Q1 2025 Terna SpA Earnings Call
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Operator: Subs by www.zeoranger.co.uk Good afternoon, ladies and gentlemen, and welcome to Canada's first quarter 2025 Consolidated Results presentation.
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Speaker Change: Good how are you doing ladies and gentlemen, I'll walk up to Tennant's first quarter 'twenty 25 consolidated results presentation.
Operator: At this time, all participants are in listen-only mode.
At this time, all participants are in listen only mode.
Operator: Please be advised that this conference is being recorded.
Speaker Change: Please be advised that today's conference is being recorded.
Stefano Gamberini: I'd like to hand the conference over to your host and speaker today, Mr. Stefano Gamberini.
Speaker Change: I'd like to hand, the call over to your host speaker today, Miss Stephano got Betty having their surveys. Please go ahead sir.
Operator: Heaven's Reservations. Please go ahead. Thank you.
Speaker Change: Thank you.
Stefano Gamberini: Good afternoon, everyone, and welcome. to Terna's first quarter 2025 results presentation. The call will be hosted by our CFO, Francesco Beccali.
Speaker Change: Good afternoon, everyone and welcome.
Speaker Change: Two.
Speaker Change: First quarter 2025, and <unk> presentation.
Speaker Change: Call will be hosted by our CFO Francisco Kelly.
Stefano Gamberini: Following the presentation, we will have the Q&A section, so we kindly ask you to send any questions you might have to our email address. investor.relations and at terna.it. Thank you.
Speaker Change: Following the presentation, we will have the Q&A session.
Speaker Change: So we candidly ask you to send any questions you might have.
Speaker Change: Our email address <unk>.
Speaker Change: <unk> Doctor relations and at.
Speaker Change: <unk>. Thank.
Francesco Beccali: Please, Francesco. Thank you, Stefano, and good afternoon, everybody.
Speaker Change: Please Francesco.
Speaker Change: Thank you Stefano and good afternoon everybody.
Francesco Beccali: 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 the 25th, we presented the update of the 2024-2028 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 plans to invest a total of 16.6 billion euros in the five-year period of 2024-28 to develop and modernize the national electricity transmission grid, marking a historical record level of regulated investment.
Speaker Change: Before start finalize the figure.
Speaker Change: I would like to take a moment to.
Speaker Change: <unk> the main achievements of the first quarter of 2025.
Speaker Change: First of all on <unk>.
Speaker Change: March 25, we presented the update of the 2024 28 industrial plan, we chartered on two investments totaling $17 7 billion, an increase of $1 2 billion compared to the previous blocks.
Speaker Change: These updates strengthened even more tell us at all as a key enabler of the energy.
Speaker Change: You can see <unk> driving equally toward a bigger position and reducing dependency on fortinet energy supply for.
Speaker Change: For what concerns regulated activities.
Speaker Change: There are no plans to invest a total of $16 6 billion euros in the five year period of 'twenty 'twenty four 'twenty eight to develop and modernize the national electricity transmission grid marketing any starting from the record level of regulated investments in this regard let me remind you that.
Francesco Beccali: In this regard, let me remind you that on March 14, TERNA presented the 2025 National Development Plan with over 23 billion euros of investment planned 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. This is an evidence of our ability in streamlining internal processes and of our constructive collaboration with authorities that allow us to reduce approval time.
Speaker Change: On March 14th.
Speaker Change: <unk> represented 2025 National development plan with over 23 billion euros of investment planned over a 10 year time horizon for a safer and more resilient grief on this point I would like to highlight that during the first quarter of 2025 12 projects for the development of the nationals.
Speaker Change: Michelle grid, we're authorized by the Ministry of the environment and energy security and the relevant to reaching out I'm sorry in Q.
Speaker Change: For the total amount of approximately 240 million euros.
Speaker Change: This is an evidence of our ability and streamlining internal processes and Nevada, our constructive collaboration with authorities.
Speaker Change: To reduce approval times about the execution of our projects.
Francesco Beccali: About the execution of our project, let me underline that a few days ago, on May the 8th, we completed the laying of the first submarine cable of the eastern section of the Tirrenian Link, one of the most significant power infrastructure projects in Italy which will connect Campania and Sicily.
Speaker Change: Let me underline that few days ago on May eight we completed delaying of this first in man in cable of the Eastern section objective annual League one of the most significant power infrastructure projects in Italy, which will connect campagna mtc.
