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Terna: Europe's Grid Giant and the Invisible Infrastructure of the Energy Transition
The Control Room That Never Sleeps
In a nondescript building on the outskirts of Rome, at any given moment, a handful of engineers stare at screens displaying the real-time flow of electricity across one of the most complex grid systems in Europe. These are the dispatchers of Terna, and their job is deceptively simple: keep the lights on for 60 million Italians, 24 hours a day, 365 days a year. But behind that simplicity lies an extraordinary engineering and financial achievement—a company that has transformed from a bureaucratic appendage of the Italian state into Europe's most valuable independent transmission grid operator.
Terna S.p.A. is a transmission system operator (TSO) based in Rome, Italy. With 75,236 kilometres of power lines—around 98% of the Italian high-voltage power transmission grid—Terna is the leading independent grid operator in Europe and the sixth largest electricity transmission grid operator in the world.
This is a story about the unsexy infrastructure that makes modern life possible. While investors chase the latest solar panel manufacturer or battery startup, Terna operates in the shadows—the literal wires and cables that connect generation to consumption. And yet, this apparent dullness conceals one of the most attractive investment propositions in European infrastructure: a regulated monopoly at the heart of the continent's energy transition, deploying billions of euros into long-lived assets with government-guaranteed returns.
Terna is an independent grid operator for the transmission of electricity. It deals with the management of electrical systems through the operation of the grid, efficiency of infrastructures and their maintenance through engineering and management of plants and grid developments.
How did a spinoff from Italy's national utility become Europe's most valuable independent grid operator? Why is everyone suddenly paying attention to transmission infrastructure? And what does Terna's remarkable twenty-year journey tell us about the nature of value creation in regulated utilities?
The answers lie in understanding a fundamental truth about the energy transition: it doesn't matter how many wind turbines or solar panels you install if you can't move the electricity from where it's generated to where it's needed. Terna is the enabling infrastructure—the picks and shovels of the energy revolution.
Part I: From Monopoly to Market—Italy's Electricity Odyssey (1962-1999)
The Enel Era
To understand Terna, you must first understand the peculiar history of Italian electricity. In 1962, Italy made a decision that would shape its energy landscape for decades: the nationalization of the entire electricity sector under a single entity—Ente Nazionale per l'Energia Elettrica, known to the world as Enel.
In Italy's history, the supply of electricity and related processes such as production, transmission, dispatching and distribution were concentrated under the Ente Nazionale per l'Energia Elettrica, or Enel, a state body since 1962.
This wasn't ideological zealotry; it was pragmatic nation-building. Post-war Italy needed to electrify rapidly to fuel its economic miracle. The fractured landscape of regional utilities, private operators, and municipal companies was deemed inadequate for the task. Under Enel's monopoly, Italy achieved what many thought impossible: near-universal electrification in a geographically challenging peninsula, from the Alps to Sicily.
There was no choice for the consumer, apart from a few remote cities where the energy was supplied by the municipal electricity company.
But monopolies breed inefficiency, and by the 1990s, Italy's electricity sector had calcified. Enel controlled everything—generation, transmission, distribution, and retail. Prices were high. Investment was sluggish. And importantly, Europe was moving in a different direction.
The Winds of Liberalization
The European Union's 1996 directive on the creation of the Single Energy Market represented a philosophical shift. The premise was simple but radical: electricity markets could be competitive, but only if the natural monopoly elements (the wires themselves) were separated from the competitive elements (generation and retail). This concept—unbundling—would reshape every major European utility.
Liberalisation was introduced to Italy with the Bersani Decree (Legislative Decree no. 79 of 16 March 1999). The decree implemented the indications of the earlier EU Directive no. 92 of 1996 on the creation of the Single Energy Market, initiating the process of liberalisation of the production, import, export, purchase and sale of electricity.
The Bersani Decree represented a turning point in the Italian energy market: the result of European ratings in favour of the liberalisation of the competition between service operators and the opening up of the free market.
The intellectual framework was elegant: transmission networks exhibit economies of scale that make competition impractical (who would build a second set of high-voltage lines across the country?), but generation and retail are naturally competitive. Separate them, regulate the monopoly fairly, and markets can work.
Italy, under Industry Minister Pierluigi Bersani, moved faster than required by EU directives. Not only the European directive was followed, but the transition to the free market was planned to be faster, with more than 40% of electricity planned to be traded on the free market by 2002 and with a corporate separation of activities.
