Investing.com
Published Mar 25, 2025 02:51PM ET
Terna reported robust financial performance in Q4 2024, with significant increases in revenue and net income. The company's strategic focus on renewable energy and digital infrastructure has driven these results. According to InvestingPro data indicates strong liquidity to support its operational needs. For deeper insights into Terna's financial health and future prospects, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Moderator/Host, Terna: Good evening, everyone, and welcome to Terna's twenty twenty four-twenty eight Industrial Plan Update Presentation. First of all, I would like to thank the people who are here with us today in Milan, as well as those who have joined us remotely. I'm here with Terna's CEO and General Manager, Giuseppe Nadefoge and our CFO, Francesco Beccalli. Today's agenda includes an overview of the key achievements reached in 2024, the update of the energy scenario, a brief description of the new ten year national development plan twenty twenty five-thirty four, the presentation of our strategy and our 2024 results, and finally, the upgrade of our twenty twenty four, twenty twenty eight financial targets. At the end of the presentation, there will be a Q and A session.
So let me immediately hand over to our CEO. Please, Jussi.
Giuseppe Nadefoge, CEO and General Manager, Terna: Thank you, Stefano, and welcome. Welcome, everyone. A year ago, I presented to you a plan that went further in investment and ambition than anything Terna has done before. We made a serious commitment to the future of energy. Over €16,500,000,000 of investment, an increase of 65% on the previous plan.
I'm delighted to be able to tell you today how as we present an update of that plan that, across all parameters, we have not only that commitment, but delivered beyond our expectations. This result is due to the diligence, expertise, and professionalism of all those in Terna, and thanks to our ever stronger relationships with all our major stakeholders, the government, the regulator, Radera, and our partners. You can trust Ternat to keep its promises and even to exceed in the toughest of markets with the toughest of challenges. And as you will see today, we expect to go beyond the original ambition of the 2024, '20 '20 '8 plan to seek even greater value for the energy transition for Italy and for the Italian consumers. We define the plan as our wider vision, and we know we can deliver more empowering tomorrow.
How do I believe this can be achieved through people and our people's strategy, through execution on all our major projects with a solid financial structure and the ability to create value and with wise and timely investment in digitalization and innovation. Let me begin by sharing with you the key achievements of this last twelve months. In 2024, we obtained authorization for 25 projects worth over €2,300,000,000 increasing the coverage of authorized projects up to about 90% of a total planned CapEx spending compared to 79% in the previous plan. This result confirms Terna's role for the Italian energy transition and highlights our effective collaboration with the institutions. Among the key projects authorized last year, there are two flagship initiatives, ELMED, the energy bridge connecting Italy and Tunisia, and the Adriatic Link, the submarine cable joining the Marche and Abruzzo regions.
We have also started the construction activities for the Tirrenia link, the Adriatic link, and the connection between Sardinia, Corsica and Tuscany. In addition, Terna signed a term sheet with the chair for the acquisition of a portion of the high voltage grid in and around Rome. This deal strengthens our network without material impact on our credit rating. It also reinforces the commitment to growth in the expansion. Indeed, our growth trajectory is further demonstrated by the 2024 full year results, which reported high double digit growth in all the key economic indicators.
We will analyze these figures in-depth later in the presentation. Lastly, I would like to emphasize our enforced leadership in sustainability In 2024, for the sixteenth consecutive year, Terna was listed in the Dow Jones Sustainability Index, reaffirming our global standing. Moving to the next slide. Let me remind you that as the Italian TSO, we are responsible for ensuring energy security and constantly balancing electricity supply and demand, maintaining a reliable, efficient, and accessible system. This is becoming becoming increasingly challenging and even more crucial in the context of the ongoing transition shifting from fossil based generation to an emission free system.
The US set emissions decarbonization targets, and Italy has aligned its national policy to meet them. In July 2024, the Ministry of the Environment and Energy Security submitted the updated national energy and climate plan to the European Commission outlining key targets for 02/1930. Italy is at has a target of 62% of the overall electricity demand being met by renewable generation by 02/1930. This will be mainly achieved through strong growth in installed capacity of wind and solar generation, reaching 107 gigawatts in 02/1930. To achieve these ambitious goals, our projects are and will be fundamental for the development of an adequate grid infrastructure.
In the next slide, we will show you the key factors that will enable our country to meet these targets. The success of the Italian energy transition depends on the implementation of four main factors, infrastructure development, the creation of efficient interconnections, and the improvement of the transmission capacity to enhance the quality, security, and resilience of the grid. Earlier this month, we identified the requirements for grid development when we presented the 2025 national development plan. This plan represents a structured and organic response to the challenges of the energy transition with over €23,000,000,000 of investments planned over the coming ten years. The next factor is the integration of renewables, A well developed infrastructure and systematic planning for the location of a new renewable energy sources is fundamental to manage the ever increasing demand for connections.
In this regard, let me remind you that in 2024, we launch launched Terra, a new digital portal for the efficient planning of renewables and infrastructures. Another factor is storage. This is vital to improve the flexibility of our system and to manage over generation. For this purpose, as we will see later in the presentation, Terna will manage the auctions to accelerate the necessary capacity to be sold by 02/1930, with the first auction taking place on the September 30. Finally, to ensure alignment between effective market development and energy scenarios, we need a market design that best integrates sport and forward markets for both energy and services.
