TERNA: 2020-2024 STRATEGIC PLAN APPROVED

OVER € 7 BILLION FOR THE ENERGY TRANSITION

€ 7.3 billion of investments in the Italian electricity grid to support the energy transition and the

integration of renewable sources into an increasingly articulated and complex energy system.

Terna’s highest financial commitment ever goes on with an almost 20% increase compared to the

€ 6.2 billion of the previous Strategic Plan. The 2020-2024 Strategic Plan confirms Terna's primary

focus on the sustainable development of the Italian Transmission Grid, cross-border

interconnections and Terna's central role to confirm Italy as a European energy hub in the

Mediterranean, in line with the Green New Deal guidelines, leveraging Group's core skills.

Increasing attention to environmental sustainability and to the development of local communities:

‘participatory planning’ and sharing through listening and dialogue with all the stakeholders of the

main infrastructures, that will be less and less invasive, ensuring more safety, resiliency and

efficiency also in the light of the climate change in progress.

Group revenues are expected at € 2.94 billion and EBITDA at € 2.17 billion in 2024, with a

compound annual growth rate (CAGR) over the Plan period of 5% for revenues and more than 4%

for EBITDA. Improvements are also expected in Group net profit, with earnings per share (EPS)

that will reach € 0.48 in 2024.

The Regulated Asset Base (RAB) will reach € 19.7 billion in 2024, with a CAGR of 5% over the

Plan period, registering a strong growth compared to the past.

Dividend policy: from 2020 to 2022, the CAGR of the dividend per share (DPS) is expected at 8%,

based on the 2019 dividend. For 2023 and 2024, a 75% payout is expected, with a minimum

guaranteed dividend equal to the 2022 dividend.

Terna’s capital structure will remain solid, also thanks to a robust cash generation, which will

contribute significantly to the Investment plan and to shareholders remuneration.

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RESULTS AS OF 31 DECEMBER 2019 APPROVED

• Revenues at € 2,295.1 million (+4.5%)

• EBITDA at € 1,741.2 million (+5.5%)

• Group Net profit at € 757.3 million (+7.2%)

• Proposed dividend for 2019 of € 0.2495 per share

(of which € 0.0842 already paid as interim dividend and € 0.1653 as final dividend

payable in June 2020)

• Capex at € 1,264.1 million (+15.9%)

• Net financial debt at € 8,258.6 million (€ 7,899.4 million as of 31 December 2018)

Rome, 10 March 2020 - The Board of Directors of Terna S.p.A. at its meeting today chaired by

Catia Bastioli, approved the 2020-2024 Strategic Plan and the consolidated results for 2019,

presented by the CEO and General Manager Luigi Ferraris.

Statement of Terna CEO and General Manager, Luigi Ferraris: “I am very satisfied with the

significant growth of our results achieved in 2019, at the end of the three-year period characterised

by a huge transformation of the energy sector in Italy, in Europe and all over the world, now

oriented towards the complete decarbonization and full use of renewable sources. Within this

context Terna is carrying out a deep transformation, by placing itself at the center of the energy

transition as a key accelerator. People, technological innovation, digitization, sustainability and

participatory planning are, and will continue to be, our enabling factors to manage an increasingly

complex, integrated and distributed system. With the 2020-2024 Strategic Plan, presented today,

Terna will continue working to develop the Italian electricity grid. Our financial commitment of € 7.3

billion is a new investments record in line with the Green New Deal and the Italian decarbonization

strategy, to support the development of local areas and generate further value for Terna’s

shareholders”.

2020-2024 Strategic Plan

The Group’s main strategic guidelines

The Strategic Plan for 2020-2024 confirms Terna’s leading role in a sustainable energy transition,

leveraging innovation, skills and distinctive technologies in order to generate value for all

stakeholders. The Plan provides for an important contribution of the Group, aimed at the further

development and integration of renewable energy sources and the overall energy efficiency for an

increasingly decarbonised, resilient, reliable and secure electricity system, guaranteeing the

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highest standards of service quality and adequacy, in line with PNIEC and EU guidelines laid down

through the Green New Deal.

Terna's three strategic guidelines are:

• Domestic Regulated: to give top priority to all those activities that enable Italy to face its

energy challenges in a safe, efficient and sustainable way by leveraging technological

competencies and the specific characteristics of local areas;

• Non-Regulated: to promote and develop new services to support the energy transition, taking

advantage of opportunities beyond our core activities, to be pursued in line with Terna’s

mission;

• International: to leverage the core competencies developed in Italy as a TSO through growth

opportunities overseas.