The Bersani Decree created an entirely new architecture for Italian electricity. Enel would be broken apart. Generation would be partially divested (15,000 MW of capacity sold to competitors). And critically, the transmission grid would become its own entity.
Some of Enel's core activities were passed onto other companies. The network was transferred to a new company, Terna, responsible for the management of the system.
This was Terna's birth certificate: May 31, 1999.
Part II: The Complicated Birth of an Independent Grid Operator (1999-2005)
Separation Anxiety: The Two-Company Solution
Terna's early structure revealed the inherent tensions in creating market-oriented entities from state monopolies. The Bersani Decree separated ownership from operation—a belt-and-suspenders approach to ensuring independence.
The Decree stipulated and implemented the separation of the Italian national transmission grid (NTG) from its management (transmission and dispatching activities) according to the Independent System Operator model. This led to the establishment of two separate companies: Terna, owner of the Italian national transmission grid, and GRTN, operator of the Italian national transmission grid.
Terna owned the wires but couldn't operate them. GRTN (Gestore della Rete di Trasmissione Nazionale) operated the grid but didn't own it. This Byzantine arrangement was meant to ensure that Enel, still Terna's parent company, couldn't favor its own generation assets in grid access.
On 31 May 1999, Terna was established within the Enel Group, by way of implementation of Italian Legislative Decree No. 79/99 which within the context of the process for the deregulation of the Italian electricity sector, sanctioned the separation between ownership and management of the national transmission grid.
The company started with approximately 18,600 km of high-voltage lines acquired from Enel—the backbone of Italy's transmission infrastructure. But it was a company in name only, still nestled within Enel's corporate structure, its assets managed by a separate public entity.
The IPO: June 23, 2004
The real birth came five years later. On 23 June 2004, following the Prime Minister's Decree issued on 11 May of the same year, Terna was put on sale with an IPO on Borsa Italiana.
Enel sold 50% of Terna to public markets. The offering attracted significant interest—here was a pure-play transmission asset, regulated and stable, in one of Europe's largest electricity markets. Enel sold its share package in June 2004 with a public sale offer on the Stock Exchange. Enel initially maintained a 50% stake, to reduce the stake and definitively sell it to CDP in September 2005.
Terna shares have been listed on the Milan Stock Exchange since June 2004.
The IPO was successful, but Terna remained an awkward creature—publicly traded but majority-owned by its former parent, owning assets it didn't operate, and dependent on a regulatory framework still being written.
The Transformational Moment: November 2005
The puzzle pieces came together in late 2005. In November 2005, Terna acquired a business unit from GRTN, as defined by the Prime Ministerial Decree of 11 May 2004.
This wasn't just an acquisition; it was an identity transformation. By absorbing GRTN's operational capabilities, Terna became what it needed to be: a true Transmission System Operator (TSO), owning the grid and operating it. The strange bifurcation of the Bersani era was healed.
The same year brought another crucial change. On 15 September 2005, Enel today sold Cassa depositi e prestiti S.p.A (CDP) 29.99% of Terna—equal to 599,999,999 shares—for 1,315 million.
Cassa Depositi e Prestiti—Italy's state-controlled investment institution—replaced Enel as the anchor shareholder. This mattered enormously. CDP's mandate was infrastructure development and national economic growth, not electricity generation. With CDP as the dominant shareholder, any conflict of interest between grid operation and generation was definitively eliminated.
"Italy becomes thus the forerunner in Europe in the liberalization of the electricity market since full independence of the national transmission grid ensures equal access to such market to any electricity operator."
This was Fulvio Conti, Enel's CEO at the time, acknowledging what the transaction meant: Italy had created something genuinely new—a truly independent, publicly traded grid operator with state backing but market discipline.
Part III: Building the Machine—The Growth Era (2006-2015)
Capital Deployment at Scale
With ownership and operations unified and independence established, Terna entered a decade of systematic growth. The strategy was straightforward: deploy capital into the regulated asset base, earn allowed returns, and extend the network.
Between 2004 and 2016, Terna invested approximately €10 billion to modernize the national transmission grid and eliminate congestion points. This represented one of the most ambitious infrastructure programs in European utilities—building new lines, upgrading substations, and critically, connecting the disparate parts of Italy's grid.
