TSX gains amid earnings parade and focus on tariff outlook
Terna Rete Elettrica Nazionale SpA reported solid financial results for the first quarter of 2025, with revenues rising to €902 million, a 5.1% increase year-over-year. The company also reported a group EBITDA of €652 million, marking a 3.8% growth compared to the same period last year. Following the announcement, Terna’s stock saw a modest increase of 0.66%, closing at €8.496, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, the company maintains impressive gross profit margins and has consistently paid dividends for 22 consecutive years, demonstrating strong financial stability.
Key Takeaways
- Terna’s Q1 2025 revenue increased by 5.1% year-over-year.
- EBITDA grew by 3.8%, reaching €652 million.
- The stock price rose by 0.66% following the earnings announcement.
- The company confirmed its full-year targets and strategic focus on grid expansion.
Company Performance
Terna demonstrated robust performance in Q1 2025, with significant growth across key financial metrics. The company’s revenue and EBITDA both showed healthy year-over-year increases, underscoring its strong operational execution. Terna’s focus on expanding its grid and integrating renewable energy sources continues to drive its strategic initiatives, aligning with broader industry trends towards sustainability.
Financial Highlights
- Revenue: €902 million, up 5.1% year-over-year
- Group EBITDA: €652 million, up 3.8% year-over-year
- Group Net Income: €275 million, up 3% year-over-year
- Total CapEx: €562 million, an increase of 16.4% year-over-year
- Net Debt: €11.1 billion, stable compared to the end of 2024
Outlook & Guidance
Terna reaffirmed its full-year targets, emphasizing its commitment to grid expansion and renewable energy integration. The company expects €550 million in out-of-base incentives for the 2025-2028 period, supporting its strategic initiatives. Additionally, Terna is preparing for increased data center connection requests, which totaled 42 GW as of March 2025.
Executive Commentary
Francesco Beccally, CFO of Terna, stated, "Terna will continue to drive Italy’s energy transition towards renewables," highlighting the company’s strategic focus. He also expressed confidence in the company’s ability to deliver strong results while maintaining financial stability.
Risks and Challenges
- Regulatory Changes: Potential shifts in energy regulations could impact operations.
- Renewable Energy Integration: Challenges in integrating new energy sources into the grid.
- Economic Conditions: Broader economic factors could affect energy demand and investment.
Terna remains well-positioned to capitalize on the growing demand for renewable energy and infrastructure development, as reflected in its solid Q1 performance and strategic outlook. For detailed insights into Terna’s valuation and growth prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro, covering over 1,400 top stocks with expert analysis and actionable intelligence.
Full transcript - Terna Rete Elettrica Nazionale SpA (TRN) Q1 2025:
Conference Moderator: Good afternoon, ladies and gentlemen, and welcome to Ternet’s First Quarter twenty twenty five Consolidated Results Presentation. At this time, all participants are in listen only mode. Please be advised that today’s conference is being recorded. I’d like to hand the conference over to your host speaker today, Mr. Stefano Gambierini, Head of Investor Relations.
Please go ahead, sir.
Stefano Gambierini, Head of Investor Relations, Terna: Thank you. Good afternoon, everyone, and welcome to Terna’s First Quarter twenty twenty five Results Presentation. The call will be hosted by our CFO, Francesco Beccally. Following the presentation, we will have the Q and A session. So we kindly ask you to send any question you might have to our e mail address, investor.
Relationstena. It. Thank you. Please, Francesco.
Francesco Beccally, CFO, Terna: Thank you, Stefano, and good afternoon, everybody. Before starting to analyze the figures, I would like to take a moment to highlight the main achievements of the first quarter of twenty twenty five. First of all, on March 25, we presented the update of the twenty twenty four-twenty twenty eight industrial plan, which outlines investments totaling EUR17.7 billion, an increase of €1,200,000,000 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 planned to invest a total of €16,600,000,000 in the five year period of twenty twenty four-twenty twenty eight to develop and modernize the national electricity transmission grid, marking an historical record level of regulated investments.