Francesco Beccali: About regulation, on March the 27th, ARERA published the Resolution 130, which establishes, for RAB indexation, the transition to the new Italian harmonized index of consumer prices, so-called IPCA Italy, 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 ratings confirmed the long-term rating held by the company, respectively at BAA2 and AAAB+, 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 TERNA at AAB+.
Speaker Change: About regulation on March 27, IRA publishing the resolution 130, <unk>, which establishes for Robyn succession, the transition to the new Italian not amortize indexed as consumer prices, so called RPC, Italy, starting from 2024.
Speaker Change: Placing the gross fixed investment if later as it up.
Speaker Change: From a financial standpoint, let me highlight that following the presentation of thermos 'twenty 'twenty four 'twenty eight industrial plan update Moodys and standard <unk> Poor's global ratings confirmed the long term or anything else by the company, respectively at Beaver Valley, two and try to re class.
Speaker Change: The stable outlook, a notch above underwriting and at that time by the time the Republic.
Speaker Change: Moreover, in Aberdeen standard and poors upgraded the dilemma the long term rating of person at singular items.
Speaker Change: In addition, confirming once again the group's strong commitment to the introduction of modal we changed to reinforce sustainability as a strategic lever for creating value for all its stakeholders in February Paramount issued 750, <unk> million euros green bonds and in March.
Francesco Beccali: 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, Terna issued a €750 million green bond and in March signed an ESG link revolving credit facility for a total amount of €1.8 billion.
Speaker Change: And you know Julien revolving credit facility for a total amount of $1 8 billion units.
Francesco Beccali: Finally, in line with what was set out by our Sustainability Plan, at the beginning of April, we presented Terna Foundation, with the aim of promoting the group's social responsibility to foster greater inclusion and inclusion.
Speaker Change: Finally.
Speaker Change: In line with what set out by our sustainability plan at the beginning of April we presented Terna Foundation with the aim of promoting the group's social responsibility to foster greater inclusion.
Francesco Beccali: And finally, the Italian Electricity Market. We have the opportunity to introduce the Italian electricity market through widespread access to the 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.
Speaker Change: True true.
Speaker Change: Widespread access to world of energy in terms of known awareness and work opportunities.
Speaker Change: With this brief introduction, let me give you the usual overview of the Italian electricity market turning to the next slide.
Yeah.
Francesco Beccali: 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, three 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. Regarding National Lab total production, this stood at 65 TWh, 6% higher than the same period of 2024.
Speaker Change: As you can see from this chart.
Speaker Change: In the first three months of 2025 National demand was about 77 terawatt hours in line with the level of registered last year when national demand was about 78 Terawatt hour.
Speaker Change: In the first quarter of 2025 renewable sources covered about 33% of national dinner three percentage points lower than last year, mainly as a consequence of a decrease in wind production caused by unfavorable unfavorable weather conditions as well as a decrease in hydroelectric.
Speaker Change: Production, mainly because the previous year was a record one.
Speaker Change: Regarding national net total production stood at 65, Terawatt hour, 6% higher than the same period of 2024.
Francesco Beccali: 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.
Speaker Change: 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 seven terawatt hour up 14% versus two.
Speaker Change: The first quarter of last year.
Francesco Beccali: 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 TNL lines and a robust CAPEX group. Indeed, global revenues and EBITDA were up by 5% and 4% respectively, which means €44 million and €24 million higher than the first three months of 2024. We also reported a group net income at €275 million, 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.
Speaker Change: Now, let's move to the main figures of the period.
Speaker Change: In the first three months of the year, we registered solid results at all P&L lines and a robust capex growth.
Speaker Change: Indeed group revenues and EBITDA were up by Skype, and 4%, respectively, which means $44 million and 24 million euros higher than the first three months of 2024.
Speaker Change: We also reported.
Speaker Change: Group net income of 275 million with an increase of 3% versus the same period of last year.
Speaker Change: Group Capex, when a $500 million and 362 million euros, and recording a 16% growth versus the first quarter of last year.
Speaker Change: This confirmed once again, our strong capex acceleration to serve the system needs and enamel between transition in line with our recently presented industrial plan update.
Francesco Beccali: 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 year-end of about 11.2 billion euros.
Speaker Change: Despite this capex acceleration at the end of March 2025, net debt stood at 11 1 billion in line with the value registered at 2024 and after about $11 2 billion.