In this regard, we will enhance our institutional role supporting the government and the area in the identification of the right mix of market rules. Moving into details of the enabling factors just described, let's firstly focus on the development and integration of renewables. It is worth noting that in recent years, the pace of installation of renewable capacity has significantly accelerated from an additional three gigawatts in 2022 to 05/2008 gigawatts in 2023, reaching a new level of 7.5 gigawatts in 2024. However, the national energy and climate plan sets the ambitious target of 107 gigawatts for wind and solar capacity in 02/1930. It is our task to support the growth of renewables by optimizing system planning to ensure the timely deployment of a new renewable capacity to supportive schemes have been designed, the so called FedEx and virtues decrease.
According to the 2025 provisional FedEx decree, the first round of auctions is expected in 2025, supporting the development of up to 17.7 gigawatts of renewable capacity by 2028. Terna will continue to play a key role in integrating renewables into the system, supporting the Italian energy transition with a more sustainable and secure electricity grid. Parallel to the development of renewable technologies, new storage plants are essential for the integration of intermittent renewable generation into the energy system. At the end of twenty twenty four, electrochemical storage plants in operation reached a capacity of 12.9 gigawatt hours, most of which was installed over the last two years. These volumes are necessary to handle the flexibility needs of the system.
To ensure the development of the required storage capacity, Terna has been charged with managing the auctions auctions of the so called Maxi incentive mechanism starting from 2025. Maxi is an innovative mechanism for forward contracting of a new storage capacity and will support the growth of a utility scale storage by accompanying development of renewable capacity. According to the scenarios to meet the EU fit for 55 package goals, 72 gigawatt hours of storage capacity will be required by 02/1930. In addition to hydro pumped storage assets already available. Thanks to the combined development of renewables and storage technologies enabled by transmission grid development, we expect not only to meet the European decarbonization targets, but we will also help reduce Italian dependence on imported commodities.
In 2024, around 16% of the energy demand was imported directly by power lines, while 41% was produced in Italy by renewable power plants. The remaining 43% comes from conventional technologies, mainly gas fired power plants. The majority of gas used in Italy is imported. Therefore, generation from gas power plants can be seen as an indirect import of energy. Looking forward, national energy and climate plan targets foresee an additional 57 gigawatts of solar and wind generation installed capacity by 02/1930.
The incremental renewable production will replace an equivalent volume of gas generation, ensuring that 6063% of domestic consumption will be met by renewables. This means a significant lower dependence of the Italian electricity system on commodities, which could fall from around 60% in 2024 to 37% by 02/1930. With a positive impact on security of supply and on the stability of the energy bills paid by consumers. In this scenario, the development of renewable energy sources and storage supported by long term contracts will not only allow for greater stability in electricity bills, but will also significantly reduce the weight of the variable component of the bill with a potential having by 02/1930. Moving now to the next slide and the consequences of climate change.
The electricity system faces growing and unprecedented challenges. In recent years, there's been a significant increase in the frequency of extreme weather events worldwide. This trend has raised the vulnerability of a critical infrastructures, including the electricity transmission network. In this context, events like drought, floods, strong winds, landslides, heavy snowfalls, and wildfires can cause structural failure. In Italy, Twenty Twenty Four registered around three fifty extreme weather events, six times the number of 2015.
As climate patterns become increasingly volatile, ensuring the reliability, security, and resilience of the grid is not just a business priority. It is a national and global necessity. Terna addresses such challenges through the resilience plan enabled by constant innovation and digitalization. These efforts are crucial to ensure a robust and adaptive energy infrastructure capable of mitigating the evolving climate challenges of the future. To summarize this opening session, which has examined the contest in which we operate as a TSO, Terna, we need to continue to develop the grade two, enable the integration of renewables to achieve decarbonization targets, support greater energy independence for the system contributing to the reduction of cost volatility for end users, guarantee the security of the transmission grid and high standards of service and increase grid resilience to face the growing number of extreme weather events.
After this overview of the current energy scenario, let me now share with you Terna's main tool to best achieve our objectives, the ten year national development plan. Moving to the next slide. We presented our new ten year national development plan just eleven days ago. The national development plan includes an investment program of more than EUR 23,000,000,000 over the ten year period twenty twenty five-two thousand and thirty four, an increase of 10% compared to the previous development plan. The interventions planned over the next ten years, shown on the right of the screen, aim at ensuring the efficiency and resilience, sustainability, and security of the grid, as well as the integration of renewable energy production.
Among the main expected benefits, the exchange capacity between market zones currently at around 16 gigawatts will reach about 59 gigawatts once the projects included in the plan will enter into operation. Planned interconnections will enable an increase in the exchange capacity with other countries by approximately 40% compared to current values, increasing the security and reliability of the system. Furthermore, a total reduction in CO2 emissions of up to 2,000 kilotons per year is expected by 02/1930. The national development plan includes several initiatives aimed at increasing transport capacity between market zones, thus creating corridors that will improve grid congestion and support the integration of renewables in line with the European targets. Several strategic projects that are either already authorized or actually underway are expected to be completed by 02/1930.
These include the Lithuania link between Campania, Sicily, and Sardinia, the Adriatic link between the Abruzzo and Marque regions, the Sacroiliac cable connections connection between Sardinia, Corsica, and Tuscany, and the Elmed interconnection between Italy and Tunisia, as well as the Russian organization of the Northern Calabria grid. Then by 02/1934, further infrastructure reinforcements are planned, including the HVDC Milano Montalto, the HVDC Foggio Forli, the central link between Umbria and Tuskali in the first poll of the new Italy Greece interconnection. Finally, several new initiatives will be underway by 02/1940 to reinforce net transfer capacity between market zones. Now let's move to the illustration of our strategy. Last year, we presented a record level of investments for twenty twenty four, twenty twenty eight.
