2018 Statistical Data Dati statistici 2017...• Asia: 72.9% of total LNG imports. LNG...

1

1941 2016

Il MetaninoDati statistici 2017

Il Metanino 2018 Statistical Data

SNAM: the mission

Snam is Europe’s leading gas utility. Founded in 1941 as “Società

Nazionale Metanodotti”, it has been building and managing sustainable and

technologically advanced infrastructure guaranteeing energy security for over 75 years.Snam operates in Italy and, through subsidiaries, Austria (TAG and GCA), France (Teréga) and the United Kingdom (Interconnector UK). It is one of the main shareholders of TAP (Trans Adriatic Pipeline) and is the company most involved in projects for the creation of the Energy Union.

First in Europe by transport network size (over 32,500km in Italy, about 40,000 with international subsidiaries)and natural gas storage capacity (16.7 billion cubicmeters in Italy, about 20 billion with internationalsubsidiaries), Snam manages the first liquefied naturalgas (LNG) plant built in Italy and is a shareholder of thecountry’s main terminal.

Snam’s business model is based on sustainable growth,transparency, nurturing talent, and development oflocal areas by dialoguing with communities. It fosterssustainable mobility, expands into energy efficiency,and invests in biomethane and innovative technologiesto increase the use of renewable gas, a key resource ofthe green economy.

*Teréga has been the new denomination of TIGF since 30 March 2018.

2

Index

5 The Energy Environment 6 Natural gas reserves in the world (2017)8 Natural gas production in the world (2017) 9 Natural gas consumption in the world (2017) 10 Natural gas: Trade movements 2017 by pipeline12 The main LNG streams in 201714 LNG worldwide in 201716 LNG in Europe: plants18 Storage capacities in the world at the end of 201720 Gas prices in the world Europe22 Natural gas supply in 2017 23 Energy consumption by source in the main countries24 Natural gas consumption by country (2014-2017) Italy25 Natural gas supply in 201726 Natural gas consumption by sector

27 Snam in the gas system28 Snam, the company profile30 The journey of natural gas in Italy through Snam infrastructures33 Regulatory framework: businesses tariff scheme34 International development, overview36 Snam, the European scenario38 Gas as a forever fuel40 Main economic-financial data41 Snam in the bond market: the credit rating

43 Appendix 44 Glossary46 Reference heat capacity47 Units of measurement48 Transported natural gas composition49 References

The Energy Environment | 5

The Energy Environment

6 The Energy Environment | 7The Energy Environment |

OECD countries: 9.2%Non OECD countries: 90.8%Total: 193.5

13.8

79.1

62.2*

19.3

Natural gas reserves in the world (2017)

Source: BP statistical review of world energy 2018.

4.2%S. & Cent. America

5.6%North America

7.2%Africa

10.0%Asia Pacific

32.1%Europe & Eurasia

40.9%Middle East

10.8

8.2

Trillion m3

*Of which 54.5 in Russia and Turkmenistan.


Natural gas production in the world (2017)

Asia Pacific: 607.5; 16%

North America: 951.5; 26%

Europe: 241.9; 7%

South and Central America

179.0; 5%

Africa:225.0; 6%

Middle East: 659.9; 18%

2014 2015 2016 2017

Usa 704.7 740.3 729.3 734.5

Russia 591.2 584.4 589.3 635.6

Iran 183.1 191.4 203.2 223.9

Canada 159.1 160.9 171.6 176.3

Qatar 169.1 175.2 177.0 175.7

China 131.2 135.7 137.9 149.2

Norway 108.0 116.2 115.8 123.2

Australia 66.6 76.0 96.4 113.5

Saudi Arabia 97.3 99.2 105.3 111.4

Algeria 80.2 81.4 91.4 91.2

Billion m3

Source: BP Statistical review of world energy, 2018.

3,680.4 billion m3

Natural gas consumption in the world (2017)

3,670.4 billion m3

2014 2015 2016 2017

Usa 722.3 743.6 750.3 739.5

Russia 423.6 409.6 420.2 424.8

China 188.4 194.7 209.4 240.4

Iran 180.9 191.9 201.4 214.4

Japan 120.5 118.7 116.4 117.1

Canada 103.2 102.9 109.5 115.7

Saudi Arabia 97.3 99.2 105.3 111.4

Germany 73.9 77.0 84.9 90.2

Mexico 80.1 78.0 91.8 87.6

UK 70.1 71.8 81.0 78.8

Billion m3

Source: BP Statistical review of world energy, 2018.