Francesco Beccali: 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, respectively.
Speaker Change: Now, let me give you a deeper analysis of the figures in the period moving to the next slide.
Speaker Change: Yeah.
Speaker Change: Let's start with revenues analysis.
Speaker Change: Total revenues in the first three months of 2025 increased by five 1%, reaching 902 million euros up by 44 million versus last year.
Speaker Change: The growth was attributable both to regulated and nonregulated activities, which contributed for $25 million and 19 million units respectively.
Francesco Beccali: Let's now go into details of the revenues evolution. 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 static recognition of depreciation related to 2024 capital expenditure, and of the fast money component that on the conventional capitalization rate defined under the ROS application. These elements more than offset the work reduction from 5.8% to 5.5% in 2025 and the lower out-of-base incentives contribution versus last year. Non-regulated international revenues reached 147 million euros, 14.5% higher than last year.
Speaker Change: Let's now go into details of the revenues evolution moving to the next slides.
Speaker Change: Regulated revenues.
Speaker Change: I reached 755 million units up three 4%, which means about 25 million euros more than the same period of last year.
Speaker Change: The increase was mainly driven by rapid growth the impact of 2025 side effect of the mission of depreciation related to 2020 for capital expenditure and of the fast money component that under conventional capitalization rate defined under their application.
Speaker Change: These elements move that offset the work reduction from five <unk> to five 5% in 2025, and nowhere else to get incentives contribution versus last year.
Speaker Change: Non simulated international revenues reached 147 million euros 14, 5% higher than last year nonregulated growth, mainly reflects the higher contribution from the equipment segment of the Blue cables group Indeterminate group International revenues will.
Francesco Beccali: Non-regulated growth mainly reflects the higher contribution from the equipment segment of the Brook Cabots Group and the Tamini Group.
Francesco Beccali: 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.
Speaker Change: Two zero.
Speaker Change: <unk> attributable to the South American subsidiaries I've been classified among asset and four same as in the first quarter of 2024.
Francesco Beccali: 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 the average headcount, partially offset by higher capitalizations, while non-regulated activities were mainly impacted by higher service costs related to the development of activities in energy services and equipment segments and higher raw material costs.
Speaker Change: Now, let's go through operating cost analysis.
Speaker Change: Okay.
Speaker Change: As you can see in the chart.
Speaker Change: Total operating costs stood at 250 million euros, eight 5% higher than last year.
Speaker Change: Regarding regulated activities the <unk>.
Increase was mainly attributable to the right average head count, partially offset by higher capitalizations, while non regulated activities.
Speaker Change: Mainly impacted by either service cost related to the development of activities in the energy services and equipment segments segment and higher raw material costs.
Francesco Beccali: 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 €17M more versus the first three months of last year, showing an EBITDA of €627M in the first quarter of 2025. Also, non-regulated activities contributed to the EBITDA improvement, with a 39% growth versus the same period of the previous year, showing an EBITDA of €25M.
Speaker Change: Let me now analyze EBITDA moving to the next slide.
Speaker Change: Okay.
Speaker Change: Due to the previously mentioned effects first quarter 2025 group EBITDA reached <unk> 652 million euros, 3% a year.
And the same period of last year.
Speaker Change: The increase was mainly attributable to regulated activities, which.
Speaker Change: Each contributed for about 17 million units more versus the first three months of last year, showing an EBITDA of 627 million euros in the first quarter of 2025.
Speaker Change: Also nonregulated activities contributed to the EBITDA improvement.
Speaker Change: 39% growth versus the same period of the previous year, showing an EBITDA of $25 million.
Francesco Beccali: Let's now have a look to the lower part of the PNL, 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.
Speaker Change: Now look to the lower part of the P&L turning to the next slide.
DNA amounted to 219 million euros.
Speaker Change: The increase versus last year was primarily due to the entry into service of new infrastructure.
Speaker Change: As a consequence.
Speaker Change: It reached 433 million euros, three 4% a year versus the first quarter of last year.
Speaker Change: We reported net financial expenses at 59 million.
Speaker Change: The slight increase versus last year of $2 3 million units is mainly caused by the subscription of new loans at higher interest rates compared compared with the average cost of existing ones.
Speaker Change: <unk> was partially offset by higher capitalized expenses.
Speaker Change: Taxes stood at 119 million euros seven.
