Snam S.p.A. · MIL:SRG
Snam — FY2017 Earnings Presentation
41 slides from Snam's earnings presentation, Mar 14, 2018
Slide 1: Full-year 2017 results and plan update
Full-year 2017 results and plan update London March 14th , 2018
Slide 2: Key Highlights
Key Highlights Long-term Strong 2021 attractive delivery in targets shareholder 2017 improved remuneration 2017 results above guidance Increasingly supportive gas scenario • 2.5% DPS growth confirmed for • € 1,363m EBIT +2% vs 2016 • Growing demand and favourable outlook 2018 and extended to 2019 (f
Slide 3: Full-year 2017 results
1 e Full-year 2017 results
Slide 4: 2017: progress on key pillars of the plan
2017: progress on key pillars of the plan What we promised What we achieved Increased investment plan in core activities • €1.034bn capex in Italy • €1bn capex in 2017 • Acquisition of Infrastrutture Trasporto Gas, stake in A-LNG • New balancing system launched; ca. €8m of revenues to YE 2017 Improv
Slide 5: 2017: strong financial results
2017: strong financial results Regulated revenues (€m) EBIT (€m) +1.9% +2.0% • RAB increase • First results from • Regulated services efficiency programme more than offsetting 2,299 2,342 1,363 1,336 run-rate demerger dissynergies 2016 PF 2017 adj 2016 PF 2017 adj EBITDA Net income (€m) NFP (€bn) +1
Slide 6: 2017 results: Ebit adj.
2017 results: Ebit adj. € mn Ebit benefiting from revenue growth, cost efficiency programme 6
Slide 7: Focus on cost efficiency programme
Focus on cost efficiency programme Main initiatives 2017 Efficiencies 2017 by area • Single dispatching and integrated management of transport and storage plants • Optimization in O&M and ICT contracts Operations • Use of new smart technologies € 19m Staff • Selective reduction in external services
Slide 8: 2017 results: adjusted net profit
2017 results: adjusted net profit € mn Outperformance on financial charges further drives net income growth 8
Slide 9: 2017 Cash Flow
2017 Cash Flow € mn Strong cash generation covering organic capex and dividends 9
Slide 10: 2017 Key financial highlights
2017 Key financial highlights Cost of debt reduction Maturity improvement 2% cost of debt in 2017: -20bps vs. guidance driven by: • Average tenor of M/L term debt: 5.5 years at end 2017 vs. 5 years at end 2016 thanks to Liability Management and new funding • €2.2bn bonds issued at ca. 1% (7.5 years
Slide 11: Continuous debt structure optimization
Continuous debt structure optimization De-risking Business Plan Cost of debt and debt structure Actions to manage risk from rate/spread increases • Expected further cost of debt reduction thanks to: • >3/4 fixed rate debt vs floating • Full effect of 2017 Liability Management exercise • Further M/L
Slide 12: Scenarios & 2017-2021 plan update
Scenarios & 2017-2021 plan update
Slide 13: Increasingly supportive gas scenario in Italy
Increasingly supportive gas scenario in Italy Italian gas demand Weather adjusted, bcm Main trends in 2017 +4.6% +4.7% • Industrial production recovery (IPI index 2017 +3%) 78 75 75 2 • Demand peak reached in January 2017 (426 mcm/day, 72 91% of historical max) 69 2 3 2 4 2 1 1 Previous base 3 1 sce
Slide 14: Recent demand spikes highlight the value of gas assets
Recent demand spikes highlight the value of gas assets Italian gas demand evolution European Hub prices Very cold Very cold Feb 2018 temperature temperature KW/h 4,500 4,000 +288% +294% 3,500 +144% 3,000 83 85 2,500 60 2,000 1,500 Electric demand Serie2 23 22 25 Gas demand Serie1 1,000 500 NBP TTF P
Slide 15: Positive gas infrastructure scenario in Europe and worldwide
