Terna Rete Elettrica Adr

Good afternoon, ladies and gentlemen, and welcome to TELNA 9-month 2025 Consolidated Results presentation. At this time, all participants are in listen-only mode. Please be advised that today's conference is being recorded. I would like to hand the conference over to our host speaker today, Mr. Stefano Gamberini, Head of Investor Relations. Please go ahead, sir.

Thank you very much. Good afternoon everyone and welcome to the presentation of Terna's 9-month results 2025. This call will be hosted by our CFO Francesco Beccali. Following the presentation, there will be the Q&A session, so we kindly ask you to send your question to our email address investor.relations at terna.it.

Thank you Stefano and good afternoon everyone. Before looking at the fears, I'd like to take a moment to highlight some of our most recent achievements. Let's start with grid development, where we have made significant progress across multiple fronts in the past few months. Starting with the Tyrannian Link, one of the flagship projects in our 2024-2028 industrial plan. Let me remind you that before the summer we completed the laying of the first submarine cables of the Eastern Section and on September 16th, Terna and Nexan began the first installation phase of the Western Section, connecting Sicily and Sardinia. Once completed, it will set a world record for the deepest high-voltage subsea cable installation, reaching 2150 meters below sea level. This project will also represent a significant step towards Italy's decarbonization target. On October 21, The Ministry of Environment and Energy Security formally launched the authorization process for the Central Link project, which plans to rebuild the 220 kW backbone between Umbria and Tuscany, a crucial step to enhance transmission capacity, grid robustness and renewable integration. Shortly after, on October 27, the Ministry initiated the authorization procedure for the Sardinian Link, a project to reconstruct and modernize Sardinia's grid infrastructure, strengthening the island's transmission capacity and ensuring a more stable and resilient electricity system. These projects are included in the development plan and are scheduled beyond the business plan horizon. A distinctive feature of both the central and Sardinian links will be the use of Terna's proprietary five-phases technology in their construction, an innovative design that represents a major step forward in the evolution of transmission infrastructure. These new pylons are lighter, more environmentally integrated and capable of increasing transport capacity while reducing electric and magnetic fields, contributing to a more efficient and sustainable growth of the grid. Moreover, with regard to the authorization updates, We signed a five-year memorandum of understanding with the Marche region to enhance the planning of new infrastructure, and the Ministry kicked off the approval process for overhauling the city of Ferrara's electricity grid. Lastly, in September, Terna completed the acquisition of part of the high-voltage fleet in Rome from Acea for 227 million euros. An operation aimed at strengthening the continuity and security of the electricity transmission service. This acquisition will also allow for more effective decision-making on renewal and development investments across the Central Italy transmission network, while having only a limited impact on Terna's financial leverage and remaining neutral for our credit rating. Beyond infrastructure development, we have also made important progress on the procurement front. Let's move to the next slide. We continue to effectively manage potential supply chain risk through timely and efficient mitigation actions. As of today, around 88% of our 2024-2028 CAPEX plan is already covered by procurement contracts, up from more than 80% in March. All major projects, including the Tirrenian, Adriatic and Sakhoi III links, are fully contracted. For the helmet interconnections between Italy and Tunisia, the cable portion is already secured, while tenders for the converter stations are currently underway. The residual and sourced portion of plant procurement contracts primarily relates to projects scheduled for the latter part of the period, whose procurement will naturally be finalized over time. Turning now to regulation. A few days ago, ARERA published resolution 476 of 2025, verifying whether the conditions for the activation of the trigger mechanisms for 2026 were met. As the variation in market parameters of the formula remained below the 30 basis point threshold defined in the regulatory framework, the current WACC of 5.5% for electricity transmission will remain unchanged in 2026. As regards to ROS mechanism, the regulator published in August the resolution 390 of 2025 Launching the experimental phase of ROS Integrale mechanism for 2026 and 2027 period. In October, TERNA submitted to ARERA its 2026-2027 business plan and proposals for incentives linked to operational and performance efficiencies. The business plan will be the reference for the fast money-slow money mechanism and for the new incentive-penalty mechanism introduced by the Regulator for the accuracy of capital. Still on the regulatory side, in October ARENA also published resolutions 440, recognising interna 93 million euros of output-based incentives for additional interzonal transmission capacity and investment efficiency. Finally, regarding shareholder remuneration, today the Board of Directors approved the 2025 interim dividend at €11.92 per share, flat compared to last year's interim dividend. Please note that the new dividend policy communicated to the market in March sets a minimum dividend per share equal to the 2024 dividend for the entire duration of the 2024-28 business plan. Now, let me briefly give you the usual overview of the