Terna — Interim / Quarterly Report 2022

Nov 9, 2022

SDIR certifie

2022 CONSOLIDATED INTERIM FINANCIAL REPORT - 30 SEPTEMBER

Driving Energy

We are Europe's largest independent electricity transmission system operator.

We are engaged in driving and enabling the ecological transition in order to create a new development model based on renewable sources and respect for the environment.

Sustainability, innovation and distinctive competencies are behind everything we do, with the aim of providing the generations to come with a clean, accessible and emission-free energy future.

We have the major responsibility for providing the country with energy, ensuring security, quality and cost-effectiveness over time.

We manage Italy's high-voltage electricity transmission grid, one of the most modern and technologically advanced in Europe, which we are working to develop and integrate with the European grid, guaranteeing secure and equal access to all grid users.

We are developing Non-regulated Activities and new business opportunities, making our expertise and experience available in Italy and overseas.

Contents

	Terna's role in the energy transition	4
	Highlights	6
	Structure of the Group	10
	Conflict in Ukraine: risk assessment and prevention for the Terna Group	12
1	The energy environment Electricity demand and production in Italy	15 16
2	The Group's strategy The Company and its strategy Innovation People	19 20 26 28
3	The Group's business Operating activities Financial review for the first nine months of 2022 Terna's shares Outlook Declaration of the manager responsible for financial reporting in accordance with paragraph 2 of art. 154-bis of Legislative Decree 58/1998	31 32 45 56 58 59
4	Annexes Alternative performance measures (APMs) Other information	61 62 63

Terna's role in the energy transition

The electricity system is made up of several segments: production, transmission, distribution and the sale of electricity. Through its activities Terna is responsible for the key transmission and dispatching segment. As Transmission System Operator (TSO), Terna must on the one hand design a grid capable of handling the progressive decarbonisation of the sources of production and the growing integration of renewables ("transmission operator"), whilst on the other guaranteeing that, at all times, energy demand from consumers is always balanced by the amount produced ("system operator").

This is an extremely complex task, requiring a director capable of taking an overall view and controlling a high number of actors, both on the supply and the demand side.

The transition to a distributed production system based on renewable sources is rapidly altering the market with the rise of the prosumer (at the same time a producer and consumer) in place of the traditional consumer. This is leading to exponential growth in active distributed resources connected to the grid. By managing demand for HV connections, coming directly by operators or indirectly via distribution companies from entities proposing renewable settings, the Group can obtain a systematic view of the current situation and future scenarios. In this manner, Terna can monitor the system's ability to meet demand for electricity whilst satisfying security and quality of service requirements: in a word, the system's "adequacy".

An electricity system is in fact deemed to be adequate if it has sufficient resources in terms of generation, storage, demand control and transport capacity to meet expected demand for electricity with a reasonable degree of confidence. Thanks to advanced forecasting and planning tools, together with innovative data management and analytics solutions, the generation resources needed to ensure system adequacy in the short, medium and long term are constantly assessed, also with a view to procuring new flexible resources for the system.

An extremely complex challenge. Economic growth is based on an energy model that is no longer sustainable and there is an urgent need for a collective effort to cut greenhouse gas emissions. Taking up (and meeting) this challenge means proposing a new approach to efficiency, sustainability and security in all areas of the economy, starting with the energy sector.

This challenge calls for a major effort to plan, approve and carry out investment projects. It is crucial to be able to identify rapid, effective solutions. Against this backdrop, the Terna Group has further accelerated work on key investment projects of most importance to the electricity system, envisaging expenditure of over €18 billion on the projects included in the ten-year Grid Development Plan.

The European climate law has set a target for the EU to achieve net zero by 2050, with an intermediate target of reducing greenhouse gas emissions by 55% by 2030 (with the widely discussed Fit for 55 package). This international commitment to decarbonisation and sustainable development plays a key role in Terna Group's strategic thinking.

Terna Group plays a central role in this major transition process, enabling the integration of renewables and the electrification of consumption. Development of the electricity grid is the main enabling factor in achieving decarbonisation of the entire energy system.

What does this mean? Achieving the European and international goals will require the participation of all members of society. The energy sector must take the lead in recognition of the fact that it is the biggest producer of emissions at global level. The energy sector accounts for approximately 82% of Europe's total greenhouse gas emissions.

Under the European Green Deal, the net zero emissions target is to be achieved in two main ways: by increasing use of renewables and through growing electrification of consumption. In this sense, energy efficiency has a leading role to play in achieving carbon neutrality.

Introducing the "energy efficiency first" principle, the European Commission invited member states to include this principle in all their decisions regarding policy, planning and investment. In this way, in keeping with the EU's long-term strategy, final energy consumption in Europe is expected to fall by (at least) 35% by 2050 compared with the levels in 20191.

Electricity will be the main energy carrier and the electricity grid will operate as the backbone for decarbonisation for all the other energy sectors. This reflects the carrier's intrinsic efficiency and the technological maturity of renewable energy sources (RES).

To fully exploit this potential, the proportion of total energy demand met by electricity needs to grow progressively. Europe expects to see the percentage of final energy demand met by electricity rise from the current 23% to 30-31%2 by 2030 and to between 47%3 and 60%4 by 2050. Currently, electricity accounts for approximately 2% of demand from transport, 24% of household demand and 34% of industrial demand5.

This factor, together with the growing penetration of renewables (which are projected to cover over 85% of the electricity generation mix by 2050, under the European Commission's long-term strategy and excluding nuclear power), will help to fully decarbonise energy consumption by 2050, starting with light transport, housing and services.

¹ EU long-term strategy.

² The European Commission's impact assessment accompanying its announcement of 2030 Climate Target Plan (September 2020).

³ Idem.

⁴ ENTSOE & ENTSOG TYNDP 2020 Scenario Report (June 2020).

⁵ Eurostat for EU27 2019.

Highlights

The "Driving Energy" 2021-2025 Industrial Plan was presented and updated on 24 March 2022.

(€m)

586.9 +1.1% vs 9M 2021 Profit attributable to owners of the Parent 8,651.4

1,033.1 +12.0% vs 9M 2021

Capital expenditure

Net debt

Terna's share price

€6.250 per share at 30 September 2022 vs €6.136 per share at 30 September 2021

ALL-TIME HIGH

€8.334 per share, recorded on 25 May 2022

Terna successfully launches the first ever Italian corporate issue of non-convertible, perpetual, subordinated hybrid green bonds for institutional investors, amounting to a nominal value of

€1billion.

Renewal of €9 billion Euro Medium Term Note (EMTN) Programme.

Bilateral ESG-linked Term Loan and four ESG-linked Credit Facilities amounting to

€900 million agreed.

S&P and Moody's affirm their long-term ratings,

downgrading the outlook following a downgrade of Italy's sovereign rating.

Launch of a bond issue in the form of a Private Placement amounting to €100 million.

€500 million loan agreed with the European Investment Bank to fund investment in the "Tyrrhenian Link" project (East Link).

The first closing for the sale of the Terna Group's South American transmission assets to CDPQ was completed on 7 November. The sale regards the first three projects in Brazil, with a value of over €145 million, in execution of the preliminary agreement, signed on 29 April, for the sale of all the Group's power transmission assets in Brazil, Peru and Uruguay for a total consideration of more than €265 million.

115 km of new power lines and an electricity substation built. Two substations have also been purchased from renewable energy producers.

Terna, Lazio Regional Authority and Rome City Council have signed a Memorandum of Understanding for the deployment of four underground "invisible" connections extending for a total of around 25 km, involving investment of over

The consents process for the East Link section of the Tyrrhenian Link was completed. Following conclusion of the public consultation for the participatory design phase, the consents process for the West Link section of the Tyrrhenian Link also began.

Terna is the leader in live-line working for the security of the national grid and, in June 2022, organised and coordinated the thirteenth edition of Icolim, the main international event on Live-line Working held at Turin's Lingotto exhibition centre.

Terna is continuing to work with the Massachusetts Institute of Technology (MIT): Terna is a member of MITEI, the Massachusetts Institute of Technology (MIT) department focusing on energy research, education and outreach. The Company is now taking part in the 'Future Energy Systems Center' that aims to facilitate interactions between MIT's teachers and researchers and member companies to address pressing energy challenges and develop decarbonisation solutions to bring to market.

ELECTRICITY SYSTEM

Demand 241* TWh +1.3% vs 9M 2021

RENS quality 184* MWh vs target of 791

Performance well below targets set by ARERA

* Provisional data.

Percentage of demand met from RES 32* % -12.3% vs 9M 2021

Cost of quality €2.0^m -57.4% vs 9M 2021

+264 professionals added in the first nine months of 2022, an increase in line with the investment programme included in the "Driving Energy" 2021-2025 Industrial Plan.

The Terna Academy, a new research and training hub, has been launched with the aim of developing the skills needed by people and throughout the Group's ecosystem.

Pirelli's "CYCL-e around" e-bike sharing scheme was launched with the aim of encouraging workers to use sustainable forms of mobility to travel to work and in their free time.

The Tyrrhenian Lab, the new competence centre focusing on the future of the electricity system, was launched. The centre is to be run in synergy with universities, research centres and innovation hubs in Cagliari, Salerno and Palermo, cities connected by the Tyrrhenian Link. Applications for the first level II master's degree programme on digitalisation of the electricity system for the energy transition closed on 18 September. The programme aims to develop specialist expertise in management, engineering, IT and statistics, with the aim of training over 150 professionals between 2022 and 2025. Programme participants can then be hired to work for Terna at local level.

Terna is participating in the Stanford Energy Corporate Affiliates programme run by the university faculty responsible for energy research, education and outreach. The initiative aims to combine the expertise and knowledge of the university and companies to study key energy-related challenges.

Terna has adopted the Envision protocol, a rating system used in the design and deployment of sustainable infrastructure that measures, determines and certifies how "green" and resilient the assets are.

Terna received the Smau Innovation Award 2022 for its Open Innovation initiatives. Thanks to the new innovation as a service model, Terna has supported business lines in developing concrete solutions that respond to both internal needs and the challenges faced by the sector, using an inclusive, distributed approach that encourages the spread of an innovation culture.

The results of the Osmose, project were presented. Undertaken as part of the European Horizon 2020 programme, the project aims to test a mix of flexibility solutions to maximise the technical and economic efficiency of the European power system, ensuring security and reliability.

The planting of 1,000trees in protected areas in the Po Valley in Piedmont, located in the municipality of Trino in the province of Vercelli, was completed in collaboration with AzzeroCO2 . This is in keeping with the Company's commitment to cutting its CO2 emissions by approximately 30% by 2030 compared with 2019 levels.

International indices and ESG ratings

Terna's membership of Bloomberg's Gender Equality Index (GEI), the MIB ESG and the Stoxx Global ESG Leaders index has been reconfirmed. Terna has also been included in Standard & Poor's Gender Equality & Inclusion Index.

Terna has received the Business International Finance Award 2022 in the "Non-financial indicators, ESG and Sustainability Report" category for its 2021 Integrated Report.

Terna has been awarded the "Best in Media Communication 2022" prize, receiving BIC - Best in Media Communication certification from Fortune Italia and Eikon Strategic Consulting.

Terna has been awarded the "Areté Prize" for Internal Communication, in recognition of its intensive, ongoing efforts to involve employees in social and environmental issues. The prize was awarded for the 'EcoTips: good sustainability practices' project, designed to promote ethical conduct and sound environmental practices.

Structure of the Group

The structure of the Terna Group at 30 September 2022 is shown below.

Scope of assets held for sale1

Compared with 31 December 2021:

* the US-registered company, Terna USA LLC., a wholly owned subsidiary of Terna Plus S.r.l., was established on 2 August 2022. The company is responsible for overseeing development of the business in North America.

The voluntary liquidation of PI.SA. 2 S.r.l., which began on 10 December 2021, was completed on 27 January 2022.

1 Companies involved in the planned sale of subsidiaries operating in Latin America, classified as assets held for sale.

Conflict in Ukraine: risk assessment and prevention for the Terna Group

From the outset of the crisis involving Russia and Ukraine, the Terna Group took immediate steps to monitor the potential impact/ risks. This focused on the ongoing geopolitical developments and, in particular, the related legislation, above all with regard to the international sanctions introduced following the outbreak of war between the two countries.

For this purpose, the Terna Group moved quickly to set up specific taskforces to monitor any new sanctions and to strengthen its due diligence procedures and ordinary controls. The main potential areas of concern to be monitored continuously by the taskforces are: cyber security, economic and financial, the electricity system and the impact on procurement.

Since the start of the conflict between Russia and Ukraine, it has been seen an increase in cyberattacks on Italian government and corporate websites. These shows of force have not led to major upheaval or data breaches, with any disruption being short-term in nature.

