Snam S.p.A. · MIL:SRG
Snam — FY2016 Earnings Presentation
39 slides from Snam's earnings presentation, Mar 7, 2017
Slide 1: Full-year 2016 results and 2017-2021 plan update
Full-year 2016 results and 2017-2021 plan update London, March 7th, 2017 snam.it
Slide 2: Agenda
Agenda 1. 2016 results 2. 2017-2021 plan update 3. Additional opportunities 4. Concluding remarks 2
Slide 3: 2016 results
01. 2016 results 3
Slide 4: In June we presented a plan with 5 key pillars
In June we presented a plan with 5 key pillars Excellence Solid in project Additional investment Stable and execution value plan in visible regulation and creation existing operational opportunities portfolio efficiency Sound Financial Policy 4
Slide 5: We are delivering on these objectives
We are delivering on these objectives 2016 key achievements Solid investment plan • Invested €906m of capex in Italy, +3% vs 2015 and in line with 2016 guidance in existing portfolio • Installed +355 km of network; +46 MW of compression capacity; +500 Mcm storage capacity • Invested € ~170m in TAP,
Slide 6: Key achievements in our European international associates
Key achievements in our European international associates 10 operational projects to support international Leverage of Snam capabilities on associates in the last 2 years (eg Debt optimization project development roll-out of Snam custom tools) Refinancing activities in TAG & TIGF TAP awarded Snam a
Slide 7: Strong full-year 2016 results
Strong full-year 2016 results RAB (2016E) € 19.4 bn In line with guidance (€ 21.3 bn including associates) >95% from regulated activities Revenues € 2,560 m Up 1.8% on 2015 excluding WACC impact Down 2.6% on 2015 including WACC impact Flat nominal controllable fixed costs EBITDA adj. € 1,987 m Up 2.
Slide 8: Adjusted and pro-forma results
Adjusted and pro-forma results €m +155 +19 -190 861 826 826 845 671 671 Reported Italgas One-off Adjusted Proforma Proforma Net Profit* Discontinued financial Net Profit Adjustment Adjusted 2016 Operations items 2016 Net Profit 2016 * Includes net profit form discontinued operations 8
Slide 9: 2016 results: Ebitda analysis
2016 results: Ebitda analysis € mn 2,057 +1 +14 1,987 -85 EBITDA Regulated Controllable Other EBITDA 2015 revenues fixed costs * 2016 Strong performance excluding impact of WACC update * At constant perimeter 9
Slide 10: 2016 results: adjusted net profit analysis
2016 results: adjusted net profit analysis € mn 863 826 845 +69 +10 +29 -145 Adj. Net profit EBIT Net Interest Net Income from Income taxes Adj. Net profit Net profit adj. 2015 Income associates 2016 pro-forma* (expenses) 2016 Net income benefited from reduction in cost of debt, fiscal charges and i
Slide 11: 2016 cash flow
2016 cash flow € mn +651 -99 1,378 -155 1,223 -1,133 826 115 -875 90 -773 -103 Adj. Net Depreciation Change in Adj. Cash One-off Cash flow Net Free Free Dividend Buy Cash profit & Other working flow financial from investmets cash flow cash flow Back flow items capital from items operation discontinu
Slide 12: 2016 change in net debt
2016 change in net debt € mn 13,779 +773 +15 11,056 -3,511 Net financial Cash flow Non cash Italgas Net financial debt 2015 2016 financial Demerger debt 2016 items 12
Slide 13: Main financial actions in 2016
Main financial actions in 2016 2016 Drivers Total committed credit facilities and bonds by source* Before Italgas demerger After Italgas Demerger Resizing of financial structure (as of 31 Dec: €12.7bn) (as of 30 Sept: €16.3bn) following Italgas demerger: • €2.75bn bond buyback 10 9 Debt capital mark
Slide 14: Another year of delivery
Another year of delivery Cost of debt reduction Maturity improvement • 2.4% cost of debt in 2016 • Average tenor of M/L term debt: > 5 years or +1 year vs. June 2016 thanks to LM exercise • -10bps vs. 2016 guideline • -40bps vs. 2015 • No major refinancing peaks FINANCIAL STRUCTURE (€ bn) • Strong l
