News@Facts March 2014

News@FactsMarch 2014

News@Facts N. 1, March 2014

Regulatory environment

Transport and regasification tariffs

for 2014 approved p. 3

Focus

2013 dividend of 0.25 euro p. 3

News

New 600 million fixed-rate

bond issue p. 3

Sustainability developments p. 3

News

2014 Financial Calendar p. 4

News@Facts Issue 1 / Year 5

Information as of 21 March, 2014

Registered at the Court in Milan

Registration n. 534

as of November 26, 2009

Chief Director: Patrizia Rutigliano

Editorial Director: Marco Porro

Snam SpA - Piazza Santa Barbara, 7

20097 San Donato Milanese (MI) - Italy

T.: +39 023703 7272

F.: +39 023703 7803

During the next four years Snam will execute a sizeable investment plan, overall amounting to 6.0 billion euro, which will be focused on the strengthening of the domestic gas infrastructure. We aim to increase flexibility and security of the Italian gas system in the wider project of a more closely integrated European network.Both the goals of increasing transport capacity and making the physical export towards northern Europe possible will be pursued through the extension of about 1,000 km of the network of 32,306 km operating at 2013 year-end, in combination with the increase of the installed capacity of

RESULTS 12M 2012 12M 2013 Change

GAS INJECTED INTO THE NETWORK (BCM) 75.78 69.01 -8.9%

TOTAL REVENUE (MN €)* 3,621 3,529 -2.5%

EBITDA (MN €) 2,817 2,803 -0.5%

REPORTED EBIT (MN €) 2,111 2,034 -3.6%

REPORTED NET PROFIT (MN €)** 779 917 +17.7%

OPERATING INVESTMENTS (MN €) 1,300 1,290 -0.8%

In 2013 Snam has achieved significant results, proving the effectiveness of the operating management and the efficiency of the financial one; such results are particularly appreciable if considered in light of the unfavourable external environment,

The intervention: Message from the CEO of Snam, Carlo Malacarne

6.0 billion euro investments at the core of the 2014-2017 Strategic Plan

Performance: 2013 results

EBIT exceeds 2 billion euro

Continue on page 2

Continue on page 2

(*) Total revenue do not include the impact of IFRIC 12, related to the “Service Concession Arrangements”.(**) Net profit is attributable to Snam.

Carlo Malacarne,

CEO of Snam

continue The intervention: Message from the CEO of Snam, Carlo Malacarne

the compression stations of around 130 megawatt (+15% vs. 2013 year-end). Investments in the Transport business will absorb 3.6 billion euro, that is roughly 60% of the overall investments envisaged in the Plan.At the same time, in order to improve security and flexibility in the system, we expect to invest 0.9 billion euro in the Storage business, with the aim of rising by 18% the modulation capacity and by roughly 12% the peak capacity, compared to the levels at 2013 year-end.Lastly in the Distribution business we have defined an articulated series of targets that we aim to achieve through investments for 1.5 billion euro in total; firstly, the improvement of the service quality thanks to higher technological levels of metering; secondly, the development of new sections of the network in Municipalities that are presently uncovered; thirdly, the optimisation of the activity portfolio, also through new concession tenders,

in order to benefit from further cost efficiencies. On the back of these initiatives we expect to reach 6.6 million meters in 2017, with a 12% increase vs. 5.9 million units in 2013.From the perspective of the international development, the two acquisitions realised in the last two-year period – TIGF and Interconnector UK – provide a positive contribution to the results of the Group, in line with our expectations; on top of these, Snam is negotiating the acquisition of TAG, a company presently 89% controlled by CDP. This deal, as TAG is the company owning the transport rights in the Austrian pipeline linked to the Tarvisio Entry Point into the National Network, would represent an interesting opportunity of integration of a further portion of European gas corridors (in particular, the East-West corridor).In spite of the relevant size of the investment plan, over the 2014-2017 four-year period we expect to be able to

keep the Debt-to-Assets (consolidated RAB and non-consolidated associates) ratio at a level around 55%, considering that the operating cashflow generation will finance the invested capital growth. The RAB compound average growth rate over the 2013-2017 period is expected at 3.3%.In the period we target further increases in profitability, leveraging on three different factors:1. the increase in the RAB with higher levels

of remuneration, which we expect to rise from 31% in 2013 to 37% in 2017, thanks to heavier concentration in investments presenting a remuneration above the base one;

2. the continuous attention to operating efficiency and to cost control, which we expect to maintain stable in real terms over the four-year period, while the asset basis grows;

3. the ever growing contribution expected from the associates.