DOMESTIC REGULATED: REINFORCING DOMESTIC CORE ACTIVITIES

LEVERAGING TECHNOLOGIES

The development, modernisation and strengthening of the Italian national electricity transmission

grid are confirmed as priority activities in the 2020-2024 Strategic Plan: Terna will invest a total of

€ 7.3 billion, a financial commitment that is growing further compared to the previous Plan (+20%)

in order to cope with the growing complexity of the system. Terna will continue to play a leading

role in the energy transition, helping Italy to become an electricity hub for the European and

Mediterranean area in order to manage in a sustainable, secure and efficient way the now greater

complexity of the energy system increasingly characterised by renewable energy sources. The

activities for the Grid development will be shared even more proactively at local level through

dialogue and by listening to all the main stakeholders, local communities, authorities and

institutions. The ‘participatory planning’ model will actively involve citizens and local communities

affected by the works in order to find the best and most innovative and technological infrastructure

solution. For Terna, attention to the environment and sustainability are extraordinary strategic

enablers to generate value for Italy and its local communities.

Over € 4 billion to develop the Italian electricity grid, with projects to strengthen the connections

between market zones, rationalise the grids in the main metropolitan areas of the country and

increase interconnections. The main projects of the 2020-2024 Strategic Plan are the Tyrrhenian

Link – an interconnection which will increase the electricity exchange capacity between Campania,

Sicily and Sardinia, facilitating integration between the different market areas with fundamental

benefits in terms of efficiency - and the SA.CO.I.3 that will strengthen the connection between

Sardinia, Corsica and the Italian mainland.

Over € 2 billion are related to asset renewal and efficiency, mainly to improve the quality of service,

digitalisation and development of sustainable solutions for the grid.

Approximately € 1 billion is for the Defence Plan, mainly for the installation of devices to increase

grid security, adequacy, resilience and stability – e.g. synchronous compensators, in the most

critical points to manage energy flows.

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In addition, over the Plan period, we expect the coming into operation of the Italy-France

interconnection.

Within the three categories of investments mentioned above, approximately € 900 million will

regard digitalisation and innovation, essential elements to enable the energy transition.

Specifically, Terna will continue its digitalisation of electricity substations for the remote control of

main infrastructures through the installation of sensor, monitoring and diagnostics systems,

including predictive systems, for the security of the grid and the national area. Following its

success in Turin, Milan and Naples, Terna will continue to set up Innovation Hubs in Italy,

laboratories of innovative ideas for the grid thanks to the interaction and synergistic work between

universities, research centres, start-ups and businesses.

The Regulated Asset Base (RAB) will reach € 19.7 billion in 2024, with a CAGR of 5% over the

Plan period, registering a strong growth compared to the past. At the end of 2020, the RAB will be

€ 15.8 billion.

NON-REGULATED: DEVELOPING NEW SERVICES TO SUPPORT ENERGY TRANSITION

In the 2020-2024 Strategic Plan, as in the previous years, Non-Regulated Activities will be focused

on supporting energy transition. Specifically, Terna will develop high added-value solutions and

products for companies, leveraging market opportunities for its customers. The main activities will

include energy efficiency projects leveraging Avvenia's know-how, EPC services for third parties

and provision of innovative digital services. In addition, opportunities in connectivity will be pursued

by exploiting the current infrastructure. Thanks to Tamini and the newly acquired Brugg Kabel AG,

Terna will continue to in-source and strengthen the distinctive and technological skills fundamental

for TSO activities.

It is expected that Non-Regulated Activities will contribute for € 450 million cumulated to the

Group’s EBITDA during the Plan period.

INTERNATIONAL ACTIVITIES: LEVERAGING CORE COMPETENCES

In terms of International Activities, during the Plan period, the Group's activities will be focused on

enhancing TSO’s core skills developed in Italy through growth opportunities abroad.

In Europe and in the Mediterranean area, Terna's commitment will be to strengthen Italy's role as

an electricity hub and platform between countries in order to favour the energy transition.

In Latin America, Terna's activities will continue with the management and maintenance of power

lines operating in Brazil and Uruguay and through the implementation and finalisation of existing

projects in Brazil (new concessions) and Peru.

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The Group will also continue to select activities for international opportunities, which may also be

developed through partnerships and will be selected through careful evaluation processes in order

to guarantee a low risk profile and a limited capital absorption.

In addition to the ongoing projects, the 2020-2024 Strategic Plan foresees a maximum cumulated

capital allocation lower than € 150 million. Overall, International activities will bring to the Group a

total contribution in terms of EBITDA of approximately € 200 million cumulated in the Plan period.

MAIN RESULTS EXPECTED IN THE 2020-2024 STRATEGIC PLAN

Group revenues are expected to grow to € 2.94 billion, while EBITDA will reach € 2.17 billion in

2024, with a compound annual growth rate (CAGR) over the Plan period of 5% for revenues and

more than 4% for EBITDA. The investments in the period, gross of the financed tranches, amount

to € 7.8 billion.

Group net profit is also expected to improve, leading to Earnings Per Share (EPS) of € 0.48 in

2024, with a CAGR at 5% over the Plan period. As a result of the optimisation of financial

efficiency, the average cost of net debt in the 2020-2024 Strategic Plan is expected at 1.4%.

These results will guarantee an Operating Cash Flow, which will contribute to the necessary

flexibility to support the planned investment, while offering at the same time an attractive dividend

policy.