I can announce today that we will further increase our effort. Indeed, we now expect to invest around €70,700,000,000 in the twenty twenty four twenty twenty eight period. This is an increase of more than €1,000,000,000 compared to our forecast last year. €16,600,000,000 will be allocated to regulated activities, a new record of the investments on the national electricity grid. The increase compared to the previous plan is mainly due to, firstly, our security plan, including costs of plant machinery and strengthening cybersecurity initiatives, as well as the renewal of assets and other investments.
These include new projects aimed at strengthening digitalization through the use of new technologies and the adoption of artificial intelligence that are the even technologies and robotics. Now let's focus on three important areas of our strategic progress, authorization, procurement, and execution. With authorization and procurement, we have made a significant progress in reducing approval times. This has been achieved by streamlining internal processes and continuing collaboration with authorities. We have also enhanced supplier relationships and contract management.
Indeed, of the twenty twenty four, twenty twenty eight updated CapEx plan, about 90% has been already authorized and around 80% is covered by procurement contracts, which represents an increase of about 10% versus last year for both indicators despite the higher level of total CapEx. Regarding execution, our projects are advancing smoothly, thanks to the integration of new technologies and digital solutions that enhance efficiency, ensure safety and sustainability. To summarize, we have made strong progress in all three areas, positioning ourselves well to meet our strategic goals and continue delivering on our commitments. Regarding non regulated activities, let's move to the next slide. As you know, non regulated activities are complementary to Terna's business model.
These activities are focused on equipment, energy solutions, interconnector and connectivity, offering Eterna and other customer cutting edge technological and digital solutions. Of regulated projects outlined in the plan. For this purpose, we are working to increase the production capacity for both Brook and Tamini. Regarding Tamini, specifically, I can announce we have launched a preliminary assessment for the construction of a new factory. Our energy services can exploit opportunities in the growing energy market, contributing to the achievement of the energy transition.
By leveraging the expertise gained in this area, energy services are expected to grow substantially, creating value both for the group and for Italy. As we will see later, although we will maintain a capital light approach for the development of these areas, nor regulated business will increase its contribution to the group's EBITDA compared to the assumptions in the last business plan. Now let's look at digital. As anticipated earlier, we will continue to focus on innovation and digitalization. In this respect, we will further increase investments in digitalization €2,400,000,000 over the period 2024 to 2028, an increase of more than 20% compared to the previous plan.
Terna is developing a roadmap for the entire TSO value chain. As you can see, we have designed a digital transformation around four pillars: process digitalization, embracing automation for enterprise processes and developing electric station digitalization, use of a digital twin, boosting building information modeling, digitalization of asset maintenance and workforce, ensuring a data driven company, supporting finance and supply chain decision and risk management and co pilot for electricity dispatching, tech adoption, identifying and leveraging new technologies to support operational processes, training, and a digital mindset for employees. To guarantee the effectiveness of this approach, we identified two horizontal streams. Digital value to monitor digital adoption and value generation, resilience and cyber transforming the way we run our business, supporting digital transformation and guaranteeing business continuity of our infrastructures. Finally, as far as our strategy is concerned, let us look at the sustainability.
Terna will maintain an approach based on robust and certified targets, and we are committed to following the regulations set out in the science based targets initiative. Regarding climate change, to boost our current commitment for a 46% reduction of scope one and two emissions by 02/1930 compared to 2019. Terna undertakes to set a new net zero target to be achieved by 02/1950. In terms of a nature protection, Terna confirms its path towards defining a science based target for nature aiming for certification by 2026. Given the importance of the topic of climate change adaptation, for the first time, the sustainability plan includes targets and actions related to climate adaptation and system resilience.
On the social front, Terna reiterates the commitments to work place safety and the stakeholder engagement with the specific objectives in the sustainability plan. Regarding social inclusion, Terna has created the Terna Foundation. Its mandate is to mitigate energy and educational poverty and promote equal opportunity and access to the energy sector, as well as brand a culture of energy efficiency and promote energy awareness. For sustainability of its supply chain, Terna integrates circularity principles into its business model and aims to take into account the social and environmental impacts by considering the criteria of the corporate sustainability due diligence directive by 2026. I will now hand over to our CFO to present Terna's excellent 2024 results and to highlight the financial improvement of our twenty twenty four, twenty twenty eight industrial plan.
Thank you for your attention so far. Please, Francesco.
Francesco Beccalli, CFO, Terna: Thanks, Juicy. I will now go through the main results we achieved last year. In 2024, group revenues and EBITDA were up by 1518%, respectively, versus the previous year, which means $494,000,000 and $398,000,000 higher than 2023, while group net income was at €1,062,000,000 which with a huge increase of 20% versus 2023. Group CapEx stood at €2,700,000,000 an increase of 18% versus 2023, confirming once again the robust CapEx acceleration to serve system needs. To support this CapEx acceleration, at the December 2024, net debt was at 11,000,000,000 €11,200,000,000 versus about 10,500,000,000.0 at 2023 year end.
As you can appreciate, all the main figures of the period registered a double digit growth in comparison with last year, exceeding the provided guidance for the year already revised upwards during the presentation of the nine months result of 2024 last November. Now let me just spend a few words to deep dive on the presented figures for 2024, turning to the next slide. Let's start with revenues analysis. Regulated revenues reached €3,100,000,000 up 16% mainly driven by the increase in RAP and the updated value of regulatory WACC. Non regulated and international revenues reached €584,000,000 13 percent higher than last year.
Non regulated revenues growth was mainly attributable to the increase in revenues coming from the equipment business related to Tamini and to the higher contribution of LT Group's energy services. International revenues were set to zero. Given that the requirements of IFRS five have been met, the total results for 2024 and 2023 attributable to the South American subsidiaries included in the planned sale of assets initiated at the end of twenty twenty one have been classified in the item profit and loss for the period from assets held for sale in the group's reclassified income statement. Now let me analyze EBITDA moving forward to the next slide. In 2024, group EBITDA reached €2,570,000,000, 18 point point 3 percent higher than last year.
