Good afternoon, ladies and gentlemen. I welcome you to Terna's Consolidated Results First Half 2025 Conference Call. [Operator Instructions] 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 Gamberini, Head of Investor Relations, to begin. Please go ahead, sir.

Thanks a lot. Good afternoon, everyone, and welcome to Terna's first half results presentation. The call will be hosted by our CEO and General Manager, Giuseppina Di Foggia; and our CFO, Francesco Beccali. Following the presentation, we will have the Q&A session, so we kindly ask you to send any questions you might have to our e-mail investor.relations@terna.it. Please, Giuse.

Thank you, Stefano, and good afternoon, everyone. Before looking at the figures, I'd like to take a moment to highlight some of our most recent achievements. In March, we presented the new 10-year national development plan. This plan outlines the main grid development projects requiring investments of over EUR 23 billion by 2034. Shortly after we published the updated 2024, 2028 sales plan, which sets out investments totaling EUR 17.7 billion. These investments are aimed at improving the efficiency, resilience, sustainability and security of our grid while also supporting the integration of renewable energy sources. In doing so, Terna continues to reinforce its role as a key enabler of the energy transition, helping the system move towards decarbonization and reducing reliance on foreign energy. The 7% increase in CapEx compared to the previous plan is mainly driven by the security plan, which focuses on enhancing grid resilience and renewing assets. It also includes new projects that promote digitalization, the use of advanced technologies and the adoption of artificial intelligence. Turning to grid development. In May, Terna and IPTO, the Greek TSO signed the Memorandum of Understanding as part of the Italy Greece Intergovernmental summit. This MoU laid the foundation for a new HVDC interconnection between the two countries. The new link will represent a strategic infrastructure for both Italy and Greece supporting their decarbonization goals and strengthening their position as energy hubs in the Mediterranean on project execution. Let me remind you that on May 8, we completed laying of the first submarine cable of the Tyrrhenian Link Eastern Section, one of the Italy's most important power infrastructure projects, which will connect Campania and Sicily. From a regulatory perspective, in May, ARERA published Consultation Paper 210/2025 the paper proposes adjustments to how certain aspects of the ROSS base regulation are implemented, particularly regarding tariff recognition of CapEx and OpEx. It also introduces the first guidelines of the ROSS integral mechanism, including environments for companies to present business plan and outlining 3 new incentive teams, 2 of which are expected to apply from 2026, while the third will introduce at a later stage. Now let me briefly touch on innovation and digitalization where we launched several initiatives in June. On June 19, Terna signed the Memorandum of Understanding with the Microsoft to develop strategic projects supporting our digital transformation. This partnership will allow us to leverage artificial intelligence, next-generation data platforms, and hybrid digital infrastructure to advance our mission. Then on June 23, we launched the Terna Adriatic Innovation Zone in the market region. Our new innovation hub created to transform the Adriatic area into a center of technological excellence and to promote innovation in support of both the energy transition and local business development. In addition, Terna has partnered with the Polytechnic Universities of Bari, Milan and Torino, to launch a Level II Master's degree innovation in electricity systems for energy. This program is part of the Polytech lab, the new high-scale polytechnic network, launched in April. The