Italy's geography creates unique challenges for electricity transmission. The peninsula is long and narrow, with major generation centers in the north and growing demand throughout. Sicily and Sardinia, both islands, required submarine connections to the mainland. And the Alps in the north created barriers to cross-border interconnection with France, Switzerland, and Austria.
The Railway Power Acquisition: Strategic Genius
In 2015, Terna acquired the high-voltage grid of the FS Italiane Group, bringing Terna's ownership to 98.5% of the national grid.
This acquisition deserves particular attention because it illustrates Terna's strategic sophistication. Italy's railway network operated its own high-voltage power infrastructure—a legacy of when trains used different power systems. By acquiring FS Italiane's grid, Terna achieved something remarkable: near-complete ownership of the national transmission network.
In 2015, Terna acquired the high-voltage grid of the FS Italiane Group and started developing new national and international interconnection infrastructures.
The 98.5% ownership figure is extraordinary by international standards. Most transmission operators share their domestic markets with regional or historical competitors. Terna's near-monopoly provides unmatched scale advantages and eliminates coordination frictions in grid planning.
Corporate Restructuring: The Terna Plus Strategy
In 2011, the Terna Group reorganized its corporate structure, establishing a holding company overseeing two fully owned operational subsidiaries: Terna Rete Italia and Terna Plus, each with its own CEO and board of directors.
This reorganization recognized an important truth: while the domestic regulated business would always be Terna's core, there were opportunities to leverage the company's expertise beyond Italy's borders and beyond pure transmission.
Terna Rete Italia focused on the domestic grid—the bread and butter. Terna Plus pursued new business opportunities and non-traditional activities, including international expansion to Chile, Peru, and the USA. Terna operates through Terna Rete Italia, that manages the Italian transmission grid and Terna Plus which is in charge of new business opportunities and non-traditional activities in Chile, Peru and USA.
Part IV: Becoming a Mediterranean Hub—International Interconnections (2016-2023)
The Balkans Bridge: Italy-Montenegro
The Italy-Montenegro interconnector, completed in 2019, represented Terna's ambitions extending beyond Italy's borders. Italian transmission system operator (TSO) Terna has put in operation an undersea power interconnector between Italy and Montenegro.
The first "electrical bridge" between Europe and the Balkans is completely invisible, being undersea and underground (for the land portion).
This wasn't just infrastructure—it was geopolitical positioning. The 445-kilometer interconnector is of strategic importance for the security of the two countries' power systems as well as for the integration of renewables.
The undersea power interconnector between Italy and Montenegro was built in an investment of some EUR 1.1 billion. The interconnector enables bi-directional exchange of electricity between the two countries of 600 MW of power, which will become 1,200 MW when a second cable is laid within the next few years.
The project connected Italy to the Trans-Balkan Electricity Corridor, enabling power flows from Serbia, Romania, and beyond. National transmission system operators (TSOs) Terna and CGES have commissioned the first part of the interconnection in 2019. The current plan is to double the capacity to 1.2 GW.
The France Connection: World's Longest Underground DC Cable
Perhaps no project better exemplifies Terna's engineering ambitions than the Italy-France interconnection. In 2013, Terna and its French counterpart RTE began work on enhancing the Italy-France interconnection via the new "Piedmont-Savoy" line, which became operational in 2023.
With 190 km of DC extra-high voltage underground cable—the longest connection in the world of this type—this strategic European infrastructure will increase the safety of supplies and trading capacity between the two countries up to 1,200 MW.
The engineering was remarkable: cables threaded through the Fréjus road tunnel, running alongside motorways to minimize environmental impact. Spanning a length of 190 km in order to connect the Grande-Île substation (Sainte-Hélène-du-Lac) and the Piossasco substation (near Turin), it is the world's longest underground line using this type of technology. It has broken the previous record established by the 65-km interconnector between France and Spain.
Overall, the collaboration between Terna and RTE will bring the transmission capacity of the grid between the two countries from today's 2,650 MW to over 4,400 MW, with an increase of over 60%.
In June 2023, the Edison Electric Institute awarded Terna the International Edison Award for its innovative Italy-France electrical interconnection project, which is entirely invisible and environmentally impact-free.
Green Finance Pioneer
To support efficiency improvements and environmental protection investments in its national infrastructure, Terna issued its first Green bond worth €750 million in July 2018, becoming the first Italian utility to do so. Additional green hybrid bonds followed in 2022 (€1 billion) and 2024 (€850 million).
