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Outlook

Natural gas is gaining global prominence as an increasingly abundant and competitive energy source, as well as an immediate, inexpensive solution to decarbonisation. This central role will be reinforced thanks to both the rapid development of renewable gases, specifically within the biomethane chain, which will be able to grow solidly in Italy also due to Snam’s investments and the numerous initiatives in progress worldwide to produce hydrogen from renewable sources at increasingly competitive costs. In both Europe and Italy, a recovery in demand has been recorded in recent years, coupled with a growing need for imports from diversified routes, in light of the decline in domestic production and the progressive exit of various countries from coal-based thermoelectric production. In Europe, the need for imports has grown by 30% since 2014 and is expected to increase further in the medium-term. In Italy, on the other hand, according to the joint Snam-Terna scenarios published on 30 September 2019, gas consumption at 2040 is expected to be substantially in line with current levels, with renewable gases playing a growing role.

Snam has forecast an increase in investments for the period 2019-2023, taking them to €6.5 billion, approximately 14% more than in the 2018-2022 plan, both thanks to the greater contribution from new businesses in the energy transition and the increase in investments in replacements (the replacement of 1,000 km of network is envisaged during the plan time frame), in order to continue to guarantee maximum resilience, flexibility and efficiency of existing infrastructure. SnamTec (Tomorrow’s Energy Company) project investments are expected to reach €1.4 billion and are aimed at boosting Snam’s capacity to innovate and fully capitalise on opportunities offered up by the evolution of the energy system.

With the new plan through to 2023, Snam intends to strengthen its role in the energy transition, increasing its presence in the biomethane segment, which is set to play a key role in the decarbonisation process and confirming the commitment made to sustainable mobility and energy efficiency. It also aims to pioneer the use of hydrogen as a clean energy carrier of the future; to this end, it has established a business unit focused on the assessment of possible pilot projects and the contribution towards the chain’s development.

Environmental, social and governance (ESG) factors are increasingly integrated into the company’s strategies and management. In environmental terms, methane emissions will be reduced by 40% by 2025 (vs 2016) with respect to the 25% target set by the previous plan. A 40% reduction is envisaged in CO2 emissions by 2030, thanks to the start of implementation of the first six gas-electric hybrid plants, which will also help ensure the flexibility of the electricity system, and to energy efficiency in buildings. By 2030, a 40% reduction is also forecast in CO2 from electricity consumption, thanks to a greater use of photovoltaic. Through the subsidiary, TEP Energy Solution, and the Snam Foundation, the urban reforestation project of the Municipality of Milan, ForestaMI, will be supported. Snam has also recently launched the “Snam Plastic Less” programme, starting in 2020, aimed at eliminating, all disposable plastic in drinks vending machines throughout the company’s offices, and by 2023, all use of plastic in industrial packaging. From a social standpoint, the company will continue implementing its internal and external training initiatives, policies for gender balance and inclusion, and the activities of Fondazione Snam for the development of territories.

Snam intends to strengthen the efficiency plan launched in the second half of 2016 with more than €65 million expected in savings by 2023, versus 2016, compared with the €60 million target of the previous plan. At the end of 2019, €51 million had already been booked – achieving the target previously set for 2021.

The optimisation of the financial structure implemented in the last three years has led to a reduction in the average cost of debt, from 2.4% in 2016 to 1.1% in 2019. The action taken also successfully reduces the volatility of the cost of debt, which is expected to remain stable at an average of 1.4% throughout the plan time frame. Additionally, with the aim of aligning the financing strategy with its sustainability targets and extending the investor base, February saw Snam issue its first Climate Action Bond, which sets the rules for the issue of debenture loans aimed at financing investments in environmental sustainability. In April 2019, Snam obtained a reduction in the margin of its €3.2 billion sustainable loan.

 

2020 guidance

 
Investments*       € ~ 1.1 bn
Tariff RAB       € ~ 20.6 bn
Net income**       € ~ 1,100 m
DPS       € cent 24.95
Net debt***       € ~ 12.4 bn
 

* The €100 million full year CAPEX delay forecasted in April, will be largely recovered before the year-end
** COVID impact to be offset - Back to the original guidance of €1.1bn at the same perimeter
*** Same perimeter. Excluding change in tariff related items (expected negative for €0.1bn), the acquisition of Adnoc, Mieci and Evolve to be completed in the second half of the year for approx. €0.3bn

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updated
06 August 2020 - 17:06 CEST