Terna’s financial structure will remain solid, and the Net Debt/RAB ratio will remain below 60% in

the five-year period.

SUSTAINABILITY OBJECTIVES AND TARGETS

As in the previous two-year period, the centrality of sustainability in the business has been

reinforced in the 2020-2024 Strategic Plan through the definition of specific targets, aimed at

creating value in the medium-long term. The set of targets is structured around four dimensions—

Human Resources; Stakeholders and the territory; Integrity, responsibility and transparency;

Environment — divided into 14 objectives associated with more than 120 activities distributed over

the entire period of the Plan.

For what concerns Human Resources, the main objectives are focused on safety, with a “Zero

Accidents” training plan (which will cover 100% of staff in the Plant Units by 2020), on the

development of digital skills, performance evaluation (which will involve 85% of employees) and

the progressive extension of agile working policies. Regarding Stakeholders and the territory, we

can note targets on the involvement of local communities and listening to their needs in order to

achieve a wider agreement on infrastructures. In the area of Integrity, responsibility and

transparency area, on the other hand, ISO 14001 and OHSAS 18001 certifications have been

taken as reference, which by 2020 will cover 100% of suppliers in the “works” sectors (94% at the

end of 2019).

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Finally, in the Environment dimension, the most significant targets regard the minimisation of visual

impact and the effect on the landscape of electricity infrastructures thanks even to the removal of

more than 600 km of obsolete lines with new grid development investments.

2020 OUTLOOK

Group revenues are expected at € 2.49 billion, with an EBITDA of € 1.79 billion. Consequently,

Earnings Per Share (EPS) are expected at € 0.38. Investments are expected at € 1.3 billion, gross

of the financed tranches.

DIVIDEND POLICY

From 2020 to 2022, the CAGR of the dividend per share (DPS) is expected at 8%, based on the

2019 dividend. For 2023 and 2024, a 75% payout is expected, with a minimum guaranteed

dividend equal to the 2022 dividend.

****

2019 CONSOLIDATED ECONOMIC AND FINANCIAL RESULTS

€ million 2019 2018 % change

Revenues 2,295.1 2,197.0 +4.5%

EBITDA (Gross Operating Margin) 1,741.2 1,650.6 +5.5%

EBIT (Operating Profit) 1,155.1 1,096.5 +5.3%

Group net profit 757.3 706.6 +7.2%

CAPEX 1,264.1 1,091.1 +15.9%

Revenues for 2019 stood at € 2,295.1 million, an increase of € 98.1 million (+4.5%) compared to

the previous year figure. This result is mainly due to the increase in revenues from regulated

activities in Italy (Domestic Regulated Activities) and the growing contribution from the Tamini

Group and from initiatives abroad (Brazil and Uruguay). Revenues from the Italy-Montenegro

private Interconnector project, which came into operation in December 2019, are also noted.

EBITDA (Gross Operating Margin) of the Group was € 1,741.2 million, with an increase of € 90.6

million (+5.5%) compared to € 1,650.6 million in 2018, mainly due to the improvement in Domestic

Regulated Activities.

EBIT (Operating Profit), after amortisation, depreciation and impairment of € 586.1 million, was

€ 1,155.1 million, compared to € 1,096.5 million in 2018 (+5.3%).

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Net financial expenses for the year, equal to € 77.7 million, decreased by € 11.1 million compared

to the € 88.8 million of 2018, mainly due to the reduction of short-term interest rates, the

seasonality of inflation and to an increased yield from liquidity and short-term financial assets.

Profit before tax stood at € 1,077.4 million, up by € 69.7 million compared to the previous financial

year (+6.9%).

Taxes for the year were € 313.5 million, with an increase of € 17.4 million (+5.9%) compared to the

previous year, mainly due to higher profits before taxes.

The tax rate for 2019 was 29.1%, substantially in line with the previous year (29.4% for 2018).

The Group net profit for the year was € 757.3 million, up by € 50.7 million compared to 2018

(+7.2%).

The consolidated statement of financial position as of 31 December 2019 showed equity

attributable to owners of the Parent of € 4,190.3 million, compared to the € 4,019.2 million as of 31

December 2018.

Net debt as of 31 December 2019 amounted to € 8,258.6 million, compared to the € 7,899.4 million

as of 31 December 2018, to support investment activities of the period.

The Terna Group Capex in 2019 was € 1,264.1 million, up by 15.9% compared to the € 1,091.1

million of financial year 2018. The main projects in the period included the completion of the Italy-

Montenegro interconnection, the ongoing development of the Italy-France interconnection and the

connection between Capri and the Sorrento Peninsula, the rationalisation of the high voltage

electricity grid in the Rome and Naples metropolitan area and the strengthening of the grid in the

Foggia-Benevento area.

