Terna S.p.A. (TERRF) Q2 2025 Earnings Call Transcript

Terna S.p.A. reported strong financial performance for H1 2025, with revenues, EBITDA, and net income all increasing by approximately 8% year-over-year to EUR 1.894 billion, EUR 1.36 billion, and EUR 588 million respectively. The company achieved a record CapEx of EUR 1.319 billion, up 27%, underscoring its accelerated EUR 17.7 billion 2024-2028 investment plan aimed at enhancing grid resilience, integrating renewables, and supporting Italy's energy transition, including key projects like the Tyrrhenian and Adriatic Links. Terna successfully secured EUR 1.5 billion in financing for the Adriatic Link and launched a EUR 750 million green bond with significant market demand, while credit ratings were affirmed or upgraded (S&P A-, Moody's Baa2 positive outlook). The company confirmed its full-year 2025 guidance, highlighting its strategic role in meeting future electricity demand, notably from data centers, and leveraging digitalization for grid stability.

Analysis

Terna S.p.A. delivered a strong performance in H1 2025, with revenue, EBITDA, and net income all growing by approximately 8% year-over-year to €1.894 billion, €1.36 billion, and €588 million, respectively. This growth is underpinned by an expanding Regulated Asset Base (RAB) and supports a significant acceleration in capital expenditure, which reached a record €1.319 billion, a 27% increase from H1 2024. The results validate the execution of the company's ambitious €17.7 billion investment plan for 2024-2028, which is central to Italy's energy transition and grid modernization. Despite an increase in net debt to €12 billion to fund this growth, Terna's financial profile remains solid, as affirmed by an S&P rating upgrade to 'A-' and a positive outlook from Moody's on its 'Baa2' rating. The company has demonstrated strong access to capital, evidenced by a heavily oversubscribed €750 million green bond and a new €1.5 billion financing facility for the Adriatic Link project. Management has proactively de-risked its plan, with procurement contracts now covering 85% of the CapEx through 2028. The company has confirmed its full-year 2025 guidance, with future growth supported by the predictable regulatory framework and burgeoning electricity demand from data centers, for which connection requests have accelerated to 50 gigawatts.

Key Decisions for Investors

• Given the strong execution on a de-risked, multi-year CapEx plan and confirmed 2025 guidance, investors may consider the stock a stable holding for exposure to the regulated European utility sector and energy transition theme.
• Monitor the evolution of the WACC parameters through the end of September 2025, as a potential regulatory update could materially impact future earnings, with the company noting the change is currently close to the trigger threshold.
• Pay close attention to future regulatory announcements regarding the ROSS integral framework, as the implementation of new output-based incentives could provide a significant earnings catalyst not yet fully priced in.
• The rapid growth in data center connection requests serves as a key indicator for future electricity demand, and investors should track this metric as a validation of the long-term necessity for Terna's grid expansion investments.