Slide 15: Balance sheet solidity and financial structure efficiency
Balance sheet solidity and financial structure efficiency Solid Investment grade profile CREDIT RATING M/L TERM OUTLOOK • Firm commitment to current credit rating metrics (Net Debt/RAB <60%; Moody’s Baa1 negative FFO/Net Debt >11%) S&P BBB stable • Snam’s metrics well within rating agencies threshol
Slide 16: What we are doing and what's next in 2017
What we are doing and what’s next in 2017 Cost of debt and debt structure Financial flexibility Expected funding cost reduction from: Plan cash flow from operations to essentially cover capex and • Latest LM exercise, locking in 2017 benefits dividends • Management of future refinancing exercises an
Slide 17: 2017-2021 Plan
02. 2017-2021 Plan 17
Slide 18: 2017-2021 Plan – key highlights
2017-2021 Plan – key highlights • Increased investment plan €5bn of investments: €4.7bn of Italian capex (+€400m vs previous plan) and € ~270m TAP equity €1bn of Italian capex in 2017 vs €0.9bn in 2016 • Improved contribution from new activities Services: €150m of cumulated revenues, thanks to SGS (
Slide 19: Increased investment plan to €5bn
Increased investment plan to €5bn CAPEX 2017-2021 CAPEX 2017-2021 Transport & CNG Storage and LNG € 4.1 bn Development of € 0.6 bn Fiume Treste 4% storage field 8% Development of a 21% 22% 28% new level (F - level) 19% Support to the to the original North West pressure of the market and reservoir bi
Slide 20: 2017 Italian capex
2017 Italian capex CAPEX 2017 Transport & CNG Storage and LNG € 0.9 bn € 0.1 bn Redelivery points upgrading Maintenance activity to preserve high-level service 7% and security of the network 18% 6% 30% Support to the 1% 1% North West 40% Ravenna – Chieti market and bidirectional Replacements Pontrem
Slide 21: CNG roll-out 2017-2021: environmentally and economically sustainable mobility
CNG roll-out 2017-2021: environmentally and economically sustainable mobility Snam: €150m investment Network/Fleet operator Compressors / Dispensers / CNG infrastructure Gas Connection Storage shelters management Additional RAB: €60m €90m capex Total c.300 stations • Italian legislation implementing
Slide 22: New asset-light services adding high-margin revenues
New asset-light services adding high-margin revenues New regulated services Snam Global Solutions Already launched • New service platform created leveraging on • New balancing regime incentives (Oct 16) Snam key competences • Demand forecast • TAP contract award, €50m over three years • TSO actions
Slide 23: Solid contribution from associates
Solid contribution from associates Net income from associates Key drivers to 2021 results €m • Contribution from TAP: ~50m€ • Addition of GCA to Snam portfolio • Enhanced visibility on medium term results from new regulation ~200 in transport in France and Austria ~200 ITG 135 • Contribution from It
Slide 24: Ambitious plan to further strengthen our operational excellence
Ambitious plan to further strengthen our operational excellence Extensive deployment of new technologies to strengthen our operational performance >€200m of investments • Real time leak detection of which € ~160m in Industry 4.0 initiatives • Smart gas and augmented reality Invest in people and proc
Slide 25: Higher efficiency target, supported by a comprehensive set of initiatives
Higher efficiency target, supported by a comprehensive set of initiatives Saving target Supporting initiatives €m Operations and Maintenance: • Optimization of operating processes >25 • Internalization of processes and review of make-or-buy mix • Energy efficiency initiatives Corporate: • Renegotiat
Slide 26: Total costs trend
