Snam S.p.a. · MIL:SRG
Snam — Investor Day (October 2013)
33 slides from Snam's investor day presentation, Oct 10, 2013
Slide 1: Investor Day
Investor Day Norwich, October 10th , 2013 snam.it
Slide 2: Agenda
Agenda Key Highlights of Snam International Strategy Implementing International Growth in European Gas Infrastructures • Strategic Alliance with Fluxys and IUK • TIGF 2
Slide 3: Agenda
Agenda Key Highlights of Snam International Strategy Implementing International Growth in European Gas Infrastructures • Strategic Alliance with Fluxys and IUK • TIGF 3
Slide 4: Playing a Leading Role in Integrating the European Gas Market
Playing a Leading Role in Integrating the European Gas Market Carlo Malacarne Chief Executive Officer 4
Slide 5: Key Themes in the European Gas Business
Key Themes in the European Gas Business…. Gas Market • Increasing dependence on imports Improving: driven by declining domestic production • Supply diversification • Decreasing reliance on long term • Interconnections between CHALLENGES contract impacting security of supply countries TRENDS • Flexib
Slide 6: Drive Snam Business Development in Italy and internationally
…drive Snam Business Development in Italy and internationally A propelling strategy consistent with the European …creates significant benefits for Snam and Italian political and legislative framework… Italian regulation • Creating new investment opportunities in Italy, while optimising the return on
Slide 7: Snam Infrastructure situated at the Heart of Energy Corridors
Snam Infrastructure situated at the Heart of Energy Corridors* 1 South - North gas interconnections (South Western Europe) South – North gas interconnection 2 (Central Eastern and South Eastern Europe) 4 Southern Gas Corridor (Caspian region) 3 Snam-Fluxys 4 Interconnection plan of Baltic energy mar
Slide 8: Agenda
Agenda Key Highlights of Snam International Strategy Implementing International Growth in European Gas Infrastructures • Strategic Alliance with Fluxys and IUK • TIGF 8
Slide 9: Implementing International Growth in European Gas Infrastructures
Implementing International Growth in European Gas Infrastructures Federico Ermoli Director of Business Development and International Activities 9
Slide 10: Agenda
Agenda Key Highlights of Snam International Strategy Implementing International Growth in European Gas Infrastructures • Strategic Alliance with Fluxys and IUK • TIGF 10
Slide 11: Snam – Fluxys Strategic Alliance
Snam – Fluxys Strategic Alliance Strategic rationale • Strategic Alliance to create gas interconnections to increase liquidity in EU markets • Infrastructure integration (transport, storage, and LNG) and development of additional services for market players Expected bi-directional flow transmission
Slide 12: IUK: company overview
IUK: company overview Overview Geographical footprint Shareholder structure • Interconnector (UK) Limited operates a subsea gas pipeline and terminal facilities to provide a strategic Interconnector UK→BE: 20 Bcm/y bi-directional link between the UK and continental BE→UK: 25.5 Bcm/y European energy
Slide 13: IUK: investment rationale
IUK: investment rationale UK GAS MARKET UK INTERCONNECTOR SNAM THE LARGEST IN EUROPE BI-DIRECTIONAL FULLY ALIGNED CHARACTERISTICS INCREASING IMPORT DEPENDENCE PROVIDE FLEXIBILITY WITH SNAM AND DIVERSIFICATION GROWING NEEDS OF INTERNATIONAL OF SUPPLY SOURCES TO INTERCONNECTIONS UK AND CONTINENTAL ALS
Slide 14: IUK: transmission assets
IUK: transmission assets TRANSMISSION CAPACITY (Bcm/y) IMPORT CAPACITY EXPANSION Installation of compressors in the Zeebrugge terminal and ORIGINAL CASE a pressure let-down station in Bacton UK export: 20 Bcm/y (=1/3 UK gas market) The Reverse Capacity gradually enhanced in 3 UK import: 8.5 Bcm/y wi
Slide 15: IUK: market framework
IUK: market framework IUK utilization and clients Key elements • IUK today mainly works as hub trading optimisation tool, • Snam investment in IUK characterized between two of the most liquid markets in Europe (NBP and by protected revenues, with a low-risk ZEE) profile • The most significant shippe
Slide 16: IUK: financials
IUK: financials Key financials* mln £ 2009-2010A 2010-2011A 2011-2012A • Snam consideration: € 131* mln Revenues 159.0 168.2 172.9 • Cash payback till Sept 2013**: ~17% . EBITDA • Expected EPS contribution 2013*: ~1% 127.5 131.2 137.3 EBIT 97.0 100.4 106.8 Financial optimization Net Income 73.9 78.2
Slide 17: Agenda
Agenda Key Highlights of Snam International Strategy Implementing International Growth in European Gas Infrastructures • Strategic Alliance with Fluxys and IUK • TIGF 17
Slide 18: TIGF: company overview
