Terna S.p.A. ADR Earnings Call Highlights Growth and Investment

Terna S.p.A. Unsponsored ADR ((TEZNY)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Terna S.p.A. Unsponsored ADR highlighted a positive outlook, driven by substantial investments in energy transition and infrastructure development. The company reported significant financial and operational achievements, although it faced challenges such as increased operating costs and a decline in the share of renewable energy. Overall, the positive aspects of the call outweighed the negatives, suggesting a promising future for Terna.

Increased Investment in Energy Transition

Terna has updated its industrial plan for 2024-’28, announcing an increase in investments to EUR17.7 billion. This EUR1.2 billion increment from the previous plan aims to propel Italy towards decarbonization and reduce its reliance on foreign energy sources.

Record Regulated Investment

The company plans to invest EUR16.6 billion over the next five years to enhance and modernize the national electricity transmission grid. This marks a historical record in regulated investment, underscoring Terna’s commitment to infrastructure development.

Completion of Significant Infrastructure Project

Terna has completed the first submarine cable of the eastern section of the Tyrrhenian Link, connecting Campania and Sicily. This milestone signifies progress in major power infrastructure projects.

Strong Financial Performance

The company reported a 5% increase in group revenues and a 4% rise in EBITDA. Group net income also grew by 3% to EUR275 million, reflecting a robust financial performance.

Robust CapEx Growth

Terna’s capital expenditure reached EUR562 million, marking a 16% growth compared to the first quarter of the previous year. This growth highlights the company’s aggressive investment strategy.

Increased Solar Production

Solar energy production increased to approximately 7 TWh, a 14% rise from the first quarter of last year, showcasing Terna’s efforts in enhancing renewable energy output.

Improved Credit Rating

Standard & Poor’s upgraded Terna’s long-term credit rating from BBB+ to A-, reflecting confidence in the company’s financial stability and strategic direction.

Successful Green Bond Issue

Terna successfully issued a EUR750 million green bond to finance environmentally beneficial projects, reinforcing its commitment to sustainability.

Decline in Renewable Energy Share

The share of renewable energy in national demand decreased to about 33%, three percentage points lower than last year, due to reduced wind and hydroelectric production.

Increased Operating Costs

Operating costs rose to EUR250 million, an 8.5% increase from last year, primarily driven by higher raw material and service costs in non-regulated activities.

Increased Financial Expenses

Net financial expenses slightly increased to EUR39 million, attributed to new loans at higher interest rates.

Higher Tax Rate

Taxes increased to EUR119 million, with the tax rate rising from 29.2% to 30.1%, impacting the company’s net income.

Forward-Looking Guidance

Looking ahead, Terna plans to invest EUR17.7 billion in its 2024-2028 industrial plan, emphasizing its pivotal role in Italy’s energy transition. The company has authorized 12 projects worth EUR240 million and completed part of the Tyrrhenian Link project. Financially, Terna expects continued growth, with revenues and EBITDA rising by 5% and 4% respectively, and a net income increase of 3% to EUR275 million. The company is also committed to sustainability, as evidenced by its EUR750 million green bond issuance and ESG-linked revolving credit facility of EUR1.8 billion.

In conclusion, Terna’s earnings call showcased a positive sentiment, with strong investments in energy transition and infrastructure development. Despite challenges such as increased operating costs and a decline in renewable energy share, the company’s financial performance and strategic direction indicate a promising outlook. Terna’s commitment to sustainability and infrastructure modernization positions it well for future growth.