Thanks to the continuous sharing of information with government bodies and priority access to information from Cyber Threat Intelligence providers, a series of rules and atures have been implemented as part of Terna's cyber protection systems with the aim of preventing any malicious acts. Checks confirmed that the Group does not use any cybersecurity products or services linked to the Russian Federation. Work has also begun on further raising the level of cybersecurity for the data flows required by Terna and Swissgrid, as members of ENTSO-E, to monitor the defence systems used by the Ukrainian national grid.

On the economic and financial front, the current crisis has led to significant movements in a number of macroeconomic variables. The rise in inflation, which began at the end of last year due to the impact of the Covid-19 pandemic on the supply of goods and services, has further accelerated since the outbreak of war in Ukraine, primarily as a result of rising energy prices. Under Terna's existing regulatory framework, which indexes allowed operating costs and the RAB (the latter revalued on the basis of the deflator applied to investment), there is no expectation for a negative economic impact due to price pressures, even if the above indexation of allowed costs will be reflected in the accounts with a time lag of approximately one year.

The increase in inflation has, on the other hand, led central banks and, specifically, the European Central Bank to accelerate their plans to tighten monetary policy, with the aim of mitigating the effect of rising prices. This has resulted in a sudden increase in interest rates, which will have an impact on Terna's cost of debt in the coming years. The effect will not, however, be immediate in view of the average duration of existing debt and the current high proportion of fixed rate borrowing (around 87%).

Major movements in the macroeconomic parameters to which the Group is exposed (interest rates, inflation, the yield on Italian government bonds and European cost of debt indices) could lead to a change in the allowed cost of capital that would offset the impact

of movements in the variables themselves. In this regard, from 2023, the WACC is due to be revised annually if, following the update of certain parameters, the WACC rises or falls by more than 50bps. In addition, there will be an overall review of the parameters used to calculate the WACC in 2025, in accordance with the resolution published by ARERA at the end of 2021. In this case, the review process does not provide for thresholds for adjustments to the cost of capital.

Finally, it should be noted that the Terna Group currently has access to funding represented by liquidity and committed lines of credit (thus immediately available). This, together with its ability to generate cash, will enable the Group to meet its funding requirements for the next 18/24 months and respond to any further capital market tensions.

There has so far been little evidence of any impact on the adequacy of the electricity system. However, given the shortage of natural gas, which is used to produce approximately 37% of the power needed (down as a result of the efforts made to maximise production from other sources), it is necessary to evaluate if, were there to be a shortfall in natural gas supply next winter, it can only partially be offset by maximizing production from other energy sources were. The Government and the gas emergency committee are considering what steps to take in response to a major drop in the quantity of gas supplied by Russia. This would involve seeking to import gas from other parts of the world and cuts to consumption, as well as maximising production from remaining coal and oil-fired power plants and from sustainable bioliquid plants.

Europe's strategy, which is moreover consistent with Terna Group's energy transition goals, aims to progressively achieve independence from Russian gas.

In terms of procurement, as a result of international sanctions, Terna Group has suspended the qualification of the sole Russian supplier, which has now expired. The related effect has been offset by increasing the use of other available suppliers. The Terna Group is also taking steps to address issues regarding the supply of power lines, substation equipment and power systems, partly in view of the problems arising due to non-indexed supply contracts (claims for extra costs). Steps have been taken to manage the most significant effects of price movements on supplies of metals (steel, aluminium, nickel and semiconductors).

As regards major projects (e.g., the Tyrrhenian Link and SACOI 3), where substation supply contracts are about to be fulfilled or negotiated as part of the tender process, etc., it cannot be excluded the potential impact of the uncertainty surrounding increases in commodity prices and possible delays to contract delivery due to force majeure. These eventualities are covered by legally required price adjustment provisions based on specific, unequivocal standards and criteria. Finally, as regards civil works contracts, the price adjustment provisions provided for in the measures introduced by the Government during the first and second half of 2021 have had a minimal impact. The potential impact of the state aid provided under the Aiuti decree is being assessed and is expected to be more significant.

Electricity demand and production in Italy 16

1 The energy environment

Despite the increase in demand registered in the first six months of 2022 compared with the same period of the previous year (up approximately 3% in the first half of 2022 versus the first half of 2021, reflecting an ongoing return to pre-Covid levels of consumption), the third quarter of 2022 provided signs of a fall in consumption. This reflects the sharp rise in energy prices in recent months as a result of the war in Ukraine and the reduction in gas imports from Russia.

These consumption trends are symptomatic of the difficulties faced by our country's economy, in line with the outlook for Italian GDP growth, which was revised downwards at the end of September in the Government's Updated Economic and Financial Plan.

There were already signs of weakening demand for energy and electricity compared with previous years in August, despite the boom in tourism. In September 2022, when industrial users typically return to work, demand was approximately 1 TWh below the figures for September 2021 and September 2019. This trend is also confirmed by the sample of energyintensive industrial companies that Terna monitors directly for inclusion in the IMCEI index, which measures monthly industrial electricity consumption: August and September 2022 registered an 8% fall compared with the same period of 2021. Large industrial users are more sensitive to energy price trends as their energy costs account for a sizeable share of their production costs, above all in the steel, metalworking and mechanical engineering sectors.

The current outlook for electricity and gas prices suggests that prices will remain high and extremely volatile in November and December 2022. As a result, the last quarter of 2022 could see a drop in electricity consumption compared with 2021 on a par with the decline registered in September.

Electricity demand and production in Italy

Electricity demand in Italy

Demand for electricity in Italy amounted to 240,923 GWh in the first nine months of 2022, an increase of 1.3% compared with the same period of 2021.

ELECTRICITY BALANCE IN ITALY (GWh)*	9M 2022**	9M 2021**	CHANGE	% CHANGE
Net production	210,322	205,723	4,599	2.2%
From overseas suppliers (imports)	35,476	36,485	(1,009)	(2.8%)
Sold to overseas customers (exports)	(2,925)	(2,372)	(553)	23.3%
For use in pumping***	(1,950)	(1,986)	36	(1.8%)
Total demand in Italy	240,923	237,850	3,073	1.3%

* Does not include demand for energy for ancillary services related to electricity production.

** Provisional data.

*** Electricity used for pumping water for subsequent use in the production of electricity or as a way of immediately balancing overproduction.

The energy environment The Group's strategy The Group's business Annexes

Monthly demand for electricity in Italy rose in the first nine months of 2022 compared with the same period of the previous year. This reflects the decline in demand in the first six months of 2021 linked to the impact on consumption of the state of emergency connected with the pandemic. There was a major hike in demand in June and July due to the high temperatures recorded. September then recorded a reduction in consumption, in part due to the impact of rising commodity and energy prices on businesses.

MONTHLY DEMAND FOR ELECTRICITY*

Meeting demand and energy production

NET ELECTRICITY PRODUCTION BY SOURCE

* Provisional data.

Electricity production in the first nine months of 2022 is up 2.2% compared with the same period of 2021.

In the first nine months of 2022, approximately 32% of total energy demand, including overseas imports, was met from renewable energy sources, down on the same period of 2021. In terms of individual renewable sources, hydro production fell sharply (down 39%), partly offset by increases in wind (up 8%) and solar (up 10%) production. Geothermal and biomass production are broadly in line.

17

The Group's strategy

The Company and its strategy

The updated 2021-2025 Industrial Plan, "Driving Energy", was approved by the Board of Directors on 24 March 2022. The Plan provides for total capital expenditure of €10 billion, confirming Terna Group's commitment to the country's ecological transition, energy independence and decarbonisation. This will strengthen its role in driving the Italian electricity system, in keeping with the challenging objectives set in the National Integrated Energy and Climate Plan ("PNIEC") and the targets in the EU's Green Deal, which aim to cut greenhouse gas emissions by at least 55% by 2030.

The key driver in the 2021-2025 Industrial Plan is sustainable investment, a concept embedded in the Company's value creation process and in the benefits for the system and the environment. Terna Group's capital expenditure, 99% of which is classified as sustainable based on the EU Taxonomy, targets the development of renewable sources. The transmission backbones that transport energy from points of production, which are increasingly located

The energy environment The Group's strategy The Group's business Annexes

in Italy's southern regions, to where demand is highest in the north of the country, will be boosted by resolving existing issues caused by grid congestion and further development of cross-border interconnections. Thanks to its strategic geographical location, Italy will be able to reinforce its role as a European and Mediterranean electricity transmission hub, becoming a leading player at international level.

The Terna Group's development initiatives will focus on three strategic areas: Regulated Activities in Italy, Non-regulated Activities and International Activities.

In terms of Regulated Activities in Italy, which continue to represent the Terna Group's core business, Terna Group plans to invest €9.5 billion in developing, modernising and strengthening the national transmission grid, confirming its role in driving the energy transition and enabling an increasingly complex, sustainable and innovative electricity system. This investment, focused on increasing the country's energy security, will generate major benefits for the system as a whole.

The planned investment will increase the value of RAB to €22.7 billion in 2025, with a CAGR of 7% over the life of the Plan. By the end of 2022, the value of the RAB will be €17.9 billion, compared with €16.9 billion at the end of 2021.

Contributing over €450m to EBITDA NON-REGULATED ACTIVITIES Technological, innovative and digital solutions to support the ecological transition Sale of LatAm assets Scouting for new opportunities in international markets INTERNATIONAL ACTIVITIES Putting competencies and know-how into grids worldwide PEOPLE Approx. 5,900 Number of employees in 2025 NexTerna continues INNOVATION AND DIGITALISATION €1.2bn invested in digitalisation, innovation and new Enablers

Enablers

technologies

The updated 2021-2025 Industrial Plan targets increased investment in development of the national transmission grid, which is due to total €5.6 billion. This is primarily linked to the construction of high-voltage lines with the aim of resolving grid congestion, boosting transmission capacity between the various market areas, fully integrating renewable sources and improving quality of service, whilst also including the construction of undersea cable connections. The most important project is the Tyrrhenian Link, the power line that will connect Sardinia, Sicily and Campania and that will contribute to the development of renewable energy production and the phase-out of the most polluting coal- and oil-fired power stations. The other projects include Sa.Co.I.3, the interconnector linking Sardinia with Corsica and Tuscany, and the "Colunga-Calenzano" power line between Emilia-Romagna and Tuscany.

Investment in renewing and improving the efficiency of assets, covering the reorganisation of existing infrastructure, with the replacement – where technically feasible – of overhead lines with underground cable, will amount to €2.6 billion.

Finally, Terna Group plans to invest a total of €1.3 billion in the Security Plan, over the life of the Industrial Plan, with the aim of boosting the system's technical and technological capabilities to increase system functionality.

Non-regulated Activities will help to generate new business opportunities thanks to the development of innovative, digital solutions in keeping with Terna Group's public service role in supporting the energy transition. These activities will include:

• industrial activities in the field of transformers, thanks to the consolidation of Tamini, and in underground cables, leveraging the distinctive expertise in terrestrial cables acquired with Brugg Cables, to respond to the system's growing needs in both sectors and strengthen the supply chain;
• connectivity offerings, including within the context of partnerships, involving the provision of housing and hosting services to enable telecommunications providers to use fibre network, and the installation of telecommunications equipment at Terna Group's existing sites;
• energy solutions and energy efficiency services for industrial customers and O&M activities for photovoltaic plants, leveraging the skills acquired with the LT Group and including through the use of innovative data collection and analysis technologies.

Terna expects Non-regulated Activities to contribute a cumulative total of over €450 million to the Group's EBITDA over the life of the Plan, in return for limited investment and risk exposure.

Turning to International Activities, following completion of the sale of the Group's South American assets, the Terna Group will continue with the strategic assessment of opportunities in markets with attractive growth potential. Such initiatives may take the form of partnerships and will involve the careful selection of projects with a view to continuing to ensure a low risk profile. Such markets include the United States, where the Terna Group can make available its experience and expertise in the design and management of infrastructure, in line with its business strategy.

The energy environment The Group's strategy The Group's business Annexes

Over the coming years, innovation, new technologies and digitalisation will acquire ever greater importance, playing an increasingly central part in enabling the energy transition for the benefit of the entire system. In response to the growing complexity of the system, Terna Group intends to invest approximately €1.2 billion from the total of €10 billion earmarked for capital expenditure in the 2021-2025 Industrial Plan in digitalisation and innovation. The Group will concentrate its efforts on the use of advanced technology to remotely control electricity substations and transmission infrastructure. The Plan identified four technology clusters around which the new initiatives and projects will be focused, taking into account global technological trends and Terna Group's requirements: Digital (intelligent energy and capacity management solutions); Energy Tech (innovative solutions using more efficient, greener technologies); Advanced Materials (research and development resulting in eco-compatible materials to reduce the environmental impact); and Robotics (process automation).

Terna's people, with their outstanding and distinctive technical expertise, are a key asset in enabling the Group to achieve its challenging goals. The Company has launched an ambitious cultural transformation called NexTerna, involving the definition of a new leadership model and new ways of working and operating that are a response to the current scenario. This innovative approach is based on the digitalisation of processes and tools to increase people's efficiency and productivity, bringing logistical benefits and, above all, improving quality of life for all the workers. Terna Group's people-centric approach is also reflected in the creation of jobs: over the life of the Plan, the Terna Group expects the number of employees to rise to approximately 5,900 units.

