The value creation process (business model)
Terna’s value creation
The 2024 Report on Operations illustrates the Terna Group’s ability to create value over time through a Sustainable business model based on the interaction between tangible and intangible capital available to the organisation. Its proper functioning is constantly monitored, metered and reported through specific financial, operational, social and environmental indicators.
The Terna Group’s process for creating value over time32 is guided by a Governance oriented towards sustainable success that aims to define and implement a clear medium- and long-term strategy. Based on the guidelines contained within the 2025 Development Plan and the 2024-2028 Industrial Plan Update, this strategy aims to foster and realise an energy and digital transition that also takes into account social impacts (a so-called just transition). Crucial to the achievement of this strategic objective is the correct allocation of resources, undertaking investments that aim to enhance and improve the efficiency and resilience of the National Transmission Grid (NTG) while ensuring an adequate assessment and management of economic and financial risks, including those of an ESG nature connected to the business, and of the possible opportunities related to them. In presenting its business model and any updates, among other things the Terna Group takes into account the impacts, risks and opportunities associated with significant areas of activity that could potentially occur in its own operations or those related to the value chain, in order to make it more resilient and adaptable to changes in the external context.
In line with the enabling factors of the 2024-2028 Industrial Plan Update, the Terna Group’s business model is structured into two main distinct areas of activity (Regulated Activities and Non-regulated Activities) that correspond to the core business (Electricity Transmission and Dispatching) and the complementary strand that operates in the free market, with a new structure for the Terna Group’s market subsidiary that integrates diversified skills along the entire energy value chain for the design, engineering, operation and maintenance of solutions for the energy market (Non-regulated Activities). For an understanding of the Group’s business model in the year 2024 and the related costs and revenues associated with the business segments, please refer to Note C “Operating Segments” of the Consolidated Financial Statements.
The capitals represent the essential resources at the Terna Group’s disposal to create and preserve value over time through their continual combination and interaction, both within the Company and with the outside world, including in the latter the legitimate needs and expectations of stakeholders. Capital plays a fundamental role within the value creation process since it is an input of the process, measurable from one year to the next (on the left side of the infographic), an output, to be understood as the set of products, services, by-products and waste of an organisation33 (in the central part of the infographic), and an outcome, to be understood as the process’s ability to increase new resources and ensure their transformation in line with the objectives set by the Terna Group (on the right). As mentioned above, the capital that the Terna Group considers to create value and achieve its corporate objectives is both tangible – specifically, financial capital and infrastructure capital, represented by all of Terna’s assets – and intangible – specifically, intellectual capital, human capital and social-relational capital.
Indeed, of all the intangibles intellectual capital is the most versatile, in fact its quality and robustness – and thus its capacity to create value – intersects with human capital, social capital and relational capital. To drive the Energy Transition, a continuous analysis and proper management of big data are essential, with their integrity safeguarded by robust cyber security processes and a reliable electricity system. Its operation is further ensured by innovation and digitalisation processes, enabling the ability to tackle the challenges and uncertainties of an increasingly complex external environment. For more information on this see the “Value creation strategy - Innovation strategy” section of the Report on Operations, the “Governance information” section of the Consolidated Sustainability Statement and Note 15 - Intangible Assets of the Consolidated Financial Statements.
With regard to human capital, its quality is crucial for the company’s growth, and consequently for fuelling the creation of value over time. People, with their basic education, skills developed and consolidated over time, managerial skills, motivation, loyalty and sense of belonging, are a central element of all company activities, and it is necessary to guarantee respect for their rights. For more information on this, see the “Social information” section of the Consolidated Sustainability Statement.
Finally, with regard to social-relational social capital, its quality is dependent on the Group’s ability to listen to its stakeholders, considering their interests and analysing their compatibility with its business objectives. For more details on this, see the “Sustainability Context” section of the Consolidated Sustainability Statement.
The representation of the business model by capital allows the Terna Group to emphasise the outputs and related outcomes generated, highlighting the benefits that its stakeholders enjoy both from a financial point of view, in terms of economic returns linked to the investments made, and from the point of view of the social-relational and environmental impacts produced. In this regard, and more generally in making strategic and operational decisions, the Terna Group uses knowledge and data such as:
• market data, such as analyses of demand and industry trends;
• legislative requirements and industry standards;
• internal company performance reports/operational KPIs.
