Main risks

Regulatory and legislative risk. For Snam is linked to the regulation of activities in the gas sector. The decisions of the Italian Regulatory Authority for Energy, Networks and the Environment (ARERA) and the National Regulatory Authorities of the countries in which the foreign subsidiaries operate, European and national regulations and, more generally, the change in the regulatory reference framework, could have a significant impact on the operations, results and financial stability of the Company. It is not possible to foresee the effect that future changes in legislative and fiscal policies could have on Snam's business and on the industrial sector in which it operates. Considering the specific nature of its business and the context in which Snam operates, changes to the regulatory context regarding the criteria for determining reference tariffs are particularly significant.

Macroeconomic and geo-political risk. Because of the specific nature of the business in which Snam operates, there are also risks associated to political, social and economic instability in natural gas supplier countries, mainly related to the gas transportation sector. A large part of the natural gas is imported or moved through countries in the MENA area (Middle East and North Africa) and in the former Soviet bloc, nations subject to political, social and economic instability which could evolve into potential crisis scenarios in the future. If a shipper using the transportation service via Snam’s networks cannot procure the transportation of natural gas from/or through the aforementioned countries because of said adverse conditions, or in any way suffers from said adverse conditions, this could have negative effects on the Snam Group’s operations, results, balance sheet and cash flow.In addition, Snam is exposed to macro-economic risks deriving from relocation or tension on financial markets or situations deriving from exogenous phenomena, which could have an impact on liquidity and access to financial markets.

Risks of climate change. Risks associated with the emissions market (in field of the application of the European Union directives concerning the sale of permits relating to carbon dioxide emissions and the rules on controlling emissions of certain atmospheric pollutants). The climate change scenarios could also cause a change in the choice of energy mixes in various European countries and in the behaviour of the population and could have an impact on the demand for natural gas (and volumes transported). Additionally, the tightening of decarbonisation targets could influence the development of the use of alternatives to gas, thereby favouring a greater penetration of low-carbon renewable gases (green hydrogen, blue hydrogen, biomethane, synthetic methane) and the growth of new businesses. Climate change could also increase the severity of extreme weather events (floods, droughts, extreme temperature fluctuations), worsening natural and hydro-geological conditions in some areas with a possible impact on the quality and continuity of the service provided by Snam as well as on Italian and European gas demand.

Commodity risk associated with changes in the price of gas. The change in the regulatory framework with regard to the recognition of natural gas quantities to cover fuel gas, network leaks and UFG could have negative effects on the Snam Group's operations, result balance sheet and cash flow.

Market risk. The change to the regulatory framework in force could have negative effects on the Snam Group’s operations, results, balance sheet and cash flow. Abroad, protection from market risk is offered by the French and Greek regulatory authorities (Terēga’) and (Desfa), from the TAP and Austria long-term contracts (different expiry dates for TAG and Gas Connect from 2023) and for the ADNOC Gas Pipeline (20 years tariff-based). In Austria and the United Kingdom (Interconnector UK) regulation does not guarantee hedging for the volume risk.

Concerns the failure to comply, in full or in part, with the European, national, regional and local laws and regulations with which Snam must comply in relation to the activities it carries out. The violation of such rules and regulations may result in criminal, civil and/or administrative sanctions, as well as damage to Snam’s balance sheet, financial position and/or reputation. As regards specific cases, the infringement of regulations on the protection of workers’ health and safety and of the environment, and the infringement of anti-corruption rules, inter alia, may also result in (possibly significant) sanctions on the Company based on the administrative responsibility of entities.

- Maintaining storage concessions;
- breakages or damages to pipelines/ installations also upon exogenous events, which can cause malfunction and unexpected service interruption;
- delays in the progress of infrastructure implementation programs;
- environmental risks;
- loss of “key” personnel or the inability to attract, train or retain qualified personnel;
- risk linked to foreign equity investments:
- risks associated with future acquisitions/equity investments.