Asia Pacific: 769.6; 21%

Africa:141.8; 4%

Middle East: 536.5; 14%

North America: 942.8; 26%

Europe: 531.7; 14%

South and Central America

173.4; 5%

CIS:815.5; 22%

CIS: 574.6; 16%


FROM FROM

To

North America 66.1 80.7 - - - - - - - - - - - - - - - 146.8

• USA - 80.7 - - - - - - - - - - - - - - - 80.7

• Canada 24.0 - - - - - - - - - - - - - - - - 24.0

• Mexico 42.1 - - - - - - - - - - - - - - - - 42.1

S. & C. America - - 14.9 - - - - - - - - - - - - - 0.5 15.4

Europe - - - 43.3 109.2 10.8 16.2 8.4 - 189.3 - - 8.9 - 33.0 4.4 - 423.4

• Austria - - - - - - - - - 8.6 - - - - - - - 8.6

• Belgium - - - 9.6 0.2 7.9 - - - - - - - - - - - 17.7

• France - - - 4.9 17.1 - 0.1 - - 11.5 - - - - - - - 33.5

• Germany - - - 20.2 25.7 - 0.4 - - 48.5 - - - - - - - 94.8

• Italy - - - 8.1 0.8 - 0.1 - - 22.3 - - - - 18.0 4.4 - 53.8

• Netherlands - - - - 22.6 1.1 8.6 - - 8.6 - - - - - - - 40.9

• Spain - - - - 2.6 - - - - - - - - - 11.8 - - 14.4

• Turkey - - - - - - - 6.3 - 27.6 - - 8.9 - - - - 42.8

• UK - - - - 35.4 - - - - 4.0 - - - - - - - 39.4

• Other Europe - - - 0.5 4.6 1.8 6.9 2.1 - 58.1 v- - - - 3.2 - - 77.6

CIS - - - - - - 13.3 - 12.1 26.2 0.3 8.4 2.0 - - - - 62.3

Middle East - - - - - - - 0.6 - - 1.7 - 1.6 18.4 - - - 22.2

Africa - - - - - - - - - - - - - - 3.4 - 4.2 7.6

Asia Pacific - - - - - - - - 1.1 - 31.7 3.4 - - - - 26.8 62.9

Total exports 66.1 80.7 14.9 43.3 109.2 10.8 29.5 8.9 13.2 215.4 33.6 11.8 12.5 18.4 36.4 4.4 31.5 740.7

USA

Can

ada

Bo

livia

Net

herl

and

s

No

rway

UK

Oth

er E

uro

pe

Aze

rbai

jan

Kaz

akhs

tan

Rus

sian

Fe

der

atio

n

Turk

men

ista

n

Uzb

ekis

tan

Iran

Qat

ar

Alg

eria

Liby

a

Tota

lim

po

rts

Billion m3

Natural gas: trade movements 2017 by pipeline

Oth

ers

Source: BP statistical review of world energy 2018.


Export

• 19 export countries.Qatar, Australia, Malaysia, Nigeria and Indonesia: 68.6% of total LNG exports.

Gas liquefaction plants across the world

• Global utilisation: 84% (from 82% in 2016).

• First LNG exports from a floating liquefaction unit in Malaysia and start up of LNG exports in Russia from the Arctic Region with the first cargoes shipped in december 2017 from Yamal LNG.

• First LNG exports from a floating liquefaction unit in Malaysia and start up of LNG exports in Russia from the Arctic Region with the first cargoes shipped in december 2017 from Yamal LNG.

• Several plants under construction in USA and Australia.

Algeria 16,6

Nigeria 27.8

Qatar 103.4

Indonesia 21.7Malaysia 36.1

Australia 75.9

Europe 65.7*

China 52.6

India 25.7

South Korea 51.3

Taiwan 22.5

Japan 113.9

The main LNG streams in 201770% of the gas is consumed in the production countries, the residual 30% is traded: 393 (356 in 2016) billion m3 by LNG (Liquified Natural Gas) and 741 (714 in 2016) billion m3 by pipeline.

TrinidadTobago 13.4

Global imports in 2017 recorded their highest annual grow rate (+9.9%) since 2010. The surge in LNG supply was driven by new production from Australia and USA as well as better performance of liquefaction plants in Algeria, Angola and Nigeria.Spot and short-term LNG imports remained flat compared to the previous years, around 27%. Most of the demand of LNG come from Asia (72.9%), most of the offer comes from Pacific Area (45.3%) and Qatar (26.7%).

USA

Europe

South A

merica

Euro

pe

Euro

pe

Japan

JapanEurope

South Korea

TaiwanIndia

Sout

h K

ore

a

Taiw

an

Japa

nJa

pan

China

Source: BP statistical review of world energy 2018, GIIGNL, The LNG Industry 2017 and IGU

World Gas LNG Report 2018.

* Of which: Spain 16.6 Turkey 10.9 France 10.8 Italy 8.4 UK 7.2 Belgium 1.3

Import

• 40 import countries (+1 compared to 2016: Malta).• Asia: 72.9% of total LNG imports.

LNG regasification plants across the world • 5 new terminals in 2017: two based on floating

solutions (in Malta and in Pakistan). Two expansions were also completed in Singapore and in Thailand.