collaboration is designed to promote research, innovation and advanced training generating a positive social impact for the electricity sector and for the country as a whole. Finally, on the sustainability front, I would like to mention that during the period, we published our first ever consolidated sustainability report fully aligned with the new corporate sustainability reporting directive framework. From a financial standpoint, let me remind you that S&P upgraded the long-term rating of Terna to A- in April following the upgrade of the Italian Republic from BBB to BBB+. In June, Moody’s confirmed Terna’'s long-term rating at Baa2, a notch above the rating of the Italian Republic. Furthermore, Moody's upgraded Terna’'s outlook from stable to positive, reflecting the company's solid financial profile despite the increased CapEx plan. On the 10th of July, the European Investment Bank, Intesa Sanpaolo, SACE and Terna signed agreements totaling EUR 1.5 billion to finance the construction of the Adriatic Link with submarine power line that will connect the Marche and Abruzzo regions. The project is a strategically important for Italy's Power Grid promoting the integration of renewable energy sources and increasing Italy's energy autonomy and security. On the 15th of July, Terna successfully launched its first European Green Bond under the new EUR 4 billion EMTN Programme, listed on Borsa Italiana electronic bond market and approved by CONSOB. The issuance has a nominal amount of EUR 750 million and received a very favorable market response with demand outstripping supply by almost 5x. Finally, as far as the remuneration of our shareholders is concerned, on June 23, we paid 2024 final dividend of EUR 0.2717 per share, bringing the total dividend for the year to EUR 0.5962 per share including the interim dividend paid last November. After this brief introduction, let me give you an overview of the Italian electricity market. Turning to the next slide. As you can see from this chart, in the first 6 months of 2025, national demand was about 153 TWh essentially in line wit the level recorded in the same period of last year when national demand was about 152 TWh. Over the period, renewable sources covered about 42% of national demand slightly lower than last year, mainly due to a drop in hydroelectric production following an exceptionally strong performance in the previous year. It is worth highlighting that in May, renewable sources covered 56% of the electricity demand, the highest ever value on a monthly basis. Moving to national net total production, this too stood at 131 TWh, up by 4% compared to the previous 2024. In this first half, renewable sources accounted for about 49% of the national net total production, down from 53% of last year. However, let me highlight the considerable increase in solar production, which grew to around 22.1 TWh, up 23% versus the first half of last year. Now let's move to the main figures of the period. In the first half of 2025, despite the complex and challenging economic environment, we delivered positive results across all key lines of the P&L and a solid CapEx growth. Indeed, group revenues and EBITDA, both grew by 8%, increasing by approximately EUR 140 million and EUR 103 million compared to the first half of 2024. We also reported a group net income of EUR 588 million with an increase of 8% versus the same period of last year. Group CapEx reached EUR 1,390 million, marking an increase of 27% versus the first half of last year and setting a new record in Terna's history. This confirms once again our solid CapEx acceleration to serve the system needs. To support this CapEx acceleration at the end of June 2025, net debt stood at EUR 12 billion, slightly higher compared to the value recorded at 2024 year-end of about EUR 11.2 billion. Now let me leave the floor to our CFO to have a closer look at the results. Please, Francesco.