ESG objectives in the 2021-2025 Industrial Plan

In March 2022, together with the presentation of the "2021-2025 Industrial Plan" to the market, the ESG objectives were updated and - in line with the overall presentation of the Group's operations adopted with effect from the 2021 Integrated Report - reorganised in terms of types of "capital".

In particular, the process of embedding sustainability within the business takes the form of setting objectives aimed at increasing intangible capital and respecting natural capital.

THE CONTRIBUTION OF ESG CRITERIA TO THE CREATION OF VALUE

The energy environment The Group's strategy The Group's business Annexes

These objectives help to leverage certain enablers of full implementation of the Industrial Plan and mitigate the ESG risks associated with the Terna Group's activities. They are aimed at ensuring the sustainability of the business, creating value in the medium and long term, further embedding sustainability within the Group's value proposition and maintaining Terna's attractiveness for investors, who increasingly take these issues into account.

Innovation

	In an expanding and highly complex electricity system, process innovation and digitalisation are playing an increasingly important role, forming the two pillars that underpin Terna Group's virtuous growth path.
	Terna Group's innovation is aimed at developing new solutions to meet the growing needs and challenges arising from the ecological transition, in line with the role of driver and enabler set out in the Company's strategy.
	In response to the challenges and the Company's needs, Terna Group has identified four technology clusters around which the new initiatives and projects will be focused: Digital, Energy Tech, Advanced Materials and Robotics.
	Terna Group has thus adopted and developed an innovation model geared towards meeting new needs and generating value for the Company and its stakeholders, via an approach that is concrete, open, inclusive and distributed, and that responds to the identified needs. The model involves both external players (at one and the same time, both enablers and beneficiaries) and internal actors with the aim of developing, protecting and safeguarding its intellectual property. This broadly-based innovation ecosystem facilitates Open Innovation and the highly productive, continuous exchange of ideas.
	In this sense, work is proceeding on projects linked to technological innovation and digitalisation. Key initiatives in the third quarter of 2022 relating to projects in the innovation portfolio include:
Satellite monitoring of structural damage	The process of demonstrating the effectiveness of a solution for detecting structural damage to power lines using SAR6 is underway. This project is part of a series of innovation initiatives that aim to develop occupational safety solutions and technologies.
Equigy	Further work took place on the development of the platform's personal data management functions regarding distributed flexibility resources was launched, as well as the design phase for using the platform to support structural innovation project initiatives.
	In line with its role in driving the energy transition, Terna Group is working with the European Union on the development of research and innovation projects, with funding provided under the Horizon programme.

⁶ SAR (Synthetic Aperture Radar): the radar is an active satellite-mounted sensor that emits electromagnetic waves and records the amount of energy reflected back from the Earth's surface, calculating the amount of time that has elapsed between emission of the signal and its return.

CONSOLIDATED INTERIM FINANCIAL REPORT – 30 SEPTEMBER 2022 | TERNA GROUP This is a corporate entrepreneurship programme that enables Terna to gather and subsequently develop innovative ideas and obtain an overview of innovation requirements in all areas of the Company. The process of patenting two of the winning ideas deemed to merit intellectual property protection, following the first edition of the programme, began during the period. The Open Call phase of the second edition of the programme was also completed, with the announcement of the ten winning teams to take part in the incubation stage. This will lead to a mid-term review, consisting of a special training session designed to give the chosen teams the tools needed to present their innovative idea. Terna Ideas Work is continuing on this initiative promoted by Terna in collaboration with the Cariplo Foundation and the Cariplo Factory, with the aim of developing young talent and supporting the growth of start-ups and companies with innovative projects. Extended trials of the solution put forward by the start-up, Pedius, began in the second half of 2022. This inclusive application, personalised for Terna, permits people with hearing difficulties to play a more integrated role in daily working life. Next Energy 5 Terna is taking part in the Open Italy programme, an Open Innovation initiative launched by ELIS to facilitate dialogue and collaboration between large companies, Italian start-ups, SMEs and innovation facilitators, such as accelerators and research centres, through concrete innovation projects. Further development and testing of two solutions relating to Digital HR & New Ways of Working and Cybertech, put forward by the start-up, Another Brick, is taking place. Work on the POCs for two solutions (one relating to Operational Excellence and Asset Management conceived by Mela Works, a second regarding Safety Management & Digital Health put forward by Laser Navigation) began in September 2022 and is to last twelve weeks. Mela Works is offering a platform for onsite collaboration, digitalising and improving the efficiency of many key processes involved in site management, including collaboration between sites and offices, quality and safety, etc.. Using the AI-based SophyAI platform, Laser Navigation's solution transforms a normal video surveillance system into an active system for protecting the safety of works and assets. Open Italy The study and analysis of technological and market trends relating to cybersecurity, asset management (focusing on the resilience of assets to extreme weather events) and nanotechnological coatings to prevent and/or reduce emissions of SF6 from the electricity substations continued in 2022. From September, Terna has also reinforced the Company's presence in the global innovation ecosystem by opening an Innovation Outpost in San Francisco. In addition to helping us to identify innovative solutions capable of meeting Company's needs and keeping track of emerging strategic trends, having a physical presence will provide a direct contact with ecosystem actors and enable a full understanding of developments in the field. International Innovation The main Open Innovation initiatives carried out in the third quarter of 2022, in collaboration with large companies, Italian start-ups, SMEs and innovation facilitators, include:

27

2. The Group's strategy

People

People are Terna's most important asset, one of the enabling factors in the 2021-2025 Industrial Plan. Each of us brings skills and experience that can help to increase the value of the Company.

		unit
AT 30 SEPTEMBER 2022	AT 31 DECEMBER 2021	CHANGE
101	92	9
838	765	73
2,999	2,815	184
1,462	1,464	(2)
5,400	5,136	264

The increase of 264 in the workforce at 30 September 2022 compared with 31 December 2021 is primarily linked to the requirements relating to delivery of the investment programme provided for in the 2021-2025 Industrial Plan, and to the need to strengthen the Group's distinctive competencies.

Management of the health emergency

Until 31 August 2022, Terna continued to apply the specific organisational measures designed to reduce the risk of infection from Covid-19 applied since 2020, retaining the option for all office staff to work in a flexible manner, coming into the office up to 50% of the time. In addition, in compliance with the new legislation in force, from 1 September through to 31 December 2022, all vulnerable workers and parents with children under the age of 14 will be able to work remotely full time. As part of the Sicuri Insieme ("Safe Together") campaign, the provision of molecular testing to anyone making a request continued.

Main initiatives during the period

NexTerna (New Ways of Working)

The NexTerna programme continued in the third quarter of 2022. In part based on the active contributions made by staff through the 2022 eNPS Survey, the programme made tangible progress towards changing the way of working. This included adoption, at national level, of Pirelli's e-bike sharing scheme named "CYCL-e around", with the aim of encouraging workers to use sustainable forms of mobility to travel to work and in their free time. From July, employees were able to convert their performance-related bonuses into welfare goods and services via a special platform. Lastly, the Gympass platform, offering discounts on wellness services with a view to improving people's work-life balance, was made available in the third quarter.

The energy environment The Group's strategy The Group's business Annexes

Over 112,232 hours of training were provided in the first nine months of 2022, including through the Terna Academy, Terna's new research and training hub set up in July 2022 to develop the skills needed by people and throughout the Group's ecosystem. The courses covered topics relating to "Sustainability, Compliance and HSE", "Energy Transition and Technical Specialisation" and "New Ways of Working and Acceleration".

Terna's commitment to exploring and trying out new ways of working continued with the Power Supporters initiative, involving over 50 colleagues acting as change agents, and initiatives focusing on young graduates and women. These include NextGenerationTerna22 targeting young people under 30, Onboarding for new recruits and the EmpowHER project, set up to support women along their career paths.

In terms of organisational wellbeing, the WellbeingInAction project presented innovative research on Smart Working and Organisational Wellbeing. Coordinated by the team from the Faculty of Psychology and Cognitive Science at the University of Trento.

Staff recruitment and selection activities continued during the quarter, with the focus on acquiring graduates from universities and vocational schools, above all those with qualifications in STEM subjects. Terna is also continuing with the commitment, in partnership with universities and business schools, to pre- and post-graduate training programmes for young people. In terms of the Talent Management process, the development center talent assessment initiative continued with the aim of designing career development pathways for both new hires and senior personnel.

Two new projects involving everyone at Terna were launched. The first, relating to health, is called "Workplace Health Promotion (WHP)" and consists of a series of campaigns that aim to encourage people to adopt healthier lifestyles, covering diet, physical activity, giving up smoking and road safety. The second project, regarding issues more closely related to occupational safety, is called "Excellence in Safety". The aim is to enable people to switch from a "reactive" approach to safety, focused mainly on compliance and the observance of procedures, to a "proactive, interdependent" approach by encouraging people to adopt

Finally, circular economy projects continued. These include the Terna circular computer reuse community project, which aims to reuse IT assets no longer in service by donating them to schools once they have been refurbished; the recovery of used PPE, which aims to transform materials from discarded clothing used by operational personnel (apparel, shoes and helmets) into secondary raw materials; the Green Procurement project, which introduces procurement circularity criteria involving application of minimum environmental criteria (MEC) in procurement processes for certain product categories. Alongside these initiatives, Terna Group is working on a Company strategy designed to guide the approach to such matters. This will result in a Circular Economy Roadmap with targets for 2030.

virtuous safety behaviours.

Health, safety and the environment

Talent Acquisition and Talent Management

Training and engagement

Operating activities	32
Financial review for the first nine months of 2022	45
Terna's shares	56
Outlook	58
Declaration of the manager responsible for

financial reporting in accordance with paragraph 2 of art. 154-bis of Legislative Decree 58/1998 59

3 The Group's business

3. The Group's business

Operating activities

The Terna Group's business model is divided into three areas of business. The main area is Regulated Activities, which coincides with the obligations deriving from the government concession, together with Non-regulated Activities and International Activities.

Regulated Activities: the National Transmission Grid

The Terna Group owns 99.9% of the NTG, one of the most modern and technologically advanced in Europe. It is the largest independent electricity transmission network operator in Europe and one of the world's leading operators, with around 75 thousand kilometres of high and very high-voltage lines. The Group is responsible for managing the flow of electricity through the grid in every part of Italy, with an obligation to ensure that there is a constant balance between the quantity of energy injected into the grid and demand and guaranteeing continuity and accessibility of service for the population as a whole. The Group is also responsible for planning, construction and maintenance of the grid.

The Group's capital expenditure

The Terna Group's total capital expenditure in the first nine months of 2022 amounts to €1,033.1 million, marking a significant increase compared with the €922.7 million of the same period of the previous year (up 12.0%). (€m)

	9M 2022	9M 2021	CHANGE	% CHANGE
Development Plan	399.9	326.4	73.5	22.5%
Security Plan(1)	143.2	160.9	(17.7)	(11.0%)
Projects to renew electricity assets(1)	317.8	320.9	(3.1)	(1.0%)
Other capital expenditure(1)	124.0	74.1	49.9	67.3%
Total regulated assets	984.9	882.3	102.6	11.6%
Non-regulated assets(2)	31.3	32.6	(1.3)	(4.0%)
Capitalised financial expenses	16.9	7.8	9.1	116.7%
Total capital expenditure	1,033.1	922.7	110.4	12.0%

(1) The figures for the first nine months of 2021 have been restated following changes to the purposes of investment, without modifying the overall value of investment in regulated assets.

(2) The figures for the first nine months of 2022 and 2021 do not include assets held for sale reclassified in accordance with IFRS 5. These primarily regard private interconnectors and the re-routing of power lines for third parties.

The following main regulated assets entered service in the period:

New overhead power lines:

• Bisaccia Deliceto (adding 34.5 km);
• Vaglio Oppido (adding 19.9 km);
• Fiume Santo Porto Torres (18.4 km);
• Lesegno Ceva (adding 6.5 km).

New cable connections:

• Udine South Udine FS (adding 7.3 km);
• Lauria Variation Rotonda (adding 5.1 km);
• Rozzano primary substation first and second connection (adding 2.9 km);
• Rogoredo primary substation connection (adding 2.1 km).
• Molassana-Borgoratti (adding 1.4 km).

Substations and connections:

• Celano (adding 11 bays) and connections (adding 2.3 km);
• Sannicandro (Purgatorio) purchase (adding 5 bays).

Reactors plan:

• Maida;
• Rotello;
• Deliceto;
• Rome North.