• 24 new terminal under construction (of which 9 offshore and 15 onshore), and 8 expansion projects underway (three in China, Belgium, Greece, India, Taiwan, Thailand).

billion m3


LNG worlwide in 2017

EuropeLNG imports increased (+19.5%) driven by the gas demand for power generation. The increase occurred in countries of southern Europe (France, Greece, Italy, Portugal, Spain and Turkey) thanks to hot weather in the summer and low hydropower and nuclear production in France. On the other hand, there has been a decline in imports into northern countries (Belgium, Netherlands and UK) mainly attributable to the United Kingdom which experienced a sharp drop in LNG, intake due to the reduction of deliveries from Qatar.

Despite the increase in imports in 2017, Europe’s share of global LNG imports has fallen by nearly 50% since 2010 (from 29.4% in 2010 to 15.9% in 2017), mainly due to a decline in gas demand and to the competition from pipelines imports.

AMERICA2 new onshore liquefaction plants in 2017 have positively influenced exports from USA.

Imports in America increased by 4.1% compared to 2016, mainly thanks to Mexico (due to constraints on pipeline imports from the Unites States).

Source: GIIGNL, The LNG Industry 2017.

AsiaImports grew by 10.2% in 2017, consolidating Asia as the largest LNG importing region (72.9% market share). Japan remained the leading importing country (28.8%), followed by China.

China’s imports recorded a 42.3% increase (compared to 2016), allowing the country to overtook South Korea as the world’s second largest LNG importer, thanks to a political decision to favor the use of gas over coal to reduce air pollution in major cities.

South Korea also experienced a strong increase in LNG imports, thanks to rising gas demand from the power sector, on the other hand India (the world’s 4° largest importer) recorded only a modest increase (+1.2%) due to the effects of stronger LNG spot prices and the strong competition with other sources.

PacificThe Pacific basin remains the largest source of LNG supplies, with 45.3% of the global market, followed by Middle East (31.5%) and the Atlantic basin (23.2%).

Australia: second largest exporter in the world, behind Qatar. 2 new onshore liquefaction plants in 2017.

AfricaThe Middle East was the only region where imports declined (-9.1%), as the start of production from new gas fields domestic gas supply in Egypt.

Better performance in 2017 of existing liquefaction plants in Algeria, Angola and Nigeria.

QatarSupplies decreased as a result of scheduled and unscheduled maintenance. However, it remains the leading exporter with 27.6% of the world liquefaction capacity.


Montoir - Elengy

Mugardos - Reganosa

Bilbao - BBG

Barcellona - EnagasSagunto - Saggas

Sines - REN Atlantico

Huelva - Enagas

Cartagena - Enagas

Fos Tonkin - Elengy

Fos Cavaou - Fosmax LNG

Panigaglia - GNL Italia

Porto Levante - Adriatic LNG

OLT - LNG Toscana

Arzew - Sonatrach

Skikda - Sonatrach

Delimara

Milford Haven - South Hook LNG

Milford Haven - Dragon LNG

Isle of Grain - National Grid Grain LNG, Ltd

Dunkerque - Gaz Opale

Zeebrugge - Fluxys

Marsa-el-Brega - Sirte oil Co.

Klaipeda-Hoegh LNG

Nysahamn - AGA gas

Pori - Skangas

Snohvit - Statoil

Revithoussa - DESFA

Marmara Ereglisi - Botas

Rotterdam - Gate Terminal

Aliaga

Etki

Frederikstad - Skangas

Lyselik - Skangas

Liquefaction plants

Regasification plants

LNG in Europe: plants

FSRU plants (Floating storage and regasification unit)


13.0

4.814.1

2.5

23.0

3.0

3.9

8.6

6.3

3.2

17.6*

3.1

33.2

2.8

1.1

74.923.2

133.8*Of which 16.7 of Snam. Souce: Stogit (Offered capacities TY 2017-2018)

6.1

Souces: IHS Markit european gas storage tracker: May 2018.

For USA: EIA, US Energy information administration.

For Canada: Natural gas annual review 2017, Canadian Gas Association.

For Turkey: Ministry of Energy and Natural resources.

Per Russia: Management report PJCS Gazprom.

Storage capacities in the world at the end of 2017

billion m3

Major European countries


8075706560 55 50 45 40 35 30252015

Gas prices in the worldLNG (Asia)(January 1, 2018 - July 31, 2018)

Henry Hub (USA) (January 1, 2018 - July 31, 2018)

€/MWh: 8.5€/MWh: 9.6

-11.2%

10

9

8

01-ja

n 20

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2018

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01-ju

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8

31-ju

l 201

8PSV (Virtual exchange point)(January 1, 2018 - July 31, 2018)

€/MWh: 24.5€/MWh: 20.5

19.4%

01-ja

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2018

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31-ju

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35

30

25

20

15

€/MWh: 28.5€/MWh: 31.7

-10.0%

Zeebrugge TTF (UE) (January 1, 2018 - July 31, 2018)

€/MWh: 22.1€/MWh:19.3

14.1%01

-jan

2018

01-f

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8075706560 55 50 45 40 35 30252015


EUROPE*Natural gas supply in 2017

Source: BP Statistical Review of World Energy, 2018.

