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Remuneration of the Chief Executive Officer and General Manager

It is worth noting that in Terna, for the CEO and General Manager, the role of Director and the executive role in being are connected.

Pay mix
Fixed Remuneration

For the 2017-2019 mandate, the total fixed remuneration for the position of Chief Executive Officer is made up of:

  • an annual amount, established by the Shareholders’ Meeting on 27 April 2017, of € 35,000;
  • an annual amount approved by the Board of Directors on 9 May 2017, following the proposal of the Remuneration Committee after consultation with the Board of Statutory Auditors, of € 200,000.

The total fixed remuneration provided for the General Manager includes:

  • a gross annual fixed component (Gross Annual Salary, RAL);
  • benefits recognised by the National Collective Employment Contract (CCNL) and company policies and practices.

The Gross Annual Salary approved by the Board of Directors at its meeting on 9 May 2017 is € 850,000.

Overall, therefore, the CEO/GM, for the current mandate, is paid an annual gross fixed remuneration of € 1,085,000.

Short-Term Incentive (MBO)

The short-term incentive envisaged for the Chief Executive Officer is subject to the achievement of the following objectives:

The amount of the annual incentive, approved by the Board of Directors, is equal to € 200,000 gross; it is an on/off payment. Therefore, this amount will be paid only on achievement of both the targets, while failure to achieve even only one of the two targets will not generate a payment.

The short-term incentive envisaged for the General Manager is subject to the achievement of the following objectives:

* Both indicators that make up the target are referred to the Terna Group’s regulated activities. Each of the two indicators contributes equally to achieving the target, according to the score curve indicated. In the final calculation, therefore, the score attributed to the target will be the arithmetic average of the scores of the two indicators (provided that both scores are ≥ 80%, otherwise the bonus portion related to the target is reduced to zero).
** ARERA is the Regulatory Authority for Network Energy and the Environment (Autorità di Regolazione per Energia Reti e Ambiente).

The amount of the incentive actually disbursed varies according to the level of achievement of the targets assigned to the single objectives. If the average score of the individual objectives is 100%, the amount is € 300,000 gross.

Therefore, overall, the CEO/GM, for the current mandate, is paid a short-term variable remuneration which, at the target, is € 500,000 gross per year.

Long-Term Incentive (LTI)

In 2017, following the appointment of the new Board of Directors and the beginning of the work of the Remuneration Committee, due to very tight time constraints, which would not have allowed for the normal approval process for a plan based entirely on financial instruments (equity-based) to be completed, it was decided to proceed with the design of a rolling system, structured as follows:

  • a first “Convertible” monetary three-year Cycle 2017-2019: A monetary plan characterised by the option for the Board of Directors to choose whether to convert the bonus into equity;
  • two subsequent three-year “equity-based” Cycles, covering 2018-2020 and 2019-2021: plans in the form of Phantom Stocks, which reward persistent and sustainable growth in shareholder value and which, being based on financial instruments, are in line with market practices and the provisions of the Corporate Governance Code.

The main features of the Cycles are as follows:

The variable fee of the General Manager linked to the 1st Cycle 2017-2019 of the LTI Plan is established with reference to an incentive level corresponding to 123.6% of the GM’s Gross Annual Salary, as a total value of the three-year Cycle, if an overall performance is achieved at the target level (100%).

Long-Term Incentive (LTI)

9. The TSR of Terna and of the peers is calculated over a time period of three years, using, for the second Cycle, the average of the closing values of the share price in 2018 and the same average for 2020 and, for the third Cycle, the average of the closing values of the share price in 2019 and the same average for 2021. The data source for the TSR is Bloomberg.
10. The companies belonging to the Peer Group (Snam, Red Electrica, Enagas, National Grid, Severn Trent, United Utilities) are major European utilities companies listed on the stock exchange. They are part of the regulated utilities sub-sector and therefore implement a business model that, although related to different sectors, presents elements of uniformity and comparability with Terna’s. The selection of the peer group was therefore guided towards the identification of stocks that reflect the characteristics of Terna’s stock, with reference to the business cycle as well as with reference to external elements that may affect their performance, so much so that at the time of drafting this Report, the same stocks were examined by financial analysts for the purposes of evaluating and comparing them with Terna’s stock. Equities that are subject to extraordinary operations that entail their delisting or a significant reduction in the floating capital, will be replaced (up to a maximum of two) by the following stock, listed in order: Elia, REN.

The variable fee of the General Manager linked to the 2nd and 3rd Cycle of the LTI Plan is established with reference to an allocation of a number of Phantom Stocks corresponding to 123.6% of the GM’s Gross Annual Salary, as the total value of each Cycle in the event that an overall target performance is achieved (100%) and for the same value of Terna’s share with respect to the allocation date;

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Fee for participating in Board Committees

For the 2017-2019 mandate, the annual remuneration of the Directors participating in the Board Committees was determined by the Board of Directors on 9 May 2017, after consultation with the Board of Statutory Auditors, which was elected by the Shareholders’ Meeting of 27 April 2017 – in line with the previous tenure – and is made up as follows:

  • Chairman/Chairwoman of the Audit and Risk, Corporate Governance and Sustainability Committee: € 60,000 per year;
  • Chairmen/Chairwomen of the Remuneration Committee, the Appointments Committee, and the Related-Party Transactions Committee: € 50,000 per year;
  • Members of the Committees: € 40,000 per year.

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