MAIN REGULATED WORKS CARRIED OUT DURING THE PERIOD > DEVELOPMENT PLAN – €399.9 million

Consents: the decree giving the go-ahead for the East Link section (Campania-Sicily) was published on 30 September 2022. The consents process for the West Link (Sicily-Sardinia) was initiated in September.	Tyrrhenian Link (€42.4 million)
Cable connections: sea trials of cable laying at the deepest section of the East Link (Campania Sicily) have been completed.
Converter stations: the call for tenders has been published and invitations to bid have been issued, with responses received in October.
380kV Paternò-Pantano power line: construction has been completed apart from stringing for the final section.	Paternò-Pantano-Priolo (€22.8 million)
380kV Pantano-Priolo power line: construction of the foundations (51 out of a total of 115) and assembly of the first pylons (48 out of a total of 115) is continuing and stringing of the first section of approximately 3 km (out of a total of 45 km) has been completed.
380/220/150kV Pantano substation: construction of the foundations for the 380kV has been completed and construction of the foundations for the 220/150kV sections, of the perimeter fencing and the related buildings is nearing completion.
132kV Colmata-Portoferraio power line: the marine survey, sea trials and geotechnical surveys regarding the terrestrial section have been completed, as have the executive design and production of the marine cable. Civil works for the landfalls and the transplanting of Posidonia seagrass began in October 2022.	Elba-mainland connection (€22.2 million)
132kV Portoferraio-San Giuseppe power line: reconstruction of the Portoferraio-San Giuseppe line using underground cable has been completed and the line is to enter service in the coming months.
380kV Colunga-Calenzano power line: the executive design phase and the related surveys are nearing completion, as is the production of key components. Confirmation of compliance with requirements imposed during the consents process is awaited from the relevant agencies before work can begin.	Colunga-Calenzano (€15.8 million)
Construction of the foundations and electromechanical assembly in the area for the new 380kV section has been completed; installation of the secondary riser and laying of secondary cables for the existing 220/132kV sections have been completed and assembly of the autotransformers has begun.	Magenta substation (€9.3 million)
Vizzini substation: the autotransformers are being assembled following completion of all the sections under construction, whilst testing of the general, auxiliary and control systems is in progress.	Vizzini substation (€8.4 million)
Vizzini substation connections: construction of the foundations and assembly of the pylons for the 380kV connections have been completed, whilst stringing is close to completion (6.1 km out of 7.2 km). Construction of the 150kV Vizzini-Mineo connection is at an advanced stage (11 foundations out of 13, with 9 out of 13 pylons assembled).
Commissioning trials for the connection are in progress.	Italy-France interconnector

(€2.9 million)

33

> SECURITY PLAN – €143.2 million

Synchronous compensators	Maida compensators: assembly has been completed and precommissioning has begun.
(€29.2 million)	Villanova and Rosara compensators: machinery production has been completed. The civil works have been completed and electromechanical assembly is at an advanced stage.
	Codrongianos compensators: the civil works for the 380kV bay have been completed and the civil works for the compensator are nearing completion. Delivery of the machinery is in progress.
	Suvereto compensators: the civil works are underway, above all construction of the underpinnings for the foundations.
STATCOM (€19.6 million)	Latina, Galatina and Villanova: electromechanical assembly has been completed for Villanova site and commissioning has begun at the Latina and Galatina sites.
	Aurelia and Montalto: work has begun and excavation for the foundations and the production of key components is in progress.
Reactors	Maida, Deliceto, Rotello and Rome North: the reactors have entered service.
(€17.0 million)	Santa Maria Capua Vetere, Montecorvino, Bari West, Partinico, Fulgatore, Casuzze and Bellolampo: the civil works are nearing completion and delivery of the machinery is in progress.
Fiber for the Grid (€13.6 million)	This project aims to boost the availability of data on the grid in order to make it easier to manage the security of the electricity system, by increasing and expanding the fibre optic network.
	By September 2022, the target of 14 substations connected via proprietary fibre was reached, making a total of 524 substations now covered.
	> ELECTRICITY ASSET RENEWAL PLAN – €317.8 million
Renewal of electricity assets	The commitment to the renewal of electricity assets to improve the reliability and resilience of the NTG continues.

The renewal of overhead lines and substation equipment continued during the first nine months of 2022: approximately 1,376 km of conductors and 17 items of equipment (16 insulated using mineral oil and 1 green) were replaced.

CONSENTS PROCESSES

Consents processes concluded

In the first nine months of 2022, the issue of a Decree by the Ministry for the Ecological Transition marked the conclusion of the consents process regarding the planned modernisation of the 132kV electricity grid to serve the city of Brescia. The decrees issued during the period also included the "Separation Premadio GIS", forming part of the cluster linked to the Milan-Cortina Olympics to be held in 2026. Provincial Authority consent was obtained for the new Albes electricity substation and for 132kV connections in the municipality of Bressanone, in preparation for, among other things, a broader reorganisation of the grid serving the Val di Isarco in the province of Bolzano. In addition, the Ministry for the Ecological Transition has given the go-ahead for the new 150kV underground cable extending for approximately 18 km between the Montecorvino Rovella electricity substation and the Campagna primary substation, both in the province of Salerno. The Ministry for the Ecological Transition has also approved construction of the Tyrrhenian Link – East Link, the stretch of submarine cable that will connect Campania and Sicily. Consent was also given for Renewal of the 380/150kV Caracoli substation in the municipality of Termini Imerese in Sicily.

The conclusion of the consents processes has enabled several projects to enter the construction phase in the first nine months of 2022, including works relating to the new "Colunga-Calenzano" power line between Emilia-Romagna and Tuscany; construction of the 150kV Pettino - Torrione (AQ) underground cable line; initial steps in the plan to rationalise and modernise the electricity grid in the metropolitan area of Catania; replacement of the underground cable line connecting the "Naples Centre" primary substation with the "Doganella" primary substation; and work on installing the synchronous compensator at the Suvereto electricity substation. Work also began on upgrading the 150kV section of the infrastructure connecting a new e-distribution primary substation to the NTG. In the first nine months of 2022, Terna also began the most complex phase of the large-scale plan to develop and modernise the HV transmission grid in Lombardy, Veneto and the self-governing provinces of Trento and Bolzano. Work began on the 150kV "Sorrento – Vico Equense – Agerola – Lettere" interconnector and on the submarine connection between the Bolano substation in Calabria and the Annunziata substation in Sicily, as well as on the first stage of demolition of the 150kV "Acireale – Fontanarossa" power line and on rationalisation of the 132kV Tavarnuzze - San Lorenzo power line in Greve, in the municipality of Scandicci. Finally, work has also started on demolition of three power lines in the municipality of Rotonda, in the province of Potenza. The project – a short section of which also affects the municipalities of Laino Borgo and Laino Castello in the province of Cosenza – regards the removal of approximately 10 km of overhead lines, involving demolition of a total of 30 pylons: 14 pylons and around 4 km of 220kV line between Terranova and Rotonda, 6 pylons and over 2 km of the 220kV Rotonda-Mercure 1 line and 10 pylons and over 3 km of the 150kV Rotonda-Lauria line.

Processes initiated

On 23 September 2022, the Ministry for the Ecological Transition formally began the consents process for the Tyrrhenian Link – West Link, indicating the Services Conference that will decide on the project. This consists of the new direct current submarine interconnector that will link Sicily and Sardinia, for which Terna, following a participatory design phase, has completed a public consultation, carried out in accordance with Law Decree 76/2020 and applying the procedures set out in Regulation (EU) 347/2013. On 28 April 2022, an application for consent for the project as a whole was submitted to the Ministry for the Ecological Transition and, on 15 June 2022, the preliminary Services Conference approved the outcome.

The other processes initiated in the first nine months of 2022 include work on the upgrade of the Pettino electricity substation (AQ) and the partial undergrounding of the Pettino-Scoppito de L'Aquila power line; work on the "Livigno-Premadio" line and the

132kV Laion–Corvara and Vandoies-Brunico lines, forming part of the cluster linked to the Milan-Cortina Olympics to be held in 2026; a new connection between Terna's existing Turbigo electricity substation and the existing Castano Primo primary substation in the metropolitan city of Milan; a new cable line between Monterosa and Michelin Stura in the city of Turin; and work on the connection to RFI substations serving the high-speed railway at Sacchitello and Vallunga in Sicily.

Applications for consent and new consultations

On 28 June 2022, the application for consent for the Adriatic Link was submitted to the Ministry for the Ecological Transition, together with the report on the outcome of the related Consultation. This new direct current undersea power line, entailing capital expenditure of over €1 billion, will link the Abruzzo and Marche regions. After a participatory design phase, Terna concluded the public consultation, which was carried out pursuant to Law Decree 76/2020 and applying the procedures set out in Regulation (EU) 347/2013. The Ministry will thus call a preliminary Services Conference to approve the above outcomes, before proceeding with the formal launch of the consents process by calling the Services Conference that will take the final decision.

Consultation on the new HVDC Italy–Greece interconnector (GR.ITA. 2) is in progress. The project, to operate in synergy with existing grid infrastructure, consists in doubling the existing HVDC interconnector between Italy and Greece, above all between the Galatina and Arachthos nodes. This will involve the laying of a new submarine cable, the laying of two new sections of terrestrial cable at the Italian and Greek ends and the addition of two AC/ DC conversion modules in areas within the existing Galatina and Arachthos substations. Under the coordination of the Puglia Regional Authority, from April 2022, talks began with the Regional Authority and several town councils potentially involved, with the aim of examining certain aspects of the design and the proposed location of the infrastructure, with particular attention paid to the location of the converter station and where the submarine cable will make landfall.

Consultation on the new 380kV Montecorvino-Avellino North-Benevento III connection is also underway. The new connection is of strategic importance for the national transmission grid as it will enable more energy from renewable sources to be integrated into the grid, improving dispatchability and increasing the ability to ensure that load demand can be met in the area concerned. An expert working group coordinated by Campania Regional Authority with all the local authorities involved in assessing the proposed location was set up in February 2022. This was followed by meetings between Terna and the various local authorities, including onsite inspections, to assess the feasibility of the proposed route. Between 17 and 20 October of this year, meetings are due to be held with all the members of the public affected by the project, to whom Terna will provide information on the new infrastructure and the consultation process carried out.

On 29 April 2022, an application for consent for the Italy-Tunisia interconnector was submitted to the Ministry for the Ecological Transition. This regards a new direct current submarine connection linking Sicily and Tunisia, for which Terna, following a participatory design phase, has completed a public consultation, carried out in accordance with Law Decree 76/2020 and applying the procedures set out in Regulation (EU) 347/2013. On 12 August 2022, the Ministry called a preliminary Services Conference to approve the above outcomes. We are awaiting a positive conclusion with the formal launch of the consents process by calling the Services Conference that will take the final decision.

In early September, the project relating to "rationalisation of Brianza West" was filed.

Continuity and quality of service

Each segment of the electricity system - generation, transmission and distribution - plays a role in ensuring the availability of electricity in Italy, guaranteeing adequate quality standards and keeping the number of outages below pre-set thresholds.

Terna monitors service continuity through various indicators defined by ARERA (Resolution 567/19) and in Terna's Grid Code.

These continuity indicators are significant for the system, as they monitor the frequency and impact of events that have occurred on the electricity grid as a result of faults or due to external factors, such as weather events. In all cases, the period of observation is three years, a period in which there have been no significant changes, testifying to the high quality of service achieved.

NTG RENS INDICATOR7

CONTINUITY INDICATORS

RENS*

What it measures

Energy not supplied following events affecting the relevant grid. **

How it is calculated

The sum of the energy not supplied to users connected to the NTG (following events affecting the relevant grid, as defined in the ARERA regulations governing quality of service).

* Regulated Energy Not Supplied. ** The "relevant grid" refers to all of the high-voltage and very high-voltage network.

ASA***

What it measures Availability of the service provided by the NTG.

How it is calculated

Based on the ratio of the sum of energy not supplied to users connected to the NTG (ENS) and energy fed into the grid.

*** Average Service Availability.

* Provisional data.

The "NTG RENS" indicator for the period from January to September 2022, based on preliminary data, amounts to approximately 184 MWh (compared with an annual target of approximately 791 MWh set by ARERA).

As regards the ASA indicator, availability was 99.99989% in the first nine months of 2022, compared with 99.99993% in the same period of 2021. The operating performance shows that ASA has remained stable at a high level over the years (the higher the indicator, the better the performance). This indicator shows that the energy not supplied following a fault on the owned grid represents a minimal part of the total quantity of energy supplied to users of the grid.

Existing regulations (set out in Resolution 567/2019/R/eel) envisage a series of mechanisms designed to regulate and encourage improvements in the quality of service provided by Terna. The overall economic effects of these mechanisms are accounted for at year end (including RENS).

With regard to costs, which are determined periodically on the basis of events that have occurred, Terna recognised costs of €2.0 million in the first nine months of 2022 compared with €4.7 million in the first nine months of 2021.

⁷ The targets for 2016–2023 have been set as an average of the 2012–2015 RENS indicator, referred to in ARERA Resolution 567/19/R/eel, with a 3.5% improvement in performance required for each year compared with the previous one. Since 2016, Terna's NTG RENS indicator also takes into account the performance of the grid operated by Terna Rete Italia S.r.l. (merged with Terna S.p.A. on 31 March 2017).

