the plan, Terna expects revenues to increase by 5% to € 2.94 billion and EBITDA to increase by 4% to € 2.17 billion. Estimates are also up for Group net profit, which will bring earnings per share to 48 cents in 2024, with an average annual growth of 5%. In the plan, the cost of net debt is expected to be 1.4% on average as a result of the optimisation of financial efficiency, while the net debt/RAB ratio is set to remain stable at below 60%. Estimates for the Regulated Asset Base, Terna's core business, are also significant, set to reach € 19.7 billion in 2024, with an average annual growth rate of 5%.

Along with the financial parameters, dividends will rise too. The policy established by the company anticipates that from 2020 to 2022 the coupon will increase by 8% compared to the 2019 forecast. However, for the next two years payout is expected to be 75%, with a minimum guaranteed dividend equal to the dividend pertaining to 2022.

A solid foundation for Terna's growth estimates can be seen in the figures contained in the 2019 financial statements, which led to CEO Luigi Ferraris’ statement of satisfaction: “I am very pleased with the 2019 results, all indicating major growth, at the close of a three-year period marked by an epic transformation of the Italian energy sector, in Europe and globally, towards the complete decarbonisation and full use of renewable sources,” said the CEO.

Last year closed with a strong increase in net profit, which grew 7.2% to € 757 million, and revenues at € 2.295 billion, up 4.5% compared to 2018. The company considers such a result to be mainly due to the increase in revenues from regulated activities in Italy and the growing contribution of the Tamini Group and initiatives abroad (Brazil and Uruguay).

Good news on the profitability front as well, with EBITDA at € 1.74 billion, up 5.5% compared to the previous year, and EBIT at 1.062 billion from 997.7 million in 2018. Net financial debt increased somewhat, from € 7.899 billion in 2018 to € 8.258 billion in 2019, also due to the strong influx given to investments, which grew 15.9% to € 1.264 billion over 12 months alone. However, it is also worth noting the growth in equity, which rose from 3.850 billion to 3.981 billion.

In 2019 the Board of Directors proposed a dividend of € 0.2495 per share (of which € 0.0842 paid as interim dividend and € 0.1653 as final dividend in June 2020), up from € 0.2332 in 2018.