The increase was mainly attributable to regulated activities, which contributed for about €376,000,000 more than last year, showing an EBITDA of 2,460,000,000.00 in 2024. Also, non regulated activities contributed to the EBITDA improvement with 27% growth versus 2023, showing an EBITDA of €105,000,000 Let's now have a look to the lower part of the P and L. D and A amounted to $889,000,000. The increase versus last year was mainly due to the impact of new assets becoming operational in the period. As a consequence, EBIT reached €1,677,000,000 20 3 percent higher versus 2023.
We reported net financial expenses at €172,000,000. The increase versus last year was mainly attributable to the subscription of new financings at higher interest rates compared to the average cost of existing debts, partially mitigated by higher financial income on available liquidity and higher capitalized financial expenses. Tax stood at €4,146,000,000 higher versus last year, and our tax rate stood at 30.2. As a result, group net income reached €1,062,000,000 20 percent higher versus, last year. Moving to CapEx analysis now, in 2024, total CapEx amounted to €2,700,000,000, about 18% higher than last year, confirming Terna's great ability to reach its goals despite the macroeconomic scenario in which we operate.
Indeed, we invested about 2,600,000,000.0 in regulated activities. Among the main projects of the period, it is worth mentioning the Tyrrhenia Link, the Adriatic Link, modernization of the high voltage grid in the locations due to host the Winter Olympics in 2026, the Sakoi 3, the Colunga Calenzano power line between Emilia Romagna and Tuscany, and the investments in stabilization devices such as synchronous compensators for grid security. As far as CapEx categories are concerned, development CapEx represented 60% of our total regulated CapEx. Defense CapEx stood at 11%, while asset renewal and efficiency was at 29%. Non regulated and other CapEx stood at €123,000,000.
This included capitalized financial charges and other investments. Regarding now net debt and cash flow analysis, let's move to the next slide. Net debt at the December 2024 stood at 11,000,000,000 €11,200,000,000, about 7,000,000 higher than twenty twenty three year end level, mainly as a consequence of the CapEx acceleration made on the national grid and on the €850,000,000 hybrid issuance made in April accounted as equity. During the year, we generated an operating cash flow at €1,900,000,000 thanks to which we were able to cover more than 70% of the CapEx spending of the period. Thanks to this transaction and to the solid cash flow generation, we estimate our FFO to net debt ratio at around 15% in 2024.
Well, after the explanation of our solid 2024 starting point, let's now move on 2024, '20 '20 '8 group financial targets. The industrial plan for 2024, '20 '20 '8 presented last March marked a bold and decisive step forward with a remarkable acceleration in our regulated investments totaling €15,500,000,000 with a growth of 60% compared to the new to the previous plan, showing our strong commitment to growth and innovation. Now for the same period, we are raising the bar even higher, increasing our regulated investments to €16,600,000,000. That's the highest investment plan ever, marking a 7% jump, reinforcing our determination to lead the way in the energy transition. As a direct result of this dynamic growth, our regulatory asset base will grow from €22,500,000,000 in 2024 to approximately €25,000,000,000 in 2025, reaching €31,800,000,000 by 2028.
This represents a solid annual compound growth rate at 9% over the plan period compared to the 8% of the previous plan. Let's now have a look at the breakdown of the CapEx plan. Turning to the next slide. Development CapEx will reach €10,800,000,000 accumulated over the planned period, in line with the previous plan. The most significant projects remain consistent with those outlined in last year's plan.
The Iranian link, which will deliver a substantial increase in volumes, the Sakoi 3 and the Adriatic link. In addition, other non HVDC installations will include interconnections and projects designed to minimize network bottlenecks, reduce congestions, integrate renewable energy, and maximize the performance of our existing assets. Regarding asset renewal and efficiency investments, we are allocating around €3,600,000,000 Our focus will be on enhancing service and process quality as well as developing solutions to improve the sustainability of the network. The defense plan and other CapEx stood for €2,300,000,000 accumulated over the twenty twenty four, twenty eight period. This includes initiatives aims at digitizing and managing the grid while also strengthening both physical and cybersecurity.
Our goal is to improve our ability to respond technically and technologically to system demands, ensuring greater flexibility and enhanced functionality of the grid. Finally, investments in network resilience, totaling approximately €900,000,000 will be spread across the security, asset renewal, and development plans. This remains a key focus in our industrial plan with a clear commitment to enhancing with performance through strengthening the network structure and driving the digitalization of plants and processes. Regarding the regulatory environment and regulatory milestones, let's go to the next slide. At the end of twenty twenty four, conceding with the conclusion of the first sub period of the twenty twenty two-twenty twenty seven WACC, the authority said the weighted average cost of capital for electricity transmission for 2025 at a real rate of 5.5%.
This will be subject to a potential annual review if updates to the key macroeconomic variables result in a change of more than 30 basis points in the final value. During 2024, the authority also approved the renewal of frameworks related to output based incentives. These renewed frameworks will be in place until 02/1930 for incentives related to the reduction of dispatching market cost and until 2027 for incentives aimed at increasing interzonal transmission capacity as well as for the use of the public capital contributions. Looking ahead to the implementation of the ROS Integrale framework, which is expected to come into force in 2026, We remain confident in the regulatory environment's full support for investments in the transmission network. This is essential in reducing reliance on fossil fuels and consequently on energy dependence from abroad.