* Europe 28.

Trillion m3

Russia35.0

Norway1.7

Netherlands0.7

Algeria4.3

Libya1.4

Egypt1.8 Qatar

24.9

Nigeria5.2

Energy consumption by source in the main countries

FRANCE: 248.2 Mtep

Gas:15.5%

Other:0.8%

Renewable:10.5%

Nuclear:40.4%

Coal:3.7%

Oil:29.1%

Source: Ministère de la transition ecologique et solidaire

GERMANY: 323.6 Mtep

Gas:23.0%

Other:0.5%

Renewable:13.1%

Nuclear:6.1%

Coal:22.0%

Oil:34.5%

Source: AG Energiebilanzen

SPAIN: 131.2 Mtep

Gas:20.5%

Other:6.1%

Renewable:7.2%

Nuclear:12.5%

Coal:7.5%

Oil:46.2%

Source: Rivalry, European energy scenarios IHS, July 2017

ITALY: 170.2 Mtep

Gas:36.0%

Other:5.0%

Renewable:19.0%

Coal:6.0%

Oil:34.0%

Source: MSE, Situazione energetica nazionale 2017

UK: 193.5 Mtep

Gas:39.2%

Other:0.7%

Renewable:10.8%

Nuclear:7.9%

Coal:5.4%

Oil:36.0%

Source: UK Government

NETHERLANDS: 75.5 Mtep

Gas:41.1%

Other:1.9%

Renewable:5.5%

Nuclear:1.0%

Coal:12.1%

Oil:38.4%

Source: StatLine Statistic Netherlands


Natural gas consumption by country (2014-2017)

Source: EUROSTAT, Supply natural gas, short term monthly data.

*Source: Snam, Annual Reports 2017.

2014 2015 2016 2017

Italy* 61.9 67.5 70.9 75.1

France 36.7 39.1 42.7 43.3

UK 70.4 71.8 77.5 79.4

Germany 79.2 81.4 90.1 92.0

Spain 27.2 27.9 27.0 31.3

Netherlands 40.3 40.3 42.8 46.7

Bcm

2014 2015 2016 2017

Billion m3100

90

80

70

60

50

40

30

20

10

0

Italy France UK Germany Spain Netherlands

ITALYNatural gas supply in 2017

Source: MSE, Situazione energetica nazionale 2017.

GAS DEMAND: 75.1 billion m3

• Domestic production: 5.5• Storage balance, export and other: 0.0• Import: 69.6 of which 8.5 by LNG

Origin details (billion m3)

Other6.4

Norway2.5

Netherlands0.9

Russia27.4

Qatar7.0

Libya4.9

Algeria20.5

Snam in the gas system | 2726 The Energy Environment |

Snam in the gas system

Demand by sector 2014 2015 2016 2017

Residential 25.66 28.97 28.86 29.48

Thermoelectric 17.88 20.62 23.43 25.36

Industrial* 16.32 15.97 16.58 17.80

Other 2.05 1.96 2.04 2.50

Gas Demand 61.91 67.52 70.91 75.14

Bcm

Natural gas consumption by sector

Residential Thermoelectric Industrial*

Billion m3

80

70

60

50

40

30

20

10

0

2014 2015

Other

2016 2017

* Includes the consumption of the Industrial, Agriculture and Fishing,

Chemical Synthesis and Automotive sectors.

Source: Snam annual reports.

28 Snam in the gas system | 29Snam in the gas system |

INTERNATIONAL ASSOCIATES

SCOPE OF CONSOLIDATION

PRISMA14.66%

GASBRIDGE 2GB250%

TIGF* 40.5%

TAG 84.47%

InterconnectorUK(IUK)

GB1 15.75%GB2 15.75%

GASBRIDGE 1GB150%

TIGFinvestissement

100%

TIGF SA 100%

ASGasinfrastruktur

BeteiligungGMBH

40%

ASGasinfrastruktur

GMBH

100%

GCA49%

Group insurance services Snam

4 Mobility100%

Trasportation100% Rigasification

100%GNL ITALIA

SNAM RETE GAS

Asset Company 2

100%

ITG100%

ITALGAS

13.5%STOGIT

Storage100%

IZTGB1 26%GB2 25%IUK 49%

TAP 20%

GAS RULE INSURANCE 100%

Snam, the company profile

Snam, shareholders at January 2018 Shareholding Geographical Break Down at January 2018

* Italy-Strategic holders includes Bank of Italy and CDP Reti. ** Italy-Retails includes the participation of Romano Minozzi equal to 5.8%

Minozzi

CDP Reti

Bank of Italy

Treasury Shares

Institutional Investors

Retail Investor

30.1%

0.5%

2.4%

52.6%

8.6%

5.8%

30.6%

14.4%

3.5%15.5%

12.2%

16.3%

5.1%

2.4%

Italy- Strategic holders*

Continental Europe

Italy-Retails**

Italy-Institutional

Rest of the world

Treasury shares

UK and Ireland

USA and Canada

* Starting from 30 March 2018, TIGF has become Teréga.