In this regard, let me remind you that on March 14, Cerna presented the 2025 National Development Plan with over EUR 23,000,000,000 of investment plan over a ten year time horizon for a safer and more resilient grid. On this point, I would like to highlight that during the first quarter of twenty twenty five, ’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 EUR240 million. This
Conference Moderator: is
Francesco Beccally, CFO, Terna: an evidence of our ability in streamlining internal processes and of our constructive collaboration with authorities that allow us to reduce approval times. About the execution of our projects, let me underline that few days ago, on May 8, completed the laying of the first submarine cable of the eastern section of the Tyrannian Link, 1 of the most significant power infrastructure projects in Italy, which will connect Campania and Sicily. About regulation, on March 27, ARERA published the Resolution 130, which establishes for RAB indexation the transition to the new Italian harmonized index of consumer prices, so called IPCA Italia, starting from 2024, replacing the gross fixed investment deflector, ASRAB. From a financial standpoint, let me highlight that following the presentation of Thema’s twenty twenty fourtwenty twenty eight industrial plan update, Moody’s and Standard and Poor’s global rating confirmed the long term rating held by the company, respectively at Baa2 and at BBB plus with a stable outlook, a notch above the rating held at that time by the Italian Republic. Moreover, in April, Standard and Poor’s upgraded the long term rating of TERNA at single A minus.
In addition, confirming once again the group’s strong commitment to the introduction of the model, we changed to reinforce sustainability as a strategic lever for creating value for all its stakeholders. In February, Perna issued EUR $750,000,000 green bonds and in March signed an ESG linked revolving credit facility for a total amount of €1,800,000,000 Finally, in line with what’s set out by our sustainability plan, at the beginning of efforts, we presented TERNA Foundation with the aim of promoting the group’s social responsibility to foster greater inclusion through a through a widespread access to 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 turning to the next slide. As you can see from this chart, in the first three months of twenty twenty five, national demand was about 77 terawatt hours, in line with the level registered last year, when national demand was about 78 terawatt hours. In the first quarter of twenty twenty five, 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 one.
Regarding national net total production, this stood at 65 terawatt hour, 6% higher than the same period of 2024. 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 hours, up 14% versus the first quarter of last year. 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 P and L lines and a robust CapEx growth.
Indeed, group revenues and EBITDA were up by 54%, respectively, which means EUR44 million and EUR24 million higher than the first three months of twenty twenty four. We also reported group net income at €275,000,000 with an increase of 3% versus the same period of last year. Group CapEx were at €500,000,000 5 60 2 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. Despite this CapEx acceleration, at the March 2025, net debt stood at €11,100,000,000 in line with the value registered at 2024 year end of about EUR 11,200,000,000.0.
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 twenty twenty five increased by 5.1%, reaching EUR $9.00 2,000,000, up by EUR 44,000,000 versus last year. The growth was attributable both to regulated and non regulated activities, which contributed for EUR 25,000,000 and EUR 19,000,000, respectively. Let’s now go into details of the revenues evolution moving to the next slide.
Regulated revenues reached €755,000,000 up 3.4%, which means about €25,000,000 more than the same period of last year. The increase was mainly driven by RAB growth, the impact of 2025 tariff recognition of depreciation related to 2024 capital expenditure and of the fast money component that on the conventional capitalization rate defined under the ROAS application. These elements more than offset the work reduction from 5.8% to 5.5% in 2025 and the lower ARPU based incentives contribution versus last year. Non fimulated international revenues reached €147000000.14.5 percent higher than last year. Non regulated growth mainly reflects the higher contribution from the equipment segment of the Bruck Kevos Group and Dettamini Group.
International revenues were set to zero. The results attributable to the South American subsidiaries have been classified among asset held for sale as in the first quarter of twenty twenty four. Now let’s go through operating cost analysis. As you can see in the chart, total operating costs stood at EUR $250,000,000, 8 point 5 percent higher than last year. Regarding regulated activities, the increase was mainly attributable to the rise in 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 the Energy Services and Equipment segment and higher raw material costs.
Let me now analyze EBITDA. Moving to the next slide. Due to the previously mentioned effects, first quarter twenty twenty five group EBITDA reached €652,000,000 3 point 8 percent higher than the same period of last year. The increase was mainly attributable to regulated activities, which contributed for about EUR 17,000,000 more versus the first three months of last year, showing an EBITDA of €627,000,000 in the first quarter of twenty twenty five. 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 €25,000,000 Let’s now look to the lower part of the P and L.
Turning to the next slide. D and A amounted to EUR $219,000,000. The increase versus last year was primarily due to the entry into service of new infrastructure. As a consequence, EBIT reached €433,000,000 3 point 4 percent higher versus the first quarter of last year. We reported net financial expenses of €39,000,000 the slight increase versus last year of EUR 2,300,000.0 is mainly caused by the subscription of new loans at higher interest rate compared with the average cost of existing ones.
