• Revenue: EUR2.647 billion, up 18% year-over-year.
• EBITDA: EUR1.892 billion, 22% higher than the previous year.
• Net Income: EUR813 million, an increase of 27% compared to last year.
• CapEx: EUR1.7 billion, up 19% from the previous year.
• Net Debt: Approximately EUR10 billion, reduced by EUR500 million from 2023 year-end.
• Regulated Revenues: EUR2.222 billion, a 17% increase year-over-year.
• Nonregulated and International Revenues: EUR426 million, 24% higher than last year.
• Operating Costs: EUR755 million, up 9.3% from the previous year.
• Tax Rate: 29.4%.
• Renewable Energy Contribution: Renewable sources covered 43% of national demand, up 6 percentage points from last year.
• Operating Cash Flow: EUR1.388 billion, covering over 80% of CapEx spending.
• Interim Dividend: EUR11.92 per share, a 4% increase from the previous year.

• Warning! GuruFocus has detected 3 Warning Signs with TERRF.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Terna SpA (TERRF) reported a double-digit growth in all P&L lines and CapEx, with group revenues and EBITDA increasing by 18% and 22%, respectively.
• The company achieved a group net income of EUR813 million, up by 27% compared to the same period last year.
• Terna SpA (TERRF) signed a EUR400 million loan agreement with the European Investment Bank for the renewal of the Italian transmission network.
• The company increased its renewable energy capacity by 5.3 gigawatts, a 33% rise compared to the previous year.
• Terna SpA (TERRF) announced a 2024 interim dividend of EUR11.92 per share, up by 4% compared to the previous year.

Negative Points

• Total operating costs increased by 9.3% compared to the previous year, driven by higher costs for raw materials and services.
• Net financial expenses rose to EUR105 million due to new financing and increased interest rates.
• The acquisition of high-voltage grid assets in Rome involves a purchase price of EUR224 million, representing a 10% premium, which may impact short-term financials.
• The company's net debt stood at around EUR10 million, indicating a need for careful financial management.
• The current output-based incentive framework will conclude at the end of the year, potentially impacting future earnings.

Q & A Highlights

Q: Could you give more details about how many outdated incentives have been accounted in 9 months '24? A: The ultimate incentives recognized in 9 months '24 are about EUR200 million, substantially in line with the previous year. These are mostly related to dispatching service market efficiency incentives connected to cost savings and interzonal incentive schemes.

Q: Could you provide your new expectations on 2024 overall contribution from out-of-base incentives? A: The output-based incentives for 2024 are mainly related to dispatching activities. We expect to book incentives slightly over EUR300 million, in line with MSD incentives accounted in 2023. Additionally, incentives for additional intraoral transmission capacity are expected to be approximately EUR15 million.

Q: Could you comment about the regulated labor cost trend in 9 months '24? A: The labor cost decreased despite an increase in gross personnel expenses due to a higher number of employees. This was offset by higher capitalized personnel costs to support carbon sensitization.

Q: Could you update us on your plans to finance your current CapEx plan and what are the additional levers to manage financial sustainability? A: The 2024-2028 CapEx plan is fully sustainable. We could use the full hybrid capacity of the company, estimated to be up to EUR4 billion by 2028, including the EUR1.85 billion already outstanding. Additional grants could also provide further flexibility.

Q: Could you comment on the rationale underlying the agreement with [Acheya] for high-voltage grid acquisition? A: The agreement reaffirms Terna's role within the National Electricity System, allowing for more efficient planning and operational management. It supports better decision-making in renewal and development investments, unlocking potential new growth opportunities. The deal will be EPS accretive from year 1.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.