Electricity cost trends

Terna uses the Dispatching Services Market (DSM) to procure dispatching resources to guarantee the security and adequacy of the electricity system.

Dispatching Services Market (DSM)

The net charge for using the DSM was €1,796 million in the first nine months of 2022 (provisional data), slightly up on the same period of the previous year (approximately €1,688 million).

The increase primarily reflects the fact that the reduction in the cost of using the DSM in the first half of 2022 was more than offset by a slight increase in March (reflects a decline in selections made on the DSM) and an increase in July, August and September (due to an increase in the price differential on the DSM).

MONTHLY DSM COSTS (€m)

Monthly DSM charge 2021 Monthly DSM charge 2022

* Provisional data.

Cost of procuring resources on the Dispatching Services Market (the uplift)

The total uplift was approximately €1,540 million in the first nine months of 2022 (provisional data), down compared with the same period of the previous year (€1,683 million). This reflects an increase in the cost of using the Dispatching Services Market, an increase in domestic and overseas congestion revenue, partly offset by a sharp rise in the cost of virtual interconnections, and a reduction in the cost of contracts providing an alternative to essential providers8 and in start-up payments9 .

MONTHLY PERFORMANCE OF REVENUE AND UPLIFT COSTS (€m)

⁸ Contracts providing an alternative to essential providers are governed by Title 2 of Arera Resolution 111/06, art. 65-bis.1. By 31 October of each year, Terna shall select a plant or group of essential plants without which it will not be possible, in the following calendar year, to guarantee adequate levels of security in the electricity system and meet demand for dispatching services.

⁹ Start-up payments are amounts paid to plants started up by Terna.

Non-regulated Activities: Energy market solutions

Non-regulated Activities are designed to support the ecological transition, in keeping with the core business. This strategy makes use of the Terna Group's know-how in the design, engineering, operation and maintenance of complex solutions, including the integration of telecommunications networks and proprietary systems. The aim is to make expertise and experience available to commercial and industrial customers to offer a wide range of solutions.

The main areas of business in this segment are:

• INDUSTRIAL
• CONNECTIVITY
• ENERGY SOLUTIONS
• PRIVATE INTERCONNECTORS PURSUANT TO LAW 99/2009

Via two leading companies in their fields, Terna Group is able to control expertise and supplies in two key areas for grid development:

• Transformers Tamini Group: a world leader in the production of industrial transformers and in after-sales service;
• Terrestrial cables Brugg Cables Group: a centre of excellence for research, development and testing in the field of terrestrial cables, the Brugg Cables Group is based in Switzerland and has several overseas subsidiaries.

TRANSFORMERS – TAMINI GROUP

Tamini operates in the electromechanical sector and is a leader in the design, production, commercialisation and repair of power transformers for electricity transmission and distribution grids, of industrial transformers for the steel and metals industry and of special transformers for convertors used in electrochemical production.

With over a hundred years of experience, Tamini has a well-established name in Italy and overseas, thanks to its technological and engineering capabilities, combined with the degree of customisation and production flexibility it can offer.

Orders for transformers received in the first nine months of 2022 are worth €134.1 million.

Order book

Orders in the Power sector amount to €94.6 million. This result is linked to the award of major orders placed by utility companies in Italy, Belgium and Finland.

Orders in the Industrial sector amount to €39.5 million, up €7.5 million (23.3%) on the first nine months of 2021.

Orders for Services received in the first nine months of 2022 amount to €9.2 million.

The value of factory backlogs is up 18.5% compared with the end of 2021 to €160 million.

3. The Group's business • Operating activities

Results	Revenue rose 4% in the first nine months of 2022 compared with the same period of 2021, due to the increased value of transformer production.
	Several very important items of equipment were also tested, including two 400MVA power transformers and two phase-shifting transformers for major TSOs in northern Europe, four 125MVA step-up transformers for compensators, four 250MVA autotransformers in Italy and five rectifier transformers of over 100MVA for the United States.
Vegetable oil transformers	Once again, Tamini plans to produce vegetable oil transformers for the Power sector in 2022. The Group plans to produce three 250 and 400MVA autotransformers using vegetable oil at its Legnano plant. A 105MVA transformer for a major steelworks in Italy was also tested.
	TERRESTRIAL CABLES – BRUGG CABLES GROUP
	The Brugg Cables Group operates in the terrestrial cable sector, producing low through to very high voltage products and specialising in the design, development, construction, installation and maintenance of electrical cables of all voltages and accessories for high and very high-voltage cables.
Order book	Orders acquired in the first nine months of 2022 amount to approximately CHF177 million (up 47% on the same period of 2021). The High Voltage System segment made a major contribution (CHF107.5 million). The Low Medium Voltage segment also made a significant contribution (CHF43.5 million), as did the High Voltage Accessories segment (CHF26 million).
Results	Revenue for the first nine months of 2022 is slightly up (+7%) on the same period of the previous year.
Operating activities	In the High Voltage Accessories segment, the new Dry Type Outdoor terminal (an outdoor gel insulated composite terminal) is undergoing final testing in accordance with Terna Group's high standards and is due to be launched by the end of 2022. Orders continue to perform extremely well and efforts to grow the market throughout the world are continuing.
	The high and very high voltage systems segment saw strong growth in orders. The energy crisis is leading to a significant increase in demand for high voltage systems. In addition, due to the difficulties in procurement, contracts are being awarded well in advance of expectations and this is reflected in a notable increase in the order book.
	The low and medium voltage segment continues to record a high volume of orders. During the third quarter, prices were increased to keep pace with the general rise in production costs. This has so far not led to a drop off in orders.

The energy environment The Group's strategy The Group's business Annexes

The Group's nationwide infrastructure is made available to meet the increasingly urgent need for fast and reliable digital connections, supporting partners in developing smart connectivity solutions via the following services: optical fibre use rights, pylon rental, housing and facilities (the installation of telecommunications equipment within the Terna Group's existing facilities).

FIBRE

Open Fiber project - fibre IRU and ancillary services (housing and maintenance) Under the framework agreement with Open Fiber regarding the provision of a national and regional backbone, in the first nine months of 2022 activation letters were signed regarding a further 215 km, scheduled for delivery by the end of 2022. In September, a 97-km section was delivered.

Fastweb - fibre IRU and ancillary services (housing and maintenance) The framework agreement signed in February 2022 envisages the delivery, by 2022, of 10 sections making a total of 555 km. In the first nine months of 2022, 3 sections amounting to 133 km were delivered.

The contract with the customer, signed in 2018, came to an end with delivery, in July, of two fibre pairs between Venice and Gorizia (191 km).

The contract signed in 2021 provides for the delivery of a further 393 km in 2022. Two sections extending for a total of 120 km were delivered in the first nine months of 2022.

Eolo – fibre IRU and ancillary services (housing and maintenance)

RETELIT - fibre IRU and ancillary services (housing and maintenance)

The Group provides engineering, procurement and construction (EPC), operation and maintenance (O&M), telecommunications (TLC) and digital services.

SMART GRIDS RENEWABLES – LT GROUP

The LT Group designs and implements the revamping and repowering of existing plants and builds new photovoltaic plants for third parties.

Turnover in the first nine months of 2022 amounted to €25 million, up approximately €11 million compared with the same period of the previous year. The increase primarily reflects routine maintenance carried out for the parent, Terna Energy Solutions S.r.l. (€3.4 million in the first nine months of 2022).

Turnover through to 30 September 2022 and the value of orders and contracts close to fulfilment is ahead of the expected amount for 2022 (approximately 115% of the budgeted amount).

OTHER PROJECTS

Eni New Energy – Storage per fast reserve	Under the contract signed in 2021 regarding the design and construction of an electrochemical storage unit in Assemini (approximately 14 MW), design and system integration activities necessary for the start-up of work have been completed, and the batteries have been procured. Construction work has begun and is ongoing, with the related civil works completed and electrical and electromechanical work in progress.
EF Solare – Revamping FTV	As part of the revamping/repowering contracts signed in 2021, work has been completed at the Focomorto 2, Latina 2 and Alfonsine plants. Revamping of the Priolo and Martignone plants is underway and, in the third quarter of 2022, work began on the Troia and Deliceto plants.
	HIGH VOLTAGE
Vetrerie Riunite - construction of new MV cable duct and replacement of transformer	The contract, signed in 2021, envisages the revamp of connection infrastructure. Following completion of the first phase of the design and construction of the new cable duct, delivery, assembly and testing of the HV/MV transformer took place in the third quarter of 2022.
Acciaierie Venete - Implementation and supply of 3 STATCOM systems	The contract, signed in February 2021, regards EPC implementation of three reactive energy compensation systems (STATCOM technology). To date, the installation of three compensation systems has been completed. Commissioning at the Padua, Sarezzo and Borgo Valsugana sites has also been completed. The system's fine-tuning is currently in progress.
NLMK Verona - HV cabling and installation of compact module	With regard to the contract entered into in 2021, development of the detailed design for the entire project and procurement have been completed. Construction work (including installation and testing of the compact module) has also been completed, enabling the system to enter service in the third quarter of 2022.
EDPR – Construction of Aquilonia electricity substation	As part of the contract regarding construction of the Monte Mattina HV/MV electricity substation to connect the Aquilonia wind farm (25.2 MW) to the NTG, the TOC has been signed, opening the way to entry into service of the infrastructure. A number of ancillary activities included in the contract were also largely completed in the third quarter of 2022.
RFI – Metering equipment	Under the framework agreement with RFI, signed in December 2018 and relating to the "Design, supply, installation, certification and commissioning of metering equipment", during the first nine months of 2022, one application contract was signed and fifteen installations were carried out.
Riva Acciai - Turnkey implementation of STATCOM system	In the first quarter of 2022, a contract was signed regarding implementation of a reactive energy compensation system (STATCOM technology). Design activities are in progress, with the technology components expected to be delivered by the end of the first quarter of 2023.

The energy environment The Group's strategy The Group's business Annexes

PRIVATE INTERCONNECTORS PURSUANT TO LAW 99/2009

Terna is responsible for operation and routine and special maintenance of the interconnector in return for an annual fee. The infrastructure entered service on 28 December 2019 and is owned by Monita Interconnector S.r.l., which the Terna Group sold to the private backers on 17 December 2019.	Italy–Montenegro interconnector project
Out of a total of approximately 95 km of cable for the Italian end of the interconnection, the laying of cable for the entire section running along the A32 motorway and through the Frejus motorway tunnel, has been completed. The remaining activities to complete the power line, including the laying of fibre and the installation of monitoring systems, were completed in 2021. The civil works for the Piossasco converter station, as was assembly of all the electromechanical equipment, have been completed.	Italy–France interconnector project
Given the delays to work on both the Italian and French sides in 2020, as a result of the Covid-19 emergency, the works were completed during 2021.
In February 2022, after the approval issued by the European Commission in January, ARERA accepted the request from Piemonte Savoia S.r.l. in 2021 for an extension of the exemption granted by Law 99/2009 until 9 November 2022. The commissioning phase is in progress, which will enable the infrastructure to enter service in 2022.
The Italy-Austria interconnector (the Reschenpass project) involves construction of a new 220kV AC interconnection between the Glorenza (Italy) and Nauders (Austria) substations. This will consist of 28 km of underground cable, including 26 km on the Italian side, and the necessary upgrade of the domestic grid. The project will increase cross-border interconnection capacity between Italy and Austria by around 300 MW, practically doubling the currently available capacity. The cost of the project is expected to be approximately €80 million.	Italy–Austria interconnector project
The sale of Terna S.p.A.'s 100% stake in Resia to Interconnector Energy Italia S.C.p.A. ("IEI"), Consorzio Toscana Energia S.p.A. and VDP Fonderia S.p.A. was completed on 15 September 2021, together with the signature of agency agreements for the construction, operation and maintenance of the Italia-Austria Interconnector in accordance with Law 99/2009.
On 6 May 2021, the European Commission gave the go-ahead for exemption to be granted and, on 17 June 2021, Resia received confirmation of the exemption from the Ministry for Economic Development (for capacity of 150 MW for a period of 10 years), following the receipt of clearance from ARERA and the European Commission.
The interconnector is due to enter service in 2023.
The project involves the development of new transmission lines between Italy and Switzerland, with the aim of increasing interconnection capacity between Italy and Switzerland.	Italy–Switzerland interconnector project
The creation of a direct current line is planned, partly in undersea cable, between the substations of Salgareda (IT) and Divaça/Beričevo (SL), together with work on upgrading the domestic grids in Italy and in Slovenia. The project is currently awaiting the necessary consents on the Italian side. The expected increase in cross-border capacity of approximately 1 GW will raise the interconnection capacity to more than double the current level.	Italy–Slovenia interconnector project

International Activities

As part of the overseas initiatives, the plan to extract value from activities in South America proceeded. Launched in the last part of 2021, the plan involves the sale of up to 100% of the Latin American assets.

