Terna Rete Elettrica Adr

Good afternoon, ladies and gentlemen. Welcome to TELA's first quarter 2025 Consolidated Results presentation. At this time, all participants are in listen-only mode. Please be advised that this conference is being recorded. I'd like to hand the conference over to your host speaker today, Mr. Stefano Gamberini, having reservations. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome. to Terna's first quarter 2025 results presentation. The call will be hosted by our CFO, Francesco Beccali. Following the presentation, we will have the Q&A session. So we kindly ask you to send any question you might have to our email address, investor.relations and at terna.it. Thank you. Please, Francesco.

Thank you Stefano and good afternoon everybody. Before starting to analyze the figures, I would like to take a moment to highlight the main achievements of the first quarter of 2025. First of all, on March 25th, we presented the update of the 2024-28 industrial plan, which outlines investments totaling 17.7 billion euros, an increase of 1.2 billion compared to the previous plan. This update strengthens even more Terna's role as a key enabler of the energy transition, driving Italy toward decarbonization and reducing dependency on foreign energy supply. For what concerns regulated activities, Terna planned to invest a total of 16.6 billion euros in the five-year period of 2024-2028 to develop and modernize the national electricity transmission grid, marking an historical record level of regulated investment. In this regard, let me remind you that on March 14th, CERNA presented the 2025 National Development Plan with over 23 billion euros of investment plan over a 10-year time horizon for a safer and more resilient grid. On this point, I would like to highlight that during the first quarter of 2025, 12 projects for the development of the National Transmission Grid were authorized by the Ministry of the Environment and Energy Security and the relevant regional authorities. for a total amount of approximately 240 million euros. This is an evidence of our ability in streamlining internal processes and of our constructive collaboration with authorities that allow us to reduce approval times. About the execution of our project, Let me underline that few days ago, on May the 8th, we completed the laying of the first submarine cable of the eastern section of the Tyrrhenian Link, one of the most significant power infrastructure projects in Italy which will connect Campania and Sicily. About regulation, on March 27, ARERA published the resolution 130, which establishes, for RAB indexation, the transition to the new Italian harmonized index of consumer prices, so-called IPCA Italia, starting from 2024, replacing the gross fixed investment deflator as RAB. From a financial standpoint, let me highlight that following the presentation of TERNA's 2024-2028 industrial plan update, Moody's and Standard & Poor's global rating confirms the long-term rating held by the company, respectively at BAA2 and at BAAB+, with a stable outlook, a notch above the rating held at that time by the Italian Republic. Moreover, in April, Standard & Poor's upgraded the long-term rating of PERNA at single A-minus. In addition, confirming once again the group's strong commitment to the introduction of a model which aims to reinforce sustainability as a strategic lever for creating value for all its stakeholders, in February, PERNA issued €750 million green bonds and in March signed an ESG-linked revolving credit facility for a total amount of €1.8 billion. Finally, In line with what set out by our sustainability plan, at the beginning of EFWEL we presented TERNA Foundation with the aim of promoting the group's social responsibility to foster greater inclusion through widespread access to world of energy in terms of knowledge, awareness and work opportunities. After this brief introduction, let me give you the usual overview of the Italian electricity market, turning to the next slide. As you can see from this chart, in the first three months of 2025, national demand was about 77 TWh, in line with the level registered last year, when national demand was about 78 TWh. In the first quarter of 2025, renewable sources covered about 33% of national demand, 3 percentage points lower than last year, mainly as a consequence of a decrease in wind production caused by unfavorable weather conditions, as well as a decrease in hydroelectric production, mainly because the previous year was a record one. Regarding national net total production, this stood at 65 terawatt hour, 6% higher than the same period of 2024. In this first quarter, renewable sources covered about 40% of the national net total production, down from the 46% of last year. However, let me highlight the remarkable increase in solar production, which grew to around 7 TWh, up 14% versus the first quarter of last year. Now, let's move to the main figures of the period. In the first three months of the year, we registered solid results at all P&L lines and a robust CAPES growth. Indeed, group revenues and EBITDA were up by 5% and 4% respectively, which means 44 million and 24 million euros higher than the first three months of 2024. We also reported a group net income at 275 million euros, with an increase of 3% versus the same period of last year. Group capex were at 562 million euros, recording a 16% growth versus the first quarter of last year. This confirms once again our strong CAPEX acceleration to serve the system needs and enable the twin transition, in line with our recently presented industrial plan update. Despite this CAPEX acceleration, at the end of March 2025, net debt stood at 11.1 billion euros, in line with the value registered at 2024 ERN of about 11.2 billion euros. Now, let me give you a deeper analysis of the figures in the period, moving to the next slide. Let's start with the revenues analysis. Total revenues in the first three months of 2025 increased by 5.1%, reaching 902 million euros, up by 44 million versus last year. The growth was attributable both to regulated and non-regulated activities, which contributed for 25 million and 19 million euros, respectively. Let's now go into details of the revenues evolution, moving to the next slide. Regulated revenues... reached €755 million, up 3.4%, which means about €25 million more than the same period of last year. The increase was mainly driven by rough growth, the impact of 2025 CITES recognition of depreciation related to 2024 capital expenditure, and of the fast money component that on the conventional capitalization rates defined under the ROS application. These elements more than offset the work reduction from 5.8% to 5.5% in 2025 and the lower output-based incentives contribution versus last year. Non-regulated international revenues reached 147 million euros, 14.5% higher than last year. Non-regulated growth mainly reflects the higher contribution from the equipment segment of the Brook Cabos Group and the Tamini Group. International revenues were set to zero. The results attributable to the South American subsidiaries have been classified among asset and for sale as in the first quarter of 2024. Now let's go through operating cost analysis. As you can see in the chart, total operating