Statement from senior management

Catia Bastioli
Chairwoman
Luigi Ferraris
Chief Executive Officer
Terna has a responsibility towards the entire community, both in its daily operations and over the medium to long term.

Our operating performance in 2018 – focusing on development projects and stakeholder engagement - demonstrates Terna's ability to combine the goals of achieving economic and financial strength and creating value for our shareholders with the need for a safe, efficient and sustainable electricity grid for Italy.

Highlights

OUR PERFORMANCE

FINANCIAL
Performance economico-finanziarie
SHARE PRICE
Performance economico-finanziarie
OPERATIONAL
Performance economico-finanziarie
ENVIRONMENTAL
Performance economico-finanziarie
PEOPLE
Performance economico-finanziarie
SOCIAL
Performance economico-finanziarie

Our environments

International climate and energy agreements have set an emissions target aimed at keeping the rise in global temperature below 2°C compared to the pre-industrial level. A recent study conducted by the Intergovernmental Panel on Climate Change (IPCC) officially announced that global warming is already within the range of 0.8 to 1.2ºC, with a rising trend of 0.2ºC per decade. To mitigate this trend,the global economy needs to commit to cutting its carbon intensity by 6.4% per year until 2100, with progressive decarbonisation of the electricity sector together with an accelerated decoupling of economic growth and energy consumption. At international level, the UN Sustainable Development Goals (SDGs) and the European Union’s Clean Energy Package indicate – in line with the targets set out in the COP21 Agreement – the path to take in order to build and energy system based on renewable sources. In 2017, the Italian government approved the National Energy Strategy (SEN) and, at the end of 2018, drew up a Proposal for an Integrated National Plan for Energy and Climate (PNIEC). Find out more
Regulated revenue, which represents approximately 86% of the Group’s total revenue, mostly derives from transmission and dispatching, subject to regulation by the Regulatory Authority for Energy, Networks and the Environment (ARERA). In a number of resolutions published in 2015, ARERA set the tariff regime for electricity transmission, distribution, metering and dispatching services and regulations regarding the quality of the transmission service for the 2016–2023 regulatory period (the fifth regulatory period). The regulator also announced the procedure for determining and revising the Weighted Average Cost of Capital (WACC) applicable to infrastructure services in the electricity and gas sectors. The WACC the period 2019-2021 has been set at 5.6%. This is a vital element in guaranteeing revenue stability, a key factor in enabling Terna to complete the substantial investment programme needed to meet the challenges of the energy transition. Find out more
A favourable social environment is essential to Terna’s ability to carry out the investments envisaged in the Grid Development Plan within the established time-scale and to exploit available opportunities for our Non-regulated business, in Italy and overseas. For this reason, right from the initial planning phase of grid development initiatives, Terna reaches out to local communities in the areas where they will be implemented, involving local institutions (regional and local authorities, park authorities, etc.) and, for a number of years, citizens via public meetings called “Terna incontra” (207 such meetings were held in 2018). This approach to “participatory development” enables us to inform stakeholders of the need for grid development and to listen to the views of local people, helping to find the best location for the infrastructure and creating the conditions for an increasingly sustainable national electricity grid. Find out more

The business model

image/svg+xml ACTIVITIES ROLE ENABLERS VALUE CREATION SYSTEM EFFECTS INNOVATION PEOPLE International Non-regulated Regulated Italy T R A N S I S S I O N DISPATCHING Transmission Operator System Operator REGULATORY FRAMEWORK M I S S I O N Guaranteeing a secure quality national electricity system Operating efficiency grid integration and digital transformation M LOCAL COMMUNITIES CLIMATE CHANGE DIGITAL TRANSFORMATION A key role in the ENERGY TRANSITION Value for money Shareholder value Risk control Resilience Grid development and maintenance Checks on the impact of our activities Quality of service CONTRIBUTION TO ACHIEVING THE UN’S SDGs GROWING INTEGRATION OF RENEWABLES PROGRESSIVE DECARBONISATION BUSINESS STRATEGY SUSTAINABILITY

Strategic Plan 2019-2023

Sustainability indices

Green finance

Green Bond
16 July 2018: Terna successfully launched a fixed-rate green bond issue amounting to €750m (in January 2019 this was increased to €1bn). The bonds have a term to maturity of 5 years and pay coupon interest of 1%.
Revolving Credit Facility
24 September 2018: Shortly after achieving the highest ranking among the world’s electric utilities in the Dow Jones Sustainability Index 2018, Terna entered into a committed ESG-linked back-up Revolving Credit Facility, with a value of €900m, with a pool of banks.
Green Bond 2
3 April 2019: Terna launched a new green bond issue worth €500m. The issue was very well-received by investors, with the bonds being seven-times oversubscribed. The securities have a 7-year term and pay a coupon of 1%.

Materiality matrixes

Ethics and governance model
EG1: Alignment with best governance practices
EG2: Business integrity
Transmission service
ST1: Sustainable NTG planning
ST2: Electricity market integration
ST3: Quality, security and service continuity
ST4: Reduction in cost of electricity service
Management of environmental impacts
GA1: Mitigation of visual impact
GA2: Protection of biodiversity
GA3: Management of electromagnetic fields
GA4: Reduction of the Group’s environmental footprint
Business Management
BM1: Strategic approach to stakeholder management
BM2: Compliance with financial targets
BM3: Prudent risk management
BM4: Choice of investments and conformity with plan
BM5: Engagement with local stakeholders
BM6: Business and development and diversification
BM7: Monitoring of environmental and social aspects of the supply chain
BM8: Innovation and research
People and community
PC1: Health and safety and correct labour practices
PC2: HR development
PC3: Promotion of wellbeing within the Company
PC4: Promoting diversity and equal opportunities
PC5: Social responsibility and positive impact on local communities

Historical data

Years

years

Series data