On 29 April 2022, Terna S.p.A., Terna Plus S.r.l. and Terna Chile S.p.A. signed an agreement with CDPQ, a global investment group, for the sale of all their power line assets, extending for approximately 1,200 km, in Brazil, Peru and Uruguay. The value of the assets being sold (the equity value) is more than €265 million. In execution of this agreement, the first closing for the sale to CDPQ of the first three projects in Brazil, with a value of over €145 million, was completed on 7 November. The closing for the other projects in Brazil, Uruguay and Peru will take place in phases, predominantly by the end of 2022.

The transaction forms part of the broader strategy of refocusing the Terna Group's international presence in low-risk markets with attractive growth potential, above all North America, as previously announced in the updated 2021-2025 Industrial Plan.

On 24 October, Terna USA, a recently established Group company, Meridiam (an independent corporation) and Boundless Energy (a US-based developer of transmission projects) signed a Joint Development Agreement with a view to jointly developing electricity transmission infrastructure in the United States. The partnership will benefit from the three partners' distinctive competencies, enabling them to capture business opportunities linked to the acquisition, development and implementation of major onshore and offshore electricity transmission infrastructure projects in the United States.

Initiatives in progress in South America

The energy environment The Group's strategy The Group's business Annexes

Other international initiatives

Via ELMED Etudes SARL10, work continued on development of the electricity interconnector project between Italy and Tunisia. The field work for the marine section survey has been completed, and the survey of the terrestrial section in Tunisia is underway. Work continues on the environmental and social impact study, which under the new EU regulations will also analyse the climate proofing of the infrastructure. At the end of April, an application for consent for the Italian section of the infrastructure was submitted to the Ministry for the Ecological Transition. In August, Terna and STEG applied for financing for the project under the Connecting Europe Facility (CEF Energy 2022), the EU funding instrument set up to promote growth, jobs and competitiveness through targeted infrastructure investment in Europe.

Financial review for the first nine months of 2022

In order to report on the Terna Group's operating performance and analyse its financial position, this section includes management accounts prepared in line with industry best practice. These reclassified statements contain alternative performance measures (APMs, as defined in the guidance provided by ESMA/2015/1415), which management considers to be useful in assessing the performance of the Group and representative of the business's operating results and financial position.

The criteria used in constructing these indicators are the same as those used in the Annual Report. Details are provided in the Annex, "Alternative performance measures (APMs)".

Basis of presentation

The measurement and recognition criteria applied in this Interim Report are consistent with those adopted in the consolidated financial statements for the year ended 31 December 2021.

Given that the requirements of IFRS 5 have been met, the total results for the first nine months of 2022 and 2021 attributable to the South American subsidiaries included in the planned sale of assets, initiated at the end of 2021, have been classified in the item "Profit/(Loss) for the period from assets held for sale" in the Group's reclassified income statement. Likewise, the attributable assets and liabilities at 30 September 2022 have been reclassified to the item "Net assets held for sale" in the Group's reclassified statement of financial position, in line with the comparative amount.

¹⁰ This is the 50/50 Tunisian joint venture between Terna S.p.A. and STEG (Tunisia's vertically integrated, state-owned electrical utility) established in 2009 with the role of conducting studies and providing technical assistance for the Tunisia-Italy electricity interconnector.

The Group's reclassified income statement

The Terna Group's operating results for the first nine months of 2022, compared with those for the same period of the previous year, and for the third quarter of 2022 and 2021, are summarised in the following reclassified income statement.

		Q3						(€m)
2022			2021 CHANGE % CHANGE		9M 2022	9M 2021	CHANGE	% CHANGE
661.6	633.6	28.0		4.4% TOTAL REVENUE	1,992.4	1,889.9	102.5	5.4%
566.6	550.1	16.5		3.0% - Regulated revenue	1,720.2	1,643.5	76.7	4.7%
13.9	11.9	2.0		16.8% of which Revenue from construction services performed under concession	36.4	27.1	9.3	34.3%
94.4	83.5	10.9		13.1% - Non-Regulated revenue	271.6	246.1	25.5	10.4%
0.6	-	0.6		- - International revenue	0.6	0.3	0.3	100.0%
196.3	178.5	17.8		10.0% TOTAL OPERATING COSTS	580.2	524.9	55.3	10.5%
72.7	70.5	2.2		3.1% - Personnel expenses	236.4	214.9	21.5	10.0%
44.6	40.7	3.9		9.6% - Cost of services, leases and rentals	135.3	124.9	10.4	8.3%
55.5	49.0	6.5		13.3% - Materials	149.2	135.1	14.1	10.4%
8.9	5.0	3.9		78.0% - Other costs	20.9	18.2	2.7	14.8%
0.7	1.4	(0.7)		(50.0%) - Quality of service	2.0	4.7	(2.7)	(57.4%)
13.9	11.9	2.0		16.8% - Cost of construction services performed under concession	36.4	27.1	9.3	34.3%
465.3	455.1	10.2		2.2% GROSS OPERATING PROFIT (EBITDA)	1,412.2	1,365.0	47.2	3.5%
176.4	165.5	10.9		6.6% - Amortisation, depreciation and impairment losses	515.9	491.0	24.9	5.1%
288.9	289.6	(0.7)		(0.2%) OPERATING PROFIT (EBIT)	896.3	874.0	22.3	2.6%
(20.1)	(23.4)	3.3		(14.1%) - Net financial income/(expenses)	(56.3)	(57.5)	1.2	(2.1%)
268.8	266.2	2.6		1.0% PROFIT/(LOSS) BEFORE TAX	840.0	816.5	23.5	2.9%
76.3	72.1	4.2		5.8% - Income tax expense for the period	236.8	228.6	8.2	3.6%
192.5	194.1	(1.6)		(0.8%) PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS	603.2	587.9	15.3	2.6%
(4.6)	2.2	(6.8)		- - Profit/(Loss) for the period from assets held for sale	(14.7)	(5.6)	(9.1)	162.5%
187.9	196.3	(8.4)		(4.3%) PROFIT FOR THE PERIOD	588.5	582.3	6.2	1.1%
(0.9)	0.5	(1.4)		- - Profit/(Loss) attributable to non-controlling interests	1.6	1.9	(0.3)	(15.8%)
188.8	195.8	(7.0)		(3.6%) PROFIT FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT	586.9	580.4	6.5	1.1%

			(€m)
EBITDA BY OPERATING SEGMENT	9M 2022	9M 2021	CHANGE
Regulated Activities	1,376.3	1,327.4	48.9
Non-regulated Activities	39.9	42.6	(2.7)
International Activities	(4.0)	(5.0)	1.0
EBITDA	1,412.2	1,365.0	47.2

Gross operating profit (EBITDA) for the first nine months of 2022 amounts to €1,412.2 million, up €47.2 million on the €1,365.0 million of the first nine months of 2021. This reflects the improvement in EBITDA from Regulated Activities.

Revenue

			(€m)
REGULATED ACTIVITIES	9M 2022	9M 2021	CHANGE
Tariff revenue	1,656.5	1,584.5	72.0
- Transmission revenue	1,485.0	1,499.4	(14.4)
- Dispatching, metering and other revenue	171.5	85.1	86.4
Other regulated revenue	27.3	31.9	(4.6)
Revenue from construction services performed under concession	36.4	27.1	9.3
TOTAL	1,720.2	1,643.5	76.7

Revenue from Regulated Activities, after excluding revenue from construction services performed under concession (up €9.3 million), are up €67.4 million, primarily reflecting the impact on tariff revenue of the output-based incentive mechanisms introduced by Resolution 567/2019 relating to grid development projects designed to relieve congestion within market areas and grid constraints due to voltage regulation and to improve conditions for essential service provision (€84.3 million) and Resolution 567/2019 relating to the delivery of additional transmission capacity between market areas (€34.5 million) net of the incentives recognised in the first nine months of 2021 (down €7.9 million). The performance also reflects the reduction in WACC recognised for 2022 (5% compared with the previous 5.6%, in accordance with Resolution 614/21) net of the increase in the RAB during the period and the volume effect.

Revenue was also reduced as a result of recognition, in the first nine months of 2021, of revenue relating to the outcome of the claim for a refund of stamp duty paid on the acquisition of Rete S.r.l. (down €13.4 million), partly offset by increased revenue in the form of the bonus receivable under the RENS incentive mechanism (up €4.4 million, due broadly to recognition of the portion due on the basis of the estimated overall performance in the 2021-2023 regulatory period), increased revenue from connections to the NTG (up €2.3 million) and an increase in compensation received for damage to infrastructure (up €1.6 million).

			(€m)
NON-REGULATED ACTIVITIES	9M 2022	9M 2021	CHANGE
Industrial	182.0	177.2	4.8
- Brugg Cables Group	91.2	90.5	0.7
- Tamini Group	90.8	86.7	4.1
Services for third parties (Connectivity, Energy Solutions, other)	82.0	60.5	21.5
Private interconnectors	7.6	8.4	(0.8)
TOTAL	271.6	246.1	25.5

The increase in revenue from Non-regulated Activities, amounting to €25.5 million, primarily reflects increased revenue from smart grids (up €22.9 million), which has benefitted from the contribution of €18 million from the LT Group and increases in the contributions from the Tamini Group (up €4.1 million) and the Brugg Cables Group (up €0.7 million).

Revenue from International Activities is classified in "Profit/(Loss) for the period from assets held for sale", in application of IFRS 5.

Revenue was up €28.0 million in the third quarter of 2022 compared with the same period of the previous year, primarily due to recognition of the incentives introduced by Resolution 567/2019 and the contribution from the LT Group.

Costs

Operating costs, excluding the cost of construction services performed under concession (up €9.3 million), are up €46.0 million compared with the first nine months of the previous year. This primarily reflects an increase in personnel expenses (up €21.5 million), broadly due to an increase in the average workforce and the contribution from the LT Group in relation to external staff and other costs (up €18.5 million).

In the third quarter of 2022, costs were up €17.8 million on the same period of the previous year, primarily due to the contribution from the LT Group.

Amortisation, depreciation and impairment losses for the period amount to €515.9 million, an increase of €24.9 million compared with the first nine months of 2021, primarily due to the entry into service of new infrastructure.

Operating profit (EBIT), after amortisation, depreciation and impairment losses, amounts to €896.3 million, compared with €874.0 million for the first nine months of 2021 (up 2.6%).

Net financial expenses for the period total €56.3 million and primarily regard the Parent Company (€57.1 million). The figure is broadly in line with the €57.5 million of the first nine months of 2021 (down €1.2 million), as rising inflation during the period was more than offset by an increase in capitalised costs and the positive impact of exchange rate movements.

After net financial expenses, profit before tax amounts to €840.0 million, an increase of €23.5 million compared with the same period of 2021 (up 2.9%).

Income tax expense for the period totals €236.8 million, an increase of €8.2 million (3.6%) compared with the first nine months of 2021. This primarily reflects the increase in pre-tax profit after the greater amount of contingent tax assets recognised during the previous year. The resulting tax rate of 28.2% is broadly in line with the rate for the first nine months of 2021 (28.0%).

The profit for the period from continuing operations amounts to €603.2 million, an increase of €15.3 million (2.6%) compared with the €587.9 million of the first nine months of 2021.

The loss for the period from assets held for sale, totalling €14.7 million, has deteriorated €9.1 million compared with the same period of the previous year. This essentially reflects the adjustment to the value of the assets recognised in accordance with IFRS 5 due to the impairment of the net assets in Peru.

Profit for the period amounts to €588.5 million, up €6.2 million (1.1%) compared with the €582.3 million of the first nine months of 2021.

Profit for the period attributable to owners of the Parent (after excluding the share attributable to non-controlling interests) amounts to €586.9 million, up €6.5 million (1.1%) compared with the €580.4 million of the first nine months of 2021.

Cash flow

Operating cash flow for the first nine months of 2022 was used entirely to finance investing activities. The impact on working capital of movements in trading and tax assets and liabilities compared with 2021, and repayment of a bond issue in the first nine months (replaced by the hybrid green bond issued on 2 February 2022 and worth €1 billion, accounted for in equity), have resulted in a reduction in net debt.

		(€m)
	CASH FLOW 9M 2022	CASH FLOW 9M 2021*
- Profit for the period	588.5	582.3
- Amortisation, depreciation and impairment losses	515.9	491.4
- Net change in provisions	5.6	(43.1)
- Net losses/(gains) on sale of assets	(2.3)	(10.5)
Operating cash flow	1,107.7	1,020.1
- Change in net working capital	646.9	(175.2)
- Other changes in property, plant and equipment and intangible assets	45.8	45.5
- Change in investments	1.0	2.1
- Change in financial assets	(152.3)	(33.8)
Cash flow from operating activities	1,649.1	858.7
- Total capital expenditure	(1,033.1)	(925.3)
Free cash flow	616.0	(66.6)
Net assets held for sale	(91.4)	-
- Dividends paid to the Parent Company's shareholders	(387.7)	(359.0)
- Cash flow hedge reserve after taxation and other movements in equity attributable to owners of the Parent	1,213.8	48.2
- Other movements in equity attributable to non-controlling interests	0.4	(23.2)
Change in net debt	1,351.1	(400.6)

* Figures published in the Consolidated Interim Report for the nine months ended 30 September 2021.

