Snam pursues a sustainable model of growth, in order to create value through these main strategic drivers: the continuing improvement in the results of core business; the growing exposure to energy transition, with new initiatives; the solid performance of international activities; the ongoing optimization of financial structure.
CAPEX PLAN 2019-2023
* Total RAB evolution calculated assuming an average annual inflation rate of ~0.8% and according to current regulatory framework.
€1,4 bn on Snamtec: Tomorrow's Energy Company
- Energy efficiency in core business: c. € 700 mln to reduce methane emissions by 40% by 2025
- Methane emissions reduction plan ("Leak Detection and Repair" applied to network, compressing and storage stations; replacement of ca. 3,000 pneumatic actuators and instrumentation);
- Energy efficiency (investments in the first 6 Dual fuel Compression stations; energy efficiency measures in our buildings; 11 GWh/year of energy produced through PV).
- Innovation & technology: c. € 350 mln to remotely inspect more than 85% of assets by 2023
Digital Asset Model to enhance infrastructure management; Digital twin, I-IOT and wearables for operational excellence; improving neural network forecasting (2 days ahead and infra-day); drone and satellite images testing for asset monitoring progressing; “Smart gas” extended to re-gasification processes; blockchain pilot for PSV transactions.
- Energy transition: c. € 400 mln
- Support the evolution of Green gas (c. € 250 mln investments in biomethane; H2 blending up to 10%; studies ongoing on asset readiness and power to gas);
- CNG and LNG development in Italy (c. 150 CNG/LCNG stations; 2 small-scale LNG plants);
- Energy efficiency with third parties (real estate deep renovation; revenues granted from fiscal benefit).
Increasing commitment to ESG and emissions reduction
- Scope 1 and Scope 2 CO2 emissions reduction: -40% by 2030 (vs 2016). 40% reduction in direct emissions is planned by 2030, thanks to the start of the conversion of the first six plants to gas-electric hybrids and energy efficiency actions on assets. A 40% reduction of CO2 indirect emissions, from electric consumption, is also planned by 2030, through the greater use of photovoltaic energy;
- Reduction of CH4 emissions: -40% by 2025 (vs 2016), compared to the target of 25% of previous plan, through the application to the grid of a methane "Leak Detection and Repair" campaign, the maximum replacement of grid and plants’ components, and the adoption of the best available technologies;
- ForestaMi: Snam, through its subsidiary TEP Energy Solution, and Fondazione Snam, will support the urban reforestation project advanced by the Municipality of Milan, which involves the planting of 3 million new trees in the metropolitan area by 2030;
- Snam Plastic less: the program aimed at eliminating disposable plastics from beverage distributors in all company offices by 2020 and the use of plastic in industrial packaging by 2023.
- Snam Institute: over 275 thousand hours of training to company employees in the period 2016-2018;
- Snam Foundation: corporate volunteering week, more than 700 Snam people involved in over 90 non-profit organizations throughout Italy.
- Effective & integrated Governance: The Shareholder Meeting approved the permanent inclusion in the statute of the provisions that guarantee a minimum representation of one third of the less represented gender in corporate bodies. A new policy to promote diversity and inclusion within the company was also recently adopted;
- Business integrity and anti-corruption: Snam is one of the four companies (the only Italian one) that have entered into a global partnership with Transparency International; since the beginning of 2019 has already carried out around 4,500 reputational checks on suppliers and third parties.
Further improved efficiency target: > €65 mln in 2023 (vs 2016).
- Main efficiency areas:
- DT&T Modeling review
- Process optimization
- Real estate saving
- Purchasing cost reduction
- Make vs buy.
- 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 € 1.8 bn on Italian infrastructure vs first stand-alone plan
- ITG; OLT acquisition € 562 mln
- GCA; IUK acquisition € 155 mln
- Energy transition at least € 400 mln
- Desfa € 119 mln.
- Enhanced returns to shareholders:
- Share buy back activated and € 739 mln executed to date;
- New dividend policy
- New share buy back tranche of € 150 mln.
- ADDITIONAL EARNING ACCRETIVE OPPORTUNITIES NOT IN PLAN:
Brown and greenfield growth opportunities; further replacement of fully depreciated pipelines; additional connections of local markets in Sardinia; additional investments in the energy transition businesses; Strategic M&A; Buyback.
For the period 2019-2023 Snam has planned to double its investment in new business for the energy transition to at least € 400 mln, compared to € 200 mln in the previous plan.
The most significant increase concerns the sector of biomethane derived from organic, agricultural and agro-industrial waste, which will play a strategic role in the decarbonisation process. Snam aims to support and accelerate the evolution of the Italian market also by investing, through its subsidiaries, in infrastructure and plant construction. Investments are planned for around € 250 mln, compared to € 100 mln in the previous plan, to build plants with an installed capacity of over 40 Megawatts.
In parallel to this, a memorandum of understanding has been signed with Infore Environmental Group, an environmental services company listed on the Shanghai Stock Exchange and controlling shareholder of Ladurner Ambiente, for possible joint initiatives for the development of biogas and biomethane infrastructure in China. Snam has also signed a binding letter of intent aimed at negotiating and defining the agreements to launch a strategic partnership in agriculture biomethane infrastructure through a 50% entry into Iniziative Biometano, a company that operates in Italy with five biogas plants, for which a conversion to biomethane is planned, and with various plants in the authorization or construction phases. Thanks to these two initiatives, Snam will be able to increase its skills in plant management and operation, both in the agricultural biomethane supply chain and in that of FORSU, which perfectly complement the expertise in the design, development and construction of IES Biogas, a subsidiary of Snam acquired last year and a leading company in the construction of biogas and biomethane plants in Italy and abroad.