The path initiated by the regulator with output based incentives and the mechanism of the so called Roth Bass, such as the fastest low money mechanism, aims at encouraging the most useful and efficient investments while also supporting the economic and financial sustainability of investment plan. We expect this support will be further strengthened with the ROS Integrale framework. In 2028, a new regulatory period will begin begin with updates to the weather average cost of capital, tariff criteria, and potential changes to the output based mechanisms. Now let's have a closer look at the non regulated activities. Turning to the next slide.
For what concerns the role of non regulated activities in our industrial plan, let me underline that the ongoing energy transition is a powerful driver for growth in this sector with a projected plus 20% increase in cumulative EBITDA compared with the previous plan, reaching about €730,000,000 between 2024 and 2028. This expansion will be fueled by three key areas. Firstly, the equipment sector with industrial presence in high voltage cables and transformers, where we see a significant surge in demand. BRUCE will strengthen its position in core markets while expanding into Asia, Saudi Arabia, and The Middle East. At the same time, Taminif will increase its production capacity to meet the rising needs of the market.
Secondly, the energy service sector benefiting from a rapidly growing market driven by the energy transition. So we will focus on EPC for photovoltaics, interconnectors, and innovative energy solutions. Lastly, not for importance, the connectivity sector, which continue to gain momentum, thanks to a solid backlog of strategic contracts and expansion into new markets such as black hole. In short, non regulated activities will be part of our growth strategy, significantly contributing to value creation and strengthening our presence in high potential markets. With a clear visual and robust plan, we are ready to seize the opportunities ahead and drive our group towards a new phase of expansion and success.
Now let me share with you the updated guidance of the plan. Here is an overview of our revenues, margins, and CapEx are expected to evolve over the course of the plan period. For 2025, we project revenues of approximately 4,000,000,000 and €3,000,000 and EBITDA of €2,700,000,000 We anticipate these figures will grow to €5,190,000,000 in revenues and €3,360,000,000 in EBITDA by 2028. Compared to the previous plan, which forecasted €4,600,000,000 in revenues and €3,250,000,000 in EBITDA for 2028. This margin growth will also be reflected in net income, which is expected to rise from 1,100,000,000.0 and €8,000,000 in 2025 to €1,190,000,000 in 2028, exceeding the €1,100,000,000 net income forecasted in the previous plan.
As far as total capital expenditures are concerned, we are planning to invest €3,400,000,000 in 2025, and the cumulative CapEx for the period of 2024, '20 '20 '8 will reach €17,700,000,000 as already mentioned. As we have just seen, we expect net income to grow to around €1,200,000,000 by 2028, representing an increase of over €300,000,000 compared to 2023, with a compound annual growth rate of earnings at 6% throughout the plan period. This is an improvement compared to the previous plan, which represented last year, provides for 2024 dividends to be equal to to the higher of 4% growth versus 2023 and a payout ratio at 75%. Thanks to the solid results we have just presented, our proposed dividend for 2024 is €39.62 per share, up 17% year on year. From 2025, our new dividend policies policy foresees the dividend per share will be equal to the higher of an annual growth of 4%, maintaining the 2023 DPS as a reference, and the €39.62 cents per share proposed as 2024 dividend, which will become the new floor of Terna dividend per share.
With these earnings projections and our new dividend policy in place, we are reinforcing an investment proposal that balances both yield and growth, providing long term visibility and stability. We reaffirm our commitment to maintain a solid financial structure throughout the entire plan period. To achieve this, we will leverage all available management tools to keep leverage under control, including the possibility of increasing the hybrid bonds in our capital structure up to full hybrid capacity. Despite the acceleration of investments, we confirm our commitment to keep the credit rating at current level as demonstrated by the EBIT additions made in April 2024. We expect the average cost of net debt over the plan period to be at 3.1%, an improvement compared to the forecasted rate of last year.
To conclude, the assessments of the main ESG rating agencies placed Terna in the leadership group, demonstrating the effectiveness of the approach adopted by the company with respect to sustainability issues. For example, Moody's ESG rewarder Terna with the highest rating level, I. E. Advance. Similarly, Sustainalytics has placed Terna in the best risk band, which is negligible.
Now before the q and a session, I would like to leave the floor to the CEO for a closing remarks.
Giuseppe Nadefoge, CEO and General Manager, Terna: Thank you, Francesco. And now let me conclude with the main highlights of this twenty twenty four, twenty twenty eight industrial plan update presentation. We reaffirm that our strategic priority as a TSO is to drive the energy transition towards renewables in Italy, enhancing the quality, security, and resilience of the grid while significantly reducing the dependence of our electricity system on imported commodities. The development of renewable energy sources and storage supported by long term contracts will also allow for a greater stability of electricity bills for final consumers. We are strongly focused on the execution of our projects, and we have made major progress in both permitting and procurement.
Despite the acceleration of investments foreseen in the 2024, '20 '20 '8 plan presented last year, we have further stepped up our effort with more than €16,000,000,000 of investments in the domestic grid by 2028. '20 '20 '4 results, which showed high double digit growth in all key economic indicators, demonstrated once again our history of consistency and our ability to deliver. With this plan update, we are in a position to guide the market to a further improvement of results in 2025 and market speed up of investments. Thanks to the efforts we are making to support the energy transition through higher regulated investments and by maximizing performance in non regulated businesses, we are able to improve our net profit growth target to an average of 6% per annum over the planned period, while ensuring financial stability and sustainability. With this strategy in place, we are confident to be on the right path, confident we are empowering tomorrow creating the energy grid of the future.