The Terna Group’s process for creating value over time32 is guided by a Governance oriented towards sustainable success that aims to define and implement a clear medium- and long-term strategy. Based on the guidelines contained within the 2025 Development Plan and the 2024-2028 Industrial Plan Update, this strategy aims to foster and realise an energy and digital transition that also takes into account social impacts (a so-called just transition). Crucial to the achievement of this strategic objective is the correct allocation of resources, undertaking investments that aim to enhance and improve the efficiency and resilience of the National Transmission Grid (NTG) while ensuring an adequate assessment and management of economic and financial risks, including those of an ESG nature connected to the business, and of the possible opportunities related to them. In presenting its business model and any updates, among other things the Terna Group takes into account the impacts, risks and opportunities associated with significant areas of activity that could potentially occur in its own operations or those related to the value chain, in order to make it more resilient and adaptable to changes in the external context.
In line with the enabling factors of the 2024-2028 Industrial Plan Update, the Terna Group’s business model is structured into two main distinct areas of activity (Regulated Activities and Non-regulated Activities) that correspond to the core business (Electricity Transmission and Dispatching) and the complementary strand that operates in the free market, with a new structure for the Terna Group’s market subsidiary that integrates diversified skills along the entire energy value chain for the design, engineering, operation and maintenance of solutions for the energy market (Non-regulated Activities). For an understanding of the Group’s business model in the year 2024 and the related costs and revenues associated with the business segments, please refer to Note C “Operating Segments” of the Consolidated Financial Statements.
The capitals represent the essential resources at the Terna Group’s disposal to create and preserve value over time through their continual combination and interaction, both within the Company and with the outside world, including in the latter the legitimate needs and expectations of stakeholders. Capital plays a fundamental role within the value creation process since it is an input of the process, measurable from one year to the next (on the left side of the infographic), an output, to be understood as the set of products, services, by-products and waste of an organisation33 (in the central part of the infographic), and an outcome, to be understood as the process’s ability to increase new resources and ensure their transformation in line with the objectives set by the Terna Group (on the right). As mentioned above, the capital that the Terna Group considers to create value and achieve its corporate objectives is both tangible – specifically, financial capital and infrastructure capital, represented by all of Terna’s assets – and intangible – specifically, intellectual capital, human capital and social-relational capital.
Indeed, of all the intangibles intellectual capital is the most versatile, in fact its quality and robustness – and thus its capacity to create value – intersects with human capital, social capital and relational capital. To drive the Energy Transition, a continuous analysis and proper management of big data are essential, with their integrity safeguarded by robust cyber security processes and a reliable electricity system. Its operation is further ensured by innovation and digitalisation processes, enabling the ability to tackle the challenges and uncertainties of an increasingly complex external environment. For more information on this see the “Value creation strategy - Innovation strategy” section of the Report on Operations, the “Governance information” section of the Consolidated Sustainability Statement and Note 15 - Intangible Assets of the Consolidated Financial Statements.
With regard to human capital, its quality is crucial for the company’s growth, and consequently for fuelling the creation of value over time. People, with their basic education, skills developed and consolidated over time, managerial skills, motivation, loyalty and sense of belonging, are a central element of all company activities, and it is necessary to guarantee respect for their rights. For more information on this, see the “Social information” section of the Consolidated Sustainability Statement.
Finally, with regard to social-relational social capital, its quality is dependent on the Group’s ability to listen to its stakeholders, considering their interests and analysing their compatibility with its business objectives. For more details on this, see the “Sustainability Context” section of the Consolidated Sustainability Statement.
The representation of the business model by capital allows the Terna Group to emphasise the outputs and related outcomes generated, highlighting the benefits that its stakeholders enjoy both from a financial point of view, in terms of economic returns linked to the investments made, and from the point of view of the social-relational and environmental impacts produced. In this regard, and more generally in making strategic and operational decisions, the Terna Group uses knowledge and data such as:
• market data, such as analyses of demand and industry trends;
• legislative requirements and industry standards;
• internal company performance reports/operational KPIs.
The Terna Group’s value chain
In order to provide as exhaustive a representation of the Group’s business model as possible, a mapping of the value chain was carried out in 2024 considering three macro-phases relating to upstream activities, operations carried out directly by the Group and those carried out downstream. The mapping also takes into account the main actors in each of these phases.