Francesco Beccali: Taxes stood at 119 million euros, 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 euros, 3% higher versus the same period of last year.
Speaker Change: 7 million higher versus last year, essentially due to the increased profit our tax rate stood at 31% versus 29, 2% in the first quarter of 2024.
Speaker Change: As a result.
Speaker Change: Group net income reached 275 million euros, 3% a year versus the same period of last year. It's.
Francesco Beccali: Moving now to CAPEX analysis, in the first three months of 2025. Total capex amounted to 562 million euros, 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 Tirrenia Link, the Sacoe Free, the Adriatic Link, the modernization of the high-voltage grid in the locations due towards the Winter Olympics in 2026, the Colunga-Galenzano connection, and, last but not least, the investment of the defense plan to enhance voltage control capacity and support grid stability, including synchronous compensators, shunt reactors, and dumping resistor systems. Among CAPEX categories, Development CAPEX represented 56% of total regulated CAPEX, Defense CAPEX stood at 14%, while Asset Renewal and Efficiency was 30%.
Speaker Change: Moving now to Capex analysis.
Speaker Change: In the first three months of 2025.
Speaker Change: Total capex amounted to 562 million euros, 16, 4% higher than last year.
Speaker Change: Confirming the robust acceleration in line with the targets set in the updated investor clients and confirming our determination to drive the energy transition.
Speaker Change: Indeed, we invested about $527 million.
Speaker Change: Regulated activities.
Among the main projects of the period it is worth mentioning the tyranny of links.
Speaker Change: Yes, the reality to leave.
Speaker Change: The modernization of the voltage grid in the locations due towards the Winter Olympics in 2026, the Columbia gallon Sino connections and last but not least the investments of the defense plan to announce voltage control capacity and support grid stability, including synchronous compensator.
Speaker Change: Sean <unk> reactors and dumping resistor systems.
Speaker Change: Among capex categories development Capex represented 56% of total regulated Capex defense Capex stood at 14%, while asset renewal and efficiency was 30%.
Francesco Beccali: Non-regulated and other capital stood at 35 million euros. This includes capitalized financial charges and other investments.
Speaker Change: Nonregulated and other Capex stood at 35.
Speaker Change: This includes capitalized financial charges and other investments.
Javier Hernandez: Javier Hernandez and Cashflow, now it is. Net debt at the end of March 2025 was about 11.1 billion euros, around 34 million euros lower than 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, thanks to which we were able to cover about 86% of the capital spending of the period.
Speaker Change: Regarding the net debt and cash flow analysis.
Speaker Change: Net debt at the end of March 2025 was about $11 1 billion euros around 34 lower million euro slower than 2020 for yearend level, confirming our ability to manage and keep the net debt evolution under control.
Speaker Change: 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 capex spending of the period.
Javier Hernandez: Let's now make a deeper analysis of our debt profile, moving to page 14. 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 risks, 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 60 years.
Speaker Change: Let's now make a deeper analysis of our debt profile moving to page 13.
Speaker Change: Yeah.
Speaker Change: 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.
Speaker Change: And of these first three months of 2025.
Speaker Change: <unk>, our fixed floating ratio on gross debt of about 88% and an average duration of about six years.
Javier Hernandez: In alignment with Terna'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-transit green bond issue for an amount of €750 million, a term of seven years. The bond was issued with a spread of 90 basis points above the mid-swap rate 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.
Speaker Change: In alignment with our strategy will change to combine investment in sustainability to drive growth and value creation.
Speaker Change: Our ambition to play a leading role in the sustainable finance market.
Speaker Change: Indeed in February 3rd and have successfully launched a new single clients Green bond issue for an amount of 750 million units a term of seven years.
Speaker Change: The bond was issued with a spread of 90 basis points above the mid swap rate and will pay an annual coupon.
Speaker Change: Three and one 8%.
Speaker Change: At the end of March 'twenty 'twenty five the senior Green bonds issued by fair amount under its 12 billion Euro medium term notes program.
Speaker Change: And yet to reach maturity amounted to 3 billion euros. In addition to the two perpetual subordinated green bonds issued in February 2022, and enabling 2024 on a standalone basis for a total of $1 85.
Javier Hernandez: Mignogniuro. 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 met 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.
Speaker Change: Numerous.
Speaker Change: Furthermore, let me remind you that he's getting issues are used to finance or refinance eligible green projects.