Lastly, the visibility of the cashflow generation, combined with the solid capital structure, will allow us to continue to remunerate our shareholders through an attractive and sustainable dividend policy: in the 2014-2015 two-year period we intend to distribute an annual dividend of 0.25 euro, payable each year in May.

characterised by an 8.9% decrease in transported volumes. Reported EBIT exceeds 2 billion euro, presenting a 3.6% decline vs. 2012. From a sector viewpoint, the operating performance of transport (+8.2%) and storage (+17.8%) has been neutralised by the drop recorded in the EBIT of distribution (-9.1%).Reported net profit reached 917 million euro (+17.7%), with a positive change of 138 million euro. Such increase is mainly attributable to the decline in net financial charges (+322 million euro), partly counterbalanced by higher taxes (-97 million euro), due to higher pre-tax profit. During 2013 Snam has executed its investment plan. Net operating investments totalled 1,290 million euro (1,300 in 2012), while equity investments amounted to 599 million, of which 597 related to the

TIGF acquisition.The positive cash flow from operating activities, equal to 1,698 million euro, allowed to almost fully cover the net technical investments and the TIGF acquisition, which have absorbed 1,790

million in total.Net financial debt, following the payment to shareholders of the dividend of 845 million euro, amounts to 13,326 million euro (+928 million euro compared with 31 December 2012).

continue Performance: 2013 results


2014-2017 PLAN TARGETS6.0 billion euro > Overall amount of investments in the 4-year period, of which 1.3 billion euro in 2014

+3.3% > RAB CAGR from 2013 to 2017

Ca. 55% > Average level of the “Debt/Total Assets” ratio in the 4-year period

2014-2015 TARGET0.25 euro Annual dividend per share in 2014 and 2015

CASH FLOW

Depreciation & other non

monetary assets

€ m

Net profit

Change in working

capital

Cash flow from operation

Net technical investments

Financial investments

Cash flow from Shareholders’

equity & other

Change in net debt 2013

Free cash flow

917

728

1,698

-599

-836 -928

-92

-1,191

53

2,000

1,800

1,200

800

400

-

-400

-800

-1,200

On 14 January 2014 Snam has successfully placed a new fixed-rate bond issue with tenor of 10 years, as part of the EMTN (Euro Medium Term Notes) Plan approved by the Board of Directors on 11 June 2013. The issue has been welcome by high-profile International investors, as the size of the demand prove, with orders exceeding 1.5 billion euro.

News: New 600 million fixed-rate bond issue

News: Sustainability developments

PRESTIGIOUS ROBECOSAM AWARD In January 2014 Snam has been awarded with the Bronze Class 2014 in the

“2014 Sustainability Yearbook”, following its inclusion in the outstanding companies’ group which are members of the Dow Jones Sustainability World Index, the most important Sustainability index in the world. Snam has been listed in the index since 2009.

SNAM MEMBER OF SIX ECPI INDICESAt the end of 2013 Snam results in being member of six indices of the ECPI group, in comparison

with the three indices in which it was listed in the previous year.- ECPI Global ESG Best-in-class Equity- FTSE ECPI Italia SRI Benchmark- FTSE ECPI Italia SRI Leaders- ECPI Ethical EMU Equity- ECPI Ethical Euro Equity- ECPI Ethical Global Equity.

The sophisticated ECPI research platform allows the monitoring of more than 4,000 companies; the stocks to be included into the indices are selected through an assessment process based on 100 EGS (Environmental, Social, Governance) indicators, divided into macro-categories.

In light of the good results achieved in the 2013 fiscal year, the Board of Directors will propose to the Shareholders’ Meeting of 15 April 2014 to approve the distribution of a dividend per share of 0.25 euro, in line with the one of the 2012 fiscal year.

In October 2013 Snam distributed an interim dividend of 0.10 euro per share: the final dividend will therefore be equal to 0.15 euro. Shareholders will receive the payment as of 22 May 2014, with an ex-dividend date of 19 May 2014.

Focus: 2013 dividend of 0.25 euro


DIVIDEND PER SHARE EVOLUTION (€) DIVIDEND YIELD

0.09

0.14

€0.23

0.10

0.14

€0.24

0.10

0.15

€0.25

0.10

0.15

€0.25

Transport and regasification tariffs for 2014 approved Through resolution 603/2013, in December 2013 the Authority has approved the 2014 tariffs for the activities of transport, dispatching and metering of natural gas. The resolution sets the RAB at 31 December 2012 at 14.8 billion euro. Tariffs have been set on the basis of recognised reference revenues at 1,969 million euro, of which approximately 135 million euro related to incentives for development investments. Real-pretax WACC is equal to 6.3%.Again in December, through resolution 604/2013 the Authority has also approved the 2014 tariffs for LNG regasifi cation. RAB at 31 December 2012 has been set at 108 million euro. Tariffs have been set on the basis of reference revenues equal to 27.6 million euro. Real pre-tax WACC is equal to 7.3%.