National (9,704 km) and regional (22,880 km) gas pipeline grid: 32,584 km• Gas injected into the grid: 74.59 bcm• Gas imported: 69.35 bcm• Gas production: 5.24 bcm

Import by entry points (bcm/year)

2015 2016 2017

Tarvisio 29.92 28.27 30.18

Mazara del Vallo 7.24 18.87 18.88

Passo Gries 10.63 6.70 7.25

Gela 7.11 4.81 4.64

Gorizia 0.03 - 0.02

Cavarzere (LNG) 5.80 5.72 6.85

Livorno (LNG) 0.04 0.48 0.91

Panigaglia (LNG) 0.05 0.22 0.22

Panigaglia LNG terminal• Gas liquefied: 0.63 bcm• Tankers loads: 15• Daily regasification capacity: 17,500 m3 of LNG• Yearly maximum capacity of injection into the grid: 3.5 bcm

TransportThanks to investments to develop and upgrade infrastructure, the network transportation capacity has always grown in the past years. In line with the provisions of the EU Third Energy Package, the Company is committed, through specific investments, to facilitating trans-European flows, thanks to the development of reverse-flow transport infrastructure. The gas from abroad is injected into the national network via eight entry points where the network joins up with the import pipelines (Tarvisio, Gorizia, Gries Pass, Mazara del Vallo and Gela) and with the LNG regasification terminals (Panigaglia, Cavarzere and Livorno). Once it has been imported or regasified, the gas is transported to the local distribution networks, the regional network redelivery points or large end users such as thermoelectric power stations or manufacturing plants.

Snam Rete Gas allocates transportation capacity to the shippers upon their request. Then they gain the right – as Users – to inject and withdraw at any time during the thermal year, a quantity of gas not greater than the daily capacity allocated. Terms to access the transportation service are set out in the Network Code. The shippers have the possibility to make sales and gas exchanges at a Virtual Trading Point (PSV) of the National Network, thanks to the dedicated IT platform.

LNG regasificationThrough the Panigaglia regasification plant, Snam provides the Italian gas system with the proper diversification of sources, while ensuring a high degree of flexibility in terms of supply.

The process for the extraction of natural gas from the fields, its liquefaction for transportation by ship and subsequent regasification for use by the users, forms the ‘LNG chain’. The process begins in the country of the exporter, where the natural gas is brought to a liquid state by cooling it to -160°C and subsequently loaded onto tankers for shipping to the LNG regasification terminal. At the regasification terminal, the LNG is unloaded, then heated and returned to a gaseous state before being injected into the natural gas Transportation network.

The journey of natural gas in Italy through Snam infrastructures

2017 data

Tarvisio

Gorizia

Cavarzere(regasification terminal)

Gela

Mazara del Vallo

Livorno OLT(regasification

terminal)

Panigaglia (LNG)

Passo Gries

National pipeline network

Compression stations

Regasification terminal

Import points


• Gas moved into the system: 19.92 bcm• Gas injected: 9.80 bcm• Gas withdrawn: 10.12 bcm• Strategic storage capacity: 4.5 bcm• Availability storage capacity: 12.2 bcm• Concessions: 10 (9 active)

StorageSnam storage capacity has sizeably increased over the last decade, thanks to relevant investments both to increase capacity of existing fields and to develop new sites.

The gas storage system fulfils different requirements between supply and consumption that are derived from the seasonality of demand. The injection phase into the National Network is generally concentrated between April and October, while the withdrawal phase from fields, treatment and delivery to users via the Transportation Network is usually concentrated between November and the following March. Storage also ensures that strategic quantities of gas are available to compensate for any lack of or reduction in non-EU supply or crises in the gas system. Through its subsidiary company Stogit, Snam is the major Italian operator and one of the leading European natural gas storage operators, via eight storage fields in Lombardy (four), Emilia-Romagna (three) and Abruzzo (one). The storage business makes use of integrated infrastructure comprising deposits, wells, gas treatment plants, compression stations and the operational dispatching system.