The Group’s employees as of 31 December 2019 totalled 4,290, up by 38 compared to 31

December 2018, due to the policy made to strengthen the Group's distinctive skills. This is aimed

at the new initiatives laid down in the Strategic Plan, in particular for investment and maintenance

activities for the Italian transmission grid, the development of innovative work in the Non-Regulated

Activities and the development of business activities abroad.

2019 results of the Parent Company - TERNA S.p.A.

With regard to the results of the Parent Company, Terna S.p.A. closed 2019 with revenues of €

2,054.5 million, up compared to the € 1,967.6 of 2018.

EBITDA (Gross Operating Margin) stood at € 1,603.5 million, with an increase of € 87.9 million

compared to the € 1,515.6 million of 2018.

EBIT (Operating Profit), after amortisation, depreciation and impairment of € 540.7 million, was €

1,062.8 million, up compared to the € 997.7 million of 2018.

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Net profit for the year amounted to € 713.5 million, up by € 52.2 million compared to financial year

2018.

The statement of financial position shows shareholders’ equity of € 3,981.1 million (compared to

the € 3,850.9 million as of 31 December 2018) and net financial debt of € 8,361.6 million

(compared to the € 8,101.8 million as of 31 December 2018).

Main events after year end

Business Development

On 17 January 2020, Terna commissioned the new Benevento III-Pontelandolfo power line in

Campania. The infrastructure, which enables greater efficiency and sustainability for the electricity

grid in the area, promotes the integration into the grid of energy production from renewable

sources in the Benevento area.

On 31 January 2020, Terna's CEO, Luigi Ferraris, signed a Memorandum of Understanding with

11 consumer associations aimed at strengthening cooperation between the parties with regard to

Terna's activities as an electricity system operator, with particular attention to electricity service

objectives in terms of safety and efficiency. The signing of the MoU launches the “Cantiere dei

Consumatori”: a permanent roundtable on the collaboration between Terna and consumer

associations.

On 18 February 2020, Terna CEO, Luigi Ferraris, and the Governor of the Veneto Region, Luca

Zaia, signed a Memorandum of Understanding for the launch of a trial on the use of the regional

electricity grid for the environmental monitoring of the region. Approximately 500 sensors have

been developed and installed on the Veneto electricity grid for the first time in order to monitor

specific areas mainly in the provinces of Belluno, Verona and Vicenza. Terna and the Veneto

Region will collaborate to develop strategies to share and use the data collected by the monitoring

devices.

On February 29 2020, through its subsidiary Terna Energy Solutions, Terna signed the closing for

the acquisition of 90% stake in the share capital of Brugg Kabel AG (Brugg Group) one of the

leading operators in the underground cable sector, designing, developing, creating, installing and

maintaining electrical cables of all voltage levels and accessories for high-voltage cables. The

acquisition of Brugg Kabel will allow Terna to insource a centre of excellence for research,

development and testing one of the TSO core technologies, i.e. underground cables.

Sustainability

On 21 January 2020, for the second consecutive year Terna was confirmed in the Bloomberg

Gender Equality Index (GEI), the international index, that measures corporate performance on

equal pay and the quality and transparency of its public reporting, a decisive element in the overall

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assessment. Terna’s performance for 2020 is considered above average both compared to the

companies included in the index and to the subset of companies in the Utilities sector.

On 30 January 2020, Terna was confirmed in the Gold Class for global sustainability by

RobecoSAM, the international rating agency that assessed the sustainability performance of over

4,700 leading global companies for the Dow Jones Sustainability Index.

Innovation

On 29 January 2020, as part of the Next Energy initiative, 10 teams of innovators from the “Call for

Ideas” were selected for the incubation course lasting a maximum of three months. In addition, 5

start-ups from the “Call for Growth” have started the so-called engagement phase with the Italian

national transmission grid operator within Terna's Innovation Hubs.

Business outlook

The electricity sector is evolving rapidly due to the currently ongoing energy transition that implies

challenging targets of sustainability, competitiveness and security. In particular, the expected

increase in global electricity consumption within a context of progressive decarbonisation will

require a significant increase in the use of renewable sources with consequent challenges for their

integration into the electricity system. The pursuit of energy security through the optimisation of

interconnections, the increase of grid resilience and a more competitive market will be determining

factors in the management of the complex exchanges between TSOs and other system operators.

With reference to financial year 2020, the Group is therefore committed to achieving the targets

defined in the 2020-2024 Strategic Plan. With specific reference to the € 7.8 billion of total

investments in the next 5 years, € 1.3 billion have been scheduled for 2020.

The main electricity infrastructure projects under construction include the interconnection with

France, the launch of works on the new SA.CO.I.3 project (strengthening of the connection

between Sardinia, Corsica and the Italian mainland). In addition, the main projects to increase the

exchange capacity between the different areas of the Italian electricity market include the Colunga-

Calenzano (Tuscany and Emilia Romagna) and Paternò-Pantano-Priolo (Sicily) power lines; the

rationalisation works for the electricity grids in metropolitan areas will affect the cities of Genoa,

Milan, Naples and Rome and mainly involve the renewal of the current infrastructure with new,

more technologically advanced connections in line with the best standards in terms of

environmental sustainability.

