Terna Rete Elettrica Adr

Good afternoon ladies and gentlemen and welcome to Terna 9 Months 2023 Consolidated Results Presentation. At this time all participants are in listen-only mode. Please be advised that today's conference is being recorded. I'd like to hand the conference over to our host speaker today, Mr. Omar Albayati, Head of Investor Relations and Sustainability. Please go ahead, sir.

Good afternoon everyone and welcome to Terna 9 Months 2023 Results Presentation. The call will be hosted by our CFO, Francesco Beccali. Following the presentation, we will have the Q&A session. We kindly ask you to send any questions to investor.relation at terna.it. Please, Francesco, the floor is yours.

Thank you, Omar, and good afternoon, everybody. Before starting, let me say that I'm really proud to take on this new challenge, and I would like to thank the company for the opportunity I was given and I'm tackling with a lot of energy, motivation and commitment, fully aware, due to my experience, of Ternas' huge potential. Now, let me show you the main achievements of the period. Regarding regulated activities, let me say that we are really well on track for what concerns authorization processes and procurement of the main projects included in our strategy plan. Indeed, in September, the Ministry of Environment and Energy Security as authorized the western branch of the Terranial Link and the final project of the SACOI-3. As you know, the Terranial Link is a direct current submarine power line that will connect Sardinia, Sicily and Campania. It is a strategic project for the Italian electrical system within the framework of the energy transition targets set by the National Integrated Plan for Energy and Climate, the so-called PNIEC. It will contribute to achieve the phase-out of coal by increasing the transport capacity, enhancing the security, adequacy and flexibility of the National Electricity Transmission Grid, as well as promoting the integration of the domestic market and renewable sources. For what concerns the SACOI-3, the project aims to connect Sardinia, Corsica and Tuscany with a total capacity of up to 400 megawatts. Once operational, PsychoE3 will contribute to strengthen the European electricity market, promote the development of renewable sources and increase transport capacity between central and northern Italy, Sicily and Sardinia. This will bring a great reliability and security of the national transmission grid and a reduction in cost for the dispatching service market. In addition, regarding procurement, At the beginning of September, Terna awarded Prismian the contract for the supply and laying of submarine and underground power cables of the Adriatic Link, the 1000 MW HPVC connection between the Abruzzo and Marche regions. The cable supply is another milestone in the rapid implementation of the project. Moving to our sustainability achievements, Sterna reaffirms its status as a Global Sustainability Leader. Indeed, this is the 13th consecutive year that the company has been listed in the Stocks Global ESG Leaders Index, which selects the best companies globally based on ESG best practices. Finally, regarding shareholder remuneration, today Board of Directors approved to hand to In the first 9 months of 2023 National demand was about 233 TWh, recording a decrease of 4% on last year, when national demand was set at 242 TWh. The reduction in electricity demand in the first nine months of the year is mainly due to the decrease in industrial consumption and the increase in average temperature. In the first nine months of 2023, renewable sources covered about 37% of national demand, five percentage points higher than last year. National net total production stood at 197 teV, about 7% lower than the same period in 2022. Despite that, let me highlight the remarkable increase in hydro production, which grew by 29% In the first nine months of 2023, group revenues and EBITDA were up by 13% and 10% respectively versus last year, which means 255 million and 144 million euros higher than the first nine months of 2022. We also reported a group net income of 642 million euros with an increase of 9% versus last year. Group CAPEX was set at 1434 million euros, recording a double digit increase of 39% versus the same period of last year. Reconfirming our solid cap acceleration to serve the system needs and enable the energy transition. To support this acceleration, at the end of September 2023, net debt stood at 9.5 billion euros versus about 8.6 billion at 2022 ERA. Now, let me give you a deeper analysis of the figures of the period, moving to slide number 8. Let's start with the revenues analysis. Total revenues in the first nine months of 2023 increased by 12.8%, reaching 2,247 million euros, up by 255 million versus last year. The growth was attributable both to regulated and non-regulated activities, which contributed for 184 million and 71 million respectively. Let's now go into details of the revenues evolution, moving to the next slide. Regulated revenues reached 1,904 million euros, 184 million better than last year. The increase was mainly driven by the investments acceleration made on the national grid and the higher output-based incentive effects related to the higher benefits generated for the system. Non-regulated and international revenues