Thank you, Giuse. So let's start, as usual, with the revenues analysis. In the first 6 months of 2025, the total revenues increased by 8%, reaching EUR 1.894 billion, up by EUR 140 million versus last year. The growth was mainly attributable to regulated activities, which contributed for EUR 122 million, while nonregulated activities increased by EUR 18 million. I will take a closer look at the evolution of revenues. Moving to the next slide. Regulated revenues reached EUR 1,594 million with an increase of more than 8% versus previous year. The growth was mainly driven by the RAB growth driving from the recognition in tariff of 2024 capital expenditure and the assessment of the tariff [indiscernible] related to the update and revaluation of capital cost parameter. The early recognition in tariff of depreciation related to 2024 capital expenditure 1 year in advance compared to the previous regulatory framework as well as the recognition of depreciation related to 2023 capital expenditures in line with the second -- the 2-year standard delay. And in the end first [indiscernible] component set on the conventional capitalization rate defined under the ROSS application. These factors more than offset the WACC reduction from 5.8% to 5.5% in 2025 and the longer run base incentives contribution versus last year. Nonregulated revenues reached EUR 300 million, 6.5% higher than last year. The improvement mainly reflects the higher contribution from Equipment segment, which includes Tamini and Brugg cables, partially offset by the decrease in revenues from the Energy Services segment. The results is attributable to the South American subsidiaries have been classified among asset for sale as in the first half of 2024. Now let's go through operating cost analysis. As you can see in the chart, total operating costs stood at EUR 534 million, 7.5% higher than last year. The regulated activities cost increase is mainly attributable to the rise in the headcount and the higher average cost of labor, partially offset by higher capitalization. The nonregulated activities were primarily impacted by higher service costs related to development of activities, mainly in the Equipment segment. Regarding EBITDA, we move to the next slide. Thanks to the acceleration in revenues, first half 2025 group EBITDA reached EUR 1.36 billion, 8.2% higher than the same period of last year. The improvement was mainly attributable to regulated activities, which contributed for about EUR 89 million more versus the first 6 months of last year, showing an EBITDA of EUR 1,302 million in the first half of 2025. EBITDA from nonregulated activities increased by 29% to EUR 58 million, mainly thanks to the higher contribution from the Equipment segment with improving results from both the Tamini and Brugg Cables groups. Let's now have a look to the lower part of the P&L, turning to the next slide. D&A amounted to EUR 447 million, the increase versus last year was mainly related to the entry into service of new infrastructure. As a consequence, EBIT reached EUR 913 million, 9.2% higher versus the first half of 2024. The net financial expenses amounted to EUR 76 million, the slight year-on-year increase of EUR 13 million is mainly due to the signing of new financings, only partially offset by higher capitalized financial charges. Taxes stood at EUR 249 million, EUR 22 million higher versus last year, essentially due to improved results. Our tax rate was 29.8% compared to 29.4% in the first half of 2024. As a result, group net income reached EUR 588 million, 8% higher versus the same period of last year Moving to CapEx analysis. In the first 6 months of 2025, total CapEx reached EUR 1,319 million, up by 27% year-on-year. This marks a new all-time high for the first half of the year, exceeding EUR 1.3 billion and confirms the strong acceleration in investment. We invested about EUR 1,243 million in regulated activities. Among the main projects of the period, it is worth mentioning the Tyrrhenian Link, [indiscernible], modernization of the high-voltage grid in the locations due towards the Winter Olympics in 2026, Colunga-Calenzano connection and the Adriatic Link. Last but not least, the investments of the defense plan, which aims to enhance our voltage control capacity and support grid stability, including synchronous compensators, shunt reactors and dumping resistor systems. Among CapEx categories, development CapEx represented 54% of total regulated CapEx. Defense CapEx stood at 15%, while asset renewal and efficiency was 31%. Nonregulated and other CapEx stood at EUR 76 million. This includes capitalized financial charges and other investments. Turning now to next slide. Cash flow generation for the period amounted to around EUR 1.1 billion and was the result of around EUR 1 billion of operating cash flow and EUR 100 million of working capital and other items. Net debt at the end of June 2025 was about EUR 12 billion, around EUR 800 million higher than 2024 year-end level, primarily due to the CapEx acceleration and the dividend payment. Let's now make a deeper analysis of our debt profile moving to Page 16. Our cautious and proactive debt management approach is focused on maximizing efficiency and maintaining a solid financial structure. As of the end of this first 6 months of 2025, we registered a fixed/floating ratio on gross debt of around 88%, with an average duration of approximately 6 years. In alignment with Terna's strategy, which aims to combine investment and sustainability to drive growth and value creation on July 15, Terna successfully launched its first fixed rate single tranche European green bond issue with a total nominal amount of EUR 750 million. The European green bonds, which received a very favorable market response with demand outstripping supply by almost 5x [indiscernible] has a duration of 6 years and will pay an annual coupon of 3%. This issuance was launched as part of Terna's new EUR 4 billion Euro Medium Term Notes program listed on Borsa Italiana's electronic bond market. As said at the beginning of the presentation, in July, a European Investment, Terna, Intesa Sanpaolo, and SACE have signed an agreement totaling EUR 1.5 billion to support the development and perception of the so-called Adriatic Link, the submarine power cable linking the Italian regions, Marche and Abruzzo. The operation is financially structured into three tranches, all of which are covered by SACE’s Archimede Guarantees for an amount exceeding EUR 1 billion. In detail, we have EUR 750 million loan granted by EIB to Terna with a duration of 22 years. Another EUR 500 million credit line provided by Intesa Sanpaolo to Terna, with a duration of 7 years and an additional EUR 250 million loan from Intesa Sanpaolo with funds made available by the EIB and a duration of 7 years. Finally, with regards to credit ratings, let me remind you that in April, Standard & Poor's upgraded Terna’s long-term rating from BBB+ to A-. Following the upgrade of the sovereign rating to BBB+. Moreover, in June, Moody's improved the outlook to positive from stable after the review of the assessment of the Italian Republic. The decision of the two agencies reflects Terna's solid financial structure despite the acceleration in investments provided by the industrial plan. Thank you for your attention. I leave now the floor to Giuse for closing remarks.