2017 data

Tarvisio

Gorizia

Cavarzere(regasification terminal)

Gela

Mazara del Vallo

Livorno OLT(regasification

terminal)

Panigaglia (GNL)

Passo Gries

Calculation of net invested capital recognised for regulatory purposes (RAB)

Revalued historical cost



Deduction of restoration costs recognised

Return of net invested capital recognised for regulatory purposes (real WACC pre-tax)

5.4% 2016/18 6.6% 2016/18 65% 2016/18

Incentives on new investments

Transitional period(investments in 2018-2019):+1% for 12 years(investments in new transportation capacity and with positive cost-benefit analysis)

Return on investments t-1 (from 2017 investments) to offset regulatory time-lag

Transitional period(investments in 2018-2019):+1.5% for 12 years(investments in new regasification capacity)

Return on investments t-1 (from 2017 investments) to offset regulatory time-lag

Transitional period

With holding for 8 years of 20% of revenues in excess of revenue recognised resulting from insolvency procedures

Return on investments t-1 to offset the regulatory time-lag (from 2014)

Efficiency factor (XFACTOR)

Transitional period+1.3% - operating costs

0% Transitional periodTo be defined in P.T. 2019

Transportation Regasification Storage

The Regulatory Authority for Energy, Networks and Environment (ARERA) has regulated the tariff system in each business, defining the criteria for setting the tariffs in different regulatory periods. The rate of return on regulatory invested capital (WACC) has been in force since 1 January 2016. For the regulations of the infrastructural gas services, the Authority has established a regulatory period lasting six years (2016-2021); moreover, a mechanism of infra-period WACC update has been envisaged, based on the trend of the macroeconomic scenario.

Transport 4 years + 2 years (transitory period) To December 2019

Regasification 4 years + 2 years (transitory period) To December 2019

Storage 4 years + 1 years (transitory period) To December 2019

Regulatory framework: businesses tariff scheme

SNAMStorage sites


International development, overview

TERÉGA• Operates in the South-East of France

and helps the energy security of the country.

• With its strategic position, between the French and the Spanish markets, will succeed in playing a key role in achieving greater integration at a European level.

Snam holding

40.5%

LNG terminalInternational AssetsNational Networks

Interconnector• Contributes to the security of supply

in North-West Europe. Following the closure of the Rough storage field, it plays a key role for UK market.

• With its bi-directional flows, also makes it possible to boost the flexibility and diversification of the system.

Snam holding

23.68%

GCA• With its strategic positioning in

Central Europe, it plays a key role in the transport of gas toward many markets adjacent to the Austrian market.

Snam holdingindirectly

19.6%In joint venture con Allianz

(Snam 40%)

TAG• A strategic infrastructure for Italy, it

transports flows coming from East.

• Strategic opportunity to establish reverse flow capability to Southern Germany and Eastern Europe.

Snam holding

84.47%**Equal to 89.22% of economic rights

TAP• Contributes to the full-scale

development of the South corridor.

• It allow for diversification of supply, through the importation of gas from Azerbaijan.

Snam holding

20%


Snam, the European scenarioWithin the european energetic policy, Italy holds an important role, as it is placed in the middle of the main European gas routes. In line with the principles of the European Third Energy Package, which promotes the integrated development of infrastructures and common rules for network access in different countries, and in order to take advantage of the privileged position it enjoys in Europe’s gas corridors, Snam, from 2012, has increased its focus on strategic partnership and M&A operations. With the positioning of its domestic and international assets, Snam will have a leading role in the investment projects that will be needed in the next 20-30 years in Europe.

APRIL 2018

Consortium headed by Snam (60%), in jv with Enagás and Fluxys, successful bidder of the tender for the privatisation of DESFA, national operator of gas infrastructure in Greece. Closing of the transaction in H2 2018.

FEBRUARY/SEPTEMBER 2012

Acquisition of a 31.5% stake of Interconnector UK (16.41% from eni and 15.09% from E-on), of a 51% stake of Interconnector Zeebrugge and of a 10% stake of Huberator through a joint ventury with Fluxys. This joint acquisition is a first important milestone in pursuing the aim of an integrated European gas network.

FEBRUARY/JULY 2013

Acquisition of a 45% stake of TIGF (Teréga from march 2018), heading a consortium in which GIC holds a 35% stake and EDF the remaining 20%.

DECEMBER 2014

Completion of the acquisition of the stake (84.47%) held by CDP GAS in Trans Austria Gasleitung GmbH (TAG), approved by the Board of Directors on 12 September 2014.

DECEMBER 2015

In 2015 Snam’s international development continued with the acquisition of a 20% stake in Trans Adriatic Pipeline AG (TAP), the company responsible for developing the pipeline that will run from the Turkey-Greece border to Italy along the Southern Corridor, enabling gas produced in Azerbaijan to reach European markets, through the italian infrastructure.

DECEMBER 2016

It was completed in December the sale of 49% of Gas Connect Austria from OMV, the international integrated oil and gas company based in Vienna, to the Consortium composed of Allianz and Snam.

MARCH 2018

Acquisition by Snam and Fluxys of the 33.5% stake owned by CDPQ in Interconnector UK. Once the share transfer is completed, Fluxys and Snam, with a 76.32% and a 23.68% stake respectively, are the sole ultimate shareholders in Interconnector UK.


