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2019-2023 Strategic Plan: San Donato Milanese November 21, 2019
2019-2023 Strategic Plan: San Donato Milanese November 21, 2019
EPS DPS
€cent €cent
32% 13%
• €739m share buyback; • Dividend policy
31.8 average repurchase increased to +5% p.a.
24.1 price 3.72 21.00 23.76 • Payout reduced to c.
• 106m shares 75%
cancelled
• >15% CH4 emissions reduction in • Improvement in safety records • First listed company to introduce an
2019E vs 2016 • Inclusion in the Forbes list of the best ESG board committee
• >650km of morphological and 150 companies in the world to • Gender policy for BoD enshrined in
vegetation restoration 2016-2018 work for Bylaws
• First Climate Action Bond
• >275 k hours training 2016-2018 • One of 4 companies worldwide part of
launched in Europe • Smart working open to 1,000 people the Global Forum of Transparency
International
• Launch of Snam Plastic Less • Suppliers with a good/excellent
evaluation increased by 60%
• C. 4500 reputational checks on
suppliers and other 3rd parties in 2019
• Policy on Inclusion and diversity
Favourable context
The global context for gas is favourable
Gas is becoming more abundant and competitive Improving potential for the coal to gas switch
75.9 60
72.7
67.5 40
4.4% 2,5
2,3
2,0 17,4
20
17,4
16
20,6 24,2 +11.8% 27,0 • Ca.3bcm of additional gas demand expected with coal phase-out
• Capacity market launched to improve flexibility to serve renewables
and demand peaks
FY 2015 FY 2018 FY 2019E
• Authorization process launched for the construction of >2 GW of new
gas capacity (peaking and flexibility) by the main power operators
Other Building
Industry Thermoelectric
Source: National Transport Network Balance, Snam elaboration on Thomson Reuters and ICIS 7
Gas will have a central role in the energy transition
Europe is moving to enable green gas
Decarbonisation will need to speed up 10X development
Long-distance
buildings Refineries
Agriculture and
farming • Pilots ongoing in Norway, Netherlands and UK
passenger vehicles Oil & Gas Power
generation
8
Source: NIR 2019, Le Quèrè et al. (2018), Global Carbon Project CDIAC, National Inventory report Italy 2018, Snam analysis
Green hydrogen to become competitive in <10 years
>500
9
Source: Thomson Reuters, Snam Terna scenarios, GME, ICIS, analysis on market estimates
Key role of gas confirmed in Italy
Constructive approach to investment returns Importance of gas for the energy transition
• WACC confirmed in all businesses; ß confirmed • Regulator supportive of gas role in the energy
• Storage regulatory period extended to 6 years transition
Energy Transition
New investment plan: € 6.5m Transport Storage, LNG (not RAB based)
13% 13%
22%
30%
36% 13%
70%
42%
Capex Replacements Dual fuel Energy Other Capex 63%
2018-22 project, trans 2019-23
(old plan) DT&T (new plan) Development Development L-CNG
Replacement Maintenance & other Biomethane
Maintenance & other SSLNG
Energy Efficiency
4
GORIZIA
• About 1,000km of transport pipelines
1 Support to the bidirectional CAMPODARSEGO TRIESTE replaced during the plan period
SALGAREDA
cross-border flow (completed 1 MESTRE
• >45% authorized or under construction
2019) 4 4 CAVARZER
E
RAVENNA
2 Sardinia energy network RIMINI
LNG
LA SPEZIA
3 Interconnection with TAP JESI
RECANATI
€ bn
Ca.2.5%
CAGR
(in line with previous plan) 2023-2030
Methane emissions reduction plan • Digital Asset Model to enhance Support the evolution of Green gas
• Leak Detection and Repair (LDAR) infrastructure management • C. 250m€ investments in biomethane
applied to network, compressing and • Digital twin, I-IOT and wearables for • H2 blending up to 10%; studies ongoing
storage stations operational excellence on asset readiness and power to gas
• Replacement of ca. 3,000 pneumatic • Improving neural network forecasting
actuators and instrumentation (2 days ahead and infra-day) CNG and LNG development in Italy
• Drone and satellite images testing for • C. 150 CNG/LCNG stations
Energy efficiency asset monitoring progressing • 2 small-scale LNG plants
• Investments in the first 6 Dual fuel • “Smart gas” (Snam’s asset management
Compression stations platform) extended to re-gasification Energy efficiency with third parties
• Energy efficiency measures in our processes • Real estate deep renovation
buildings • Blockchain pilot for PSV transactions • Revenues granted from fiscal benefit
• 11 GWh/year of energy produced
through PV
CH4 reduction target increased >85% of the grid >40MW of biomethane capacity
from 25% to -40% by 2025 remotely controlled
-40%
Direct Co2 emissions – 40% @2030
604 • Electrification of 6 compressor units
scope1 • Direct emissions reduction
KtCO2 • More efficent compression
CO2
scope1 Leak Detection and Repair (LDAR) applied to network, compressing and storage
stations
KtCO2eq • >85,000 emission measurements over 50 sites
• Real-time remote leak detection alarms to dispatching centre
• In-field measurement to update emission factors
• Replacement of ca. 3,000 pneumatic actuators and instrumentation
Organic &
agricultural waste
Snam4Environment
CNG/LNG stations
Biomethane
Power to gas
Hydrogen Industrial &
Residential
Natural Gas
Transport &
Small scale LNG off grid user
LNG
18
Energy transition: progress on strategy
• Key enabler to accelerate market development • 6 CNG and 2 LCNG S4M stations already in operation,
• Distinctive internal competences from our subsidiary IES biogas, expected delivery of further 13 by 1Q2020
leading EPC player • further 69 CNG/LCNG contractualized
• Two platforms in biomethane production from both urban waste • Low-risk business model confirmed:
and agriculture feedstock to internalize competences and
capture further growth opportunities: • Long term contracts with credit-worthy
counterparties
• Renerwaste: acquisition of 100% (€ 46m equity)
• Base return set with potential upside on volumes