Specifically, the activities upstream in the value chain take into account the procurement of materials and finished products required for the production processes of the Subsidiaries and for the Group’s activities in general, and the procurement of labour from third-party companies (through labour and service contracts). The main actors in this phase therefore include suppliers of materials and finished products and contractors. Given the specificity of the Group’s business, which is characterised by the need to perform maintenance in a short timeframe while guaranteeing the safety of the electricity system, among the supply contracts there is a prevalence of purchases of works (as opposed to supplies and services) and of national operators. The use of local suppliers also reduces the costs of transporting bulky and heavy materials and contributes to the reduction of its environmental impact34.
The phase relating to own operations is in turn subdivided into:
• Planning: identification of the structural modifications necessary for the transmission system to optimally fulfil its function of safely and economically transporting the energy produced from the production areas to the distribution and load centres. Also included are activities related to the design of photovoltaic systems based on customer requirements;
• Development: grid development activities, and on the other hand the production of finished products required for grid development, such as transformers and high-voltage power cables and the construction and implementation of photovoltaic plants;
• Maintenance: preventive and corrective maintenance of electrical lines and substations through regular inspections and repair work to prevent and solve malfunctions, and maintenance of photovoltaic installations through the repair and regeneration of photovoltaic inverters;
• Provision of products and services: energy dispatching aimed at ensuring that the demand for electricity is always balanced by the energy produced by power plants through the coordination of production plants and the management of emergencies for the proper functioning of the electricity system. Also included in this sub-phase are consulting and the sale of finished products to customers, the installation and connection of photovoltaic systems to the electricity grid, and ordinary staff activities preparatory to the Group’s activities.
The main actors in this phase include the Group’s workers. In addition to these, for the performance of its so-called “Regulated Activities” the Group has business relations with various categories of operators. These include dispatching users, i.e. manufacturers, wholesalers and customers. Another significant group consists of the distribution companies and private grid operators involved in the transmission and aggregation of measures required for the regulation of the dispatching service.
Other business relations concern the parties requesting the connection of their plants to the National Transmission Grid, whether manufacturers or consumers, as well as so-called interruptible customers, i.e. those who, against payment of a fee, agree to temporarily interrupt their electricity supply to contribute to the security of the system. To these the Group offers specific contracts for the interruptibility service, aimed at mitigating the risk of widespread power blackouts and ensuring the stability of the electricity system.
For the so-called “Non-regulated Activities”, the Group’s business relations involve corporate customers of numerous companies belonging to a variety of sectors. For the design, manufacture, marketing and repair of transformers the Group serves players in the steel, metallurgical and electrochemical industries. The Group also works to ensure fast and reliable digital connections by supporting its partners in the development of smart solutions. This also includes the business of licensing the right to use optical fibre, within the scope of which the Group has contracts with several customers, mainly in the telecommunications sector. Finally, Terna develops energy solutions for companies that want to evaluate and integrate renewable energy plants, storage systems, and cogeneration solutions within their production process, also offering revamping/repowering solutions for photovoltaic plants.
Finally, the activities carried out downstream in the value chain focus on:
• Transport and logistics: activities related to the transport and logistics of finished products from production sites to end customers that are entrusted to specialised external partners able to guarantee product traceability;
• Waste disposal and end-of-life products: waste transport and disposal, also relating to end-of-life management of assets and works.
The main actors in this phase include third-party disposal companies.
For more information on the method the Group has adopted to map its value chain, see the “Double Materiality” section in the Consolidated Sustainability Statement.
Furthermore, again with regard to the value chain, the Group pays great attention to measuring and evaluating results in terms of the current or expected benefits of the parties it deals with. In keeping with the approach applied to the business model, the outcomes generated are assessed as benefits that stakeholders gain both from a financial perspective and in terms of social-relational and environmental impacts. As a result, Terna’s business model not only generates positive impacts for the Group but also helps to create the conditions for the generation of positive results for the players in the value chain.
Specifically, the activities upstream in the value chain take into account the procurement of materials and finished products required for the production processes of the Subsidiaries and for the Group’s activities in general, and the procurement of labour from third-party companies (through labour and service contracts). The main actors in this phase therefore include suppliers of materials and finished products and contractors. Given the specificity of the Group’s business, which is characterised by the need to perform maintenance in a short timeframe while guaranteeing the safety of the electricity system, among the supply contracts there is a prevalence of purchases of works (as opposed to supplies and services) and of national operators. The use of local suppliers also reduces the costs of transporting bulky and heavy materials and contributes to the reduction of its environmental impact34.