Speaker Change: These are projects producing environmental benefits that met certain criteria, specifically youre talking about projects that aim to increase the renewable energy production projects designed to cut Q2 emissions by reducing the losses.
Projects are designed to ensure the quality security and resilience of key infrastructure.
Speaker Change: And projects that aim to reduce the land use and protect biodiversity.
Javier Hernandez: Regarding ESG-linked revolving credit facilities, as already mentioned in the beginning of the presentation, on March 21st, Terna signed an ESG-linked revolving credit facility for a total amount of 1.8 billion euros, aimed at refinancing the ESG-revolving credit facility signed in December 2021. The transaction allows Terna to count on a liquidity appropriate to its current credit rating, further strengthening the company's financial structure. Regarding trading 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.
Speaker Change: Regarding ESG linked revolving credit facilities.
Speaker Change: I already mentioned in the beginning of the presentation on March 21st then assign an ESG linked revolving credit facility for a total amount of $1 8 billion euros aimed at refinancing DSG revolving credit facility signed in December 2021.
Speaker Change: The transaction allows them not to count on liquidity appropriate to its current rate credit rating further strengthening the company's financial structure.
Speaker Change: Regarding trading residency needs, let me step stress once again that in March following the presentation of the updated 2020 for transplant in that plan the rating agencies, Moody's and standard <unk> Poor's, both confirmed the company's ratings than in April.
Francesco Beccali: Then, in April, Standard & Poor's announced that it has Thank you for your attention. First of all, Terna will continue to drive Italy's energy transition towards renewables.
Speaker Change: <unk> announced that it had upgraded parallel long term and I think from private with class to a single in Ireland with the stabilized following the upgrade of the sovereign rating the type of decline.
Speaker Change: Thank you for your attention.
Speaker Change: Thanks.
Speaker Change: First of all we continue to drive the Italy as you transition towards renewables.
Francesco Beccali: Thank you very much. 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 community. 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 agency.
Speaker Change: Focusing on enhancing with quality, while reducing our reliance on imported energy services.
Speaker Change: Strategic investments in mill expansion will support the growing demand for electricity and the efficiency integration of renewable energy.
Speaker Change: The same time, we are strengthening the resilience and security of the infrastructure, enabling the energy transition and ensuring system stability.
Moreover.
Speaker Change: We will also continue to guarantee value creation for our shareholders and communities.
Speaker Change: Focusing on the execution of projects included in our updated 2024 28, and that's our plan for which we are well on track both in terms of authorizations and procurement.
Speaker Change: Finally as reiterated during the presentation of the 2024 28 industrial plan update we remain confident in our ability to deliver a strong set of results, while preserving financial stability and maintaining a low risk profile is also confirmed by the net proceeds received from the agencies in.
Francesco Beccali: In the first quarter of 2025, we demonstrated, once again, our ability to deliver solid results and a robust cap and screw. Therefore, we confirmed all the targets provided two months ago.
Speaker Change: The first quarter of 2025, we demonstrated once again, our ability to deliver solid results and a robust capex growth. Therefore, we confirm all the targets provided two months ago.
Francesco Beccali: Thank you for your attention.
Speaker Change: As you for your attention we are now ready for the Q&A session.
Stefano Gamberini: We are now ready for the Q&A session. Thank you, Francesco. Now we can move to the Q&A section.
Francesco: Thank you Francesco now we can move to the Q&A section.
Operator: Let's start with some figures.
Speaker Change: Let's start with some figures.
Speaker Change: Francesco could you give us more detail about how many output based incentives has been accounted in the first quarter and then any guidance on the <unk> for the full year 'twenty five.
Francesco Beccali: Francesco, could you give more details about how many out-of-base incentives have been accounted for in the first quarter, and any guidance on the OBIs for the full year 2025? Sure, Stefano. In Q1-25 revenues, there is no contribution coming from the out-of-base incentives related to dispatching services, OBIs or inter-zone incentives. These incentives will be recognized during the year when there will be the certainty in line with accounting principles.
Francesco: Sure Stefan in Q1, 'twenty fives and revenues.
Francesco: There is no contribution coming from the output based incentives relating related to dispatching services or the ice or internal incentives. These incentives will be recognized during the year. When there will be certainty in line with accordion principles accounting principles.