Total costs trend Core business costs flat in real terms CNG and SGS (1) 2016 PF New regulated Emerging costs Efficiency 2021 Core 2021 activities and from demerger business growing business dimension Core business costs flat in real terms, offsetting higher costs due New businesses and services exp
Slide 27: Regulatory framework in Italy and Europe
Regulatory framework in Italy and Europe Europe: good visibility on new regulation in transport Italy: inflation & spread linked, risk free floor in France and Austria 2014 2015 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 TAG Regulated 4° regulatory period 5° regulatory period GCA In
Slide 28: Robust growth to 2021
Robust growth to 2021 Consolidated RAB1 (€bn) EBIT (€bn) Net income (€m) CAGR 2016-2021 1% 1% 4% 19.4 1.34 5% 4.1 845 15.3 2016E 2021E 2016 2021E 2016 2021E Transport & LNG Storage 2016 guidance (€800m) Sustainable organic growth in the asset base and attractive returns 1. Total RAB evolution ca
Slide 29: 2017 guidance and growth targets
2017 guidance and growth targets Guidance 2017 Targets Investments € ~1.3* bn €5* bn 2017-2021 Consolidated RAB € ~19.8 bn 1% CAGR to 2021 Net income € 0.9 bn 4% CAGR to 2021 DPS cagr 2016-2018 DPS € cent 21.55 +2.5% Interim dividend from 2018 Debt/RAB*** at 2021 in line with YE 2016 Net debt € 11.5
Slide 30: Investment criteria
Investment criteria Financial flexibility H1 2016 Already invested or earmarked Investment approach • Additional capex of € 400mln on Criteria Italian infrastructure vs prior plan • Committed to current credit rating metrics and risk profile • Share buy back activated • Accretive returns (risk adjus
Slide 31: Additional opportunities
03. Additional opportunities 31
Slide 32: Improving context: gas demand recovery in Italy and Europe
Improving context: gas demand recovery in Italy and Europe Italian gas consumption EU gas consumption Weather adjusted, bcm bcm +3.1% +4.7% +4.2% +5.0% 71.9 437 461 66.7 68.6 420 2.0 20.6 2.0 20.6 2.0 18.5 Other Sectors 23.3 138.2 17.9 20.6 114.2 121.1 Thermoelectric 16.3 16.0 16.7 122.8 124.2 121.9
Slide 33: Demand will be supported by evolution in environmentally-friendly technologies
Demand will be supported by evolution in environmentally-friendly technologies Natural gas advantages Natural gas technology evolutions will support penetration • CNG vehicles are an immediately available Availability solution to reduce urban pollution • Abundance of resources • Growth expected in I
Slide 34: New supply sources, interconnections required to meet import requirements
New supply sources, interconnections required to meet import requirements Potential sources of gas LNG global oversupply NORTH Bcma SEA High demand1 800 Base demand1 RUSSIA 600 LNG Single market opportunity: Low demand1 400 • Greater Interconnections • Higher Flexibility 360 • Security of supply • L
Slide 35: Additional potential growth opportunities
Additional potential growth opportunities Main opportunities in Italy • New regasification capacity • Small scale LNG Reverse • Building the backbone in Sardinia flow • Maintenance and further replacement of fully French Market Area depreciated pipelines • Additional expansion of CNG network beyond
Slide 36: Concluding remarks
04. Concluding remarks 36
Slide 37: Concluding remarks
Concluding remarks Growing organic capex plan with fair regulation New stream of asset-light services Operational excellence and efficiency Well positioned to capture additional accretive opportunities Strict financial discipline Superior long-term returns with low risk profile 37
Slide 38: Disclaimer
Disclaimer Franco Pruzzi, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the company’s evidence and accoun
Slide 39: Full-year 2016 results and 2017-2021 plan update
Full-year 2016 results and 2017-2021 plan update London, March 7th, 2017 snam.it