Production Transport & Storage Distribution Consumption

Methane

Biomethane

Hydrogen/syngas

Power to gas

Thermal gasification

Agricultural and organic waste

Final users and distribution networks

CNG/LNG stations

Small Scale LNG

Gas as a forever fuel

In February 2018, Ecofys published a study commissioned by the Gas for Climate, a consortium in which Snam is a member. The results of the research show “how gas can contribute to achieving the Paris Agreement’s objective in a cost-effective manner.”

The study explored the potential role of gas in a completely decarbonised energy system in 2050, coming to the conclusion that in the EU the production of renewable gas, in the form of biomethane and renewable hydrogen, could be increased to 122 billion cubic meters by that year.Further evidence from the study is that using this gas with existing gas infrastructure, smartly combined with renewable electricity in sectors where it adds the most value, can lead to annual cost savings of 138 billion euro compared to decarbonisation without a role for renewable gas.


Main economic-financial data

Transport, 2017• Regulated Revenues: 1,816 € million

Snam (million) 2016 2017

Total revenue* 2,415 2,441

Adjusted EBITDA 1,987 2,022

Adjusted EBIT 1,336 1,363

Adjusted Net profit 845 940

Net debt 11,056 11,550

Capex 906 1,034

**Net of pass-through items.

Regasification, 2017• Regulated Revenues: 18 € million

Storage, 2017• Regulated Revenues: 508 € million

Snam in the bond market: the credit ratingAt 31 December 2017, the Group’s net financial position was 11,550 million euro. Snam’s goal is to achieve a debt structure consistent with business requirements in terms of loan term and interest rate exposure. In October 2017, Snam successfullycompleted a buyback on the bond market with a total nominal value of 607 million euro, with an average coupon of approximately 2.5% and a remaining maturity ofapproximately 4.4 years. The repurchase price totaling 656million euro was largely financed through a new fixed rate bond issue, expiring on 25 October

2027, for a total amount of 650 million euro, with a coupon equal to 1.375% and a duration of ten years. In addition, Snam has signed a contract with the EIB for the financing of projects promoted by Snam Rete Gas, for 310 million euro, with a fixed rate of about 1.5% and maturing in 2037. These transactions on both the banking and bond market made it possible to optimise medium and longterm debt maturities by extending their average term andcreating conditions for a reduction in average borrowingcosts in 2018.

LASTUPDATE

11 June 2018

RATING FOR LONG-TERM DEBT

Baa1 (under review for downgrade)

RATING FOR SHORT-TERM DEBT

Not assigned

OUTLOOK

Negative

LASTUPDATE

8 November 2017


BBB+


A-2

OUTLOOK

Stable

LASTUPDATE

12 October 2017


BBB+


F2

OUTLOOK

Stable

Appendix | 43

Appendix Glossary

Reference heat capacity

Units of measurement

Transported natural gas composition

References

44 Appendix | 45Appendix |

Unbundling: ownership, corporate and accounting separation of import, transportation and storage activities of the vertically integrated companies of the gas, aimed at the beralisation of the market.

Regulatory period: period of time (usually four years) for which criteria are defined for setting tariffs for transport and dispatching, storing, distributing, regasifying liquefied natural gas.

Tariff: unit prices applied to the natural gas business.

Commercial termsThermal year: period of time into which the regulatory period is divided, currently coinciding with the calendar year.

National Network: set of pipelines, compressor stations and infrastructures that, at national level guarantee the transport of natural gas, through interconnection with international transport networks, production sites, to the delivery points for the distribution and use of natural gas.

Liquified Natural Gas, LNG: Natural gas comprised essentially of methane liquefied by cooling at around -160°C, at atmospheric pressure, to make it suitable for tanker transportation or reservoir storage. In order to be injected into the transportation network, the liquid must be reconverted into a gas at regasification plants and brought to the operating pressure of the pipelines.

Upstream: activity of reserch, drilling and coltivation of hydrocarbons.

Downstream: activities following the reserch and drilling of oil. In more details it regards the refining and processing of the oil to obtain products ready to be used; the storage and transport of oil products; the distribution and commercialization of fuel and lubricant through the distribution network.

Gas chain: totality of activities concerning the natural gas market, from the production/importation to the distribution to the final client.

Natural Gas: is a gas consisting primarily of methane and, at lower level, ethane, propane and higher hydrocarbons. The natural gas injected into the transportation network must respect a specific quantity to guarantee the interchangeability of the gas.

GlossaryEconomic and financial termsEconomic and financial terms: net investments made for operating reasons, being the sum of net working capital and non-current assets.

Weighted Average Cost of Capital (WACC): indicates the remuneration of the invested capital as recognised by the Authority (RAB).

Net debt: Indicator of the ability to meet financial obligations. Represented by gross financial debt minus cash and cash equivalents as well as other financial receivables not held for operations.

Incentives on investments: remuneration on the investments to be added to the base return.

Capex: costs of long-lasting assets where useful life does not expire over one reporting period.

Gross Operating Margin (EBITDA): unit of measurement to assess the group’s operating performance, as a whole and in the individual business segments, in addition to EBIT. Determined by the difference between revenue and operating costs.