Francesco Beccali: With the reference to full year, our overall expectations reflect the update in the performance estimates for 2025, which we expect will allow to book incentives over €550 million.
Francesco: With reference to full year, our overall expectations reflect the updated updating the performance estimates for 2025, which we expect will allow us to book incentives over $50 million.
Francesco: Now again on <unk>, what are your expectations regarding the evolution of out of base incentives over 2025 28 year yet.
Francesco Beccali: Now again on OBIs, what are your expectations regarding the evolution of out-of-base incentives over 2025-2028 period? The industrial plan update assumes about €550 million cumulated in the 2025-2028 period, back-ended loaded, mostly referring to ancillary services market incentives.
Francesco: The industrial plan update assumes about 550 million numerous cumulated in the 2025.
Francesco: 2008 period back ended loaded.
Francesco: Mostly referring to ancillary services marketing incentives.
Francesco Beccali: Is there any increase in capitalized costs year-on-year in the first quarter of 2025? On this point, let me say that in the first quarter we registered a slight increase in capitalized personal costs versus the first quarter of last year, mainly following higher investments in the period.
Francesco: Okay.
Francesco: There any increase in capitalized cost <unk> in the first quarter 'twenty five.
Francesco: On this point, let me say that in the first quarter, we registered a slight increase in capitalized personnel cost versus the first quarter of last year.
Francesco: Mainly following a year investments into pediatrics.
Francesco: Going now to recent regulatory update can you. Please comment about regulators. So a solution on the shift from <unk> to the <unk> index of consumer prices for the Rab indexation.
Francesco Beccali: Going now to recent regulatory updates, can you please comment about regulators' resolution on the shift from the deflator to the harmonized index of consumer prices for the RAAB indexation? First of all, let me say that the outcome of the resolution is positive on our end. Since HICP demonstrates to be a more stable and predictable parameter compared to the Flator for Gross Fee Investment.
Francesco: First of all let me say that the outcome of the resolution is positive in our view.
Francesco: Seen chip <unk>.
ICP demonstrates can be a more stable and predictable parameter compared to the flatter for crushing seat for gross fixed investment.
Francesco Beccali: These results were already part of the assumptions on our business plan update, so no impact on estimates since it was already included in our guidance.
Francesco: This result was already part of the assumptions on our business plan update so no impact on estimates since it was already included in our guidance in Q.
Speaker Change: What are your expectations about integrally framework implementation when could we expect the first consultation document about it.
Francesco Beccali: What are your expectations about the Earth Integrale framework implementation?
Francesco Beccali: When could we expect a first consultation document about it? As we always say, we have a positive view of Arenda's approach to the Rost system, in which we see an opportunity to create further value for both the electricity system and our More visibility will come from the RISConsultation.co document that we expect to be published in the upcoming weeks.
Francesco: Okay.
Francesco: As we always say if we have a positive view on Friday at his approach there are system in which we see an opportunity to create further value for both the electricity system and our shareholders more visibility will come from the rest consultation document that we expect to be published in the upcoming weeks.
Francesco Beccali: Now, on the WAC, which are your latest expectations with respect on the update in WAC for 2026? As of today, it is too early to assess if the threshold for the potential WAC update at the end of the year will be met. Since you know that the observation period will conclude at the end of September 2025.
Francesco: Now on the walk which are your latest expectation with respect on the update in walk for 2026.
Francesco: As of today. It is too early to assess is the threshold for the potential work update at the end of the year will be met.
Francesco: Since you know that.
Francesco: The observation period will conclude at the end of September 2025.
Francesco Beccali: Anyway, according to the latest market-to-market calculations, WACC value is still below the threshold of 30 basis points, so for 2026, at the moment, we do not expect a change in the regulatory WACC compared to the current value of 5.5%.
Francesco: The way according to the latest mark to market calculation.
Francesco: Worldwide value is still below the threshold of 30 basis points. So from 2026 at the moment, we do not expect a change in the regulatory work compared to the current value of five 5%.
Francesco Beccali: Moving now on the energy scenario and the operation. Could you provide an update on new requests of connection from data centers? Sure, Stefano. In Italy, the connection request to the grid associated to the construction of data centers have experienced a strong growth in recent years. As of March the 21st of 2025, the total high voltage connection request reached approximately 42 gigawatts, with around 257 active requests.
Francesco: Moving now on the energy scenario and <unk> operations.
Francesco: Could you provide an update on new requests of connection.