This green financing strategy served multiple purposes. It reduced funding costs by tapping ESG-focused investors. It aligned Terna's capital structure with its mission as an enabler of renewable integration. And it demonstrated strategic foresight about where the capital markets were heading.
Part V: The Hypergrid Revolution—Terna's €23 Billion Transformation (2023-Present)
The Energy Transition Catalyst
While Terna had been steadily building for two decades, the energy transition created an inflection point. Europe's push toward decarbonization, accelerated by the Ukraine crisis and energy security concerns, placed unprecedented demands on transmission infrastructure.
The 2025 Development Plan envisages an investment programme of more than €23 billion over the ten-year horizon covering the years 2025-2034 (up 10% compared to the previous ten-year Plan), with an overall value beyond the 10 year horizon of up to approximately €40 billion, with the aim of enabling the energy transition and achieving the environmental objectives outlined by EU regulations.
The scale of this investment plan deserves emphasis. €23 billion over ten years is transformational—roughly €2.3 billion annually, far exceeding Terna's historical investment run rate. This represents one of the largest infrastructure commitments in European utilities.
The strategic logic is compelling. Italy's renewable energy ambitions require massive grid expansion. Terna also takes stock of connection requests, which currently amount to 348 GW for renewable plants and 277 GW for storage. Numbers that far exceed the national requirements identified by the Energy Scenarios.
Hypergrid: Doubling Italy's Grid Capacity
The centerpiece of Terna's plan is Hypergrid—an €11 billion project to fundamentally reshape Italy's transmission architecture.
The problem Hypergrid addresses is structural: Italy's electricity flows predominantly from south to north, as southern regions have better solar and wind resources while northern regions house most industrial demand. The existing grid, designed for a different era, cannot efficiently move this renewable energy.
Terna's broader strategy to create a sustainable and technologically advanced transmission network under the "Hypergrid" model—a next-generation system architecture focused on digitalisation, flexibility, and resilience.
The Hypergrid network comprises five major HVDC backbones, each designed to increase transmission capacity between market zones. The project aims to double exchange capacity from the current 16 GW to over 30 GW.
Tyrrhenian Link: Engineering at the Frontier
The Tyrrhenian Link, one of the most ambitious infrastructure projects in Europe's energy sector, has reached a pivotal milestone. Terna, Italy's electricity transmission system operator, in partnership with Nexans, has begun laying the first section of the western branch connecting Sicily and Sardinia.
Terna will invest a total of approximately €3.7 billion in the project, which also includes the eastern section between Sicily and Campania.
The engineering challenges are extraordinary. Once completed, the connection between Sicily (Termini Imerese, Palermo) and Sardinia (Terra Mala, Cagliari) will set a world record for the greatest installation depth of a high-voltage (HVDC) subsea cable, reaching 2,150 meters below sea level.
The infrastructure consists of two branches: the eastern branch, approximately 490 km long, connecting Sicily with Campania, and the western branch, about 480 km long, connecting Sicily with Sardinia. The laying of the eastern section of the submarine cable was completed in May 2025—a record-breaking achievement that, for the first time in Italy, involved installing a high-voltage direct current (HVDC) cable at a depth of 2,150 meters. In just over two months, 490 km of cable were laid in two phases.
The entire infrastructure is expected to be fully operational by 2028, with the first pole of the eastern section entering service in 2026.
The Tyrrhenian Link represents a total investment of approximately €3.7 billion, of which €500 million is funded under the European Union's REPowerEU program.
Adriatic Link and Beyond
The Adriatic Link will bridge Abruzzo and Marche, featuring a 1,000 MW capacity and 250 km in length, with 210 km being submarine. Its entry into operation is planned for 2029.
The North Africa connection represents Terna's most ambitious geographic expansion. The Elmed project involves a 200 km submarine cable between Italy and Tunisia, jointly developed by Terna and STEG, the Tunisian grid operator. Elmed will support the integration of renewable energy and enhance energy supply security and diversification.
Sicily: The Grid's Future Laboratory
Terna presented the contents of the Plan for Sicily, which includes investments of approximately €3.5 billion over the next decade—the highest amount for any Italian region—confirming the island's central role in the development of the country's electricity system.