This effect was partially offset by higher capitalized expenses. Taxes stood at EUR119 million, 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 twenty twenty four. As a result, group net income reached EUR275 million, 3 percent higher versus the same period of last year. Moving now to CapEx analysis.
In the first three months of twenty twenty five, total CapEx amounted to EUR $562,000,000, 16 point 4 percent 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 €527,000,000 in regulated activities. Among the main projects of the period, it is worth mentioning the Tirana Link, the Sakhoi-three, the Adriatic Link, the modernization of the high voltage grid in the locations due towards the Winter Olympics in 2026, the Colunga Calenzano connection and last but not least, the investments of the defense plan to enhance voltage control capacity and support grid stability, including synchronous compensators, shunt reactors and damping 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%.
Non regulated and other CapEx stood at EUR 35,000,000. This includes capitalized financial charges and other investments. Regarding the net debt and cash flow analysis, net debt at the March 2025 was about EUR 11,100,000,000.0, around EUR 34,000,000 lower than twenty twenty four 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 €483,000,000 thanks to which we were able to cover about 86% of the CapEx spending of the period. 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 this first three months of 2025, we registered a fixed floating ratio on gross debt of about 88% and an average duration of about six years. 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 tranche green bond issue for an amount of €750,000,000 a term of seven years. The bonds was issued with a spread of 90 basis points above the mutual credit and will pay an annual coupon of 3.18. At the March 2025, the senior green bonds issued by Terna under its EUR 12,000,000,000 medium term notes program and yet to reach maturity amounted to EUR 3,000,000,000 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 EUR €1,850,000,000 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. Regarding ESG Link’s revolving credit facilities, as already mentioned in the beginning of the presentation, on March 21, Terma signed an ESG linked revolving credit facility for a total amount of EUR 1,800,000,000.0 aimed at refinancing the ESG revolving credit facility signed in December 2021. The transaction allows TERNA to count on liquidity appropriate to its current credit rating, further strengthening the company’s financial structure. Regarding credit ratings indeed, let me stress once again that in March, following the presentation of the updated twenty twenty four-twenty twenty eight industrial plan, the rating agencies, Moody’s and Standard and Poor’s, both confirmed the company’s ratings.
Then in April, Standard and Poor’s announced that it has upgraded Terma’s long term rating from BBB plus to single a minus with a stable outcome following the upgrade of the sovereign rating to BBB plus. Thank you for your attention.
Stefano Gambierini, Head of Investor Relations, Terna: First
Francesco Beccally, CFO, Terna: of all, Ternard will continue to drive the Italy’s energy transition towards renewables, focusing on enhancing grid quality while reducing reliance on imported energy sources. 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, Ternan will also continue to guarantee value creation for our shareholders and communities, focusing on the execution of projects included in our updated twenty twenty four-twenty twenty eight industrial plan, for which we are well on track, both in terms of authorizations and procurement. Finally, as reiterated during the presentation of the twenty twenty fourtwenty twenty eight 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 agencies.
In the first quarter of twenty twenty five, 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. Thank you for your attention. We are now ready for the Q and A session.
Stefano Gambierini, Head of Investor Relations, Terna: Thank you, Francesco. Now we can move to the Q and A section. Let’s start with some figures. Francesco, could you give more details about how many out of base incentives have been accounted in the first quarter? And any guidance on the OBIs for the full year 2025?
Francesco Beccally, CFO, Terna: Sure, Stefan. In Q1 twenty twenty five, revenues there is no contribution coming from the out of base incentives relating related to dispatching services OBIs or internal incentives. These incentives will be recognized during the year when there will be the certainty in line with according principles accounting principles. With the reference to full year, our overall expectations reflect the updated the update in the performance estimates for 2025, which we expect will allow to book incentives over EUR550 million. Now
Stefano Gambierini, Head of Investor Relations, Terna: again on OBIs, what are your expectations regarding the evolution of out of base incentives over twenty twenty five, twenty twenty eight period?
Francesco Beccally, CFO, Terna: The industrial plan update assumes about EUR $550,000,000 cumulated in the twenty twenty five-twenty twenty eight period, back end loaded, mostly referring to ancillary services market incentives.
Stefano Gambierini, Head of Investor Relations, Terna: Okay. Is there any increase in capitalized cost year on year in the first quarter twenty twenty five?
Francesco Beccally, CFO, Terna: 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, mainly following higher investments in the period.
Stefano Gambierini, Head of Investor Relations, Terna: Okay. Going now to recent regulatory update. Can you please comment about regulators solution on the shift from the deflator to the harmonized index of consumer prices for the RAB indexation?