Francesco: From data centers.
Seth: Sure Seth.
There is no connection request to the grid associated to the concession of data centers have experienced strong growth in recent years as of March 21 of transplant five the total high voltage connection requests reached approximately 42 gigawatt with around 257 Act.
Seth: Great.
Speaker Change: Recently, a new Interconnector between Greece, and Italy has been announced is it included in your Capex guidance could you provide more details about these projects. Please.
Francesco Beccali: Recently, a new interconnector between Greece and Italy has been announced. Is it included in your CAPEX guidance? Could you provide more details about this project, please?
Seth: Sure.
Francesco Beccali: So, the newly announced HVDC-Summan Interconnection between Italy and Greece will increase the integration of the two countries' electricity markets and diversify supply sources, enhancing energy security and reinforcing the role of Italy and Greece as electricity hubs in the Mediterranean region. The project, jointly developed between Terna and the Greek TSO IPTO, foresees one gigawatt link spanning 300 kilometers, including 240 kilometers of undersea cable. This project is already part of the 2024-10 year development plan, while not included in the 2024-28 update of the industrial plan, the CAPES guidance, since the project will be developed after the business plan arrives.
Seth: The newly announced <unk> money into collection.
Seth: Italy, and Greece will increase the integration of the two countries electricity markets and diversify supply sources, enhancing energy security and reinforces the role of Italy, and Greece as electricity ops in the military in our region.
Seth: The projects jointly developed repair between terna and the Greek GSO IPO.
Foresees, one gigawatt link spanning 300 kilometer included 140 kilometer of cable of undersea cables.
Seth: This project is all is already part of 2024 10 year development plan, while not included in the 'twenty 'twenty four 'twenty eight update of the industrial plan. The Capex guidance since the project will be developed after the business plan are either.
Seth: Yes.
Francesco Beccali: Do you have any update on Maxi Auction?
Speaker Change: Do you have any update on Max at auction.
As to the Max.
Francesco Beccali: As to the Maxxair, let me recall that it is a market-based long-term mechanism for the development of a new electricity storage system in Italy. After carrying out a system needs assessment, Terna also requires actions to procure the required volume of storage capacity. After each auction, Terna offers to the selected developers a long-term contract where, on the one hand, they are required to build the storage facility during the lift period. On the other hand, for the entire period of delivery, they will be entitled to the payment of a yearly premium meant to cover both fixed costs and remunerate the cost of capital.
Speaker Change: Let me vehicles and it is a market based long term mechanisms. So the development of new and increased storage systems.
Speaker Change: After carrying out a system needs assessments.
Speaker Change: Also requiring auctions to procure the required volume of storage capacity.
Speaker Change: As Trish auction now.
Speaker Change: Through selected developers.
A long term contract where.
Speaker Change: On the well and they are required to build the storage facilities are structured.
Speaker Change: <unk> during the period on the other hand softly.
Speaker Change: <unk> of deliveries.
Speaker Change: [laughter].
Speaker Change: We will be entitled to the payment to the payment of yearly premium meant to cover both fixed cost or ameliorate the cost of capital.
Francesco Beccali: And then they are also required to make the storage facility available to the system and pay Terna the difference, if positive, between the ancillary services market price and the strike price.
Speaker Change: And then they are also required to make the storage facility available to the system and not the difference if positive between the ancillary services market price and strike price there.
Francesco Beccali: The first Storage Capacity Auction will take place next 30 December 2025, with the delivery period in 2028. In this auction, 10 GWh of new capacity from lithium-ion batteries will be procured. The annual cost of the mechanism will depend on the total quantity procured and on the price of each auction. Auction Cap will be defined by ARERA.
Speaker Change: First storage capacity auction will take place next 30 30 December 35.
Speaker Change: The delivery period in 2028 in these auctions.
Speaker Change: One gigawatt hour of new capacity from EQM iron batteries will be procured the annual cost of the mechanism will depend on the total quantity procured and on the price of each auction auction cap will be defined by area.
Speaker Change: Okay.
Speaker Change: Now do you see any risk from USA ties to tennis procurement.
Francesco Beccali: Now, do you see any risk from USA tariff to Ternas procurement? Let me say that we do not see many direct impacts from U.S. studies, as the share of our supplies manufactured in the U.S. is negligible.
Speaker Change: Let me say that we do not see many direct impacts from U S studies.
