Terna Rete Elettrica Adr

Good afternoon everybody and welcome to TURN's full year 2022 results presentation. As usual, before starting to analyze the features, I would like to share with you the latest main achievements. Regarding regulated activities in 2022, TURN obtained the approval by the Italian Ministry of Environment and Energy Security and regional councils for 29 projects for a total value of more than 2.5 billion euros of investments, all aimed at developing the Italian electricity grid, confirming our key role as energy transition enabler. With this, Terna set new records, after exceeding the 1 billion euros in approved investments in 2021 for the first time in history. In this regard, let me remind you that the company's sustainable investments create value for the country with the positive effects on gross domestic product and also create jobs. Thus, they help to make Italy become even more crucial within the European system and the Mediterranean hub for electricity. In these regards, at the beginning of 2023, the Ministry of Environment and Energy Security also launched the authorization procedure for Adriatic Link, in which Terna will invest over 1 billion euros. The project will connect the Italian regions of Abruzzo and Marche and will directly or indirectly involve about 120 external partners. Regarding sustainability achievements, Terna is once again confirmed at the top of global sustainability. The company is among the top 1% in the Sustainability Hero Book 2023, the leading industry publication for Standard & Poor's Global, that evaluates ESG performances. The score awarded makes Terna the highest scoring company out of the 250 electric utilities analyzed around the world. This international recognition consolidates Ternas' role as director and enabler of the energy transition towards an increasingly sustainable, safe and resilient electricity grid. Ternas' leadership in sustainability is also underlined by the company's inclusion in several main ESG indexes, the Bloomberg Gender Equality Index, Euronext Video Heris, FTSE for Good stocks global ESG leaders. Regarding shareholders remuneration, today's board of directors approved and will propose to the annual general meeting the 2022 final dividend of 20.83 euro cents per share to be paid in June, up by 80% compared to the previous year, in line with the communicated dividend policy. The 2022 interim dividend of €10.61 per share was already paid last November, so the total dividend for 2022 is €31.44 per share. Finally, regarding international activities, LATAM's deconsolidation process is going on as planned, confirming the company's broader strategy to refocus its international activities as already announced in the updated industrial plan. After the brief introduction, let me give you the usual overview of the Italian electricity market, turning to the next slide, number 5. As you can see from this chart, in 2022, national demand was about 317 TWh, recording a decrease of 1% versus last year, when national demand was about 320 TWh. This modest coefficient of electricity demand was mainly the result of middle-world conditions recorded in the autumn and winter months, and the measures to contain electricity consumption adopted by families and businesses. In 2022, renewable sources covered about one-third of national demand, that means 31.1%. Regarding the national net total production, this stood at 276 TWh, 1.3% lower than 2021. Despite that, let me highlight the remarkable increase of the photovoltaic production, which grew by 11.8% versus last year. Moreover, let me also say that in 2022, renewable sources covered about 36% of the national net total production. Now let's move to the main features of the period at page number 6. In 2022, group revenues and EBITDA were up by 14% and 11% respectively versus last year, which means 360 million and 204 million higher than the same period of 2021. while group net income was 857 million, with a relevant increase of 9% versus last year. Group capex stood at about 1.8 billion, an increase of 16% versus last year, confirming once again the robust capex acceleration in line with Turner's institutional role for the country. Despite this capex acceleration, at the end of December 2022, net debt was 8.6 billion versus about 10 billion at the 2021 year-end. As you can see from the chart, all the main features of the period meet and exceeded the provided updated guidance of the year. Let me also remind you that thanks to the initiatives aimed at further increasing benefits for the system and efficiency, 2022 EBITDA and EPS guidance had already increased back in November during the 2022 nine-month results presentation. Now, let me just spend a few words regarding the main results registered in these last three years, turning to the next slide, number seven. The growth path that you can observe in the last years is briefly presented in this chart. In details, 2022 revenues EBITDA and EPS grew up by 19, 14, and 9% respectively, despite the regulatory WAC reduction, while group CAPEX registered an increase of about 30%, all compared to 2020 year-end level. As you can appreciate, despite the challenging scenario in which we operated, we were able to significantly increase the investments to serve the system needs and to enable the energy transition while generating value for all our stakeholders. Now I leave the floor to the CFO, Agostino Scornaienchi, for a deeper analysis of the 2022 features. Next to the next slide, number eight.