The Group's reclassified statement of financial position

The Terna Group's financial position at 30 September 2022 and 31 December 2021 is summarised below in the reclassified statement of financial position.

			(€m)
	AT 30 SEPTEMBER 2022	AT 31 DECEMBER 2021	CHANGE
Total net non-current assets	16,978.3	16,352.9	625.4
- Intangible assets and goodwill	718.1	656.5	61.6
- Property, plant and equipment	15,729.1	15,316.6	412.5
- Financial assets	531.1	379.8	151.3
Total net working capital	(2,354.0)	(1,706.7)	(647.3)
- Net energy-related pass-through payables	(944.1)	(209.1)	(735.0)
- Net receivables resulting from Regulated Activities	565.6	448.4	117.2
- Net trade payables	(528.6)	(737.5)	208.9
- Net tax liabilities	(215.0)	(50.6)	(164.4)
- Other net liabilities	(1,231.9)	(1,157.9)	(74.0)
Gross invested capital	14,624.3	14,646.2	(21.9)
Sundry provisions	(54.0)	(48.4)	(5.6)
Net invested capital	14,570.3	14,597.8	(27.5)
Net assets held for sale	209.1	117.7	91.4
TOTAL NET INVESTED CAPITAL	14,779.4	14,715.5	63.9
Equity attributable to owners of the Parent	6,094.9	4,681.9	1,413.0
Equity attributable to non-controlling interests	33.1	31.1	2.0
Net debt	8,651.4	10,002.5	(1,351.1)
TOTAL	14,779.4	14,715.5	63.9

The €625.4 million increase in net non-current assets compared with 31 December 2021 primarily reflects a combination of the following:

• total capital expenditure of €1,033.1 million, as described in detail in the section on "Regulated Activities";
• an increase of €151.3 million in financial assets, mainly due to the purchase, in September 2022, of Italian Government bonds ("BTP") with a notional value of €100.0 million, maturing in May 2025 and paying a coupon of 1.4% (€99.8 million at 30 September 2022), an increase in guarantee deposits received from operators participating in the capacity market in accordance with Resolution 98/2011/R/eel, as amended (up €40.4 million) and an increase in the Interconnector Guarantee Fund, set up to fund investment in interconnections by art. 32 of Law 99/09 (up €14.7 million);
• amortisation and depreciation for the period, totalling €514.7 million;
• other movements during the period, resulting in a reduction of €35.1 million, including grants related to assets (primarily in relation to projects financed by the Ministry for Economic Development and the EU and the re-routing of power lines at the request of third parties) and the penalty applied for delayed completion of work on the Italy-France interconnector (down €19.5 million) and disposals and impairment losses resulting in a reduction of €4.4 million.

The Terna Group's total capital expenditure during the period, amounting to €1,033.1 million, is up 12.0% compared with the €922.7 million of the same period of 2021.

MAIN INVESTMENT IN THE NTG* (€m)

* Amounts include financial expenses.

Net working capital (net current liabilities) of -€2,354.0 million resulted in a cash inflow of €647.3 million compared with 31 December 2021. This reflects the combined effect of:

Cash inflows

• an increase of €735 million in net energy-related pass-through payables, primarily linked to the combined effect of an increase in net payables relating to essential plants for the security of the electricity system - UESS (€365.9 million), reflecting payments made during the period to the owners of essential plants11 and recognition of the net amount payable in the form of capacity payments (€332.9 million) payable from 2022;
• an increase of €164.4 million in net tax liabilities, broadly due an increase in net VAT payable (€77.4 million) and an increase in the net amount payable as income tax for the period, after payments on account in June and the settlement of tax due for the previous year (€89.3 million);
• an increase in other net liabilities of €74.0 million, primarily due to the above increase in guarantee deposits received from operators participating in the capacity market and from electricity market operators to guarantee the obligations undertaken regarding dispatching and virtual interconnection contracts (up €40.4 million and €41.3 million, respectively).

¹¹ ARERA ordered payments to the owners of essential plants via resolutions 42-43-67-76-92-131-172-214-223- 237-267-319-362/2022.

Cash outflows

• a reduction of €208.9 million in net trade payables, largely due to the increase in capital expenditure during the last part of the previous year;
• an increase in net receivables resulting from Regulated Activities of €117.2 million, primarily reflecting a combination of the following:
  • intrazonal incentives introduced by Resolution 699/2018: recognition of a receivable of €84.3 million;
  • interzonal incentives introduced by Resolution 567/2019 (articles 44 and 46 of annex A): collection from the CSEA, at the end of February, of the amount receivable for the efficiency bonus recognised at the end of 2021 (€40 million) and recognition of the accrued amount receivable for the period (€34.5 million);
  • the RENS bonus: the accrued amount due for the first nine months of the year (€8.7 million);
  • a reduction in transmission charges receivable (€15.3 million) following the revision of tariffs;
  • factoring transactions completed at the end of 2021 (€40 million).

Gross invested capital thus amounts to €14,624.3 million, marking a reduction of €21.9 million compared with 31 December 2021.

Sundry provisions are up €5.6 million, primarily due to:

• the net release of deferred tax assets (up €43.4 million), primarily due to the effect on taxation of movements in derivative financial instruments held by the Group, amortisation and depreciation and movements in provisions for risks and charges;
• net uses of provisions to fund staff incentives (down €6.3 million), quality of service (down €4.9 million), early retirement incentives (down €4.6 million), urban and environmental redevelopment schemes (down €3.0 million) and disputes and litigation (down €3.2 million), in addition to the change in provisions for employee benefits (down €9.9 million).

Net assets held for sale, totalling €209.1 million at 30 September 2022, are up €91.4 million compared with 31 December 2021. This primarily reflects an increase in investment in infrastructure operated under concession in Brazil and a reduction in the related net debt.

Total net invested capital, including assets held for sale, amounts to €14,779.4 million, marking an increase of €63.9 million compared with 31 December 2021. This is financed by equity attributable to owners of the Parent, totalling €6,094.9 million (up €1,413.0 million compared with the €4,681.9 million of 31 December 2021, primarily due to recognition of the reserve for the hybrid green bonds issued, amounting to €989.1 million and accounted for in equity), equity attributable to non-controlling interests of €33.1 million (€31.1 million at 31 December 2021) and net debt of €8,651.4 million (down €1,351.1 million compared with the €10,002.5 million of 31 December 2021).

Debt

The Terna Group's financial management is based on an approach that aims to maximise efficiency and achieve and maintain a solid financial structure, whilst adopting a highly prudent stance towards mitigation of the potential financial risks. The key aspects of the Group's financial policy are diversification of the sources of funding, a balance between short- and medium/long-term forms of debt and the proactive management of debt.

Gross debt at 30 September 2022 amounts to approximately €11 billion, consisting of approximately €7 billion in the form of bond issues and approximately €4 billion in bank borrowings. The average term to maturity of debt, 87% of which is fixed rate, is approximately 5 years.

Bonds have been issued in the form of both public and private placements under the €9 billion Euro Medium Term Notes (EMTN) Programme (in which a large number of Italian and overseas banks participate), in addition to a stand-alone issue of €800 million dating back to 2004. Focused specifically on qualified investors and listed on the Luxembourg Stock Exchange, Terna's bonds have a very diverse investor base, in terms of both sector and geographical profile.

The main provider of Terna's bank loans is the European Investment Bank (EIB). Total borrowings from the EIB at 30 September 2022 amount to approximately €2.1 billion. Thanks to its strong credit ratings, Terna is able to obtain financing from banks on extremely good terms. Evidence of this is provided by the €1 billion hybrid green bond issue carried out in February 2022 and the issue of fixed rate bonds with a nominal value of €100 million, in the form of a private placement, in September 2022. In addition, €300 million was disbursed in the first nine months of 2022 under a credit facility of the same amount agreed with the EIB in 2021, whilst a further €900 million in bank facilities was also disbursed. Finally, Terna also has access to two committed revolving credit facilities, amounting to approximately €3.2 billion.

Sustainable finance

In line with Terna's strategy, which aims to combine investment and sustainability to drive growth and value creation, it is Terna's ambition to play a leading role in the sustainable finance market. This strategy was also followed in the third quarter of 2022.

Terna agreed four three-year ESG-linked Credit Facilities, amounting to a total of €600 million, on 3 August, 22 September and 11 October 2022. The transactions involved Banca Nazionale del Lavoro S.p.A., CaixaBank S.A., the Italian branch of BNP Paribas S.A., Unicredit S.p.A. and the Milan branches of Crédit Agricole Corporate and Investment Bank and SMBC Bank EU AG.

The rates applied to the ESG-linked Credit Facilities is based on Terna's performance against environmental, social and governance ("ESG") metrics. The agreed facilities provide Terna with a level of liquidity appropriate to its current rating and confirms the Group's strong commitment to introducing a model that increasingly reinforces the role of sustainability as a strategic driver of value creation for all its stakeholders.

Terna also has access to two sustainability-linked Revolving Credit Facilities amounting to €3.15 billion. The two Revolving Credit Facilities include a mechanism based on bonuses and penalties linked to the achievement of specific ESG objectives.

On 15 September 2022, Terna launched a euro-denominated fixed rate bond issue in the form of a private placement. The issue, amounting to €100 million, was carried out under the Company's Euro Medium Term Notes (EMTN) programme, which has been assigned ratings of "BBB+" by Standard and Poor's, "(P)Baa2" by Moody's and "A-" by Scope. The bonds have a term of five years, pay annual coupon interest of 3.44% and were issued at par, with a spread of 91 basis points over the midswap rate. The securities have been admitted to trading on the Luxembourg Stock Exchange.

The senior green bonds issued by Terna at 30 September 2022 amount to €2.6 billion, in addition to the perpetual, subordinated hybrid green bonds issued on a standalone basis in February 2022, amounting to €1 billion. The net proceeds from the issues are used to finance the Company's eligible green projects, identified on the basis of Terna's Green Bond Framework, published by Terna in compliance with the "Green Bond Principles" drawn up by the ICMA (International Capital Market Association) and the EU Taxonomy.

On 8 November 2022, Terna signed a loan agreement with the European Investment Bank (EIB) amounting to €500 million, with a term to maturity of approximately 22 years. The loan will be used to fund construction and commissioning of the "East Link" section of the Tyrrhenian Link. This financing marks the first tranche of the overall sum of €1.9 billion made available by the EIB to fund the above project.

Terna's leadership in sustainable finance is widely recognised in the market which, since 2018, has shown a strong appetite for the green bonds issued. In addition to its inclusion in the main ESG indices, from January 2021, Terna is the first Italian electric utility to join the Nasdaq Sustainable Bond Network, the sustainable finance platform operated by Nasdaq that brings together investors, issuers, investment banks and specialist organisations.

Terna continues to be a member of the CFO Coalition for the SDGs, which is building on the work of the CFO Taskforce for the SDGs, the initiative launched by the UN Global Compact at the end of 2019 to develop sustainable finance and of which Terna was one of the founding members. The Coalition aims to continue to promote sustainability, scale up its global community and follow the example set by the CFOs that founded the Taskforce.

(€m)

Further confirmation of its commitment to playing an active role in developing sustainable finance, Terna is taking part in the Corporate Forum for Sustainable Finance, a network of major European businesses committed to the development of sustainable finance as a means to promote a more sustainable and responsible society.

Finally, Terna, both individually and as a member of the above Corporate Forum on Sustainable Finance, will continuously monitor developments in European legislation, with particular regard to the impact on sustainable finance.

Net debt

The Group's net debt at 30 September 2022 amounts to €8,651.4 million, marking a reduction of €1,351.1 million compared with 31 December 2021.