To support the above, the contribution of investments in innovation and digital solutions will be

crucial to manage the increase in the complexities of the system. Terna will also be focused on the

development and insourcing of strategic skills, the consolidation of structures and the optimisation

of project execution and project control skills.

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The 2020-2024 Strategic Plan aims at ensuring the sustainability and observance of ESG

objectives, minimising environmental impact, promoting stakeholder engagement and

guaranteeing the principles of integrity, responsibility and transparency – the basis behind Terna’s

approach to business – are respected. The objectives described above will be pursued mainly by

focusing to maximise the generation of the necessary cash flows required to guarantee a safe and

stable financial structure. But above all, once again, these ambitious targets can only be achieved

through our most important asset: our people.

2019 Sustainability Report - Consolidated Non-Financial Statement

The Board of Directors approved the 2019 Sustainability Report - drawn up according to the GRI

standards - which also meets the reporting requirements on non-financial information, in

accordance with Italian Legislative Decree 254/2016 and subsequent amendments thereto. Among

the main results achieved in 2019, it is worth noting Terna's presence in all the main international

stock exchange sustainability indexes and its confirmation as Industry Leader in the Electric

Utilities sector for the second consecutive year.

Corporate Governance, Shareholders’ meeting and dividend

The Board of Directors approved the 2019 Report on Corporate Governance and Ownership

Structure (which reports the outcome of the assessment of the continued independence

requirements for the Directors) and, on the proposal of the Remuneration Committee, approved

the Report on the remuneration and compensation policy.

The Board of Directors also called the Shareholders’ Meeting as disclosed to the market on 30

January 2020.

The Shareholder’s Meeting - called to approve Terna S.p.A.’s financial statements as of 31

December 2019, as well as the income allocation - has been scheduled for 27 April 2020 in both

Ordinary and Extraordinary session, in order to:

1. Approve TERNA S.p.A’s financial statements as of 31 December 2019 and review the

consolidated financial statements as of 31 December 2019

2. Decide on the allocation of the profit for the year

The Board of Directors will propose to the Shareholders’ Meeting the approval of a total dividend

for financial year 2019 of € 501,493,004.00, or € 0.2495 per share and the distribution - net of the

ordinary interim dividend related to financial year 2019 of € 0.0842 per share already paid from 20

November 2019 - of the remaining € 0.1653 per share, before any legal withholdings, to be paid

starting from 24 June 2020 and with “ex-dividend date” 22 June 2020 of coupon no. 32 (record

date pursuant to Art. 83-terdecies of Italian Legislative Decree no. 58 of 24 February 1998,

“Consolidated Law on Finance” - CLF - of 23 June 2020).

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3. Decide on the replacement of the Board of Directors and the Board of Statutory Auditors, whose

term are expiring, as well as the relative compensation and remuneration

4. Decide on adopting a long-term incentive plan based on Performance Share 2020-2023 for

TERNA S.p.A.’s management and/or its subsidiary companies pursuant to Art. 2359 of the Italian

Civil Code

The plan, based on financial instruments, includes the right to the free allocation of a number of

Terna S.p.A. shares (Performance Shares) at the end of the vesting period, as long as the

performance goals outlined in the attached plan have been achieved. In particular, our

performance goals include: operating performance - cumulative EBITDA – relative weight 50%;

market performance - relative TSR – relative weight 30%; sustainability - Dow Jones Sustainability

Index – relative weight 20%.

At the end of the vesting period, 30% of the allocated shares will be subject to a further lock up

period of one year, during which these shares will not be transferable (i.e. they cannot be

transferred or sold over a period of 12 months).

Claw-back clauses have been applied to the Plan, as foreseen by the Governance Code and

market best practices.

The beneficiaries of the Plan are the General Manager, who also serves as Chief Executive

Officer, Senior Managers with Strategic Responsibilities, as well as other Senior Managers and

Middle Managers in the Company and/or its subsidiaries, pursuant to Art. 2359 of the Italian Civil

Code.

In consideration of its features, its structure, and the performance objectives identified, the Plan is

designed to ensure the alignment of management’s interests with the priority objective of creating

value for shareholders over the medium to long term.

For a full description of the plan, please see the Information Document prepared pursuant to Article

114-bis of the Consolidated Law on Finance, which will be made accessible to the public within the

legal terms.

5. Approve the Report on the remuneration and compensation policy

The Shareholders’ Meeting is called to decide on:

- (binding) the first section of the Report, which explains the policy on remuneration of the

members of Terna S.p.A.’s Board of Directors and the Board of Statutory Auditors, the General

Manager and the Senior Executives with Strategic Responsibilities, as well as the procedure for

adopting and implementing the Policy;

- (non binding) the second section of the Report, which explains the compensation paid to the

members of the Board of Directors and the Board of Statutory Auditors, the General Manager and,

as an aggregate number, Senior Executives with Strategic Responsibilities.