Sicily has become Terna's proving ground for the energy transition. The island has excellent renewable resources but limited grid infrastructure. According to the 2030 burden-sharing targets, Sicily will require an increase of around 10.48 GW in renewable capacity compared to 2021 levels. According to Terna data, as of 30 June 2025, around 81 GW of renewable energy plants have requested connection to the high-voltage grid, in addition to about 53 GW of storage systems.
Part VI: Leadership in Transition—The Giuseppina Di Foggia Era
Breaking the Glass Ceiling
In April 2023, Giuseppina Di Foggia was appointed CEO and General Manager, becoming the first woman to lead a major publicly listed Italian company.
Di Foggia's appointment was historic, but her background is equally notable. An electronic engineer, Giuseppina Di Foggia began her career in 1998 as technical director at Lucent Technologies before joining Nokia in 2016.
Born in Rome on July 16, 1969, Giuseppina Di Foggia graduated in Electronic Engineering from the University of Rome La Sapienza and qualified as a professional engineer. She obtained a master's degree in Professional Program Management from the Stevens Institute of Technology in New Jersey (United States) and attended specialization courses in General Management at SDA Bocconi in Milan and Luiss Business School in Rome.
Her telecommunications background—decades at Lucent Technologies and Nokia—brought a different perspective to Terna. In 2020, she was nominated CEO and Vicepresidente of Nokia Italia and Malta, and in 2023 became Head of Strategic Business Development for southern-central Europe. During her mandate at Nokia, she promoted initiatives for digitalization, inclusion, and gender equality.
In March 2024, she presented the 2024-2028 Industrial Plan, characterized by a record level of planned investments: 16.5 billion euros in 5 years (+65% compared to the previous plan).
"I am proud to present the Industrial Plan with the highest level of investments in Terna's history: €16.5 billion over five years, with around 80% of projects already authorised and more than 70% covered by existing procurement contracts."
The Digital Transformation Imperative
Di Foggia's technology background is reflected in Terna's increasing focus on digitalization. "Grid development must inevitably be accompanied by significant growth in the use of digital technologies to support and accelerate the country's energy transition: a twin transition, energy and digital, will ensure a faster, sustainable, just and inclusive transition for all our stakeholders."
The "twin transition" concept—combining energy and digital transformation—has become central to Terna's strategy. Modern grid management requires sophisticated monitoring, predictive analytics, and automated control systems. Terna has invested heavily in these capabilities.
Terna signed a Memorandum of Understanding for development of the Grita 2 interconnection. The company's focus on innovation and digitalization was evident in its agreement with Microsoft on digitalization, innovation, and security.
Part VII: Understanding the Business Model—The Regulated Asset Base Machine
The Regulatory Framework
Operating as a natural monopoly, Terna is regulated by the Italian Authority for Energy, Networks, and the Environment (ARERA).
Understanding Terna requires understanding the Regulated Asset Base (RAB) model—the framework through which European regulators allow monopoly utilities to earn returns.
ARERA takes Terna's cost structure into account. Terna submits its revenue requirements and cost structure (including operating costs, capital expenditure and other financial considerations in relation to the operation, development and maintenance of the grid) and ARERA then devises a tariff methodology taking into account the following; mainly the regulatory asset base (RAB) remuneration, allowed depreciation, allowed operating costs and output based incentives.
The mechanics are straightforward: The RAB remuneration is calculated by applying the weighted average cost of capital (WACC) to the value of the regulatory asset base.
The WACC is set by ARERA for the period 2022-2027 and foresees a mid-period review of the WACC at the end of the first three years, but also includes the possibility for a yearly update during these years with a so called trigger mechanism. For the year 2023 the WACC was set at 5.0%.
The Italian energy regulator ARERA has kept the allowed weighted average cost of capital (WACC) for regulated networks unchanged, including the 5.5% rate for electricity transmission applicable to Terna.
The Investment Incentive
The RAB model creates powerful incentives for capital deployment. Every euro invested increases the regulatory asset base, which in turn increases allowed revenue. AEEGSI has introduced an incentive system, in the form of higher WACC rates, designed to promote new investments for the enhancement of electricity and natural gas transmission and distribution networks. For example, in the case of electricity transmission, the current regulation attributes to investments in development of the national electricity grid a WACC increase of 1.5% or 2% for a period of 12 years from the date of entry into service.
This creates a virtuous cycle: invest in grid infrastructure, earn enhanced returns during the initial period, then continue earning base returns on an expanded asset base. The system explicitly rewards capital deployment while protecting consumers from monopoly pricing.