Thank you, Francesco. Let me conclude this presentation with some closing remarks. First, I'd like to highlight that we have delivered a solid set of results despite the increasingly complex and challenging macroeconomic and geopolitical environment. This reflects the robustness of our business model, our ability to adapt and the continued commitment of our people that allow us to keep our promises and even to exceed them. In this regard, Terna is committed to the execution of its planned targets. This will allow the integration of renewable sources, the development of the network and the strengthening of interconnections with the foreign countries. These efforts will enhance the security and resilience of the electricity system, enabling the achievement of national and European targets and ensuring system stability. And before moving to the Q&A session, let me underline that with the strong set of results just presented for the first half, we can fully confirm our 2025 full year guidance. Thank you for your attention so far, and we are now ready for the Q&A session.

Very well. Let's start with the first questions for you, Giuse, about ROSS integral effect color about the consultation document published at the end of May and which are your expectations for potential new incentive scheme proposed?

Well, about the ROSS integral framework. Let me say that the document makes -- it's clear that Arera is really focused on making sure we deliver a strategic high-value energy infrastructure. It's not just about having a forward-looking business plan that outlines spending and targets. It's also about giving operators the chance to earn additional reward if they can meet system needs and cost saving efficiently. And now while this consultation document does give us an early look at the incentive schemes under the ROSS Integral framework, I want to be clear. The detailed design of those reward mechanism probably won't be decided as part of this round, that will likely come later once ARERA has reviewed the specific proposal submitted by companies.

What are your latest expectations with respect to the update in WACC for 2026.

Well, let me be straight. 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 the observation period will finish at the end of September 2025. And according to the latest mark-to-market calculation, the change in WACC value is still below the threshold of 30 basis points. However, since the values remain close to the threshold, we should closely monitor the parameters over the final 2 months as they could trigger a WACC update.

Okay. Now can you give us an update on the installation of renewables as of June 30 this year, do you expect this trend to continue over the coming years?

Well, we have really seen the pace of renewable installations pick up in recent years. Just to give you some context, until 2021, the average was about 1 gigawatt a year. Then in 2022, that rose to around 3 gigawatts. And the trend continued in 2023 with the 6 gigawatts and 2024, so another record with the 7.5 gigawatts installed. And 2025 is off to a solid start as well and there has been a slight slowdown compared to the first half of last year, but we have still seen about 3.1 gigawatts added so far, not far off from the 3.7 gigawatts installed in the same period of 2024. And this steady growth in installations is an encouraging sign for meeting the targets set out in the in the updated National Climate and Energy Plan, the one that Italy submitted to the European Commission in June 2024. And let me conclude with the first FER X auction scheduled for 2025, further momentum is expected from the upcoming incentive scheme.

Great. Let's move to another topic. Due to the penetration of renewables, do you think that the Spanish blackout might be an event that we call more frequently in the future?

Well, let me start saying that the European electricity system is complex. It's complex and Italy is a key part of it. So while we can't eliminate the risk and we can see that the Italian grid is now much more resilient, thanks to the investments Terna has made in recent years to improve grid security. And now let's have a look at our investments on this. It's important to say that our 2024 security plan already included over EUR 1.3 billion in investment for 2024, 2027. And this was increased to EUR 2 billion for 2025, 2028 in our industrial plan update last March. And it was confirmed again in the 2025 security plan update we sent to the Ministry of the Environment and Energy Security in May. These investments focus on both the energy transition and digitalization, for example, that is just an example through the use of synchronous compensators connected to the grid. And beyond the numbers, we have also deployed a full range of technologies to strengthen the national grid safety. And as renewables grow and traditional thermal capacity declines, system stability can be affected. And that's why we are planning even more investments in grid security. This is our [indiscernible] transition. This is what I mean as [indiscernible] transition. And now let me conclude with the good news, Stefano. Italy already has a strong framework with clear rules on how renewables must support system stability and balance.

Thank you, Giuse. Now another question. How is your investment plan progressing? Are there any slippages in the execution of major projects?

Yes. A key part of our plan, the execution, as I said many times and the execution of our investment plan is going forward as planned. So let me reiterate that we are on the right path and the CapEx plan is solid and safe. All our main HVDC projects have received the necessary authorization and over 90% of the projects in the plan have completed the approval process. On the procurement side, we are fully aware of the potential supply chain shortages and bottlenecks affecting the industry. And to manage this risk, we have taken several steps to ensure continuity. Thanks in part to the support of Brugg Cables and Tamini transformers. We have already secured nearly all procurement needs through the end of 2025. And to conclude, looking at the full business plan period, about 85% of the 2024-2028 CapEx is already covered by existing procurement contracts, up from 80% in March.