The investment in the biomethane sector complements those envisaged in sustainable mobility to support the increase in the Italian network of distributors of compressed natural gas (CNG and bio-CNG) and liquefied natural gas (LNG and bio-LNG), the first in Europe with more than 1,350 distributors (about 150 stations connected to the network since 2018). The plan confirms planned investments of € 50 mln in the construction of around 150 methane and biomethane refuelling stations for cars and buses, created in collaboration with Cubogas, which is controlled by Snam4Mobility. To date Snam4Mobility has already delivered eight stations and has contracted a further 69. Additional investments of € 50 mln are also planned for the construction of two small liquefaction plants (SSLNG), one in the North and one in Southern Italy, and for the upgrading of the Panigaglia terminal in order to allow the loading of tankers and foster the use of LNG for heavy transport, industry and residential buildings for a total capacity of 250 thousand tons per year. There is also the possibility of adapting the Panigaglia plant to allow the loading of naval units to develop the use of LNG in maritime transport. A similar activity is being developed by OLT, the regasification terminal off the Tuscan coast between Livorno and Pisa, of which Snam will acquire a 49.07% stake following the completion of the required authorizations and the subsequent closing of the agreement announced last 20th September (expected in the first quarter of 2020).
Still in the area of energy transition, investments of around € 50 mln are expected in energy efficiency, a sector that requires impetus to meet the growing potential of the market and in which Snam is already among the leading Italian operators through the subsidiary Tep Energy Solution, an Energy Service Company (ESCo) specializing in energy efficiency solutions for condominiums, companies and public administrations. TEP expects to achieve revenues of € 20 mln in 2019, with a forecast of further growth over the period of the plan. The company has a contract portfolio of over € 60 mln and is continuing to develop new initiatives. Recently, the company TEA Servizi, an ESCo active in the design and construction of plants on behalf of industrial customers, with a particular focus on small and medium enterprises, was also acquired
Snam believes in the potential of hydrogen as a clean energy carrier and trusts that enabling its insertion in the gas network can contribute to the development of hydrogen production from renewable sources, reducing costs. For this reason, last April the company was the first in Europe to successfully experiment in the Region of Campania the injection of a blend of 5% of hydrogen (by volume) with natural gas in a section of the transmission network, serving two industrial users. This experiment will be repeated by the end of the year, doubling the amount of hydrogen fed into the network to 10%. These initiatives are aimed at making the company’s assets ever more ready to accept increasing amounts of hydrogen.
Snam has created a new business unit dedicated to hydrogen, with the task of evaluating possible pilot projects and contributing to the development of the supply chain. At the same time, studies will continue on the adaptation of compression and storage infrastructure, on the role of hydrogen in the future energy system, also with a view on sector coupling, and on possible experiments in power-to-gas. According to a study commissioned by Snam, hydrogen could cover almost a quarter (23%) of the Italian energy demand by 2050 in a scenario of profound decarbonisation.
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.
Internationalization strategy and associates to 2023
Snam has further strengthened its leading position in energy infrastructure in Europe with the recent acquisition of DESFA in Greece, finalised at the end of 2018. The contribution to the net profit of the international associates (TAG and GCA in Austria, Teréga in France, Interconnector UK, DESFA and TAP) will amount to approximately € 160 mln in 2022, consolidating Snam’s European leadership.
With regard to TAP, of which Snam is a 20% shareholder, the state of progress of the work is around 90%. Expected completion of the work by the end of 2020 is confirmed.
- Average tenor of M/L term debt: >5 years
- Maturities well-spread over time
- €3.2 bn undrawn committed lines and approx. € 3.7 bn cash available
- >3/4 fixed rate debt vs floating with opportunistic attitude to benefit from lower for longer interest rate scenario
- Proactive management of maturities: 2017 and 2018 Liability Management exercises; extension of approx. € 3.9 bn banking facilities; new EIB funding for approx. € 0.3 bn; €1.1 bn bonds in early September for 2020 prefunding
- Access to large and diversified sources of funding: 1/3 of total committed funding from sustainable financing
- Flat cost of debt over the Plan horizon, leveraging on: actions already executed to lock in favorable market conditions; normalization of country risk premium, supporting bond-roll over; investors’ awareness of Snam’s credit profile in spite of sovereign cap
- Lower than sector-average gearing with Net Debt /RAB well below 60% which remains our reference threshold and FFO/ND consistent with an A- rating space
- Potential upside from: treasury management optimization in both banking and Commercial paper; further diversification of investors’ base; Bond-roll over
- Growing share of sustainable finance
SUPERIOR LONG-TERM RETURNS WITH LOW RISK PROFILE
- Excellent track record
- Significantly improved role of gas in the future energy mix
- Stable and visible regulation
- Increased plain target to 2023
- Well positioned to capture additional accretive opportunities
Dividend policy upgraded
- +5% DPS growth (from € 23.76 cents in 2019 to € 24.95 cents in 2020)
- Target: 5% DPS CAGR 2017-2022
As part of the authorization received from the Shareholder Meeting on 2 April 2019, Snam intends to resume the buyback program of treasury shares with the launch of a further tranche of € 150 mln
26 August 2020 - 17:06 CEST