Positive gas infrastructure scenario in Europe and worldwide EU Domestic production and import requirements Global gas demand (Bcm) Change in gas demand 2016- Import 40(Bcm) +30% Import 363 280 305 332 372 389 Domestic production 140 131 125 128 91 91 2014 2015 2016 2017 2025E 2025E IEA IHS Key tren
Slide 16: Renewable gas is emerging as a key component of a long-term integrated energy strategy
Renewable gas is emerging as a key component of a long-term integrated energy strategy ~122bcm of renewable gas (biomethane and power to gas) leading €140bn annual savings for EU 2050+: • Affordable flexibility in power generation • Removes need to fully electrify peak heating demand • Lower insulat
Slide 17: Italy focus: new technologies to underpin demand
Italy focus: new technologies to underpin demand Biomethane connections update CNG connections update 3 2 5 99 1 2 6 39 1 40 2 46 4 5 2 16 11 13 2 Biomethane breakdown 8 4 CNG Preliminary inquiries 515 13 3 34 Connections being built 77 8 17 3 3 1 8 Accepted offers 37 60 17 Connections in operation
Slide 18: Regulatory framework
Regulatory framework 2014 2015 2016 2017 2018 2019 2020 2021 2022 Transition • Low risk regulatory framework: TRANSPORT 4° regulatory period 5° regulatory period period returns on real basis, no volume or price exposure REGAS. Transition 4° regulatory period 5° regulatory period period • 2 years of
Slide 19: Improving organic investment profile
Improving organic investment profile Capex 2017-21 Tariff RAB1 evolution (€ bn) € 5.2 bn (+10% vs previous target) c. 2% + 0.5 CAGR 5.1 4.7 5.2 Previous 4.7 5.2 target: 4.7 1.4% CAGR Capex 2017-21 Capex 2017-21 old plan plan update • Sardinia methanization • Increase storage capacity • ICT and innov
Slide 20: Main initiatives and benefits for the system
Main initiatives and benefits for the system CAPEX 2017-2021 Support to the North West market and CAPEX 2017-2021 bidirectional cross-border flows Transport & CNG Central Italy main lines replacement Storage & regass Flexibility and 420Km replacement of 50 yrs old, € 4.6 bn (+10% vs previous target
Slide 21: Focus: capex in energy efficiency and lowering emissions
Focus: capex in energy efficiency and lowering emissions Energy efficiency on our grid >€200m Innovations to reduce emissions €120m • 50MW high-efficiency gas turbines in Istrana and Sergnano • Remote monitoring systems in hydrogeological risk areas on 3000 measuring points • Replacement of gas turb
Slide 22: Asset-light services
Asset-light services Regulated services on the Italian market Snam Global Solutions New Balancing Regime: Rationale New demand forecasting IT system in place since Oct 17, improved • Leverage on key competencies and expertise to consolidate and develop accuracy and performance international position
Slide 23: Solid contribution from associates
Solid contribution from associates Storage business Stake increased Leverage of Snam Good growth from merchant capabilities on project opportunities to 23.68%, for a Debt optimization: management to regulated consideration of Relevant progress coming from the refinancing activities c. € 22m, increas
Slide 24: Opportunities not in the plan: supply, security and liquidity
Opportunities not in the plan: supply, security and liquidity Italy Europe • Further connections along • Integration of European markets Sardinia backbone • New infrastructure connecting • Potential storage opportunties sources to markets • Potential LNG facilities • Opportunities along the • Furthe
Slide 25: Digitalisation to support efficiency, grid operations and market liquidity
Digitalisation to support efficiency, grid operations and market liquidity Improvement of IT infrastructure Main projects Simplified and flexible application • Smart Gas: integrated tool to design, architecture build and maintain assets. Improved • From >100 to ~50 applications within maintenance an