In the extraordinary session, the Shareholders’ Meeting shall decide on the change to the by-laws,

which would eliminate the reference in the transitional provisions to the pre-existing regulations on

gender quotas in order to make the by-laws consistent with the currently prevailing provisions.

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The Board of Directors has given the Chairwoman the task of setting a time and place for the

Shareholders’ Meeting. The notice of call and the documentation regarding the matters on the

agenda will be published in the ways and times foreseen by the law.

AUTHORISATION TO PURCHASE AND SELL TREASURY SHARES

The Board of Directors has also decided to refer to the ordinary session of the 27 April 2020

Shareholders’ Meeting a proposal to authorise the purchase and subsequent sale, all at once or

over several transactions, of treasury shares for a total outlay of up to € 10 million and up to a

maximum of 1.77 million ordinary Company shares, representing around 0.09% of Terna’s share

capital.

This request is based on the opportunity to grant the Board of Directors the right to purchase and

sell treasury shares, in compliance with the current regulations and methods indicated here below,

as part of the Performance Share Plan and/or any share incentive plans foreseen for the Directors

and/or Company employees and/or subsidiaries and/or affiliates.

The authorisation to purchase treasury shares is requested for the maximum period established by

Article 2357.2 of the Italian Civil Code, and therefore for eighteen months from the date of the

Shareholders’ Meeting approval. There is no required time limit for the disposal of treasury shares.

The authorization request provides that purchases can be made at a price, which does not differ by

more than 10%, either higher or lower, compared to the reference price on the Mercato Telematico

Azionario (Electronic Stock Market)—organised and operated by Borsa Italiana S.p.A.—recorded

for the previous day’s session for each individual transaction. Additionally, treasury share

purchases on the market shall be made according to the terms, conditions and requirements

established by current regulations, as well as the prevailing market protocols at the time, if

applicable.

Treasury share sales or other disposal of treasury shares will be made as part of the Performance

Share Plan and/or any other share incentive plans intended for the Directors and/or Company

employees and/or subsidiaries and/or affiliates, in accordance with the terms and conditions

indicated in the applicable rules, without prejudice to current regulations, as well as the prevailing

market protocols at the time, if applicable. Purchase transactions will be made in compliance with

the provisions of Art. 132 of the Consolidated Law on Finance and Art. 144-bis of the Issuers'

Regulation and all other applicable regulations, as well as the prevailing market protocols at the

time, if applicable.

More specifically, pursuant to Art. 132.1 of the Consolidated Law on Finance, treasury share

purchases shall be made in a way that assures equal treatment among Shareholders, according to

the methods established by CONSOB. In this latter regard, according to the methods identified in

Art. 144-bis of the Issuers' Regulation, Terna share purchases may be also made under the

conditions indicated in Art. 5 of Regulation (EU) no. 596/2014, except for the methods established

by letters d and d-bis of Art. 144-bis.

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Note that, in cases where the right referred to in Art. 144-bis, section 1(c) of the CONSOB Issuers'

Regulation is being exercised, purchases and sales of derivative instruments must be made

through specific assignment to an approved financial intermediary.

Additionally, please note that, at present, Terna does not hold any treasury shares, either directly

or through its subsidiaries.

Alternative performance indicators

In this release, some "alternative performance measures" (EBITDA, Tax Rate and Net Debt) are

used, which are not provided for in the IAS/IFRS accounting standards; their meaning and

contents are explained below pursuant to the ESMA/2015/1415 guideline published on 3

December 2015:

- EBITDA (Gross Operating Margin): this is a measure of operating performance; it is calculated as

net “profit for the year” before “Income taxes for the year”, “Financial income/(expense)” and

“Amortisation, depreciation and impairment”.

- Tax Rate: this expresses the proportion of tax with respect to the profit/(loss) and derives from

the ratio between “Income taxes for the year” and “Profit before taxes”.

- Net Financial Debt: this is an indicator of the funding structure; it is determined as the result of

short-term loans (“Short-term loans”, “Current portion of long-term loans” and “Current financial

liabilities”) and long-term loans (“Long-term loans”) and the relative derivative instruments (“Non-

current financial liabilities”) net of “Cash and cash equivalents”, “Current financial assets” and

“Non-current financial assets” for the value of hedging derivatives on bonds. It should be noted that

the net financial debt of Terna Group and Terna S.p.A. is in compliance with the provisions of

ESMA Recommendation no. 319 of 2013 regarding the definition of the net financial position, less

“Non-current financial assets”.

Today, at 3:00 pm, a conference call will be held to present corporate strategy and the 2019

consolidated results to financial analysts, institutional investors and media representatives. The

support material for the event will be made available on the Company’s website (www.terna.it), in

the Investors section, at the beginning of the meeting. The presentations will also be made

available, via “eMarket SDIR”, on the website of Borsa Italiana S.p.A. (www.borsaitaliana.it) and

through the authorised storage service “1Info” (www.1info.it). Journalists will have the opportunity

to follow the meeting without any right to speak. It will also be possible to follow the presentation by

connecting to the audio webcast on the Company website (www.terna.it): following the live

coverage, the file will be available in the Investors section.

