Letter of the Chairwoman and the Chief Executive Officer
The Report we present shows the very positive results achieved by the Terna Group in 2015, both in economic and financial terms, as well as in terms of operations and sustainability. The information it contains does not capture only the company’s performance, but also illustrates the factors underlying the results achieved and the new initiatives set up. First of all, there is the organizational restructuring of the Parent Company, with improved oversight on strategies and on innovation, with the aim of giving Terna the dynamism and flexibility necessary to continue to create value also in the coming years. The company’s future will be characterized by an evolution of the electricity system which will entail a new market design and which will increasingly focus on the development of innovative services and new technologies, with attention to benefits for electricity users and to the problems of climate change.
From this comes the need for Transmission Operators to play a new role in the electricity system, taking grid security as a point of reference and continuing to guarantee high levels of service quality.
During 2015 we achieved all the targets provided for in the previous Plan. Besides acquiring the Ferrovie dello Stato electricity grid, with which Terna consolidated its role as leader among European grid operators, we managed to very successfully complete an important generational turnover project, which enabled us to recruit more than 300 young talents and equip ourselves with a more efficient structure.
The 2015 results confirm the Group’s solid growth trend. Revenue was more than € 2 billion, with 4.3% growth compared to the previous year. EBITDA came out at more than € 1.5 billion, up 3.2% compared to the previous year. Net profit reached € 600 million, up by 9.4%. The investments are in line with the National Transmission Grid Development Plans and with the Strategic Plan and amounted to € 1.1 billion.
Terna was able to make its contribution also to the reduction in the costs of the electricity system, visible in the containment of expenses incurred on the dispatching service market and in further convergence of the zonal prices, keeping the system secure. Proof of this ability was provided on 21 July 2015, when Terna managed to cope with the highest demand ever (59.4 GW, +15.1% compared to the 2014 peak), managing at the same time the production of the approximately 700 thousand renewable plants connected and active in Italy, without losing a single kW of energy.
During 2015, Terna consolidated its cooperation with other grid operators both in the context of international bodies (ENTSO-E), and at the bilateral level, with the signing of a mutual collaboration agreement between Terna and the operator of the French grid RTE. In February 2015, “market coupling” also began on three Italian borders (France, Austria and Slovenia), which simplifies access to the market for the operators and guarantees efficient allocation of the transfer capacity between countries. The operating focus for the creation of the new interconnections provided for in the development plan is also continuing. Their entry into operation will increasingly facilitate the process of integration and coordination with the large continental electricity grids.
Moreover, the Group achieved environmental and social results which were, in some cases, the best ever. Among these, the 14% reduction in direct CO2 emissions (down to 66,799 tonnes) and the growth in the percentage of recyclable waste to 92%. The grid development work enabled the removal from the territory of 98 km of obsolete lines (more than 613 km in the period 2010-2015). Investments in the development of human resources and in workplace safety found expression in the 30% increase in training hours (56 hours per capita in 2015, 43 in 2014), which involved 97% of employees, and in the reduction in occupational injuries, down both in absolute terms and in terms of injury rate and lost-day rate. The gradual improvements on all the sustainability fronts recorded over the last few years earned Terna – on the occasion of the annual revision of the Dow Jones Sustainability indices – recognition as Industry Leader among all the companies of the electric utilities sector.
In 2015 solid foundations were laid for the coming years. In fact, last December the tariff revision process was completed and this will guarantee a visibility of eight years. From 2016 to 2019, the regulatory framework is characterized by substantial methodological continuity with the past and from 2020 provides for the introduction of a new approach, based on the recognition of costs against total expenses (TOTEX). Terna’s team will be focused in the coming months on achieving the targets of the 2016–2019 Strategic Plan. Above all focused on strengthening the core business with electricity grid development – € 3.3 billion the total commitment, of which € 2.6 billion to increase the regulated assets (RAB) – and to integrate the grid acquired from Ferrovie dello Stato.
In addition, the Group will concentrate on the development of Non-Regulated Activities in Italy, on the Interconnector projects and on identifying new opportunities for investment abroad. The commitment to cost excellence will also continue, with the aim of generating further benefits with respect to the previous Plan. We shall pay great attention to cash generation: a cumulative Free Cash Flow of approximately € 2 billion over the period of the Plan will enable us to service the cost of the debt, the dividends and international expansion, with a financial structure which will remain solid.
At the same time, the commitment to sustainability will continue. In particular, we shall pursue the strengthening of our ability to relate positively to all stakeholders, both at the central level and around the country, and we shall continue to invest in training, in safety and in the improvement of our environmental performance. In the context of future challenges, we are reassured by being able to count on the professional quality and values of Terna’s people, who have provided an irreplaceable contribution to past results and who will be fundamental for seizing future opportunities.
CATIA BASTIOLI MATTEO DEL FANTE
The Chairwoman The Chief Executive Officer