The phase relating to own operations is in turn subdivided into:
• Planning: identification of the structural modifications necessary for the transmission system to optimally fulfil its function of safely and economically transporting the energy produced from the production areas to the distribution and load centres. Also included are activities related to the design of photovoltaic systems based on customer requirements;
• Development: grid development activities, and on the other hand the production of finished products required for grid development, such as transformers and high-voltage power cables and the construction and implementation of photovoltaic plants;
• Maintenance: preventive and corrective maintenance of electrical lines and substations through regular inspections and repair work to prevent and solve malfunctions, and maintenance of photovoltaic installations through the repair and regeneration of photovoltaic inverters;
• Provision of products and services: energy dispatching aimed at ensuring that the demand for electricity is always balanced by the energy produced by power plants through the coordination of production plants and the management of emergencies for the proper functioning of the electricity system. Also included in this sub-phase are consulting and the sale of finished products to customers, the installation and connection of photovoltaic systems to the electricity grid, and ordinary staff activities preparatory to the Group’s activities.
The main actors in this phase include the Group’s workers. In addition to these, for the performance of its so-called “Regulated Activities” the Group has business relations with various categories of operators. These include dispatching users, i.e. manufacturers, wholesalers and customers. Another significant group consists of the distribution companies and private grid operators involved in the transmission and aggregation of measures required for the regulation of the dispatching service.
Other business relations concern the parties requesting the connection of their plants to the National Transmission Grid, whether manufacturers or consumers, as well as so-called interruptible customers, i.e. those who, against payment of a fee, agree to temporarily interrupt their electricity supply to contribute to the security of the system. To these the Group offers specific contracts for the interruptibility service, aimed at mitigating the risk of widespread power blackouts and ensuring the stability of the electricity system.
For the so-called “Non-regulated Activities”, the Group’s business relations involve corporate customers of numerous companies belonging to a variety of sectors. For the design, manufacture, marketing and repair of transformers the Group serves players in the steel, metallurgical and electrochemical industries. The Group also works to ensure fast and reliable digital connections by supporting its partners in the development of smart solutions. This also includes the business of licensing the right to use optical fibre, within the scope of which the Group has contracts with several customers, mainly in the telecommunications sector. Finally, Terna develops energy solutions for companies that want to evaluate and integrate renewable energy plants, storage systems, and cogeneration solutions within their production process, also offering revamping/repowering solutions for photovoltaic plants.
Finally, the activities carried out downstream in the value chain focus on:
• Transport and logistics: activities related to the transport and logistics of finished products from production sites to end customers that are entrusted to specialised external partners able to guarantee product traceability;
• Waste disposal and end-of-life products: waste transport and disposal, also relating to end-of-life management of assets and works.
The main actors in this phase include third-party disposal companies.
For more information on the method the Group has adopted to map its value chain, see the “Double Materiality” section in the Consolidated Sustainability Statement.
Furthermore, again with regard to the value chain, the Group pays great attention to measuring and evaluating results in terms of the current or expected benefits of the parties it deals with. In keeping with the approach applied to the business model, the outcomes generated are assessed as benefits that stakeholders gain both from a financial perspective and in terms of social-relational and environmental impacts. As a result, Terna’s business model not only generates positive impacts for the Group but also helps to create the conditions for the generation of positive results for the players in the value chain.
Benchmark SDGs
For Terna, the United Nations’ Sustainable Development Goals (SDGs), forming the heart of the 2030 Agenda, provide a series of benchmark values, with SDGs 7 (Affordable and clean energy), 9 (Industry, innovation and infrastructure) and 13 (Climate action) fully aligned with the Company’s mission and strategic objective of achieving a just transition. SDG 17 (Partnership for the goals), meanwhile, provides further impetus for accelerating delivery of this objective.
The SDGs also summarise the coherency of Terna’s value creation process with the aim of delivering sustainable success, the operating results of which are measured through specific indicators referred to throughout the Report.
The SDGs also summarise the coherency of Terna’s value creation process with the aim of delivering sustainable success, the operating results of which are measured through specific indicators referred to throughout the Report.
The changed socioeconomic environment, in recent years heavily impacted at global level by the effects of a series of events such as the high inflation and energy crisis caused by the conflicts in Ukraine and the Middle East, has, on the one hand, made it even more urgent to fully deliver the energy transition – also in terms of making Italy fully energy independent and secure – and, on the other, redefined it scope by including considerations relating to social equity and inclusion.