The Financial Reporting Manager, Agostino Scornajenchi, pursuant to paragraph 2 of Art. 154-bis

of the Consolidated Law on Finance, declares that the accounting information included in this

press release corresponds to the evidence in the documents, books and accounting records.

The 2019 Annual Financial Report including Terna S.p.A.’s draft separate financial statements and

the Terna Group’s consolidated financial statements at 31 December 2019, accompanied by the

14

report on operations on the separate financial statements of Terna S.p.A. and on the consolidated

financial statements and by the certification of the Financial Reporting Manager and of the Chief

Executive Officer under the terms of paragraph 5 of Art. 154-bis of the Consolidated Law on

Finance together with the additional documents as established by the law, the Consolidated Non-

Financial Statement and the Annual Report on Corporate Governance and ownership structure, by

the deadline set out by law, will be made available to the public at the Company’s registered office,

published on the Company's website (www.terna.it) and on the website of the authorized storage

service "1Info" (www.1info.it) and filed at the stock exchange management company Borsa Italiana

S.p.A. (www.borsaitaliana.it). Disclosure regarding filing will be issued.

The 2019 Annual Report and the 2019 Consolidated Non-Financial Statement have been

submitted to the Board of Statutory Auditors and to the Independent Auditing Company for the

assessments they are responsible for. The report by the Board of Statutory Auditors and the

reports by the Independent Auditing Company will be made available to the public as soon as they

are available according to the terms established by the law.

The reclassified Income Statement, Statement of Financial Position and Statement of Cash Flows

of the Terna Group and of Terna S.p.A. are attached.

It should be noted that, pursuant to Communication No. DME/9081707 of 16 September 2009, the

reclassified statements presented below are those included in the Report on Operations (included

in the 2019 Annual Financial Report), for which the Independent Auditing Company, in compliance

with Article 14 of Italian Legislative Decree No. 39 dated 27 January 2010 will verify consistency

with the Financial Statements.

15

The Terna Group’s reclassified income statement

(€m)

2019 2018 Change % change

TOTAL REVENUE 2,295.1 2,197.0 98.1 4.5%

- Regulated revenue in Italy 2,055.0 1,989.6 65.4 3.3% of which Revenue from construction services

performed under concession 27.6 25.5 2.1 8.2%

- Non-Regulated revenue 211.7 194.9 16.8 8.6%

- International revenue 28.4 12.5 15.9 127.2%

TOTAL OPERATING COSTS 553.9 546.4 7.5 1.4%

- Personnel expenses 251.6 238.8 12.8 5.4%

- Cost of services, leases and rentals 171.8 176.5 (4.7) (2.7%)

- Materials 86.2 77.9 8.3 10.7%

- Other costs 16.1 22.6 (6.5) (28.8%)

- Quality of service 0.6 5.1 (4.5) (88.2%)

- Cost of construction services performed

under concession 27.6 25.5 2.1 8.2%

GROSS OPERATING PROFIT (EBITDA) 1,741.2 1,650.6 90.6 5.5%

- Amortisation, depreciation and impairment losses 586.1 554.1 32.0 5.8%

OPERATING PROFIT (EBIT) 1,155.1 1,096.5 58.6 5.3%

- Net financial income/(expenses) (77.7) (88.8) 11.1 (12.5%)

PROFIT/(LOSS) BEFORE TAX 1,077.4 1,007.7 69.7 6.9%

- Income tax expense for the year 313.5 296.1 17.4 5.9%

PROFIT FOR THE YEAR 763.9 711.6 52.3 7.3%

- Profit/(Loss) attributable to non-controlling

interests 6.6 5.0 1.6 32.0%

PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS

OF THE PARENT 757.3 706.6 50.7 7.2%

16

The Terna Group’s reclassified statement of financial position

(€m)

at 31 December 2019 at 31 December 2018 Change

Total net non-current assets 14,908.5 14.083.6 824.9

- Intangible assets and goodwill 542.7 519.4 23.3

- Property, plant and equipment 13,864.2 13,244.3 619.9

- Financial assets 501.6 319.9 181.7

Total net working capital (2,207.8) (1,822.5) (385.3)

- Net energy-related pass-through payables (575.8) (777.6) 201.8

- Net receivables resulting from Regulated Activities 320.4 313.9 6.5

- Net trade payables (899.1) (908.9)* 9.8

- Net tax liabilities (5.3) 50.9 (56.2)

- Other net liabilities (1,048.0) (500.8)* (547.2)

Gross invested capital 12,700.7 12,261.1 439.6

Sundry provisions (210.2) (307.5) 97.3

NET INVESTED CAPITAL 12,490.5 11,953.6 536.9

Equity attributable to owners of the Parent 4,190.3 4,019.2 171.1

Equity attributable to non-controlling interests 41.6 35.0 6.6

Net debt 8,258.6 7,899.4 359.2

TOTAL 12,490.5 11,953.6 536.9

* Reclassified to improve comparability. No impact on working capital or equity.