TIGF: company overview Overview Geographical footprint Shareholder structure • TIGF is the second largest French infrastructure operator, after GDF Suez companies (GRTgaz and PEG North Storengy), in the transmission and gas storage business: (Transmission) (Storage) • 5,000 km transmission network,
Slide 19: TIGF: investment rationale
TIGF: investment rationale PLATFORM TO: • DEVELOP SOUTH KEY STEP WESTERN EUROPEAN STRATEGIC INFRASTRUCTURE MARKET TO DEVELOP DE-BOTTLENECKING OF POSITIONING SPANISH LNG IMPORT SNAM CAPACITY OF TIGF ASSETS • SUPPORT THE INTERNATIONAL DEVELOPMENT OF THE WESTERN LEG OF STRATEGY SOUTH-NORTH CORRIDOR 19
Slide 20: TIGF: transmission assets
TIGF: transmission assets TIGF assets map Overview of TIGF assets • Sole transmission network in the area • More than 5,000 km of gas transmission pipelines and 7 compressor stations with a total power output of 70MW • 13% of the total volume transported in France • 35 shippers • 138 industrial deli
Slide 21: TIGF: current transmission regulatory framework
TIGF: current transmission regulatory framework • 4 years duration Regulatory period • From April 2013 to March 2017 • RAB calculated according to revaluated historical cost methodology Transparency, clarity and stability • WACC calculated according to CAPM methodology • Linear depreciation accordin
Slide 22: TIGF: transmission - main regulatory figures (2013-2016)
TIGF: transmission - main regulatory figures (2013-2016 period) Allowed Revenues* = Remuneration + Depreciation + Opex * No exposure to volume risk • RAB equal to € 1,118 mln at 31.12.2012 Remuneration • WACC equal to 6.5% in real terms pre-tax 2.0% Real risk-free rate* (RAB x WACC) • WIP remunerate
Slide 23: TIGF: transmission investment plan
TIGF: transmission investment plan Capex 2013-2016 (€ mln) Capex 2013-2016 -Incentive scheme 132 121 89 82 ~ 20% ~ 80% 2013 2014 2015 2016 Source: CRE, Deliberation portant décision sur le tarif d’utilisation des réseaux de transport de gaz naturel, 13 Dec. 2012 Incentivized capex Over € 420 mln c
Slide 24: TIGF: evolution of RAB and allowed revenues
TIGF: transmission - evolution of RAB and allowed revenues RAB* evolution (€ mln) Allowed Revenues evolution* (€ mln) RAB yearly updated by inflation considering 100% capacity revenues budget of investments and disposals (no exposure to volume risk) CAGR 2012-2016 +6.3% CAGR 2012-2016 +9.2% 1,427 1,
Slide 25: TIGF: storage assets
TIGF: storage assets Lussagnet field Storage assets • TIGF operates approx. 20% of French storage capacity, exporting winter flexibility to southern France and Spain • 2 aquifer storage facilities, backed-up by a single compression system, for a total storage capacity of around 5.7 Bcm (working gas
Slide 26: TIGF: storage capacity assignment
TIGF: storage capacity assignment 2013 TIGF storage capacity breakdown (Bcm) Minimum long term “granted” capacity booking 61% 46% 15% 39% 1.1 0.4 2.7 1.2 Long-term Public service Assignable Total TIGF contracts obligation market capacity capacity Source: Snam estimates on TIGF data 26
Slide 27: TIGF: storage business
TIGF: storage business Revenues & capacity subscription rates Business performances Included in the 120% acquisition business 180 plan • Successful commercial policy, based on 147 A 148 A an effective mix of new and competitively 160 100% priced storage products 124 F 140 80% 120 • Better positionin
Slide 28: TIGF: impact of French market convergence
TIGF: impact of French market convergence Current situation 2015: Common TIGF-GRTgaz 2018: Merger of North and South South PEG PEGs Pipe Taisnières Taisnières Taisnières Obergailbach Obergailbach Obergailbach LNG PEG PEG NORTH NORTH North-South North-South Montoir Montoir Montoir PEG PEG FRANCE PEG
Slide 29: TIGF: financial structure of acquisition
TIGF: financial structure of acquisition • Limited financial commitment for shareholders • Boosts shareholders return and cash flow generation • Maintains TIGF’s risk profile in line with investment grade 29
Slide 30: TIGF: financials
TIGF: financials Profit & Loss Acquisition Highlights €m 2010A 2011A 2012A Revenues transport 367 223 353 206 363 215 • Implied EV of € 2,390 mln storage 144 147 148 • 2012 Ebitda Adj: € 247 mln EBITDA 239 232 224 • Snam financial commitment (45% stake): € 597 mln margin 65% 66% 62% • Expected EPS c
Slide 31: TIGF: partage project
TIGF: partage project Develop technical & commercial networking Project Share best practice and Identify opportunities for improvement Objectives Develop action plans to create value Up to now: Project launched • 7 teams working in parallel before close of deal on different work-streams • Over 70 pe
Slide 32: Conclusion
Conclusion International development focused on Organic investments in Italy North – South and Est – West corridors 32
Slide 33: Q & A Session
Q & A Session 33