Thanks to improve the financial targets and the new and more solid dividend policy, we are offering our shareholders an investment proposition that balances yield and growth with the long term visibility and stability. In conclusion, our additional commitment to digitalization from €2,000,000,000 last year to €2,400,000,000 in this plan update shows we intend to continue to pursue the twin transition energy and digital. Thanks to the progress made also on the ESG goal set last year and the establishment of a Terna Foundation will confirm the inclusion and environmental and social impacts impacts at the core of our strategy to achieve a just transition and an equitable solution for everyone. Thank you.
Moderator/Host, Terna: Thanks, Susie and Francesco. We'll start now the Q and A session. So I kindly ask you to raise your hand and say your name and company. Thank you. Please, Javier, you can switch on your microphone.
Thank you.
Javier Suarez, Analyst, Mediobanca: Thank you for the presentation. Javier Suarez, Mediobanca. Three questions that has to do with maybe a new plan comparison versus the previous one and the financial sustainability of the plan. So the first question is on the plan. The company is increasing debt and is increasing CapEx.
So the question for you is, which is the assumption of higher hybrid emissions to finance the plan? I think that the company, as we speak, has EUR 1,800,000,000.0 of hybrid issue in the market. Why what are you assuming a total number of high risk by 2028 to finance this plan? The second question is related to this financial solidity kind of argument. Can you share with us the EPS CAGR to 2028?
Because obviously on the EPS, we should adjust for the financial cost of the hybrid. So the question for you, you can share with us the EPS growth as well. And the third question is related to the slide on which you are making the presentation of this plan versus the previous business plan. In the previous business plan, the EBITDA margin was at 70%. On the new business plan, it's lower, it's at 64%.
So can you elaborate with us why the EUR 600,000,000 of additional revenues has a lower contribution to the EBITDA? So it's just the philosophy behind this significant increase on revenues that is not targeted into that significant increase on the EBITDA.
Francesco Beccalli, CFO, Terna: Thank you. I think that's all for me. So let's start from the increase in debt and increase in CapEx. The answer is short and easy. The assumption under this business plan is that we will not raise any additional CapEx hybrid capital over the business plan horizon.
Why? You you might remember that we said last year, and we repeat today, that if needed, we are ready in order to protect our rating to use all our hybrid capacity. I remind you that the total amount come accordingly with the methodology of standard and pools, which is the more restrictive one, for, for Terna is at about €4,000,000,000 So we still have 2,200,000,000.0 more or less of additional hybrid capacity to use. Having said that, the positive results of this plant, the additional visibility on future, results allow us to not having the need of issuing additional hybrids also to maintain current threat level. Indeed, if you look at 2024 and you remember what we used to say last year, the left footwinded debt expected was below 14%, whereas whereas now we are above 15%.
And the same applies to all the curve. You will notice that the amount of accumulated net income over the business plan horizon is significantly higher, allowing an higher FFO and therefore to avoid issuance of new hybrids. Therefore, I come to the second questions. The EPS adjusted compounded annual growth rate is basically the same because we are not assuming any additional new, new hybrid additions over the plan the plan period. As far as the EBITDA margin is concerned, it's true the contribution coming from nonregulated activities is increasing.
It's increasing in nominal terms. In percentage term, we are still, I mean, in the era of 5% vis a vis the total EBITDA of the group. And this amount will not materially change over the plan horizon. We still consider non regulated activities as non core for our business. Nevertheless, we are already starting and we plan to do it more and more, leveraging on the fact that we are we have invested in markets which are close to our core business, and therefore close to the energy transition.
So they are now benefiting from the positive trend that is characterizing all the energy transition market. This is the reason why we are planning an increase of more or less €130,000,000 in term of EBITDA, which by definition will imply a higher increase in revenues because the average EBITDA margin for our non regulated business revolve around 15%. So this is mainly the reasons. Let me come back for a second to your question related to also the financial sustainability of the plan because it is consistent with the fact that we consider non regulated activities as non core. This means that they are just are as high risk, flexibility tools that we might use in order to keep the leverage under control and maintain our rating.
Since we are we see a lot of growth potential in those businesses, we do believe that it will be possible in future to monetize some of those businesses, opening the capital of some of those, and doing it in a way with multiples, which are accretive under a rating standpoint, which is the main constraints that we have. We will look at any possibility of monetizing those businesses only if it will be accretive under a rating standpoint.
Moderator/Host, Terna: Please, Bartek.
Bartek Hubitsky, Analyst, Bernstein: Thank you very much. Good evening, Bartek, Hubitsky, Bernstein. Thank you for the presentation. Two sort of general questions and one maybe number of questions, if it's okay. First of all, I would like to ask you about regulatory upsides.
One of the things which to me is a little bit unfair for Terna versus other regulated names in Italy is the remuneration on work in progress, which actually penalizes you for investing more than others. So I wonder what is the upside here to kind of equalize the remuneration on work in progress towards the remuneration of wrap and consequently impacting your earnings and whether you are in any discussions with the regulator regarding this. Second of all, looking at your 10 plan, just two numbers, SEK 23,000,000,000 for ten years, SEK forty billion for the whole CapEx included in the ten year. So I just wonder how long this megatrend of super high investments in transmission will last. So how many years we should actually somehow discount in our models for your growth?
And last number just on just the last question just on numbers. If we look at your '25 guidance on EBITDA net income, it's quite above consensus, more than 100,000,000 on EBITDA at least. So I just wonder what are the moving parts between '24 and '20 '5 that you are assuming such a high increase in EBITDA despite the fact that WACC is decreasing? Thank you.
Francesco Beccalli, CFO, Terna: So I start with the numerical question. As far as regulatory upsides are concerned, well, Bart, we in Italy, we say you have to pick your enemies. And the work in progress remuneration is true that it is penalizing if you compare it with the remuneration of the regulated asset base. But we we cannot forget that it was much more penalizing in the past. You might remember that, the regulator just introduced a new they did it with the introduction of the the resolution, which was introducing the Ross Bauzner mechanism.