In other words, it is necessary for the path to decarbonisation to coincide with a restart of economies based around inclusive and resilient models. This must also take into account social aspects, with priority given to the need to combat the progressive erosion of social cohesion and, more generally, respect for human rights.
Taken as a whole, the SDGs are also a clear benchmark from an operational standpoint to which Terna refers in carrying out its activities. The SDG’s steer Terna towards achieving environmental objectives (e.g., efficient use of natural resources, respect for the environment, life under water, reduction of CO2 emissions, the reduction and recycling of waste), social objectives (quality education, respect of human rights and gender equality) and good governance objectives (fighting corruption and transparent reporting).
In this sense, Terna also strives to achieve SDGs 4 (Quality education), 5 (Gender equality), 8 (Decent work and economic growth), 10 (Reduced inequalities), 11 (Sustainable cities and communities), 12 (Responsible consumption and production), 14 (Life under water), 15 (Life on land) and 16 (Peace, justice and strong institutions).
In other words, it is necessary for the path to decarbonisation to coincide with a restart of economies based around inclusive and resilient models. This must also take into account social aspects, with priority given to the need to combat the progressive erosion of social cohesion and, more generally, respect for human rights.
Taken as a whole, the SDGs are also a clear benchmark from an operational standpoint to which Terna refers in carrying out its activities. The SDG’s steer Terna towards achieving environmental objectives (e.g., efficient use of natural resources, respect for the environment, life under water, reduction of CO2 emissions, the reduction and recycling of waste), social objectives (quality education, respect of human rights and gender equality) and good governance objectives (fighting corruption and transparent reporting).
In this sense, Terna also strives to achieve SDGs 4 (Quality education), 5 (Gender equality), 8 (Decent work and economic growth), 10 (Reduced inequalities), 11 (Sustainable cities and communities), 12 (Responsible consumption and production), 14 (Life under water), 15 (Life on land) and 16 (Peace, justice and strong institutions).
The SDGs undoubtedly represent a cornerstone for Terna, being an integral part of the orientation of the company’s activities and cutting across various strategic areas within the Group’s Policies.
In fact, the SDGs are referred to in the Terna Group’s Integrated Management System Policy as well as the Sustainability Policy, through which the Group’s main sustainability commitments are outlined.
Another policy that refers to the SDGs is the Corporate Giving Policy, whose guidelines and priorities are established in implementation of corporate strategies, sustainability goals, any new information from stakeholders, the positioning of the company, and the evaluation of activities and plans already implemented and the results achieved. Specifically, the Terna Group is primarily focused on issues related to the pursuit of Goals 4, 9 and 11.
Finally, note that the Terna Group’s Audit Plan also takes into consideration issues related to the SDGs, which therefore qpermeate the governance model and internal control system in keeping with the Group’s mission and objectives.
In fact, the SDGs are referred to in the Terna Group’s Integrated Management System Policy as well as the Sustainability Policy, through which the Group’s main sustainability commitments are outlined.
Another policy that refers to the SDGs is the Corporate Giving Policy, whose guidelines and priorities are established in implementation of corporate strategies, sustainability goals, any new information from stakeholders, the positioning of the company, and the evaluation of activities and plans already implemented and the results achieved. Specifically, the Terna Group is primarily focused on issues related to the pursuit of Goals 4, 9 and 11.
Finally, note that the Terna Group’s Audit Plan also takes into consideration issues related to the SDGs, which therefore qpermeate the governance model and internal control system in keeping with the Group’s mission and objectives.
32 Terna has adopted the principle-based framework proposed by the International Integrated Reporting Council (IIRC), the guiding principles of which are: (1) Strategic focus and future orientation, (2) Connectivity of information, (3) Stakeholder relationships, (4) Materiality, (5) Conciseness, (6) Reliability and completeness, and (7) Consistency and comparability. Their almost total coincidence with the guiding principles in the GRI standard 101 – Foundation setting out the content of quality ESG reporting further strengthens the structure of this Report.
33 https://www.integratedreporting.org/wp-content/uploads/2021/09/IRFRAMEWORK_ITALIANO.pdf
34 For more details on the management of relations with suppliers, see the specific section within the chapter “Governance information”.