Terna follows complex regulation. The return on invested capital is based on a WACC that is periodically revised by ARERA to enable the parameters used in calculating the cost of equity and debt to be updated.
Inflation Protection
A crucial but often overlooked feature of the regulatory model is inflation protection. Terna is not exposed to any risk of greater contract expenses due to rising inflation or increased costs incurred as a result of rising commodity and energy prices and salaries. This is because any price increases agreed by law are covered by tariff revisions, which envisage adjustments for inflation.
Part VIII: Financial Performance—Record Numbers in 2024-2025
The Numbers
Terna's recent financial performance reflects the acceleration of its investment program.
In Q1 2025, Terna Rete Elettrica Nazionale SpA reported solid financial results for the first quarter of 2025, with revenues rising to €902 million, a 5.1% increase year-over-year. The company also reported a group EBITDA of €652 million, marking a 3.8% growth compared to the same period last year.
Terna Rete Elettrica Nazionale SpA presented its first-half 2025 consolidated results on July 29, showcasing strong financial performance across key metrics. The Italian grid operator continues to play a pivotal role in the country's energy transition, with renewable energy sources covering 42% of national demand during the period.
Capital Expenditure Acceleration
The company's record capital expenditure demonstrates its commitment to supporting Italy's energy transition while delivering sustainable financial growth for shareholders.
Terna reiterated its full-year 2025 guidance, projecting revenues of €4.03 billion, EBITDA of €2.7 billion, and net profit of €1.08 billion. The company plans to invest approximately €3.4 billion, focusing on energy transition and grid modernization initiatives.
The Data Center Opportunity
Perhaps the most striking development in Terna's recent results is the explosion in data center connection requests. The company expects €550 million in out-of-base incentives for the 2025-2028 period, supporting its strategic initiatives. Additionally, Terna is preparing for increased data center connection requests, which totaled 42 GW as of March 2025.
Terna highlighted strong interest in data center connections, with 378 active requests totaling 64 GW, indicating robust future demand. As of the 31st of October of this year, the total high-voltage connection requests reached approximately 64 gigawatts, with around 378 active requests. Geographically, around 80% of connection requests are concentrated in northern part of Italy, especially in Lombardy, around Milan, confirming the region as the primary hub for data center development. For this reason, data centers will represent one of the drivers, together with the electrification of domestic consumption and electric mobility, underlying the expected increase in power demand in future years.
At the end of last year the requests for connections to the high-voltage grid managed by Terna amounted to 30 GW. Investments in Italy's data centres will double to 10 billion euros in the 2025-2026 period compared with the previous two years as technology heavyweights roll out spending plans.
This is a remarkable development. Data centers are among the most electricity-intensive facilities, and Italy—particularly Milan—has emerged as a major European data center hub. Every new data center requires grid connection, and Terna is the sole provider.
Balance Sheet Strength
On the financial front, Terna successfully secured €1.5 billion for the Adriatic Link project and launched its first European Green Bond for €750 million, demonstrating strong market confidence in its business model and strategy.
The company maintains a solid capital structure despite increased investment. Debt levels have risen to fund the capital program, but the regulated business model provides cash flow visibility that supports leverage.
Part IX: Competitive Landscape and Porter's Five Forces Analysis
Threat of New Entrants: Essentially Zero
With 75,236 kilometres of power lines or around 98% of the Italian high-voltage power transmission grid, Terna is the leading independent grid operator in Europe and the sixth largest electricity transmission grid operator in the world based on the size of its electrical grid.
The threat of new entrants in transmission is virtually non-existent. The barriers are overwhelming: - Government concession required to operate transmission infrastructure - Enormous capital requirements (€20+ billion just to maintain existing operations) - Physical impossibility of duplicating grid infrastructure - Regulatory framework designed around a single operator
This is as close to an impregnable competitive position as exists in business.
Bargaining Power of Suppliers: Moderate
Terna's major suppliers are specialized infrastructure companies—cable manufacturers like Prysmian and Nexans, equipment manufacturers, and construction contractors.
The MONITA (MONtenegro – ITAly) project is the largest turnkey submarine project that Nexans has completed to date. The cable supplied by Nexans comprises 423 km of aluminium conductor subsea cable and 22 km of copper conductor onshore cable.
