Snam pursues a sustainable model of growth, in order to create value through these main strategic drivers: continuous improvement in core business, enhanced exposure to the energy transition, strong performance of international activities, optimization of financial structure.
CAPEX PLAN 2018-2022
* Total RAB evolution calculated assuming an average annual inflation rate of ~1% and according to current regulatory framework.
€850 mln on TEC: Tomorrow's Energy Company
- Increase effectiveness: “Smart gas” project; neural network forecasting project (DAFNE); testing drones and satellites for asset monitoring; real-time measurement of geologically induced phenomena
- Reduce emissions: real-time remote leak detection; AI aided turbocharger management; equipment substitutions; in-field measurement to update emission factors
- Enhanced the energy transition: energy transition businesses (biomethane, mobility, energy efficiency); study of the impact on grid of hydrogen and H2NG mixtures; study of sustainable solution of the power to gas
- Pioneering in new technology
- Consolidating distinctive competences and leveraging capabilities through Snam Global Solutions
- Supporting an affordable energy transition
ESG guiding principles
- Emissions reduction and efficiency: cogeneration plants, heaters, electric compressors, DLE turbines, energy efficiency on real estate
- Reduction of CH4 emissions: launched leak detection and repair campaign, technology update, in line gas recompression, ecc
- Energy transition: Snam4Mobility, biomethane and CNG, SSLNG
- CH4 emissions targets: -15% by 2022, -25% by 2025.
- Snam4Safety: a new safety model acting both on skills development and strengthening of contractor management
- Inclusion: female hires +10%
- Snam Institute: 90.000 hours of training
- Performance management: extended to 100% of employees
- Smart working open to 500 employees
- Snam Foundation: corporate volunteering week,300 employees involved.
- Business integrity and anti-corruption: one of 4 companies worldwide part of the Global Forum of Transparency International; ~ 1700 ethic and integrity pacts and reputational checks on suppliers in 2018.
- Effective & integrated Governance: ESG factors fully integrated in our governance; BoD oversight of climate risks and opportunities; Indipendence: 56% of BoD independent. All BoD committees chaired by Independent Directors; Diversity: 44% of the Board are women; From rules to purpose: from 650 procedures to 90 rules. 4 shared values for business conduct.
- GREEN FINANCING
Bond Framework published; €3.2 bn of banking facilities converted into a Sustainable Loan.
- Main efficiency areas:
- DT&T Modeling review
- Process optimization
- Real estate saving
- Purchasing cost reduction
- Make vs buy.
Improved efficiency target: > €60 mln in 2022 (+€50 mln from previous target by 2021; €19 mln already achieved by 2017 and €30 mln expected by YE).
Capital allocation approach
- Criteria: committed to current credit rating metrics and risk profile; Accretive returns(risk adjusted returns at least in line with Italian regulated assets)
- Industrial opportunities: enhance existing infrastructure; leverage industrial capabilities; unlock additional growth/optionality
- Enhanced returns to shareholders: dividend policy; buyback.
Already invested or earmarked
- Industrial opportunities
- Additional capex of €0.8 bn on Italian infrastructure vs prior plan
- ITG acquisition: €217 mln
- GCA, IUK acquisition: €155 mln
- Energy transition (includes Snam4Mobility): €240 mln
- Desfa: €119 mln.
- Enhanced returns to shareholders
- share buy back activated and €680 mln executed to date
- new dividend policy: +5% per annum to 2022
Output-based incentives and Snam Global Solution
- Output-based incentives:
- balancing activities (existing): demand forecast; TSO market actions; residual balancing; Default service
- short-term storage products (under definition)
- furher potential additional incentives related to: asset health; market functioning; environment; quality of service.
- Snam Global Solution:
- leverage know how to create value
- develop partnership with gas value chain operators
- €15 mln of revenues expected in 2018
- contract portfolio enhancing value from affiliates
- prospects in promising new gas market.
Output-based incentives and Snam Global Solutions will generate approx. €250 mln of cumulated revenues over the period 2018-2022.
The new Snam plan envisages investments of at least €200 mln for the development of new businesses in the field of energy transition.
The biomethane sector in Italy is already showing promising development, as demonstrated by the three plants already connected to the national transport network and the more than 800 expressions of interest for new connections. In recent months, through its subsidiary Snam4Mobility, Snam acquired control of IES Biogas, an Italian company that is a leader in the construction of biogas and biomethane plants.
The company plans to invest at least €100 mln, even in partnership with other operators, in the construction of facilities to produce biomethane from refuse or agricultural waste, given the essential role of biomethane in the Italian decarbonisation strategy.
The Plan includes €50 mln of investment in the construction of methane and biomethane filling stations for cars and buses through Cubogas, a company controlled by Snam4Mobility, and another €50 mln for the construction of at least four small scale liquefaction plants (SSLNG) for use by the heavy transport, industrial and residential sectors.
Integration of the continental networks is a key-element in the development perspectives of the Company. In this regard, Snam signed strategic partnerships with the biggest operators in the sector along the main continental energy corridors, becoming one of Europe’s leading gas infrastructure operator.
International strategy to 2022
The contribution of Snam’s international subsidiaries (TAG and GCA in Austria, Téréga in France, TAP, Interconnector in the UK and DESFA in Greece) will exceed €160 mln in 2022 consolidating Snam’s European leadership (including Italgas the contribution will be above €220 mln, compared to the previous target of €200 mln).
The closing of the acquisition of 66% of DESFA by the Snam-led consortium is expected by the end of 2018. In relation to TAP, in which Snam is a 20% shareholder, the project is more than 80% completed and the works on the Italian section have recently been resumed after the summer break. The expected completion of the work is confirmed for 2020.
- Average tenor of M/L term debt: >5 years
- Maturities well-spread over time
- €3.2 bn undrawn committed lines
- >3/4 fixed rate debt vs floating
- Proactive management of maturities: prefunding of the 2019 maturities for approx. €1 bn; extension of more than €3.5 bn banking facilities
- Protection of financial outperformance: three Liability Management exercises to smooth refinancing risk and potential yield increase; natural hedging provided by the current tariff framework; Investors’ awareness of Snam’s credit profile in spite of sovereign cap (outperformance in excess of 150bps)
- Pre-hedging strategy to limit P&L volatility: interest rates of 40% of 2019-2021 issuances already locked
- Management of the risk profile: lower than sector-average gearing with Net Debt /RAB well below 60% which remains the threshold reference
- Potential upside for financial structure from: treasury management optimization in both banking and DCM segments; further diversification of investors’ base (sustainable and green finance); normalization of Country Risk Premium boosting high-coupon bond roll-over benefits.
SUPERIOR LONG-TERM RETURNS WITH LOW RISK PROFILE
- Track record of outperformance
- Significantly improved gas outlook
- Stable and visible regulation
- Increased plain target to 2022
- Well positioned to capture additional accretive opportunities
Dividend policy updated
- +5% DPS growth, from €22.63 cents in 2018
- 2019 DPS: €23.76 cents
Authorization obtained in April 2018 for the purchase of up to €500 mln treasury shares
22 January 2019 - 14:59 CET