Terna Rete Elettrica Adr

Hello and welcome to the Turner First Half 2022 results presentation. My name is Jess and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. I will now hand over to your host, Stefano Donnarumma, CEO, to begin today's call. Thank you.

Good afternoon everybody and welcome to Terna's first half 22 results presentation. Before starting to analyze the features, I would like to share with you the latest main achievements. Firstly, let me remind you that in the 24th of March we presented the update of the 21-25 Industrial Plan Driving Energy that foresees 10 million euros of investments, of which 9.5 billion of regulated investments confirming our role in driving a more complex, sustainable and innovative electricity system. In this regard, important steps for a world have been done regarding authorization process and construction activities. In April, we concluded the public consultation on the west branch of the Terrenia Link. And in May, we submitted to the Italian Ministry of Ecological Transition the request for the authorization to construct and operate the west branch. Concerning international activities, the already announced LATAM deconsolidation process is ongoing. The signing was completed in April, while the closing of the deal foresees multiple steps, most of which in the second half of 2022. All operational activities are in line with the milestones set in the deal. Regarding people, in April, TURN announced the Mediterranean Lab Initiative. A project aimed to set up a training center in collaboration with the main universities of the three cities where the cables of the Titanian Links will land, namely Cagliari, Salerno and Palermo. In addition, in July, we launched the Aterna Academy, the new training and research hub aimed to developing the expertise of employees within the group. In line with the goals set with the update of the industrial plan, Terna wants to strengthen and promote the new skills through an innovative culture and training offer to support the energy transition. Then I would like to confirm our strong ESG commitment, in line with the updated industrial plan. Indeed, for the second consecutive year, the company was included in the MIB ESG, the first Italian blue-chip index dedicated to environmental, social and governance best practices. Terna has also once again been confirmed as one of the top companies at international level for sustainability best practices, according to the Euronext BGO Harris, the Feeds for Good and SAP Global ESG Index. Finally, regarding shareholders remuneration, let me remind you that in June we paid 19.19% 19.29 euro cents per share as 21 final dividend in line with the dividend policy presented in the update in the Russell Plan back in March. After this brief introduction let me give you the usual overview of the Italian electricity market moving to the next slide. As you can appreciate from this chart, in the first six months of the 22, national demand was about 158 TWh, an increase of 2.7% versus the same period of the last year, when national demand was about 154 TWh. I would like to underline that despite the challenging scenario related to the ongoing energy crisis, in the first half of 22, electricity consumption returned to the values registered in the first half of 2019. Concerning the national net total production, this stood at about 138 TWh, 3.4% higher than the same period of 2021, mainly thanks to the contribution of wind and solar productions. Let me also underline that in the first half of 2022, renewable sources increased covered about 33% of the demand and about 37% of the national net total production. Now let me introduce the main features of the period. In the first half of 22, group revenues and EBITDA were up by 6 and 4% respectively versus last year. which means 75 and 37 millions higher than the first half of 21, while group net income was 398, about 4% higher versus last year. Group capex stood at 661, an increase of 10% versus the same period of last year, in line with the targets set in the 10-year development plan and in our updated industrial plan. Despite this capex acceleration, net debt was below 9 billion. Now, I leave the floor to the CFO, Agostino Scornaienchi, for a deeper analysis of the features of the period. Turning to the next slide.

Thank you, Stefano. Let's start with revenues analysis. Total revenues in the first half of 2022 increased by 5.9%, reaching 1,331 million, up by 75 million versus last year. The growth was attributable both to regulated and non-regulated activities, which contributed for 60 million and 15 million respectively. Let's now go into the details of revenue evolution, moving to the next slide. Regulated revenues reached 1,154 million, 60 million better than last year. The increase was mainly due to higher output-based incentive effects related to the higher benefits generated for the system, net-of-the-work reduction recognized for 2022. Non-regulated and international revenues reached 177 million, 8.8% higher than last year. Non-regulated growth was mainly attributable to the increase in revenues of the energy solutions, mostly related to LT Group and to the increased contribution coming from TAMENI. International revenues were set to zero in accordance with IFRS 5 accounting standard, referred to asset L4SAVE. Now, let's go through operating cost analysis. As you can see in this chart, Total operating costs stood at 384 million, 10.8% higher than last year. Regarding regulated activities, the increase was mainly attributable to the insourcing of new competences, while non-regulated activities have been impacted, maybe, by the LT Group's recent acquisition. Let me now analyze the BDA, moving to the next slide. Due to the previously mentioned effects, first half 22 group EBDA reached 947 million, 37 million better than last year. The increase was mainly attributable to regulated activities, which contributed for about 41 million versus last year, showing an EBDA of 923 million in the first half of 22. Let's now have a look to the lower part of the profit and losses, turning to slide number 12. The precision and amortization amounted to $340 million. The increase versus last year was mainly due to the impact of new assets becoming operational in the period. As a consequence, EBIT reached $607 million, 4% higher versus the first half of 2021. We reported net financial expenses at 36 million. The increase versus last year was mainly due to the rise in inflation registered in the recent months, partially offset by increased capitalized charges and positive exchange rate effect. Taxes stood at 161 million, 4 million higher versus last year, essentially due to increased profit. As a direct consequence, Our tax rates stood at 28.1%. As a result, GroupNet income reached 398 million, about 4% higher versus the same period of last year. Moving to CAPEX analysis. In the first half of 22, total CAPEX amounted to 661 million, 10% higher than last year, confirming the solid acceleration aimed at enabling the energy transition process. Indeed, we invested about 629 million in regulated activities. Among the main projects of the period, it is worth mentioning the Terranial Link, the Paternò Pantano Priolo in Eastern Sicily, and the investment in stabilization devices as STATCOMs and synchronous compensators. Among CAPEX categories, Development capex represented 37% of total regulated capex. Defense capex stood at 16%, while asset renewal and efficiency was 47%. Non-regulated and other capex stood at 31 million. This includes capitalized financial charges and other investments. Regarding net debt and cash flow analysis, Net debt at the end of June 22 was about 9 billion, about 1 billion lower than 21 year-end level, mainly due to the hybrid issuance made in February that, in line with accounting standards, has been accounted as equity. During the period, we generated an operating cash flow of 740 million, thanks to which we were able to more than cover the capex spending of the period. Let's now make a deeper analysis of our debt profile, moving to page 15. In line with our prudent and proactive debt management approach, at the end of this first half we registered a fixed overfloating ratio on gross debt of about 86% and an average duration of about 5 years. With the aim of confirming our leadership in the sustainable financial market, let me just remind you The launch made in February of the first green hybrid bond for an Italian corporate for a nominal amount of 1 billion euro, successfully accepted by the market, as well as the ESG link term loan for a total amount of 300 million euro. Thank you very much for your attention. Now, before the Q&A session, let me leave the floor to Stefano for his closing remarks. Thank you.