Italian electricity market, turning to the next slide. As you can see from the chart, In the first nine months of 2025, national demand was about 233 TWh, recording a negligible contraction of 1.2% in comparison with the same period of last year, when national demand was about 236 TWh. Over the period, renewable sources covered about 43% of national demand, in line with the level registered last year. For what concerns national net total production, this stood at 201 TWh, up by 1% compared to the same period of 2024. In the period, renewable sources accounted for about 50% of the national net total production, essentially in line with the level recorded in the same period of last year when renewable energy sources covered about 51% of net total production. To conclude, let me highlight the remarkable increase in photovoltaic production, which grew by 23% versus the first nine months of last year, compensating the reduction in hydro generation. With renewables continuing to play a major role in Italy's power mix, flexibility becomes crucial. So, before moving to the financial results of the company, let's turn the storage to storage and the progress made under the MAXTE mechanism, moving to the next slide. As you know, storage is the next frontier of the energy transition, essential to ensure flexibility and a system increasingly powered by renewables. As of September the 30th, Intel's total electrochemical storage capacity stood at 17.4 GWh, mostly small-scale systems, of which around 4.4 GWh were installed since December 2024. While small-scale installations still represent the majority, we are now witnessing a sharp acceleration in large-scale battery projects. In September, we successfully held the first auction under the master framework. The auction awarded a total of 10 GWh of storage capacity, fully covering the demand. Results confirmed strong market interest in the maintenance, with bids exceeding demand by more than four times and average clearing prices around 65% lower than the reserve premium. around 30,000 euros per megawatt hour and year compared to a cap of 37,000 euros. The contracted facilities are expected to enter into operation by 2028, alongside renewable plants from the FedEx auctions, helping to balance the system and reduce reliance on fossil fuels for power generation, in line with the national decarbonization objectives. On this, the first octaves of the so-called Transitional Ferris closed in September, with final rankings expected by December 11th. It saw strong participation, awarding up to 12 gigawatts of wind and solar capacity to be commissioned by 2028. The second ferric suction, which focused on resilient photovoltaic systems, was held in October and offered an additional capacity of almost 2 gigawatts. The final rankings are expected by the end of December. Overall, these results mark a major step forward in Italy's energy transition. Now, let's move to the main figures of the period at slide number 8. In the first nine months of 2025, group revenues and EBITDA increased by 9% and 7% respectively versus last year, increasing by approximately 235 million and 134 million euros compared to the first nine months of 2024. We also reported a group net income of 853 million euros, with a growth of 5% compared to the same period of last year. Group capex reached around 2.1 billion euros, marking an increase of approximately 23% versus the first nine months of last year, and setting a new record in turnover history. This confirms, once again, our effort to accelerate investments to serve system needs. To support this capacity acceleration, at the end of September 2025, net debt stood at 11.7 billion euros, slightly higher compared to the value recorded at 2024 year-end of about 11.2 billion euros. Now let's have a closer look at the results moving forward. Let's start, as usual, with revenues analysis. In the first nine months of 2025, total revenues increased by 9%, reaching 2 billion and 882 million euros, up by 235 million euros versus last year. The growth was attributable both to regulated and non-regulated activities, which contributed for 135 million and 99 million euros respectively. Let's now take a closer look at the evolution of revenues, turning to the next slide. Regulated revenues reached 2,357,000,000 euros, with an increase of more than 6% versus previous years. The growth was mainly driven by the rapid growth deriving from the recognition in time of 2024 capital expenditure, including the update and revaluation of capital cost parameters. The early recognition in time of depreciation related to 2024 capital expenditure, one year in advance compared to the previous regulatory framework. And the fast money component. set on the conventional capitalization rate defined under the ROSM application. These factors more than offset the weighted average cost of capital reduction from 5.8% to 5.5% in 2025 and deliver output-based incentives contribution versus last year. Non-regulated revenues reached 525 million euros, recording a double-digit increase of 22.3% in comparison with the same period of last year. The improvement mainly reflects the higher contribution from the equipment segment, which includes Stamini and Bruckebos, and from the energy services segment. Now, let's go to operating cost analysis. As you can see in this chart, total operating costs stood at 856 million euros, 13% higher than last year. The regulated activities cost increase is mainly driven by the rise in the headcounts and the higher average cost of labor, partially offset by higher capitalizations. The non-neglected activities were primarily impacted by higher costs for material and services related to the development of activities, mainly in the energy services segment and equipment segment. These increases were driven by higher volume of