They just introduced a new regulation for work in progress, and they did it after, I mean, the consultation also with us because they were basically recognizing the fact that the, basket of CapEx of Terna was evolving over time because the energy transition and the increase in CapEx was leading us to a CapEx plan characterized by a few very big projects, which implies by definition almost automatically an increase in work in progress. So they significantly improved this remuneration. I remember that the the previous remuneration was foreseeing a lower WACC, which was more or less 100 basis point lower than the the remuneration of the RAP, which was lasting for two years, and then which was forecasted to decrease in year three and year four significantly down to also 1% according to a peculiar formula, and it was zero from year five onwards. Now the new remuneration scheme foresee a constant WACC still lower than the one of the RAB, more or less of 100 basis point, that'd be more than 100 basis point. But the amount of working capital is now work in progress, sorry, is now, revalued by inflation.
And the amount is con the tariff is constant for four years, and it can be further extended for additional two years in in, for the project which worth more than €1,000,000,000. So I do agree with you that we can do better as far as the remuneration of work in progress is concerned, but I have to point out the fact that we just obtained a significant result, and we are very, very happy, honestly, with it. Then on top of it, you know that we always try to tell the same story. You it's difficult to look at Italian regulation. Together with the CEO, we always say this thing.
You cannot focus on single specific parameters. You have to look at the regulation as a whole. So you might have to give up something on some items in order to receive a total remuneration, which will allow you to fund the, in a sustainable way, the the the CapEx plan. As far as the
Giuseppe Nadefoge, CEO and General Manager, Terna: Yeah. I'll
Francesco Beccalli, CFO, Terna: release another. Sorry.
Giuseppe Nadefoge, CEO and General Manager, Terna: Okay. Because you asked about the national development plan, the ten years plan with EUR 23,000,000,000 of investment. And linking my answer to what my colleague was saying about Herrera and authority, we have a very positive view of Herrera approach to the ROS system in which we see an opportunity to create further value for the system and for our shareholders. And based on that, we developed our plan. We will continue to work to make the energy transition as for our country, it means enabling the energy independence.
This is why it's really important, it's key to us, and minimizing the costs for, for final consumers. I can add that we want to continue to maintain our risk profile and a solid grade rating level investment grade rating level. We are open eventually to alternative tools, financial tools to keep to maintain our financial solidity, such as public grant. We already used them, for example, the PNRR in the past, and we are using still PNRR or opening the capital of non regulated entities. These are in a few words the concept under our ten years plan.
Please, for the further question
Francesco Beccalli, CFO, Terna: Actually, the main driver of the the the 2025 guidances, the growth in EBITDA in EBITDA is mainly related is only related to regulated activities. I would say that the main component, the the increasing wrap, which is basically capitalizing, and the the fast money. You know that they that we have, the recent the most recent resolution from Herrera, which introduced some changing in the fast monies, lomani recognition, anticipating some value at the 2025. So basically, there are €235,000,000 of difference between EBITDA 2025 that can be explained mostly by regulated EBITDA.
Moderator/Host, Terna: Gonzalo.
Gonzalo, Analyst, UBS: Hoping this works this. Gonzales and Sephardina from UBS. Couple of questions on my side. Just, I mean, the the plan looks very promising, and I just wanted to understand whether you see any any risks on the execution and particularly with, which relates with the execution of the energy transition in general in Italy, whether that could have any impact. I'm assuming no, given that 90% of the plan or the investments are sort of contracted or secured, but I just wanted to get your views on that.
And then the second on the point, that the CEO was making on alternative sources of financing, When do you expect to take a decision on that? I'm assuming whether that is needed or not. And is that something more towards 2028 or something that could happen earlier? Thank you.
Giuseppe Nadefoge, CEO and General Manager, Terna: Okay. So talking about renewables in Italy, you know, the energy transition. To meet the targets set by the national plan for energy and climate, Italy will need additional 57 gigawatts from wind and solar capacity by 02/1930. And to be honest, we are accelerating a lot. As we said, in the last year, the pace of installations has increased three gigawatts added in 2022, almost six gigawatts in 2023, '7 point '5 gigawatts in 2024.
We are continuing to accelerate so to to continue to meet this considerable challenge, lots of efforts and actions are in place. First of all, we have to coordinate the increase in request of renewables connection with an equivalent, let me say, development of the infrastructure. And this is why our plan with all those investments. And, on the other side, we have to continue to to to work with the local administrations, institution to speed up the the authorization You know? And also on that, I can say that we are on the right path, and our plan is strong, solid and safe.
As we we said, 90% has been already authorized. And you have to take into account that 80% has been already covered by existing procurement contract. So let me say that we are also supporting the the increase the the increase of storage capacity to the maximum mechanism. So we are contributing to to to this, let me say, journey to make in Italy the energy transition.
Francesco Beccalli, CFO, Terna: As far as the alternative financing measures of the plan are concerned, sorry for repeating, but I mean, this plan is extremely solid, and it is totally sustainable under a financial standpoint. As I was saying at the beginning of my speech, we think that we will be able to we would be able to maintain and could be able, let's say, to maintain current threat levels without issuing any additional hybrid. Nevertheless, we commit to do so if it will be needed instead. Generally speaking, we have, let's say, four I would say four plus one flexibility tools that we can rely on in order to maintain the rating under control if needed. And again, at the moment, it is not needed, but let me tell you.