NET DEBT (BY TERM TO MATURITY)	30 SEPTEMBER 2022	31 DECEMBER 2021	CHANGE
Total medium/long-term debt	8,076.1	8,917.1	(841.0)
- Bond issues	5,091.4	6,925.6	(1,834.2)
- Borrowings	2,736.3	1,909.4	826.9
- Derivative financial instruments	248.4	82.1	166.3
Total short-term debt/ (funds)	575.3	1,085.4	(510.1)
- Bond issues (current portions)	1,646.5	999.9	646.6
- Short-term borrowings	493.9	1,947.0	(1,453.1)
- Borrowings (current portions)	442.9	640.1	(197.2)
- Other financial liabilities, net	51.1	23.6	27.5
- Derivative financial instruments	7.8	0.1	7.7
- Financial assets	(363.3)	(958.5)	595.2
- Cash and cash equivalents	(1,703.6)	(1,566.8)	(136.8)
Total net debt	8,651.4	10,002.5	(1,351.1)
NET DEBT (BY TYPE OF INSTRUMENT)
- Bond issues	6,737.9	7,925.5	(1,187.6)
- Borrowings	3,179.2	2,549.5	629.7
- Short-term borrowings	493.9	1,947.0	(1,453.1)
- Derivative financial instruments	256.2	82.2	174.0
- Other financial liabilities, net	51.1	23.6	27.5
Gross debt	10,718.3	12,527.8	(1,809.5)
- Financial assets	(363.3)	(958.5)	595.2
- Cash and cash equivalents	(1,703.6)	(1,566.8)	(136.8)
Total net debt	8,651.4	10,002.5	(1,351.1)
Net debt attributable to assets held for sale	135.5	161.8	(26.3)

The energy environment The Group's strategy The Group's business Annexes

Changes in the Group's net debt are as follows:

• a reduction in bond issues of €1,187.6 million, primarily following the repayment of bonds worth €1,000 million;
• an increase in borrowings of €629.7 million, primarily as a result of the drawdown of new bank facilities totalling €900.0 million and of an EIB loan of €300 million, after the repayment of two bank loans totalling €300.0 million and scheduled repayments on existing EIB loans;
• a reduction in short-term borrowings (down €1,453.1 million), essentially due to the Parent Company's repayment of amounts obtained under short-term credit facilities;
• an increase in the fair value of derivative financial instruments (up €174 million), primarily due to movements in the derivatives held and in market interest rates;
• an increase in other net financial liabilities (up €27.5 million), essentially due to the recognition of accrued interest on financial products;
• a reduction in financial assets (down €595.2 million) following the repayment of Italian government securities held, partly offset by new investments during the period;
• an increase in cash and cash equivalents of €136.8 million. Cash amounts to €1,703.6 million at 30 September 2022, including €1,622.0 million invested in shortterm, readily convertible deposits and €81.6 million held in bank current accounts and in the form of cash in hand.

Net debt attributable to assets held for sale, amounting to €135.5 million at 30 September 2022, essentially includes the value of bond issues, totalling €49.5 million and bank borrowings of €177.8 million, after the short-term portion of investment in infrastructure operated under concession in Brazil, recognised in application of IFRIC 12, totalling €33.2 million, and cash and cash equivalents of approximately €58.6 million. The reduction of €26.3 million compared with 31 December 2021 is primarily due to repayment of a bank loan by one of the Brazilian companies.

3. The Group's business

Terna's shares

Terna S.p.A. has been listed on Borsa Italiana's screen-based trading system (Mercato Telematico Azionario) since 23 June 2004. From the date of floatation to the end of September 2022, the share price has risen 268% (a capital gain), providing a Total Shareholder Return (TSR12) of 866%, ahead of both the Italian market (the FTSE MIB, up 42%) and the relevant European sector index (DJ Stoxx Utilities), which has risen 249%.

Europe's leading stock markets fell during the first nine months of 2022, weighed down by the current energy crisis and the tightening of monetary policy by central banks to combat inflation. Milan lost 24.5%, Paris and Frankfurt gave up 19.4% and 26.2%, Madrid fell 15.5% and London was down 6.6%.

Performance of Terna's shares

Against this backdrop, the pressures resulting from rising interest rates weighed on the performance of regulated stocks. The relevant European sector index (DJ Stoxx Utilities) ended the period down 20.03%, the FTSE MIB closed down 24.49% and Terna's share price was down 12.15% at €6.250 per share. The daily average volume traded during the period amounted to approximately 4.3 million. It should also be noted that the ex-dividend date for the final dividend for 2021, amounting to 19.29 euro cents per share, was 20 June, whilst the share price reached a new all-time high of €8.334 per share on 25 May.

¹² Total Shareholder Return (TSR): total return on an equity investment, calculated as the sum of:

I. capital gain: the change in the share price (difference between the price at the end and at the beginning of the relevant period) as a percentage of the price at the beginning of the period;

II. reinvested dividends: the ratio between dividends per share paid out during the period and the share price at the beginning of the period. Dividends are assumed to have been reinvested in the shares.

TOTAL SHAREHOLDER RETURN ON TERNA'S SHARES AND THE FTSE MIB AND DJ STOXX UTILITIES (from the otation to the end of September 2022)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

	Source: Bloomberg.	Terna	Ftse Mib	DJ Stoxx Utilities
--	--------------------	-------	----------	--------------------

WEIGHTING OF TERNA'S SHARES	9M 2022	9M 2021
> on the FTSE MIB	2.61%	2.00%

Source: Borsa Italiana.

Ratings

	SHORT-TERM	MEDIUM/LONG-TERM	OUTLOOK
Terna S.p.A.
Standard & Poor's	A-2	BBB+	Stable
Moody's	Prime-2	Baa2	Negative
Scope*	S-1	A-	Stable
Italian state
Standard & Poor's	A-2	BBB	Stable
Moody's	Prime-3	Baa3	Negative
Scope	S-2	BBB+	Stable

* Terna has requested Scope Ratings to withdraw its ratings of the Group. Despite this, the rating continues to be valid at 30 September 2022.

On 29 July and 9 August 2022, S&P and Moody's reaffirmed Terna's long-term ratings of BBB+ and Baa2, one notch above Italy's sovereign rating. Moody's has also affirmed the short-term rating of P-2 and its rating of subordinated debt as Ba1. The two agencies have also revised Terna's outlook, downgrading it from positive to stable and from stable to negative, following a downgrade of the sovereign outlook for Italy.

At the end of September, Terna requested Scope Ratings to withdraw its ratings of the Group in keeping with the Group's long-term strategy of rationalising the resources dedicated to rating activity to make it more efficient.

3. The Group's business

Outlook

Despite the geopolitical crisis caused by the prolonged conflict between Russia and Ukraine and continued commodity price pressures, the last quarter of the year will see the Group continue to focus on delivering on the "Driving Energy" 2021-2025 Industrial Plan. The updated Plan confirms and strengthens Terna's central role in driving the Italian energy system and enabling the ecological transition, with the Group planning to invest a total of €10 billion in the five years from 2021 to 2025, including approximately €1.7 billion in 2022.

In line with the 2021 National Transmission Grid Development Plan presented in July, which targets investment of €18.1 billion over the next ten years (up 25% on the previous plan), expenditure on Regulated Activities will be stepped up. Investment will focus on enabling the energy transition and facilitating the development and integration of renewable sources, making a major contribution to achieving the ambitious goals set out in the Green Deal and helping to drive the country's economic recovery.

In terms of the Group's most important investment projects, work is progressing on the Tyrrhenian Link, for which the Ministry for the Ecological Transition has recently granted consent for construction of the East Link, which will connect Campania with Sicily, and has formally initiated the consents process for West Link, due to connect Sicily and Sardinia. The consents process for the Adriatic Link, the new submarine cable between the Abruzzo and Marche regions is also expected to begin in the last quarter.

In terms of the Security Plan, the planned installation of synchronous compensators will continue, with the aim of supporting the regulation of short-circuit voltage and power in areas of the country characterised by a high level of production from renewable sources and a significant reduction in traditional production.

Work on the reorganisation of electricity grids in metropolitan areas will also continue during the last part of the year, primarily involving the renewal of existing infrastructure with new technologically advanced connections meeting the highest standards in terms of environmental sustainability (e.g., Florence and Rome).

Finally, the Group will continue to make progress towards meeting the requirements resulting from output-based incentive mechanisms introduced by ARERA. These regard work designed to provide additional transmission capacity between market areas (interzonal incentives), resolve grid constraints due to voltage regulation and improve conditions for essential service provision (intrazonal incentives) and reduce dispatching costs (DSM incentives). Significant results on the reduction of dispatching costs are already expected during the fourth quarter of 2022.

With regard to Non-regulated Activities, Terna Group will continue to consolidate its role as a provider of both connectivity and energy solutions, developing high value-added services for corporate customers and exploiting market opportunities for traditional and renewable customers. This will include openings resulting from the acquisition of the LT Group.

In the industrial segment, the aim is to build on Tamini's performance and, with regard to Brugg, take full advantage of its distinctive expertise in terrestrial cables and of synergies with the Terna Group's other businesses.

Following completion of the due diligence and the agreement entered into with CDPQ on 29 April, International Activities will focus on closing the sale of the South American assets, which is due to take place in phases, for the most part in the last quarter of the year, following the satisfaction of certain conditions. Within the scope of the assets being sold, work on the construction of the Linha Verde I power line in Brazil will continue, with the line due to enter service in 2023.

The strategic assessment of further opportunities in overseas markets, focusing above all on the US market, will continue. This may take the form of partnerships and will involve the careful selection of projects with a view to ensuring a low risk profile and avoiding the need to tie up large amounts of capital.

In line with previous months, the Group will focus on stepping up investment in innovation and digital solutions in order to continue the transformation that will enable us to manage the growing complexity of the electricity system. In addition, increasingly central roles will be played by people development and the insourcing of strategic competencies, to the strengthening of departments, and to optimising the working environment for Company people through delivery of the NexTerna project.

Management of Terna Group's business will continue to be based on a sustainable approach and respect for the ESGs, ensuring that the Company is able to minimise its environmental impact, involve local stakeholders and meet the need for integrity, responsibility and transparency.

The above objectives will be pursued whilst maintaining its commitment to maximising the cash generation necessary ensure a sound, balanced financial structure.

Declaration

of the manager responsible for financial reporting in accordance with paragraph 2 of art. 154-bis of Legislative Decree 58/1998

The manager responsible for financial reporting, Agostino Scornajenchi, declares, pursuant to paragraph 2 of article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this Consolidated Interim Report for the nine months ended 30 September 2022 is consistent with the underlying accounting records.

Alternative performance measures (APMs) 62

Other information 63

4 Annexes

Alternative performance measures (APMs)

In accordance with the guidelines in ESMA/2015/1415, the APMs used in this Interim Report are described below.

MEASURE	DESCRIPTION
OPERATING RESULTS
Operating profit/(loss) - EBIT	is an indicator of operating performance obtained by adding Net financial income/(expenses) to Profit/(Loss) before tax.
Gross operating profit/(loss) – EBITDA	is an indicator of operating performance obtained by adding Amortisation, depreciation and impairment losses to Operating profit/(loss) (EBIT).
TAX RATE	is the amount of tax paid as a proportion of pre-tax profit and is based on the ratio of Income tax expense to Profit/(Loss) before tax.
FINANCIAL POSITION
Net working capital	is an indicator of financial position, showing the Group's liquidity position; it is based on the difference between Current assets and Current liabilities of a non-financial nature, as presented in the statement of financial position.
Gross invested capital	is an indicator of financial position, showing the Group's total assets and is obtained by adding Net non-current assets and Net working capital.
Net invested capital	is calculated by deducting Sundry provisions from Gross invested capital.
CASH FLOW
Net debt	is an indicator of the Group's financial structure and is obtained by deducting Cash and cash equivalents and Financial assets from Short- and long-term financial liabilities and the related derivative instruments.
Free cash flow	is the cash generated by operating activities less capital expenditure and is the difference between Cash flow from operating activities and Cash flow for investing activities.

The energy environment The Group's strategy The Group's business Annexes

Other information

Additional information is presented below in accordance with specific statutory or industry requirements.

Treasury shares

The Parent Company holds a total of 4,375,909 treasury shares (equal to 0.218% of the share capital). These shares were purchased in implementation of three separate buyback programmes to service (i) the Performance Share Plan 2020-2023, in the period between 29 June 2020 and 6 August 2020, (ii) the Performance Share Plan 2021-2025, in the period between 31 May 2021 and 23 June 2021 and (iii) the Performance Share Plan 2022-2026, in the period between 27 May 2021 and 13 June 2022. The Company does not hold any additional treasury shares other than those purchased under the above programmes, including through subsidiaries13.

The Parent Company does not directly or indirectly hold any shares in CDP Reti S.p.A. or Cassa Depositi e Prestiti S.p.A., nor has it purchased or sold any such shares during the first nine months of 2022.

Related party transactions

Information on related party transactions is provided in the Annual Report for the year ended 31 December 2021.

Participation in the regulatory simplification process introduced by CONSOB Resolution 18079 of 20 January 2012

Information on participation in the simplified process introduced by the CONSOB is provided in the Annual Report for the year ended 31 December 2021.

¹³ In this regard, see the press releases published on 10 August 2020, 28 June 2021 and 13 June 2022, available at the following links: https://download.terna.it/terna/2020.08.10_CS%20TERNA%20operazioni%20su%20 azioni%20proprie%20CHIUSURA%20ITA__8d83d42cfd43cb6.pdf

https://download.terna.it/terna/Terna_operazioni_su_azioni_proprie_conclusione_programma_8d93a651f5f9ffb.pdf https://download.terna.it/terna/Terna_concluso_programma_acquisto_azioni_proprie_8da4d5856032b0b.pdf

All pictures are property of Terna.

www.terna.it

Mercurio GP Milan

Strategic advisory Creative concept Graphic design Layout Editing

www.mercuriogp.eu

Password Language Services S.r.l.
Rome Translation