activities, reflected also in revenues growth. Regarding EBITDA, moving to the next slide. Thanks to the acceleration in revenues, 9 months 2025 Grupo BIDA reached 2 billion and 26 million euros, 7% higher than the same period of last year. The improvement was mainly attributable to regulated activities, which contributed for about 99 million euros more versus the first nine months of the previous year, showing an EBITDA of 1,923 million euros. EBITDA from non-regulated activities increased by 51% to 103 million euros. mainly driven by a stronger contribution from the equipment segment with improving margins from both the Tamini and Brook Cabot groups, as well as better results from the energy services. Let's now have a look to the lower part of the P&L, turning to the next slide. DNA amounted to 679 million euros. The rise versus last year figure was mainly related to the entry into service of new infrastructures. As a consequence, the EBIT reached 1 billion and 348 million euros, 7% higher versus the first nine months of 2024. The net financial expenses amounted to 132 million euros, The slight year-on-year increase of 27 million euros is mainly due to the drawdown of new financing and the lower financial income resulting from cash investments, partially offset by higher capitalized financial charges. Taxes stood at 362 million euros, 24 million higher versus last year, essentially due to improved results. Our tax rate was 29.10% compared to 29.4% in the 9 months of 2024. As a result, group net income reached 863 million euros, marking a 5% growth versus the same period of last year. Moving now to CAFEX analysis. In the first nine months of 2025, total capex reached around 2.1 billion euros, up by 23% year-on-year, confirming the solid capex acceleration in line with planned targets. We invested about 1.972 billion euros in regulated activities. Among the main projects of the period, it is worth mentioning the Terranial Link, the Adriatic Link, Stakoi III, the modernization of the high voltage grid in the locations due to host the Winter Olympics in 2026, and the Chiaramonte-Golti-Cimina power line. Moreover, we should consider the investments planned under the defence plan, which play a crucial role in reinforcing the resilience of the national transmission systems through the installation of synchronous compensators, shunt reactors and dumping resistor systems. Among CAPEX categories, development CAPEX represented 57% of total regulated investments, Defense capex stood at 13%, while asset renewal and efficiency was at 30%. Non-regulated and other capex stood at 115 million euros. This includes capitalized financial charges and other investments. Turning to the next slide, cash flow generation from the period amounted to around 2.2 billion euros. This was the result of around 1.5 billion euros of operating cash flow and around 700 million euros of working capital and other items. Net debt at the end of September 2025 was about 11.7 billion euros, around 500 million euros higher than 2024 year-end level, primarily due to the capital acceleration and the dividend payment. Let's now make a deeper analysis of our debt profile, moving to slide 17. At the end of September 2025, we registered a fixed floating ratio on gross depth of around 83%, with an average duration of approximately 6 years. Consistent with Terna's strategic approach of aligning capital allocations with sustainability goals to enhance long-term value, as of the end of September, Terna's sustainable financing portfolio included 3.75 billion euros in senior green bonds and 1.85 billion euros in perpetual subordinated hybrid green bonds. Let me remind you about the successful launch of the first European Green Bond, with a total nominal amount of 750 million euros made in July. This Bond, which received a very favourable market response, will pay an annual coupon of 3%. In addition, PERMA can rely on 2 billion euros in ESG-linked term loans, Three ESG-linked revolving credit facilities for a total of approximately 4 billion and 300 million euros and a 2 billion euro commercial paper program dedicated to the issuance of short-term conventional or ESG noses. To conclude, As already communicated to the market, in July, the European Investment Bank, Terna, Instesa San Paolo and such have signed agreements totaling 1.5 billion euros to support the development and construction of the Adriatic Link, the submarine power cable linking the Italian regions of Marche and Bruxelles. Thank you for your attention. Let me now conclude this presentation with some closing remarks. First of all, I would like to emphasize that we remain strongly focused on executing our industrial plan. As highlighted during the presentation, alongside delivering a solid set of results, we continue to make tangible progress across all our main projects, while keeping a disciplined approach on the procurement front despite a still challenging environment. All of this confirms once again our ability to deliver on our commitment. At the same time, the broader energy transition continues to advance rapidly. The recent FERICS and MAXE options have shown clear evidence of this progress, with over 12 GW of new renewable capacity awarded under the FERICS scheme and 10 GW of storage capacity contracted in the first MAXE option, both at competitive prices well below the respective caps. These results confirm the market's strong momentum and the standards of the regulatory framework supporting the transition. To conclude, we firmly confirm our full year 2025 guidance. We expect to achieve revenues of 4.03 billion euros, an EBITDA of 2.7 billion euros and a net profit of 1.08 billion euros. In terms of investment, the group has set a target of approximately 3.4 billion euros for 2025. Thank you for your attention. We are now ready for the Q&A session.