Francesco Beccally, CFO, Terna: First of all, let me say that the outcome of the resolution is positive on our view. Since HICP demonstrates to be a more stable and predictable parameter compared to the flatter for gross fees investments. These results was already part of the assumptions on our business plan update, So no impact on estimates since it was already included in our guidance.
Stefano Gambierini, Head of Investor Relations, Terna: Thank you. What are your expectations about loss integral framework implementation? When could we expect the first consultation document about it?
Francesco Beccally, CFO, Terna: As we always say, we have a positive view of Areva’s approach to the ROS 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 resconsultation.co document that we expect to be published in the upcoming weeks.
Stefano Gambierini, Head of Investor Relations, Terna: Now on the WACC, Which are your latest expectation with respect on the update in WACC for 2026?
Francesco Beccally, CFO, Terna: As of today, it is too early to assess if the threshold for the potential WACC update at the end of this year will be met since you know that the observation period will conclude at the September 2025. Anyway, according to the latest mark to market calculation, 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%.
Stefano Gambierini, Head of Investor Relations, Terna: Moving now on the energy scenario and the operations. Could you provide an update on new requests of connection for from data centers?
Francesco Beccally, CFO, Terna: 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 twenty first of twenty twenty five, the total high voltage connection request reached approximately 42 gigawatts with around two fifty seven active requests.
Stefano Gambierini, Head of Investor Relations, Terna: 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?
Francesco Beccally, CFO, Terna: Sure. The newly announced HVDC system managed 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 apps in the Mediterranean region. The project jointly developed with between Terna and the Greek TSO IPTO foresees one gigawatt link spanning 300 kilometer included to 140 kilometer of cable of undersea cables. This project results is already part of 2024 ’10 year development plan, while not included in the twenty twenty four, twenty eight update of the industrial plan CapEx guidance since the project will be developed after the business plan horizon.
Stefano Gambierini, Head of Investor Relations, Terna: Very clear. Do you have, I mean, do you have any update on Maxi
Francesco Beccally, CFO, Terna: auction? As to the Maxi, me recall that it is a market based long term mechanism for the development of new electricity storage systems in Italy. After carrying out a system needs assessment, Ternop’s also requiring actions to procure the required volume of storage capacity. After each auction, TERNA offers to selected developers a long long term contract where, on the one hand, they are required to build the storage the storage facility during the week period. On the other hand, for the entire period of delivery, they are they will be entitled to the payment to the payment of a yearly premium meant to cover both fixed cost and remunerate the cost of capital.
And then they are also required to make the storage facility available to the system and pay there another difference, if positive, between the ancillary services market price and the strike price. The first storage capacity auction will take place next 12/30/2025, with the delivery period in 2028. In this auction, 10 gigawatt hour 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 cut will be defined by Herrera.
Stefano Gambierini, Head of Investor Relations, Terna: Now do you see any risk from USA tariffs to turn as procurement?
Francesco Beccally, CFO, Terna: Let me say that we do not see many direct impacts from U. S. Tariffs as the share of our supplies manufactured in U. S. Is negligible.
Clearly, we expect that as a consequence of U. S. Tariffs, we will face more potential shortages on bottle 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, 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 twenty twenty five.
Stefano Gambierini, Head of Investor Relations, Terna: Okay. Lastly, what risk does Italy have of suffering a blackout like in Spain?
Francesco Beccally, CFO, Terna: Regarding this topic, first, I would like to underline that despite the impact of the blackout in the Iberian Peninsula, the Italian electricity grid maintained its stability and current function. This was made possible thanks to the robustness of the system and the adoption of defined protocols for managing emergency situations. 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 entire electricity system has been the subject of numerous investments in grid security carried out by TERNA to enhance its robustness through the so called defense 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 February, which requires the TSO to submit the security plan for the national electricity system on an annual basis.
This plan is approved by the Ministry of Environment and Energy Security, so called MACE. In this regard, the latest security plan submitted in May 2024 foresees over EUR 1,300,000,000.0 in investments for the twenty twenty four-twenty twenty seven 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 EUR 2,000,000,000 for the twenty twenty five-twenty twenty eight period, which considers 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 system.
Stefano Gambierini, Head of Investor Relations, Terna: Very well. Thank you, Francesco. The Q and A section is now over. Many thanks, everyone. The IR team remains available for any further request you might have.
Please, Francesco.
Francesco Beccally, CFO, Terna: Thanks, everybody. See you for the first half results. Good evening.
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