Slide 26: Total cost trend
Total cost trend Core business costs flat in real terms All lean: continuous improvement • 80% of colleagues involved • 210+ actions under implementation • 40+ dedicated team • Streamlined and reduced procedures and methodologies Cost efficiency activities • Integration cross functional activities (
Slide 27: Financial targets of the plan
Financial targets of the plan
Slide 28: 2021 targets increased
2021 targets increased RAB1 (€bn) EBITDA/EBIT (€bn) Net income (€m) Ebitda c.1.5% c. 2% Ebit c. 4.5% c.1% 19.2 20.3 1,987 2,022 Increasing D&A due to faster Previous Previous Target: Target: 1,336 1,363 depreciation: 4% CAGR 1.4% • Increasing ICT and CAGR innovation 900 940 • Change in capex 845 mix
Slide 29: Updated dividend policy
Updated dividend policy Update dividend Policy Dividend per share 2.5% CAGR • +2.5% DPS growth confirmed for 2018 and extended to 2019 • 2019 DPS is a floor in real terms to 22.64 2021 22.09 21.55 21.00 2016 2017E 2018E 2019E Self-financing plan underpins strong and sustainable shareholder remunerat
Slide 30: Self-financing plan
Self-financing plan Net debt evolution • Cash flow from operations to essentially cover capex and growing dividends • 2018 net debt2 guidance: € 11.5bn • Debt/RAB1 broadly stable over the plan period Financial flexibility enables disciplined value-enhancing opportunities 1. Including affiliates 30 2
Slide 31: Use of financial flexibility
Use of financial flexibility Financial flexibility Already invested or earmarked Capital allocation approach • Additional capex of € 500 m on Italian • Committed to current credit rating metrics and risk profile infrastructure vs prior plan • Accretive returns (risk adjusted returns at least in line
Slide 32: Closing remarks
| e Closing remarks
Slide 33: 2018 guidance and targets
2018 guidance and targets Guidance 2018 New Targets March 2017 €4.7bn Investments € ~ 0.9 bn € 5.2 bn 2017-2021 Investments 1.4% cagr Tariff RAB € ~ 20.3 bn ~ 2% CAGR 2017-2021 2017-20212 4% cagr Net income € ~ 975 m ~ 4.5% CAGR 2016-2021 2016-2021 Policy limited DPS € cent 22.09 +2.5% DPS growth to
Slide 34: Closing remarks
Closing remarks 1 Strong delivery to date, with 2017 results guidance 2 Improved growth targets 3 Attractive and sustainable shareholder remuneration 4 Additional value from new opportunities 34
Slide 35: ANNEXES
ANNEXES
Slide 36: Income Statement
Income Statement [ € mn ] 2016 PF 2017 adj. Change Revenues 2.560 2.533 - 27 Operating expenses - 573 - 511 +62 EBITDA 1.987 2.022 +35 Depreciation & amortisation - 651 - 659 -8 EBIT 1.336 1.363 +27 Net interest income (expenses) - 263 - 227 +36 Net income from associates 135 150 +15 EBT 1.208 1.286
Slide 37: Revenues
Revenues [ € mn ] 2016 PF 2017 Change Regulated revenues 2.444 2.434 - 10 Transport 1.779 1.816 +37 Storage 502 508 +6 LNG 18 18 Pass-through revenues 145 92 -53 Other revenues 116 99 - 17 TOTAL REVENUES 2.560 2.533 - 27 37
Slide 38: Operating Expenses
Operating Expenses [ € mn ] 2016 PF 2017 Change Regulated activities 456 404 - 52 Controllable fixed costs 271 267 -4 Variable costs 9 7 -2 Other costs 31 38 +7 Pass-through costs 145 92 -53 Non regulated activities 117 107 - 10 TOTAL COSTS 573 511 - 62 38
Slide 39: Balance Sheet
Balance Sheet Dec, 31 Dec, 31 [ € mn ] Change 2016 2017 Net invested capital 17.553 17.738 +185 Fixed capital 18.080 18.875 +795 Tangible fixed assets 15.926 16.396 +470 Intangible fixed assets 810 850 +40 Net payables for investments -368 -335 +33 Financial receivables held for operating activities
Slide 40: 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 41: Full-year 2017 results and plan update
Full-year 2017 results and plan update London March 14th , 2018