Terna — Board/Management Information 2020

Apr 6, 2020

Guidelines of the Board of Directors of TERNA S.p.A. for shareholders

on the size and composition of the new board of directors

The Board of Directors of TERNA S.p.A. ("Terna" or the "Company"), in line with the recommendations of the Governance Code for Listed Companies, considering that its mandate expires with approval of the financial statements for the year 2019, and having:

• consulted the Appointments Committee;
• considered the outcome of the Board Review for the year 2019;
• considered the benchmark and good corporate practices shared at national and international level;
• considered the business focus of the following Board of Directors, whose mandate will be of significant importance for continuing growth of the Company's business in line with the development plans set in the past three years;

with a view to renewal of the Board itself, provides Shareholders with its guidelines regarding:

• the size of the new Board of Directors;
• the composition, in terms of the figures considered useful for the new Board of Directors, also considering aspects such as professional and general characteristics of its members, and their seniority of role.

Size of the new Board of Directors

The Board of Directors of TERNA S.p.A. considers that the current number of nine Directors, between a minimum of seven and a maximum of thirteen as defined by the Company's Bylaws, is appropriate to ensure an adequate balance of expertise and experience as required by the complexity of TERNA's business, as well as to allow establishment of Committees without excessive overlapping of the relative members;

Composition of the new Board of Directors

The Board suggests ensuring, in line with corporate-governance rules, sufficient continuity in terms of composition of the Administrative Body in order to take advantage of the knowledge acquired regarding the Company and the business in which it operates on the part of Directors. To this end, the Board suggests that on renewal, it maintains and strengthens the presence of managerial, professional and/or academic/institutional profiles and profiles with experience in the electricity and energy sector. The Board also recommends that at least one of the directors is equipped with specific expertise in the field of digital innovation, systems and sustainability.

In relation to diversity criteria to guarantee an appropriate composition of the Board, for effective performance of tasks and responsibilities assigned, the following is also noted:

• the provisions of the Governance Code;
• the provisions of the "Diversity Policy" adopted by the Company with particular reference to the requirement that the members of the Board collectively possess

sufficient expertise in the following sectors: (i) energy/grid structures/public services; (ii) finance, administration and auditing; (iii) legal; (iv) strategy; (v) engineering; (vi) sustainability.

In line with the criteria described, the personal and professional characteristics considered appropriate for the different roles in the Board of Directors of Terna are as follows:

• 1) the Chairman of the Board of Directors, in continuation of the existing role held on the Board, should:
• possess personal traits that allow creation of a strong sense of team spirit and cohesion amongst the members of the Board of Directors;
• possess adequate knowledge in the field of corporate governance, with significant prior experience, preferably as leader, of boards of directors of complex listed companies of a significant size and international character, equivalent to TERNA's own characteristics, and/or primary experience at technical/institutional level.
• represent a figure that guarantees the trust of Shareholders, investors and stakeholders;
• have international experience, accompanied by sufficient knowledge of foreign languages and, in particular, at least English.
• 2) The Chief Executive Officer, in continuation of the role covered in the outgoing Board, should:
• be a figure with strong leadership qualities, as well as recognised strategic capabilities and vision;
• have significant experience and success at the head of listed companies comparable to TERNA;
• have international experience in the energy business, the energy transition, climate change and technological innovation, as well as economic and financial skills;
• possess recognised leadership qualities and a management style focused on guidance and the ability to foster team spirit amongst colleagues;
• have international experience, accompanied by sufficient knowledge of foreign languages and, in particular, at least English.

The other Directors should all be non-executive and should possess the independence requirements established by law and the Governance Code, have recognised personal integrity, and furthermore should:

• be represented by figures with professional and/or managerial and/or academic/institutional profiles that pool differing and complementary skills and experience, thus contributing to the overall adequacy of the Board of Directors, also taking into account the benefits that may be derived from presence on the Board of different genders, ages and levels of professional seniority;

• be capable of expressing, on the basis of experience gained on boards of directors of listed companies with significant capitalization, strategic guidance, stimulation of results, collaboration and capability to influence and settle any differences;
• possess adequate professional seniority, understood as proven experience in complex organisational contexts in business and/or professional and/or institutional spheres;
• possess or be capable of acquiring, through appropriate induction activity, the technical knowledge necessary to understand the Terna Group's business and the risks to which it is exposed, allowing adequate performance of stimulation and control in the relative role;
• possess, in addition to the expertise already indicated, specialised expertise such as to allow effective participation both in work of the Board of Directors and in the various Committees, contributing to debate and providing stimulation and dialogue in relation to management;
• have an international mentality and vision, accompanied by sufficient knowledge of foreign languages and, in particular, at least English;
• demonstrate social intelligence and appropriate personal traits, including interpersonal skills at all levels, a sense of responsibility and loyalty.

In addition to the above and in line with the provisions of the Governance Code, in order to guarantee appropriate composition of Committees, it is recommended that at least one Director:

• possesses adequate knowledge and experience in the area of finance and remuneration policy;
• possesses adequate experience in the area of accounting and finance or risk management and sustainability.

Furthermore:

• management profiles should:
• have experience in positions of responsibility in the context of industrial groups of dimensions and complexity equivalent to Terna;
• possess strategic vision and business judgement capability;
• professional profiles should:
• have experience in positions of responsibility in the context of important professional enterprises, consulting companies or other organisations, public or private or of an institutional nature;
• have performed their professional activity with particular focus on industrial and services enterprises;

Commitment and availability

All candidates for Director, in accepting their candidature, in addition to meeting all honour and independence requirements and experience criteria, should carefully assess the availability of sufficient time to dedicate to the diligent performance of their duties and preparation for board and committee meetings, considering both the number and characteristics of roles held on boards of directors and auditors of other companies, and the commitment required of them for other work and professional activities.

In this regard, attention is drawn to the content of the document "Guidelines on the maximum number of positions that relative members can hold on the boards of directors and statutory auditors of other companies of significant size", prepared by the Board of Directors in line with the recommendations of applicative criterion 1.C.3 of the Corporate Governance Code.

It is noted, purely as an indication, that in 2019 the following meetings were held:

• Board of Directors: 13 meetings;
• Internal Audit and Risks, Corporate Governance and Sustainability Committee: 6 meetings;
• Remuneration Committee: 4 meetings;
• Appointments Committee: 3 meetings;
• Related Parties Committee: 2 meetings.