Speaker Change: The share of supplies manufactured in U S is negligible.
Francesco Beccali: Clearly, we expect that as a consequence of your studies, we will face more potential shortages and bottlenecks in the supply chains affecting the industry. We manage the risk by implementing various actions to handle possible issues efficiently. So, on the procurement side, let me remind you that we are well on track since we have already secured almost all the procurement needs until the end of 2025.
Speaker Change: Clearly, we expect that as a consequence of your studies, we will face more potential shortages on bottom and bottlenecks in the supply chain affecting the industry, we manage the risk by implementing value sections 200 possible issues efficiently.
Speaker Change: So on the procurement side, we are let me remind you that we are well on track since we have already secured almost all the procurement needs until the end of 2025.
Francesco Beccali: Lastly, what risk does Italy have of suffering a blackout like in Spain? Regarding this topic, first, I would like to underline that despite the impact of the blackout in the Iberian Peninsula, The Italian electricity grid maintains stability and corrects functions. This was made possible thanks to the robustness of the system and the adoption of defined protocols for managing emergency situations.
Speaker Change: Okay, Lastly, luxuries that Italy head of suffering a blackout like in Spain.
Speaker Change: Yes.
Regarding this topic.
Speaker Change: Firstly I would like to underline that despite the impact of the blackout in the Iberian Peninsula.
Speaker Change: The Italian increased degreed, maintaining stability and cardiac function.
Speaker Change: This was made possible thanks to the robustness of the system.
Speaker Change: Adoption of defined protocols of managing emergency situations.
Francesco Beccali: In this context, let me say that the European electricity system in which the Italian electricity system participates is very complex and it is impossible to rule out every potential risk. However, the Italian electricity system has been in the subject of numerous investments in grid security carried out by Terna to enhance its robustness through the so-called defence plan, in which tools and processes are defined to face emergency situations. In fact, Terna has made significant investments in the security of the electricity system, and in Italy there is a regulation introduced after the 2003 blackout. which requires the TSO to submit the security plan for the National Electricity System on an annual basis.
Speaker Change: In this context, let me say that the European business.
Speaker Change: System in which the Italian electricity system participants is very complex.
It's impossible to rollout every potential risk however, the timeline entities here.
Speaker Change: Has been the subject of numerous investments in grid security.
Speaker Change: Carried out by terna to enhance its robustness. So theres two call defense plan in which tools and processes are defined to face the emergency situations.
Speaker Change: In fact.
Speaker Change: Fair enough I have made significant investments in the security of the electricity system in Italy is a regulation introduced after the 20.
Speaker Change: Two or three blackout.
Speaker Change: Which required the tier show to submit to the security plan for the National electricity system on an annual basis.
Francesco Beccali: This plan is approved by the Ministry of Environment, Energy and Security, so-called MASE. In this regard, the latest security plan submitted in May 2024 foresees over 1.3 billion euros in investments for the 2024-27 period. And in the update of the industrial plan presented last March, Terna announced the increase of investments included in the security plan up to 2 billion euros for the 2025-2028 period, which considers the recent developments concerning the increase in renewables penetration. Finally, in addition, there is a mature regulatory framework for renewable energy sources in Italy regarding the contribution these sources must also provide to the stability and balancing of the Very well.
Speaker Change: Plan is approved by the Ministry of environment and energy security so called market.
Speaker Change: In this regard the latest security plans submitted in May 2024, foresees over $1 3 billion euros in investments for the 2024 2007 period and in the update of the industrial plan presented last March.
Speaker Change: The increase of investments included in the security plan up to 2 billion euros for the 2025 2000 28 billion, which considers recent recent developments concerning the increase in revenue almost penetration.
Speaker Change: Finally in addition, there is a module regulatory framework for renewable energy sources in Italy regarding the contribution the surface must also provides to the stability and balancing of the system.
Speaker Change: Thank you Francesco the Q&A section is now over.
Operator: The Q&A section is now over. Many thanks, everyone.
Speaker Change: Many thanks, everyone.
Operator: The IR team remains available for any further requests you might have. Thanks, everybody.
Speaker Change: The IR team remains available for any further request you might have.
Speaker Change: Okay fantastic.
Speaker Change: Thanks, everybody see you for the first half results.
Operator: See you for the first talk with us. Good evening.
Speaker Change: Good evening.
Speaker Change: Okay.