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Terna’s economic impacts

 

Our economic performance and their impact such as: benefits resulting from investments, the impact on electricity bills deriving from the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) incentive mechanisms, and the creation and distribution of added value

The electricity transmission service provided by Terna allows connecting production plants to the distribution grids and constantly maintaining the balance between production and consumption. 

It is therefore an essential service for guaranteeing to all citizens and to the production system the necessary electricity demand, through appropriate investments, both now and in the near future.  

According to the government concession, Terna is responsible for guaranteeing this service safely, continuously and at the lowest cost. Terna’s economic impacts can be identified as follows:

  • Economic return of Terna’s investments

    Terna’s investments aimed at improving the transmission service create an economic benefit for the community.
    The Terna Group's total investment in 2018 amounted to €1,091.1 million, compared with €1,033.9 million in the previous year (up 5.5%), and was ahead of target. Investment incentives amount to €99.5 million.

    Investment - TERNA Group

    2018

    2017

    2016

    Total investment (€m)

    1,091.1 1,033.9 854.3

    The most important investment are the ones allocated for grid development (NTG’s development plan), that are implemented only upon the condition that economic returns for the community (typically, lower electricity cost deriving from a more efficient production mix or from the capacity of importing less costly electricity) exceed the implementing costs.

    Other investments are aimed at the electricity service’s greater safety, for example, by developing automatic grid protection systems in cases of malfunctions for reducing the risk of outages (Electricity system’s safety plan). Both Plans are approved annually by the appropriate authorities.

  • Procurement and creation of employment

    In 2018, total expenditure on the procurement of services, supplies and works amounted to over €1,183* million, spread across 2,148 suppliers contracted during the year.
    In terms of a breakdown of procurement by origin, 93% of the Group’s suppliers are Italian and the remaining 7% are overseas.

    Breakdown of purchases by type Breakdown of purchases by origin

    The prevalence of national and local suppliers is determined by the specific nature of the business, especially by the need to carry out maintenance operations very swiftly in order to ensure the utmost safety of the system and greater competitiveness in terms of transport costs for heavy and bulky supplies. This also helps to cut the related environmental impacts.

    * The figure refers to the amount ordered during the year. This means the sum of the amounts allocated for all contracts (works, supplies and services) signed during the year.

  • The ARERA’s incentive mechanisms

    Terna monitors continuity of the service provided through a range of indicators, as defined by ARERA (Resolution 250/04) and in Terna’s Grid Code. These continuity indicators are important to the system, as they record the frequency and impact of events on the electricity network and linked to faults or external factors, such as weather events. All of the indicators are shown over a four-year period, in which there were no significant changes, providing confirmation of the high level of quality achieved.
    The principal continuity indicators are Regulated Energy Not Supplied (RENS) and Average Service Availability (ASA).

  • Tax law compliance

    Terna’s responsible approach to fiscal issues and to tax strategy is depending on its business model. Terna is first of all the Italian Transmission System Operator, that runs its activities within the National boundaries under Government concession, where regulated business is predominant. In such a framework, a strict compliance with fiscal norms is part of Terna’s commitment, in line with principles of the Code of Ethics, of the Administrative liability (231 Model) publicly available.

    With regard to taxes paid overseas by the Group's subsidiaries in 2018, the following should be noted:

    • Terna: with reference to the activities relating to the Italy-Greece interconnector, income taxes totalling €2,775,999 paid in Greece.
    • Terna Crna Gora: during the year, the company paid property taxes totalling €29,675 (of which €26,201 in the municipality of Kotor relating to plots of land owned, and the remainder in the municipality of Podgorica in relation to the company's headquarters).
    • Tamini Group: €10,389 was paid, primarily including taxes on services and withholding tax.
    • Terna Chile: the Group's Chilean subsidiary paid municipal tax of 6,254,430 Chilean pesos.
    • Difebal S.A.: the company paid 13,542,056 Uruguayan pesos, primarily in the form of value added tax of 8,780,713 Uruguayan pesos and income tax on non-residents of 4,127,360 Uruguayan pesos.
    • Terna Perù pais value added tax of US$796,116 and income tax on non-residents of US$26,314.
    • Brazil: the Brazilian subsidiaries, Santa Maria Transmissora de Energia (SMTE), in the state of Rio Grande do Sul, and Santa Lucia Transmissora de Energia (SLTE), in the state of Mato Grosso, paid total income tax of 1,010,660 Brazilian reals in 2018, in addition to financial transaction tax totalling 415,934 Brazilian reals.
  • Production and distribution of added value

    Value added measures the value created by an enterprise, but also by an entire economy, over a certain period, usually a year. In corporate accounting terms, value added is calculated by subtracting the costs of purchasing the intermediate goods and services used in operations from the value of production (revenue attributable to the goods and services produced during the year). These costs do not include personnel expenses, which instead form part of the value added by the enterprise to the intermediate goods and services as a result of its operations. The difference between revenue generated by the sale of the final product and the cost of the raw materials (and the related support services) is the value added, which, in addition to personnel expenses, also includes any profit and the share of income used to pay the interest on any debt and income taxes.

    TERNA GROUP – VALUE ADDED STATEMENT (1)


    Measurement and redistribution of value added (1)  Unit  2018

    2017

    2016

    Change 18-17

    % change 18-17 

    A – Remuneration of employees

     €  313,038,619

    322,058,429

    327,152,165

    -9,019,810

     -3

    B – Payments to the government

     €  302,842,820

    301,533,096

    320,643,092

    1,309,724

     0

    C – Payments to credit providers

     €  104,044,756

    97,746,883

    105,508,004

    6,297,873

     6

    D – Payments to providers of risk capital (2)

     €  468,730,134

    442,198,240

    414,058,352

    26,531,894

     6

    E – Retained by the Company

     €  242,888,183

    252,011,601

    213,870,808

    -9,123,418

     -4

    TOTAL NET VALUE ADDED

     €  1,431,544,513

    1,415,548,249

    1,381,232,421

    15,996,264

     1

    (1) Amounts relating to the creation and distribution of value added have been taken from the consolidated financial statements prepared in accordance with IFRS/IAS. In particular, the Terna Group has used IFRS/IAS since 2005.
    (2) Payments to capital providers in 2018 regard the interim dividend paid in November 2018 (€158.2 million) and the final dividend that the Board of Directors decided on 21 March 2019 to propose to shareholders at the Annual General Meeting (€310.5 million).