Thank you, Stefano. Let's start with revenues analysis. Total revenues in 2022 increased by 13.8%, reaching 2,964 million, up by 360 million versus last year. As you can see, we registered positive results, both from regulated and non-regulated activities, which contributed for 289 million and 71 million respectively. For the details of the revenues evolution, Let's move to slide number 10. Regulated revenues reached 2,542 million, 289 million better than last year, which means about 13% more than 2021. The increase was mainly due to the higher output-based incentives effects related to the higher benefits generated for the system. Non-regulated and international revenues reached 422 million, 20.2% higher than last year. Non-regulated growth was mainly attributable to the increased revenues of the energy solution, mostly related to LT Group acquired in October 2021, and to the greater contribution coming from Tamini and Brook. International revenues were set about zero in accordance with IFRS 5 accounting standard referred to asset health for sale. Now, let's go through operating cost analysis. and I am now at page 11. Total operating cost stood at $905 million, 20.7% higher than last year. Regarding regulated activities, the increase was mainly attributable to the insourcing of new competences and increased level of activity, while non-regulated activities have been impacted mostly by higher raw material purchases related to Brook and Tamini and by the LT Group contribution. Let me now analyze the BDA. Moving to slide number 12. Considering the previously mentioned effects, 2022 group EBDA reached 2,059 million, 11% higher than last year. This increase was mainly attributable to regulated activities, which contributed for about 206 million, showing an EBDA of 2,007 million in 2022. Let's now have a look to the lower part of the profit and losses, turning to the next slide, page 13. Depreciation and amortization amounted to 726 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 1,334 million, 11.1% higher versus 2021. We reported net financial expenses at 100 million. The increase versus last year was mainly due to the rise of inflation registered in the period. Taxes stood at 355 million, 37 million higher versus last year, essentially due to increased profits. Tax rates stood at 28.8%. As a result, group net income reached 857 million, about 9% higher versus the same period of last year. Moving to CapEx analysis, in 2022, Total capex amounted to 1,757 million, about 16% higher than last year, and confirming the double-digit acceleration highlighted at the beginning of the presentation. Indeed, we invested about 1,668 million in regulated activities. Among the main projects of the period, it is worth mentioning the terrain link, the Paternò Pantano Priolo in eastern Sicily, and investment in stabilization devices such as STATCOM synchronous compensator for grid security. For what concerns CAPEX categories, development CAPEX represent 41% of total regulated CAPEX, defend CAPEX stood at 16%, while asset renewal and efficiency was 43%. Non-regulated and other CAPEX stood at 89 million. This included capitalized financial charges, and other investments. Regarding net debt and cash flow analysis, let's move to page 15. Net debt at the end of December 22 stood at €8,576 million, about €1.4 billion lower than the 21-year end level, mainly due to the hybrid bond issued in February and accounted as equity, as well as the impact of commercial items on the working capital dynamics versus 2021. During the year, we generated an operating cash flow of $1,596 million, thanks to which we were able to cover almost the whole CAPEX spending for the period. Let's now make a deeper analysis of our debt profiles, moving to page 16. Thanks to our efficient and proactive debt management approach of the last few years, At the end of December 22, fixed overfloating ratio on gross debt stood at about 87%, while the average duration was about 5 years. Thanks to the strong credit profile, Terna is able to top the financial market at extremely favorable conditions. as demonstrated by the green bond hybrid bond launched in February 22 for a nominal amount of 1 billion euro successfully welcomed by the market. I would also like to highlight that in September Torna launched a fixed rate single tranche bond through a private placement procedure for an overall amount of 100 million euro. The notes, with a duration of five years, will pay a coupon of 3.44%. During the year, Terna also signed four ESG Link credit facility agreements for a total amount of 600 million euro. The credit lines will have a term of three years with an interest rate linked also to Terna performance in relation to specific ESG indicators. Finally, on November 8, Terna signed a 500 million euro contract with the European Investment Bank for the financing of the ETH branch of the Terranian Link. This loan is the first branch of a total of 1.9 billion euro approved by the European Investment Bank for the mentioned project. The 22-year loan has a longer maturity and a more competitive cost than those generally available on the market. in lines with Turner Policy to optimize its financial structure. Thank you very much for your attention. And now, before entering in the Q&A session, let me leave the floor to Stefano for his closing remarks. Please, Stefano.

Thank you, Agostino. After this strong 2022 results, I would like to announce the 2023 guidance. In 2023, we expect the revenues of 3.11 billion euros and an EBITDA of 2.12 billion euros. Earning per share will amount to 43 euro cents per share. Regarding CAPEX for the next year, we expect a figure of about 2.2 billion euros. This CAPEX acceleration foreseen for 2023 is part of an overall growth process driven by increasing system needs to ensure efficiency, resiliency and security of the supply. Indeed, let me underline that on the 15th of March we published the new 10-year National Development Plan, as illustrated in the next slide, number 19. The new National Development Plan comes at an historic moment in which energy is even more central. In a phase of rapid and deep geopolitical change, the energy system has to deal with a series of unprecedented and ambitious challenges. The targets set as a part of the ongoing energy transition will be fully achievable only by developing infrastructures. In these regards, Terna increased the investments foreseen in the new year development plan, which foresees more than 21 billion of investments, the highest ever, with an increase of about 17% compared to the previous plan. The investments foreseen in the National Development Plan will be made to continue the integration of renewable sources and the progressive phase-out of coal-fired power plants, in line with the targets set at the national and international level. Moreover, considering the entire life of the projects included in this Development Plan, Behind the 10-year horizon, the total amount of investments will exceed 30 billion euros. In conclusion, Terna continues to create value for shareholders and communities through the investments foreseen in updated industrial plans and a strong dividend policy. Despite the extremely challenging scenario in which we operate and the deferred acceleration of the investments to meet the needs of the system, Terna will remain committed to preserve a solid and sustainable capital structure. As you appreciated from this presentation, Terna was able to present a very good set of results, even exceeding the guidance provided for 2022, in addition with a strong expectation for 2023, demonstrating the commitment on the execution of the plan. Thank you for your attention. We are now ready for the Q&A session.