Regulatory environment

BOND CHARACTERISTICSListing market: Luxembourg Stock Exchange

Maturity: 22 January 2024

Coupon: 3.25% (spread of 128 basis points over the reference mid swap rate)

2010 2011 2012 2013

Interim Final

2010 2011 2012 2013

8,00%

7,00%

6,00%

5,00%

4,00%

3,00%

2,00%

1,00%

0

6.17%7.08% 7.10%

6.19%

The 2013 dividend yield, calculated on the basis of the year-end official price of 4.04 euro, is equal to 6.19%. As the bar chart shows, Snam has provided its shareholders with one of most attractive dividend yields over time.

Snam and the financial markets

Since the beginning of 2013 the Snam stock presents a performance in line with the one of the sector benchmark index (Euro Stoxx Utility). The Index of the blue chips of the Italian equity market (FTSEMIB) has showed stronger dynamics, even though characterised by huge volatility, being driven by the significant weight of the financial sector. The renewed interest of foreign investors for the Italian market, distinguishing both late 2013 and early 2014, has been focused on stocks presenting deep market capitalisation decreases as a consequence of the long-lasting phase of economic recession, in sight of the recovery expected at the end of 2014. In such an environment Snam share, presenting defensive features, has enjoyed a lower consideration by investors looking for purchasing bargains in the Italian market, despite investors have favourably welcomed both the 2013 annual results, released on 28 February, and the 2014-2017 Strategic Plan, presented on 19 March. Since the beginning of 2014, following the sustained growth that has characterised the last part of 2013, the Snam share price has oscillated in a lateral direction moving within the 4.00-4.15 euro range.

The average target price, representing the consensus of the 23 brokers covering the Snam stock, has improved from 3.9 euro as at the end of December 2013 up to the current level of 4.1 euro. In comparison with the picture provided in the last issue of News@Facts, also the high target-price improved, increasing from 4.35 to 4.50 euro. Presently, three brokers out of the 23 ones covering the Snam stock, present a target price of 4.50 euro. The set of recommendations has not substantially changed: most ratings either suggest to buy (10 brokers) or to adopt a neutral stance (further 11 brokers).


OFFICIAL LISTING MARKET > BORSA ITALIANA EQUITY MARKET

TYPE OF SHARES > ORDINARY SHARES

INDEX MEMBERSHIP > FTSEMIB / FTSE ALL-SHARE / EURO STOXX /

EURO STOXX UTILITY / STOXX EUROPE 600

ETHICAL INDEX MEMBERSHIP > FTSE4GOOD / ETHIBEL / CAPITAL PARTNERS /

DOW JONES SUSTAINABILITY WORLD / STOXX GLOBAL ESG LEADERS INDICES

/ VIGEO WORLD 120 / VIGEO EUROPE 120/ GC 100 /CDLI

CREDIT RATINGS > S&P’S: BBB+; MOODY’S: BAA1

CODES

ISIN > IT0003153415

REUTERS > SRG.MI

BLOOMBERG > SRG IM

HIGH (365 DD) > € 4.20 – 19 MARCH 2014

LOW (365 DD) > € 3.37 – 25 JUNE 2013

LAST DIVIDEND PAID (INTERIM 2013) >€ 0.10 – 24 OCTOBER 2013

TOTAL N. OF SHARES OF THE SHARE CAPITAL > 3,381,638,294

MKT CAP (BILLION EURO) > 13.83

SNAM AND THE STOCK EXCHANGE

CONSENSUS TARGET PRICE

LOW3.2

HIGH4.5

AVERAGE4.1

NUMBER OF BROKERS: 23

0 1 2 3 4 5

CONSOLIDATED FINANCIAL STATEMENTS AND DRAFT FINANCIAL STATEMENTS AT 31 DECEMBER 2013. DIVIDEND PROPOSAL FOR 2013. REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE FOR 2013. REPORT ON REMUNERATION FOR 2013. SUSTAINABILITY REPORT FOR 201327 FEBRUARY 2014 > BOD28 FEBRUARY 2014 > PRESS RELEASE AND CONFERENCE CALL

2014-2017 STRATEGIC PLAN18 MARCH 2014 > BOD 19 MARCH 2014 > PRESS RELEASE AND STRATEGY PRESENTATION

FINANCIAL STATEMENTS AT 31 DEC. 2013. DIVIDEND APPROVAL FOR 201315 APRIL 2014 > SHAREHOLDERS’ MEETING (SINGLE CALL)

FIRST QUARTER 2014 REPORT5 MAY 2014 > BOD6 MAY 2014 > PRESS RELEASE AND CONFERENCE CALL

2013 DIVIDEND DISTRIBUTION19 MAY 2014 > 2013 FINAL DIVIDEND EX-DIVIDEND DATE 22 MAY 2014 > 2013 FINAL DIVIDEND PAYMENT DATE

INTERIM FINANCIAL REPORT AT 30 JUNE 201429 JULY 2014 > BOD30 JULY 2014 > PRESS RELEASE AND CONFERENCE CALL

THIRD QUARTER 2014 REPORT30 OCTOBER 2014 > BOD31 OCTOBER 2014 > PRESS RELEASE AND CONFERENCE CALL

Press release will be issued in the morning (non-trading hours), with the exception of the one on 15 April 2014, which will be issued at the end of the Meeting.Conference Calls and Strategy Presentation take place in the afternoon.