I already told you about the noncore activities, which is a potential strong flexibility too, and we already discussed the hybrid. Then we have grants from you. Current plan, just like we used we did for the previous one, is currently assuming a total amount slightly above 1,000,000,000 of grants from from you. To this extent, let me remind you that the same resolution which introduced the the vast money also introduced, improved the remuneration of the, the grants for, for the TSO. Basically, we are now entitled to claim for an amount which goes from 5% to 15% of the amount of the grant that we are able to to lock, and which will be paid in three years' time, spread, starting from the year after the reception of the of the of the grant.
This means that, obviously, we we still have as an objective to increase the wrap, which is our bread and butter. So we want to increase our CapEx, increase the wrap, and get paid out of it. But we cannot forget that if we rely on rents, we will be able to, we will not be able to increase RAP, but the debt will not increase neither, and we will receive financial support, financial incentives. So basically, the ROE of the specific project will be infinite. On top of grants, we also have a more, let's say, qualitative tool, which is which means that we can go through the prioritization of our CapEx plan.
This is an exercise that we did in last, national development plan in order to spread the CapEx over time, prioritizing the one which are really needed under an electrical standpoint. So those are and by the way, if you look at the increasing CapEx of this CapEx plan, we have more or less €1,000,000,000 of increasing CapEx. This €1,000,000,000 is the result of three main factors. On the one hand, an increase in cost in raw material price, by the way, in flash in in a wider term. On the other hand, we had some additional project mainly related to renewal and digitalization, but those effects were partially offset by a prioritization exercise that we made internally in order to spread over time the CapEx which were not, did not have top priority in our under electrical standpoint.
So those are the the four the real four, tool flexibility tools. Then we have the plus one tool, which is to work on the numerator instead of working on the denominator. The CEO was mentioning the fact that we are confident on the fact that the, the upcoming Ross Integral framework will be positive for us. We see it as an opportunity. Generally speaking, let me say that the transi we welcome very favorable the transition from an input based regulatory framework towards an output based one Because we had in the company in this company, we have always had a wealth of knowledge, competencies, skills, informations on the electrical system, which we were not able to make it generating financial value because of the input based regulatory framework.
The transition that the regulator is driving at the moment towards an output based regulatory mechanism, instead, will allow us to unlock this value as we demonstrated with the, results that we obtained with the up to base incentive schemes, which I think we all agree are very positive. So, again, the last flexibility tool is working on the numerator, and I would say that it is the most important one. It's one of the biggest challenge that we have, in the months, years ahead.
Moderator/Host, Terna: So we don't have much time. Last question. Roberto, please.
Roberto Ranieri, Analyst, Stifel: Yes. Roberto Ranieri, thank you. From Stifel, thank you for taking my question. Two questions, please. The first one is a follow-up on the renewable power developments.
And there are some difficulties, especially in terms of authorizations. And 2023, '20 '20 '4 were positive in that way, mainly on solar, but we have some problems with wind capacity development. So and ferics is one of the could be one of the trigger for this development. So my question is, do you see ferics is suffering some difficulties in terms of procedures mainly? So do you see this process, the authorization of ferics and so the speeding up of authorization to come out in the short term term in that way.
So can you give us some idea when the ferics could be completed in terms of procedures? My second question is on CapEx plan. So the 70% of the basically, 70% of CapEx plan is being developed would be developed in 2025, '20 '20 '8 according to my calculations. And so I'm wondering why do you see this CapEx plan to slow down yearly CapEx plan to slow down beyond 2028? Or do you see anyway or your approach is conservative?
And would you see any upside after 2028? Thank you.
Francesco Beccalli, CFO, Terna: As to the Felix's concern, I mean, in mind that, I mean, at Sterna, we are we have been involved in the structuring of the Felix method. It is part of those activities that we do. And as a CFO, I must say that we do it without being paid out of it, but we do it because it, help us in positioning ourselves at the very heart of the electrical system in Italy. And then it's all it also gives us more power when it comes to negotiate our our remuneration. We believe that the ferries will enter into operation by the end of this year.
Honestly, I don't have any precise date to share with you. If you want, I can give you some more details on the MAX mechanism for the storage systems, on which we have also been involved and which will see its first auction starting the 09/30/2025. We do believe that the ferics will realize an attractive business model for investors and developers in order to help the to even accelerate the growth that you were mentioning and we are experiencing in the renewables space, specifically helping and boosting the large scale renewable energy generation plants, which will benefit from the FedEx, from the FedEx scheme. As far as the CapEx plan is as to the dynamic of the CapEx plan, it is the same of the previous plan. And it is mainly related to the fact that we in this plan, we have the entrance into operation of the Terraina Link, which on its own, it is our flagship project.
We we talked a lot about it, and it's worth, €3,700,000,000 So it's it is and it's entering into operation. It is spread over time. Mainly, most of it will enter into operation in 'twenty six and 'twenty seven and a small part in 'twenty in 'twenty eight. So this generates the peak in CapEx that we see in the belly of the curve, basically. As to the future, I come back to what the CEO said.
We can look at the national development plan. We have a sustainable amount of CapEx in the years ahead, and we will manage it through prioritization. I'm sorry. I'm not able to to to to spell this this word. It was the same last year.
I perfectly remember it. So please find me another word, Stefan, for for next time. And but, I mean, the national development plan shows that we do have a consistent amount of CapEx in the coming years, and we will have to deal with it, always taking in our mind the financial sustainability of the plan.
Moderator/Host, Terna: So we are out of time, and the Q and A session is over now. The Investor Relations team is available for any follow-up question you might have. Many thanks for your participation. Please, Jose.
Giuseppe Nadefoge, CEO and General Manager, Terna: Thank you. I'll see you next time, next year hopefully. Okay?
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Written By: Investing.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.