reached 343 million euros, 25.9% higher than last year. Non-regulated growth was mainly attributable to the increase in revenues coming from Brook and Tamimi and to the higher contribution of the energy solutions mostly related to the healthy group. International revenues were set to zero in accordance with the IFRS 5 accounting standard, referred to asset L4C. Now, let's go through operating cost analysis. As you can see in this chart, total operating cost stood at 691 million euros, 19.1% higher than last year. Regarding regulated activities, The increase was mainly attributable to the insourcing of new competencies and increased level of activity, while non-regulated activities have been impacted mainly by higher costs for the purchase of raw material and services related to BRUC and LC Group. Let me now analyze the BDA, moving to the next slide. Due to previously mentioned effects, 9 months 23 Gruppe BDA reached 1,556,000,000 euros, 144 million better than last year. The increase was mainly attributable to regulated activities, which contributed for about 132 million euros more versus the same period of last year, showing an EBITDA of 1,508,000,000 euros in the first nine months of 2023. Let's now have a look to the lower part of the P&L, turning to slide number 12. DNA amounted to 577 million euros. The increase versus last year was mainly due to the impact of new assets becoming operational in the period. As a consequence, EBIT reached 980 million euros. 9.3% higher versus the result of the nine months of 2022. We reported net financial expenses at 81 million. The increase versus last year was mainly due to the cost of the new financing and to the increase of interest rates partially mitigated by the lower level of inflation in the period, the increase in capitalized financial expenses and the higher financial income on available liquidity. Taxes stood at 252 million euros, 25 million higher versus last year, essentially due to increased profit and positive one-off items recorded in 9 months of 2022. As a consequence, our tax rate stood at 29.1%. As a result, group net income reached 642 million euros. 9.3% higher versus the same period of last year. Now moving to CAPEX analysis. In the first nine months of 2023, total CAPEX amounted to 1,434 million, 39% higher than last year, confirming the solid acceleration in line with our institutional role as a country. Let me underline that this is a record-breaking level of capex for the first nine months of the year. Indeed, we invested about 1 billion 360 million euros in regulated activities. Among the main projects of the period, it is worth mentioning the Tyrrhenian Link, the Adriatic Link, the Elba mainland connection and the investments in stabilization devices as synchronous compensators. Among CAPEX categories, the development CAPEX represented 56% of total regulated cards. Defense CAPEX stood at 12%, while asset renewal and efficiency was 32% of the total. Non-regulated and other CAPEX stood at 74 million. This includes capitalized financial charges and other investments. Regarding net debt and cash flow analysis, net debt At the end of September 2022 was about 9.5 billion euros, around 900 million higher than 2022 year-end levels, mainly as a consequence of the investment in the period and the payment of the 2022 final dividend made in June. During the period, we generated an operating cash flow at 1.168 billion euros, thanks to which we were able to cover most of 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 cautious and proactive debt management approach, aimed at maintaining a solid financial structure, at the end of these first nine months we registered a fixed floating ratio on gross debt of about 87%, and an average duration of about six years. Moreover, Terna aims to establish itself as one of the leaders in the sustainable financial market. This strategy has been confirmed also during the first nine months of this year and in the process of updating its green bond framework, Terna achieved by Moody's in late October the highest possible score in the second party opinion, the sustainability quality score 1. In this sense, let me remind you that in July, Terno launched a 10-year fixed-weight green bond for a total amount of 650 million euros. The issuance was very successful on the market, with an order book at a peak of approximately 4 times the offered amount and a final spread of 90 basis points over the mid-swap. The green bond will have a duration of 10 years and will pay a coupon of 3.875%. Moreover, let me remind you that last May, Terna signed an ESG-linked revolving credit facility for a total amount of 1.8 billion euros. The transactions allow Terna to count on a liquidity appropriate to its current rating, further strengthening the company's financial structure. With regard to bank debts, two EIB loans totaling 900 million euros For the construction and commissioning of the east and west sections of the Tirania Link project, signed in March, were drawn in June and in October respectively. To conclude, given the strong set of results for the period, we confirm once again all the guidance for 2023, waiting for the new business plan that we expect to present by the first quarter of 2024. Thank you for your attention. We are now ready for the Q&A session. Thank you Francesco.