The market for HVDC cables and converters is concentrated among a handful of global players. However, Terna's scale and long-term planning horizon provide significant procurement leverage. The company has established strategic partnerships with key suppliers.
Bargaining Power of Customers: Low
Terna's customers—generators, distributors, and large industrial users—have no alternative grid to use. The regulatory framework sets tariffs, removing price negotiation from the equation.
Threat of Substitutes: Minimal but Evolving
Traditional substitutes for grid transmission (distributed generation, on-site storage) exist but remain complements rather than replacements. The grid remains essential for balancing supply and demand across regions and time periods.
However, the growth of distributed generation and storage does create some long-term uncertainty about grid utilization patterns. Terna has responded by positioning itself as an enabler of distributed resources, not a competitor.
Competitive Rivalry: N/A (Monopoly)
As a regulated monopoly, Terna faces no domestic competitors in its core business. The competitive dynamics are regulatory rather than commercial—the "competition" is with the regulator over allowed returns.
Hamilton Helmer's Seven Powers Framework
Evaluating Terna through Hamilton Helmer's Seven Powers lens reveals multiple sources of durable competitive advantage:
Counter-Positioning: Terna's regulated monopoly business model cannot be replicated by incumbents from adjacent industries. A generator or retailer cannot credibly enter transmission without accepting dramatically different risk-return characteristics.
Scale Economies: With 98% of Italy's transmission grid, Terna captures virtually all scale benefits available in the market. Planning, procurement, operations, and innovation all benefit from unmatched scale.
Switching Costs: For customers, switching costs are infinite—there is no alternative grid. For suppliers, Terna represents such a significant customer that relationships tend to be long-term and deep.
Network Effects: The grid exhibits strong network effects—each new connection increases the value of the entire network by improving redundancy, flexibility, and market liquidity.
Process Power: Decades of operating Italy's grid have created institutional knowledge that cannot be easily replicated. Terna's dispatching capabilities, maintenance procedures, and emergency response protocols represent accumulated process power.
Branding: While branding matters less in a monopoly context, Terna has established a strong reputation with regulators, politicians, and the public that supports its strategic initiatives.
Cornered Resource: The physical grid itself represents a cornered resource—no one else can build a parallel transmission network in Italy.
Part X: Bull and Bear Cases—What Could Go Right and Wrong
The Bull Case
Energy Transition Tailwinds: Every scenario for European decarbonization requires massive grid expansion. Whether Italy prioritizes solar, offshore wind, or other renewables, all roads lead through Terna's grid. The company is the essential infrastructure regardless of which generation technologies win.
Data Center Boom: The AI revolution requires electricity, and Italy has emerged as a European data center hub. To date there are requests for 30 GW from data centers, a figure 24 times higher than in 2021. Most recently, total requests have grown to 64 GW. Each gigawatt of data center capacity requires grid connection—and Terna is the only provider.
Regulatory Support: Italian and EU policymakers are aligned on grid investment priorities. The regulatory framework provides attractive returns and inflation protection. Recent WACC determinations have been favorable.
Execution Track Record: Terna has demonstrated the ability to execute complex infrastructure projects on time and on budget. The Tyrrhenian Link is advancing according to schedule. The France interconnection delivered successfully. This execution capability supports confidence in the €23 billion development plan.
Defensive Characteristics: In uncertain markets, Terna's regulated returns and inflation protection provide portfolio stability. The dividend yield (approximately 4.3%) is attractive relative to government bonds.
The Bear Case
Regulatory Risk: While the current regulatory framework is favorable, it can change. A future Italian government might seek to reduce allowed returns or impose additional obligations. European directives could alter the transmission business model.
Execution Risk on Mega-Projects: The scale of Terna's investment program is unprecedented. Construction costs could exceed estimates. Permitting delays could push back project timelines. Supply chain constraints could affect equipment availability.
Technology Disruption: While unlikely to eliminate the need for transmission, technology evolution could reduce grid utilization growth. Advanced batteries, distributed generation, and demand response could diminish the value of centralized transmission infrastructure over very long time horizons.
Interest Rate Sensitivity: As a capital-intensive business with stable cash flows, Terna's equity value is sensitive to interest rate changes. Rising rates increase funding costs and reduce the present value of future cash flows.
Country Risk: Despite Italy's EU membership, the country carries sovereign credit risk. Economic or political instability could affect Terna's operating environment and market valuation.