Very well. The following question is for you, Francesco. Could you quantify the one-off revenues related to inflation upside.

Sure. For each variation of plus or minus 1% and expected inflation using the RAB revaluation, the impact of regulated revenues is about EUR 20 million. Considering the updated value of 2023 and 2024 inflation approved by ARERA in its last resolution, there is a total increase of about 2%, which leads to an increase in regulated revenues of about EUR 40 million on tariff 2025, further adjustment of around EUR 16 million on 2024.

We received many questions about OBI. What are the output-based incentives accounted in the first half, is your expectation for the full year confirmed also related to the evolution of dispatching costs? And what are your expectations about further OBIs that could be introduced through ROSS integral scheme?

Well, in the first half of 2025, there is no contribution coming from the output-based incentives related to dispatching market efficiency incentives. It will be recognized in the second half of the year when there will be a higher degree of certainty about the possibility of reaching the targets, in line with the accounting principles. In the first half of 2025, we have instead registered EUR 16 million related to intrazonal and efficiency incentives. With reference to the full year 2025, our expectations reflect the update in the performance estimates for 2025, which will allow us to reach and possibly exceed the guidance already provided after the first quarter of 2025 of more than EUR 550 million of OBI. Finally, let me also remind that our updated industrial plan assumes that OBI's contribution of about EUR 900 million, considering also EUR 361 million accounted in 2024, mostly referring to existing output-based incentives framework and for a residual part related to the new ROSS Integral schemes.

Thank you. Now move on the financing. What will be your cost of debt at the end of 2025, please?

Cost of debt will be around -- for the first half of the year is at around 2.6%. And the cost of debt for 2025 will be slightly below 3%. Since in the second half of the year, we expect the net financial charges to increase compared to the first half, primarily due to the issuance of new debt at a higher cost vis-a-vis the average cost of the existing debt.

Regarding the acquisition of high-voltage assets, do you expect further deals?

Well, we are aware of the public interest in the consolidation of high-voltage assets to achieve synergies and have more efficient system overall for which ARERA, as you know, has set an incentive scheme for deals closed in 2025 and 2026. For this reason, we cannot exclude undertaking other small potential transactions linked to market opportunity that should be fully aligned with our strategic targets.

Could you remind us the remaining financial flexibility in terms of additionally hybrid instruments? And would you still prefer hybrid capital increase?

As you know, our ambitious CapEx plan could lead to a deterioration of the financial ratio in the future. As we already communicated to the market during the presentation of the update of the strategic plan last March, despite this acceleration in capital, we aim to preserve a solid and sustainable capital structure, also through the issue of further hybrid instruments if needed, up to the full capacity that we estimate to be at around EUR 4 billion towards the end of the plan. Let's consider that we already have at the moment, EUR 1.8 billion of hybrid already issued. Furthermore, in order to protect our rating, we can rely on a wide range of further tools, such as, for example, public grants that if necessary, Terna could seek in an additional amount to reduce the company's debt and strengthen the financial structure, which consider that in the current plan, we already assume slightly above EUR 1 billion of grants. We can also rely on CapEx prioritization. Terna indeed may prioritize expenses related to investment costs, seeking to defer some of them to later years. And finally, we can also consider the potential valorization of our noncore assets and the nonregulated activities. All the previous options are considered more efficient than a capital increase. Therefore, as already stated in the strategic plan presentation, as of today, we do not see any strong rationale for the capital increase of the company.

Many thanks, Francesco. Finally, we have received the last question for you, Giuse. Could you comment about the evolution of electricity demand in 2025 and the impact from data centers.

Well, you may recall, I already commented on the evolution of demand so far this year during the presentation. In recent years, we have seen a gradual change in consumer behavior related to the high temperature. Now regarding data centers. As of 30th of June 2025, the total high-voltage connection request reached approximately 50 gigawatts, marking further acceleration compared to 42 gigawatts at the end of March 2025. For this reason, data centers will represent one of the drivers together with the electrification of domestic consumption, electric mobility, underlying the increase we expect to see in power demand in future years.

Very well. Many thanks and for all the participants to our call, our Q&A session is now over. The Investor Relations team remains available for any follow-up questions you might have. Thank you for participation and enjoy your summer break.

Thank you, Stefano. Hello, everybody. Goodbye.

Bye.