17

The Terna Group’s cash flow

(€m)

Cash flow

2019

Cash flow

2018

- Profit for the year 763.9 711.6

- Amortisation, depreciation and impairment losses 586.1 554.1

- Net change in provisions (97.3) (48.3)

- Net losses/(gains) on sale of assets (12.9) (3.5)

Operating cash flow 1,239.8 1,213.9

- Change in net working capital 386.2 336.6

- Other changes in property, plant and equipment and intangible assets 46.8 36.0

- Change in investments (3.3) 1.7

- Change in financial assets (178.4) (113.7)

Cash flow from operating activities 1,491.1 1,474.5

- Total capital expenditure (1,264.1) (1,091.1)

Free cash flow 227.0 383.4

- Dividends paid to the Parent Company’s shareholders (479.7) (451.1)

- Cash flow hedge reserve after taxation and other movements in equity attributable to

owners of the Parent (106.5) (39.6)

- Other movements in equity attributable to non-controlling interests - 4.3

Change in net debt (359.2) (103.0)

18

Terna S.p.A.’s reclassified income statement

(€m)

2019 2018 Change % change

TOTAL REVENUE 2,054.5 1,967.6 86.9 4.4%

- Tariff revenue 1,838.5 1,800.6 37.9 2.1%

of which transmission revenue 1,725.6 1,657.5 68.1 4.1%

of which dispatching, metering and other revenue 112.9 143.1 (30.2) (21.1%)

- Other operating income 188.4 141.5 46.9 33.1%

- Revenue from construction services performed

under concession 27.6 25.5 2.1 8.2%

TOTAL OPERATING COSTS 451.0 452.0 (1.0) (0.2%)

- Personnel expenses 60.0 63.6 (3.6) (5.7%)

- Cost of services, leases and rentals 354.5 343.8 10.7 3.1%

- Materials 1.2 0.9 0.3 33.3%

- Other costs 7.1 13.1 (6.0) (45.8%)

- Quality of service 0.6 5.1 (4.5) (88.2%)

- Cost of construction services performed under

concession 27.6 25.5 2.1 8.2%

GROSS OPERATING PROFIT (EBITDA) 1,603.5 1,515.6 87.9 5.8%

- Amortisation, depreciation and impairment losses 540.7 517.9 22.8 4.4%

OPERATING PROFIT/(LOSS) (EBIT) 1,062.8 997.7 65.1 6.5%

- Net financial income/(expenses) (63.6) (78.5) 14.9 (19.0%)

PROFIT/(LOSS) BEFORE TAX 999.2 919.2 80.0 8.7%

- Income tax expense 285.7 257.9 27.8 10.8%

PROFIT FOR THE YEAR 713.5 661.3 52.2 7.9%

19

Terna S.p.A.’s reclassified statement of financial position

(€m)

at 31 December 2019 at 31 December 2018 Change

Total net non-current assets 13,981.2 13,548.1 433.1

- Intangible assets and goodwill 443.8 427.7 16.1

- Property, plant and equipment 12,258.3 12,035.0 223.3

- Financial assets 1,279.1 1,085.4 193.7

Total net current liabilities (1,517.4) (1,388.0) (129.4)

- Net energy-related pass-through payables (598.6) (799.7) 201.1

- Net receivables resulting from regulated activities 320.4 313.9 6.5

- Net trade payables (592.5) (537.6) (54.9)

- Net tax liabilities (79.3) (14.2) (65.1)

- Other net liabilities (567.4) (350.4) (217.0)

Gross invested capital 12,463.8 12,160.1 303.7

Sundry provisions (121.1) (207.4) 86.3

NET INVESTED CAPITAL 12,342.7 11,952.7 390.0

Equity 3,981.1 3,850.9 130.2

Net debt 8,361.6 8,101.8 259.8

TOTAL 12,342.7 11,952.7 390.0

20

Terna S.p.A.’s cash flow (€m)

Cash flow

2019 Cash flow 2018

- Profit for the year 713.5 661.3

- Amortisation, depreciation and impairment losses 540.7 517.9

- Net change in provisions (86.3) (66.1)

- Net losses/(gains) on sale of assets (11.2) (3.0)

Operating cash flow 1,156.7 1,110.1

- Change in net working capital 130.5 243.0

- Change in investments (29.2) (55.7)

- Other movements in property, plant and equipment and intangible assets 275.6 38.7

- Change in financial assets (164.5) (19.6)

Cash flow from operating activities 1,369.1 1,316.5

- Total capital expenditure (1,045.6) (886.1)

Free cash flow 323.5 430.4

- Dividends paid to shareholders (479.7) (451.1)

- Cash flow hedge reserve after taxation and other movements in equity (103.6) (34.6)

Change in net debt (259.8) (55.3)