costs stood at 250 million euros, 8.5% higher than last year. Regarding regulated activities, the increase was mainly attributable to the rise in average accounts, partially offset by higher capitalizations, while non-regulated activities were mainly impacted by higher service costs related to the development of activities in the energy services and equipment segments, and higher raw material costs. Let me now analyze EBITDA, moving to the next slide. Due to the previously mentioned effects, first quarter 2025 group EBITDA reached 652 million euros, 3.8% higher than the same period of last year. The increase was mainly attributable to regulated activities, which contributed for about 17 million euros more versus the first three months of last year, showing an EBITDA of 627 million euros in the first quarter of 2025. Also non-regulated activities contributed to the EBITDA improvements with a 39% growth versus the same period of the previous year, showing an EBITDA of 25 million euros. Let's now have a look to the lower part of the P&L, turning to the next slide. DNA amounted to 219 million euros. The increase versus last year was primarily due to the entry into service of new infrastructure. As a consequence, EBIT reached 433 million euros, 3.4% higher versus the first quarter of last year. We reported net financial expenses at 39 million euros. The slight increase versus last year of 2.3 million euros is mainly caused by the subscription of new loans at higher interest rates compared with the average cost of existing ones. This effect was partially offset by higher capitalized expenses. Taxes stood at €119 million, €7 million higher versus last year, essentially due to the increased profit. Our tax rate stood at 30.1% versus 29.2% in the first quarter of 2024. As a result, group net income reached €275 million, 3% higher versus the same period of last year. Moving now to CAPEX analogies. In the first three months of 2025, total capex amounted to €562 million, 16.4% higher than last year, confirming the robust acceleration in line with the targets set in the updated industrial plan and confirming our determination to drive the energy transition. Indeed, we invested about 527 million in regulated activities. Among the main projects of the period, it is worth mentioning the Tyrrhenian Link, the Sakhoi Free, the Adriatic Link, the modernization of the high voltage grid in the locations due towards the Winter Olympics in 2026, the Colunga Calenzano connection and, last but not least, the investments of the defense plan to enhance voltage control capacity and support grid stability including synchronous compensators, shunt reactors and damping resistor systems. Among CAPEX categories, development CAPEX represented 56% of total regulated CAPEX. Depends CapEx stood at 14%, while Asset Renewal and Efficiency was 30%. Non-regulated and other CapEx stood at 35 million euros. This includes capitalized financial charges and other investments. Regarding the net debt and cash flow analysis, Net debt at the end of March 2025 was about 11.1 billion euros, around 34 million euros lower than the 2024 year-end level, confirming our ability to manage and keep the net debt evolution under control. During the period, we generated an operating cash flow of 483 million euros. thanks to which we were able to cover about 86% of the capital spending of the period. Let's now make a deeper analysis of our debt profile moving to page 13. In line with our cautious and proactive debt management approach that aims to maximize efficiency and achieve and maintain a solid financial structure with mitigating potential financial risk, At the end of these first three months of 2025, we registered a fixed floating ratio on gross debt of about 88% and an average duration of about six years. In alignment with Tecna's strategy, which aims to combine investment and sustainability to drive growth and value creation, it is our ambition to play a leading role in the sustainable finance market, Indeed, in February, Terna successfully launched a new single-trans-green bond issue for an amount of 750 million euros, a term of seven years. The bond was issued with a spread of 90 basis points above the mutual trade and will pay an annual coupon of 3.18%. At the end of March 2025, the senior green bonds issued by Terna under its 12 billion euro medium term notes program, and yet to reach maturity, amounted to 3 billion euros, in addition to the two perpetual subordinated green bonds issued in February 2022 and in April 2024 on a standalone basis for a total of 1.85 billion euros. Furthermore, let me remind you that these green issues are used to finance or refinance eligible green projects. These are projects producing environmental benefits that meet certain criteria. Specifically, we are talking about projects that aim to increase renewable energy production, projects designed to cut CO2 emissions by reducing grid losses, projects designed to ensure the quality, security, and resilience of grid infrastructure, and projects that aim to reduce land use and protect biodiversity. Regarding ESG-Linked revolving credit facilities, As already mentioned in the beginning of the presentation, on March 21, Terna signed a ESG-linked revolving credit facility for a total amount of €1.8 billion, aimed at refinancing the ESG revolving credit facility signed in December 2021. The transaction allows Terna to count on liquidity appropriate to its current credit rating, further strengthening the company's financial structure. Regarding credit ratings indeed, let me stress once again that in March, following the presentation of the updated 2024-2028 industrial plans, the rating agencies Moody's and Standard & Poor's both confirmed the company's ratings. Then, in April, Standard & Poor's announced that it had upgraded Ternas' long-term rating from 3.3 plus to a single A minus with a stable output. following the upgrade of the sovereign rating to the triple B+. Thank you for your attention. First of all, Ternas will continue to drive the Italy's energy transition towards renewables, focusing on enhancing grid quality while reducing reliance on imported energy sources, Strategic investments in grid expansion will support the growing demand for electricity and the efficient integration of renewable energy. At the same time, we are strengthening the resilience and security of the infrastructure, enabling the energy transition and ensuring system stability. Moreover, Terna will also continue to guarantee value creation for our shareholders and communities. focusing on the execution of projects included in our updated 2024-2028 industrial plan for which we are well on track both in terms of authorizations and procurement. Finally, as reiterated during the presentation of the 2024-2028 industrial plan update, we remain confident in our ability to deliver strong set of results while preserving financial stability and maintaining a low risk profile as also confirmed by the debt ratings received from the agencies. In the first quarter of 2025, we demonstrated once again our ability to deliver solid results and a robust capital growth. Therefore, we confirm all the targets provided two months ago. Thank you for your attention. We are now ready for the Q&A session.