Key Metrics to Monitor
For investors tracking Terna's ongoing performance, three KPIs matter most:
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RAB Growth Rate: The regulated asset base is the foundation of Terna's revenue generation. Tracking RAB growth against the investment plan reveals whether capital deployment is proceeding as anticipated.
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CapEx Execution: Actual capital expenditure versus guidance indicates whether Terna is maintaining its investment trajectory. Shortfalls could signal permitting problems, supply chain issues, or capital allocation changes.
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Connection Request Pipeline: The volume and composition of connection requests (renewable generation, storage, data centers) provide forward visibility into future RAB growth opportunities.
Part XI: Myth vs. Reality—Fact-Checking the Consensus Narrative
Myth: Terna is a boring, low-growth utility.
Reality: While regulated utilities are typically associated with stability over growth, Terna is investing €23+ billion over ten years—a growth rate more typical of technology companies than utilities. The energy transition has transformed Terna from a mature infrastructure operator into a growth company with regulated returns.
Myth: The grid is a commodity business with no competitive advantage.
Reality: Terna's near-monopoly position, 98% market share, and regulated return structure create one of the most defensible business models in European infrastructure. The barriers to entry are not just high—they're essentially insurmountable.
Myth: Renewable energy threatens grid utilities.
Reality: The opposite is true. Renewable energy is intermittent and geographically dispersed, requiring more grid infrastructure, not less. Solar farms in Sicily need connections to consumers in Milan. Offshore wind requires submarine cables. Energy storage requires grid integration. Terna is an enabler, not a victim, of the energy transition.
Myth: State ownership means political interference.
Reality: The CDP Reti structure creates alignment between state interests (infrastructure development) and shareholder interests (returns on capital). CDP RETI is an investment vehicle established in October 2012 whose shares are owned by Cassa Depositi e Prestiti Spa (59.1%); State Grid Europe Limited - SGEL (35%), a company owned by State Grid Corporation of China; and the remainder owned by Italian institutional investors (5.9%). CDP RETI's mission is to manage the holdings in Snam (31.35%), Italgas (25.96%) and TERNA (29.85%) as a long-term investor. The structure has proven effective at maintaining commercial discipline while supporting national infrastructure priorities.
Part XII: The Verdict—What Terna Teaches Us About Infrastructure Investing
Terna's twenty-year journey from bureaucratic appendage to Europe's leading independent grid operator offers several lessons for infrastructure investors.
First, privatization can create enormous value when done thoughtfully. The Bersani Decree's careful separation of ownership from operations, followed by the GRTN integration, created a genuinely independent company with commercial incentives and public purpose.
Second, regulated monopolies can be excellent investments when the regulatory framework is stable and rational. The RAB-WACC model provides predictable returns while allowing for growth through capital deployment. This is not a "beat the market" proposition—it's a "match the market with lower risk" proposition.
Third, timing matters in infrastructure. Terna's 2004 IPO came at the inflection point of European liberalization. Today's investment thesis is driven by a different inflection point—the energy transition. Recognizing these structural shifts early is essential for infrastructure investing.
Fourth, management quality matters even in regulated businesses. Di Foggia's appointment brought new perspectives on digitalization and operational excellence. The company's execution on complex projects reflects accumulated organizational capability.
Fifth, geography creates destiny in infrastructure. Italy's position as a Mediterranean crossroads, its long north-south configuration, and its island regions create unique grid challenges—and opportunities. Terna's strategy leverages this geography to position Italy as a European energy hub.
Looking ahead, Terna stands at the intersection of several powerful trends: European decarbonization, data center growth, and infrastructure modernization. The company's €23 billion development plan positions it to capture these opportunities while maintaining the stable, regulated returns that have characterized its history.
For investors seeking exposure to the energy transition without taking bets on specific generation technologies, Terna offers a compelling proposition: the invisible infrastructure that makes the transition possible, backed by a regulatory framework that rewards capital deployment and protects against inflation. It's not glamorous, but it's essential—and in infrastructure investing, essential often beats exciting.
The engineers in that Rome control room will continue their quiet vigil, balancing supply and demand across Italy's grid, keeping the lights on. Behind them stands a company that has transformed from a state monopoly into a sophisticated infrastructure operator, deploying billions into projects that will shape Italy's energy system for decades. That's the Terna story: unglamorous, essential, and quietly building the future.
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