• Iniziative Biometano: binding LOI signed (50% stake with
option for control) • Risk-adjusted returns higher than Italian regulated
• Overall 19MW is already authorized business
19
Growing role in the LNG market
SSLNG
Fast growing LNG market
• Increasing
0,3 competitiveness of LNG OLT
0,5
0,8 • Competitive
0,1
regasification tariffs SSLNG
2019 2025 2030 • Crucial role of LNG going
Trucks Bunkering & off-grid
forward
Expand our capabilities through OLT acquisition: Snam to support gas for mobility
• Exposure to an offshore infrastructure directly • Snam to build & operate 2 liquefaction plants
connected to our grid • Bio-LNG for transport
• Offshore LNG terminal with a maximum annual • Truck loading facility upgrade in Panigaglia
regasification capacity of 3.75 bcm, 100%
capacity booked for 2019/2020 Overall Capacity: c 250Ktpa LNG
• Net amount of the transaction ca. 345 € million (OLT future source of additional small-scale LNG services via
ships) 20
Energy efficiency
• Better use of energy in the territories in TEP operates as a main 10Y Tax Credit
which we operate contractor for transferred to Snam
• Accelerate the growth of TEP leveraging on • Carbon footprint
70% - 85%
Snam’s strengths: industrial expertise, local assessment
presence, low cost of funding Deep Paid by customers
• Energy Efficiency and
renovation 15% - 30%
Deep renovation for
investment
buildings
Fast-growing market
1. Asset Readiness
2. System design
3. Value chain
development
Belgium
• Commercial business • Solid capex plan • Ongoing regulatory review (for 2021-24) • ~90% progress, 2020 • Stronger Greek macro
model, strong 2019 completion confirmed environment
• Capital structure • Long-term TAG contracts expiry may lead to
sales optimization headwinds in 2023, although flows are expected • Non binding interest • Strategic position along
• Cost efficiency plan • Ongoing regulatory to remain strong from shippers for the southern gas
capacity expansion corridor
• LNG availability and review (2020-23) • Ongoing assessment of SSLNG projects
cost reduces need • New capex plan to be
for capacity booking approved by YE
Payback c. 80% by Payback >100% Payback >100% Pay back >60% by Snam exposure at New regulation
the end of the plan within the plan within the plan the end of the plan completion: c. € 310m improves risk adjusted
returns
>10% average cash return1 on investments to date; consistently outperformed acquisition budgets
>10% cash return confirmed to 2023
23
1. Yearly average cash in/acquisition price of Teregà, TAG, IUK & GCA
Efficiency Plan further improved: >65m in 2023 vs 2016
€m Actions
Down in nominal terms ongoing
Already
428 achieved: c. 20% > € 65m
C. € 45m c. 80%
>65
9
16
20
2016 One off costs 2016 Efficiency Demerger Labour Other incl. 2023 2017 2018 9M 2019 External Internal 2023
Net pass- & write off core Program dissynergies inflation network core Costs Costs
through & service expansion
contract
attitude to benefit from lower for longer interest M/L term maturity: ~ 5 years
rate scenario
• Proactive management of maturities Fixed – Floating
Gross debt1 Total committed credit facilities and bonds1
• 2017 and 2018 Liability Management exercises
• Extension of approx. € 3.9bn banking facilities
• New EIB funding for approx. € 0.3bn 1,6
25% 3,2
• € 1.1bn bonds in early September for 2020 1,7 Pool banking facilities
Debt capital market
prefunding € 16bn Bilateral banking facilities
• Access to large and diversified sources of funding 75%
Institutional lenders financing
base 1,5%
3,00%
1,1% 2,00%
• Bond-roll over4 1,00%
0,00%
2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2020 2021 2022 2023
• Growing share of sustainable finance
Expiring bond Coupon Potential new bond coupon
Avg 2019-23 cost of debt @ 1.4%
(Not including short-term uncommitted lines and Commercial
Paper)
1. Rating from the Grid for Moody’s , Stand alone credit profile for S&P 3. Considering rating adjustments and affiliates 26
2. Before change in working capital 4. New coupon based on forward curve
Use of financial flexibility
20.3 20.4
2,022 2,095
19.3
0.29 0.32
1,010 1,080 0.27
940
Franco Pruzzi, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of
the Legislative Decree n. 58/1998, that data and accounting information disclosures herewith set forth correspond to the company’s evidence
and accounting books and entries.
This presentation contains forward-looking statements regarding future events and the future results of Snam that are based on current
expectations, estimates, forecasts, and projections about the industries in which Snam perates and the beliefs and assumptions of the
management of Snam.
In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs,
return on equity, risk management are forward-looking in nature.
Words such as ‘expects’, ‘anticipates’, ‘targets’, ‘goals’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, variations of such words, and
similar expressions are intended to identify such forward-looking statements.
These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict
because they relate to events and depend on circumstances that will occur in the future.
Therefore, Snam’s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors
that might cause or contribute to such differences include, but are not limited to, economic conditions globally, political, economic and
regulatory developments in Italy and internationally.
Any forward-looking statements made by or on behalf of Snam speak only as of the date they are made. Snam does not undertake to update
forward-looking statements to reflect any changes in Snam’s expectations with regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.
The reader should, however, consult any further disclosures Snam may make in documents it files with the Italian Securities and Exchange
Commission and with the Italian Stock Exchange.
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