Leverage: Indicator of financial structure. Measures a company’s level of debt and is calculated as the percentage ratio of net financial debt to net invested capital.

Regulated revenues: revenues from the regulated activities of the company.

Net profit: EBIT minus result from financial operations and income taxes.

Operative profit (EBIT): difference between revenues and costs in a given period; therefore the income from operations before costs and revenues from financial operations and taxes.

Regulatory termsNegotiated access: access system to the network based on individual contracts at prices freely negotiated between the parts (producer/suitable client and network operator).

Regulated access: access system to the network based on individual contracts (producer/suitable client and network operator) at prices regulated by a proper agency ((Authority for Energy, Networks and Environment).


Units of measurement

To convert in multiply for

pinch in millimeters mm 25.4

feet ft meters m 0.305

statue mile mi. kilometers km 1.609

nautical mile mile kilometers km 1.853

short ton sh. ton ton t 0.907

long ton long ton ton t 1.016

pound lb. kilometers kg 0.454

kilogram kg newton N 9.81

pound per square inch psi bar bar 68.95x10-3

kilogram per square cent. kg/cm³ bar bar 0.981

atmosphere atm bar bar 1.013

cubic feet ft³ m3 m³ 28.32x10-3

gallon U.S. gal liters l 3.785

barrels (42 gal. U.S.) m3 0.159

kilocalories kcal joule J 4,185

kilocalories kcal kilowatt hour kWh 1.163x10-3

british thermal unit Btu joule J 1,055

horse power (meters) CV kilowatt kW 0.735

horse power hp kilowatt kW 0.746

gas m3 m3 kilowatt hour kWh 10.35

gas m3 m3 tons of oil equivalent toe 0.0008

To convert in multiply for

oil barrels bbl oil tons t 0.135

daily oil barrels bbl/d yearly oil tons t/a 50

Btu millions MMBtu kilowatt hour kWh 2.93

liquid methane tons t m3 methane gas m3 1,400

daily cubic feet ft3/d yearly m3 m/a 10.34

kilocalories kcal gas m3 m3 0.11x10-3

Btu millions MMBtu gas m3 m3 27.69

megajoule MJ gas m3 m3 0.026

gas m3 m3 megajoule MJ 38.1

Conversion factors

Equivalences

Reference heat capacity

LHV (MJ/kg) HHV LHV (kcal/kg) HHV

Vapour coal 26.1 / 6,250 /

Sulcis coal 22.3 / 5,330 /

Green lumber 10.5 / 2,500 /

Coke of coal 29.3 / 7,000 /

Reference crude oil 41.8 44.4 10,000 10,600

Dense combustible oil 40.2 42.5 9,600 10,150

Fuel oil 42.7 45.2 10,200 10,800

Virgin Naphta 43.9 47.7 10,500 11,400

LPG 46.0 50.2 11,000 12,000


Trasported natural gas composition

Algeria North Russia LNG Nat. Libya Europe Prod.

Helium % Mol. 0.15 0.04 0.01 0.00 0.00 0.08

Nitrogen = 3.99 2.31 0.80 0.97 0.58 0.43

Carbon dioxide = 0.65 1.19 0.09 0.00 0.03 1.42

Methane = 84.25 90.10 97.83 89.15 99.33 86.89

Superior hydrocarbons = 10.96 6.37 1.27 9.88 0.06 11.18

High heating value MJ/Smc 40.094 38.891 37.969 40.786 37.573 40.803

Low heating value MJ/Smc 36.233 35.095 34.202 36.834 33.829 36.860

Wobbe index MJ/Smc 49.824 49.485 50.380 51.901 50.302 51.237

Volume mass kg/Smc 0.7936 0.7569 0.6960 0.7568 0.6837 0.7771

Z - 0.9974 0.9977 0.9979 0.9975 0.9980 0.9974

References

Web sites:

Energy Information Administration: www.eia.govBP global: www.bp.comMinistero Sviluppo Economico: www.sviluppoeconomico.gov.itSnam: www.snam.itIhs: www.ihs.com

Report:

• Snam Annual report• BP statistical Review of World Energy, 2018• The LNG Industry - 2017, International Group of LNG Importers (GIIGNL)• World Gas LNG Report - 2018, IGU• Bloomberg data• Supply natural gas, EUROSTAT• Situazione energetica nazionale 2017, MSE

References

www.snam.it

Piazza Santa Barbara, 720097 San Donato Milanese (MI)Tel. +39 0237031

Limited CompanyFull paid-up capital: euro 2,735,670,475.56Milan Company Register - Tax code and VAT No 13271390158R.E.A. (Economic-Admin. Roll) 1633443

GraphicsInarea e Gosmarty

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This publication, a consulting handbook which collects data on the natural gas sector, is the new edition of a manual issued between 1973 and 2000 that in the course of the years has been named by the people of the business “metanino”.

September 2018

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