2014 FINANCIAL CALENDAR

STOCK PRICE PERFORMANCE (2 JANUARY 2013 – 21 MARCH 2014)STOCK PRICE (CLOSING PRICE OF 21 MARCH 2014 = 4.09 EURO)COMPARED WITH SECTOR AND MARKET INDEX (BASE 2 JAN.2013 =100).

BROKER RECOMMENDATIONS

NUMBER OF BROKERS: 23

0 2 4 6 8 10 12 13

ADD/BUY4

OUTPERFORM6

HOLD/NEUTRAL11

REDUCE/SELL1

UNDERPERFORM1

SNAM EURO STOXX UTILITY FTSEMIB

Jan2013

Feb2013

Mar2013

Apr2013

May2013

Jun2013

Jul2013

Aug2013

Sep2013

Oct2013

Nov2013

Dec2013

Jan2014

Feb2014

Mar2014

130

125

120

115

110

105

100

95

90

85

In-depth in Snam businesses - TRANSPORT AND DISPATCHING


News – New steps into international development: MOU for TAG acquisition

Snam has become an international operator thanks to the acquisitions completed over the last two years• of the 45% stake in TIGF, the company operating in transport

and storage in South France, purchased in consortium with CIG (35%) and EdF (20%),

• of the 31.5% stake – purchased through a JV with the Belgian operator Fluxys – in the Interconnector UK, the company operating the submarine pipeline linking United Kingdom and Continental Europe.

A new signifi cant step into international development is represented by the recent signature of the Memorandum of

Understanding, which sets the process to acquire the present stake (89%) held by Cassa Depositi e Prestiti in TAG GmbH, through a negotiation already underway.The strategic value of this acquisition is important to Snam, since TAG owns the transport rights in the pipeline connecting the Slovenian-Austrian border with the Tarvisio entry point into the National Network. TAG infrastructure system, which is articulated into three pipelines of 380 km (1,140 km in total) and into fi ve compression stations, presents a transport capacity of 47.5 bcm per year.The control of TAG would therefore allow Snam to integrate the West-East corridor, in which it is already present with the stake owned in TIGF.

8 entry points of the National Network for natural gas coming from abroad: Tarvisio, Gorizia, Passo Gries, Mazara del Vallo, Gela, as well as the LNG terminals in Panigaglia, Rovigo (Cavarzere) and Livorno.

53 entry points of the National Network at which national production is injected.

2 virtual entry points, one for each storage operator (Stogit SpA and Edison Stoccaggio SpA).

69.01 bcm of natural gas injected into the Network in 2013.

32,306 km Transportation Network in use at 2013 year-end.

108 shipper having transport contracts with Snam Rete Gas.

INVESTMENTS OBJECTIVES

● Develop new infrastructure along Italy’s South-North backbone and in the Po Valley, with the aim to increase transport capacity, diversify supply sources and make physical export to North Europe possible.

● Increase flexibility and liquidity of the domestic and European market, even through the offer of new integrated services to system operators.

Saturation (%)Transport Capacity

Allocated Capacity

87.0375.6 326.9

TRANSPORT INVESTMENTS IN 2013Breakdown by level of remuneration

2014-2017 INVESTMENTS IN TRANSPORT

3.6 billion euro(of which 0.7 billion euro in 2014)

500 600 700 800 900 1000

2011892

2012700

2013672

TRANSPORT OPERATING INVESTMENTS (mn euro)

1000 1050 1100 1150 1200 1250

20111,137

20121,135

20131,217

TRANSPORT EBIT (mn euro)Transport continues to represent the most relevant portion of the four-year Investment Plan of Snam.

Snam has planned to invest 6.0 billion euro in Italy in the 2014-2017 four-year period, of which approximately 60%, that is 3.6 billion euro, in the transport business. As the 2013 fi gures prove (see chart on the right), most of the Snam investments benefi ts from higher remuneration than the basic one.

REMUNERATION RATE FOR NEW INVESTMENTS: 7.3%

TRANSPORT CAPACITYCALENDAR YEAR 2013 (bcm/d) Greater return of 1%

Greater return of 2%

New compression stations

Greater return of 3%

Basic rate of return

New pipelines

41%

22%

14%

23%

News@Facts March 2014

Economy & Finance

Transcript of News@Facts March 2014